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29–936 PDF 2006

S. HRG. 109–680

THE NEXT GENERATION OF HEALTH

INFORMATION TOOLS FOR CONSUMERS

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MAY 10, 2006

Printed for the use of the Joint Economic Committee

(

(II)

JOINT ECONOMIC COMMITTEE

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Chairman

PAUL RYAN, Wisconsin

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

KEVIN BRADY, Texas

THADDEUS G. MCCOTTER, Michigan

CAROLYN B. MALONEY, New York

MAURICE D. HINCHEY, New York

LORETTA SANCHEZ, California

ELIJAH CUMMINGS, Maryland

SENATE

ROBERT F. BENNETT, Utah, Vice Chairman

SAM BROWNBACK, Kansas

JOHN SUNUNU, New Hampshire

JIM DEMINT, South Carolina

JEFF SESSIONS, Alabama

JOHN CORNYN, Texas

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

CHRISTOPHER J. FRENZE, Executive Director

CHAD STONE, Minority Staff Director

(III)

C O N T E N T S

OPENING STATEMENT OF MEMBERS

Hon. Robert F. Bennett, Vice Chairman, a U.S. Senator from Utah .................. 1

Hon. Carolyn B. Maloney, a U.S. Representative from New York ...................... 3

WITNESSES

Statement of Carolyn M. Clancy, M.D., Director, Agency for Healthcare Research and Quality, Rockville, Maryland ........................................................... 4

Statement of Arnold Milstein, MD, MPH, Medical Director, Pacific Business

Group on Health; Worldwide Partner, Mercer Human Resource Consulting,

San Francisco, California .................................................................................... 6

Statement of Michael D. Parkinson, M.D., MPH, Executive Vice President

and Chief Health and Medical Officer, Lumenos, Alexandria, Virginia .......... 8

Statement of Paul Ginsburg, Ph.D., President, Center for Studying Health

System Change, Washington, DC ....................................................................... 9

Statement of Walton J. Francis, MA, MPA, MPP, Author and Independent

Consultant, Fairfax, Virginia .............................................................................. 23

Statement of Donald W. Kemper, MPH, Chairman and CEO, Healthwise,

Inc., Boise, Idaho .................................................................................................. 25

Statement of Douglas G. Cave, Ph.D., MPH, President, Cave Consulting

Group, Foster City, California ............................................................................ 26

SUBMISSIONS FOR THE RECORD

Prepared statement of Senator Robert F. Bennett, Vice Chairman .................... 34

Prepared statement of Representative Carolyn B. Maloney ................................ 36

Prepared statement of Carolyn M. Clancy, M.D., Director, Agency for

Healthcare Research and Quality, Rockville, Maryland ................................... 38

Prepared statement of Arnold Milstein, MD, MPH, Medical Director, Pacific

Business Group on Health; Worldwide Partner, Mercer Human Resource

Consulting, San Francisco, California ................................................................ 45

Prepared statement of Michael D. Parkinson, M.D., MPH, Executive Vice

President and Chief Health and Medical Officer, Lumenos, Alexandria,

Virginia ................................................................................................................. 62

Prepared statement of Paul Ginsburg, Ph.D., President, Center for Studying

Health System Change, Washington, DC .......................................................... 67

Prepared statement of Walton J. Francis, MA, MPA, MPP, Author and Independent Consultant, Fairfax, Virginia ............................................................... 72

Prepared statement of Donald W. Kemper, MPH, Chairman and CEO,

Healthwise, Inc., Boise, Idaho ............................................................................. 81

Prepared statement of Douglas G. Cave, Ph.D., MPH, President, Cave Consulting Group, Foster City, California ................................................................ 96

(1)

THE NEXT GENERATION OF HEALTH

INFORMATION TOOLS FOR CONSUMERS

WEDNESDAY, MAY 10, 2006

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC.

The Committee met at 10 a.m., in room 106 of the Dirksen Senate Office Building, the Honorable Robert F. Bennett (Vice Chairman of the Committee) presiding.

Senators present: Senator Bennett.

Representatives present: Representatives Maloney, Sanchez,

and Cummings.

Staff members present: Tom Miller, Jeff Schlagenhauf, Colleen

Healy, Katie Jones, Daniel Dowler, Chad Stone, and John

McInerney.

OPENING STATEMENT OF HON. ROBERT F. BENNETT,

VICE CHAIRMAN, A U.S. SENATOR FROM UTAH

Chairman Bennett. The Committee will come to order. We’re

expecting some Members of the House to join us fairly quickly, but

we will move ahead in respect to the witnesses and their willingness to be with us and to share their expertise.

We welcome you all to this hearing on the next generation of

health information tools for consumers. We need to provide health

care consumers, employee plan sponsors, doctors, hospital administrators, and health care program administrators with better information to improve their choices and decisionmaking.

I sit on the Banking Committee where we’re always using the

word transparency, and talking about the importance of transparency in capital markets. Well, we need transparency in health

care choices. I remember the time, which I hope is past now, when

policymakers would say: Customers are not intelligent enough to

make decisions with health care. They are at the mercy of providers, because they don’t have the education, the background, the

understanding of science that can allow them to make intelligent

decisions. So they simply take whatever the provider or the payment administrator decides is the best decision.

We’re in ‘‘Health Care Week’’ in the Senate right now, discussing

health care issues. This is a logical time to examine the current

and future state of health information. That’s essential to improve

our current health care arrangements, whether we’re talking about

consumer-driven health plans or health savings accounts, traditional employer-sponsored plans, Medicare, Medicaid, charitable

care, or concierge care; cash payment at the moment of service.

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Whatever it is, we need better information; more transparency, to

use the capital market’s word, with respect to our health care

choices.

We need information about price, quality and value of health

care options as well as support tools to assist and improve decisionmaking all across the board. We may differ in how much information we wish to or can absorb, but something more than what we

currently have is available is better for just about all of us.

Now, neither stronger financial incentives to consumers nor topdown efforts to re-engineer health care delivery will by themselves

be able to change the future trends without better information.

We’ve witnessed the transformative power of better information

in other parts of the economy. Information technology is king in

such mundane areas as retailing. Health care need not continue to

be a lagging exception with respect to the importance of information technology.

So today’s hearing will go into this area, and we have two panels,

of whom we’re very proud and to whom we’re very grateful.

Our first panel of witnesses includes Dr. Carolyn Clancy, who directs the Agency for Healthcare Research and Quality, and they’re

at the forefront of coordinating public and private efforts to improve the data measurement, aggregation, and reporting activities

that can produce more valuable and actionable consumer health information.

Then we have Dr. Arnold Milstein, who is the medical director

of the Pacific Business Group on Health and the U.S. Health Care

Thought Leader at Mercer Health & Benefits.

He heads performance measurement activities for both the Leapfrog Group and the Consumer-Purchaser Disclosure Project and is

a MedPAC Commissioner.

I like somebody with a scientific background who embraces the

name of the Leapfrog Group. It shows a little bit of flexibility.

Dr. Michael Parkinson is executive vice president and chief

health and medical officer for Lumenos, one of the country’s leading providers of consumer-driven health care. And the company’s

goal is to improve consumers’ health outcomes and achieve longterm cost efficiency for employers that sponsor health plans.

Paul Ginsburg is an economist and president of the Center for

Studying Health System Change. HSC’s main research tool is the

Community Tracking Study, which consists of national surveys of

households and physicians in 60 nationally representative communities across the country and site visits to 12 of these communities.

So that will be our first panel. I’ll introduce the members of our

second panel when we’re through with the first panel, but we express gratitude for you all for your willingness to come share your

insights here. Now we’ve been joined by Mrs. Maloney from the

House, and we’re happy to have her for whatever opening statement she might wish to make.

[The prepared statement of Senator Robert F. Bennett appears

in the Submissions for the Record on page 34.]

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OPENING STATEMENT OF HON. CAROLYN B. MALONEY,

A U.S. REPRESENTATIVE FROM NEW YORK

Representative Maloney. I thank the Senator for calling this

hearing; thank you so much, Senator Bennett, and I want to thank

you for holding this hearing on health information tools for consumers, and I want to welcome our panels of experts and thank

them all for testifying today.

I think the Joint Economic Committee has an important role to

play in looking at ways that markets for all kinds of goods and

services can serve consumers, and health care is certainly a market

that Americans would like to see work better. They would like to

be sure that they can get affordable health insurance and high

quality medical care. I think we would all agree that more and better health care information is good for everyone and is part of the

solution to improving the performance of the health care market.

But I would also like to strike a cautionary note. A large fraction

of medical expenses are accounted for by a small percentage of people, and many of those expenses are incurred in situations that are

largely divorced from normal economizing behavior. So I worry that

the benefits from better information, while real, are often oversold.

Better information and increased transparency may help people

make some routine medical decisions more wisely, but they are not

likely to significantly affect the overall costs of health care or make

much of a dent in the number of people without health insurance.

I also think we have to be sensitive to privacy issues when we

talk about making vastly more information available. Those pushing hardest for greater information appear to be those who are particularly enamored of the ‘‘consumer-driven’’ approach to health

care with its emphasis on high-deductible health insurance and

tax-sheltered health savings accounts.

The President’s push for consumer-driven health care would shift

more costs onto individuals, while creating additional tax incentives for high-deductible insurance and HSAs that ordinary families will have little opportunity to use. High deductible plans don’t

reduce costs or cover the uninsured, but they do have a tendency

to discourage people from using health care services.

Consumer-driven health plans rely on consumers to obtain reliable information on treatment choices, quality, and charges by providers. But the concept of ‘‘empowering’’ consumers to make costconscious choices about their health care decisions is misleading,

because purchasing health care is not like buying a car or a washing machine. You simply don’t have a lot of time to shop for a doctor when your appendix bursts. Health care needs are often unanticipated, and patients rely on their doctors’ expertise to guide their

medical decisions.

Finally, for years we have heard that our information technology

systems are inadequate, and that patients die because of mistakes

that could have been corrected if we had better technology and

record keeping. Clearly government and the private sector have a

responsibility to close the information gaps that are affecting the

health of or having a life or death impact on Americans.

I look very much forward to the testimony, as always, and to

your comments, Senator. Thank you.

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[The prepared statement of Representative Carolyn B. Maloney

appears in the Submissions for the Record on page 36.]

Chairman Bennett. Thank you very much.

Dr. Clancy, we’ll begin with you.

STATEMENT OF CAROLYN M. CLANCY, M.D., DIRECTOR,

AGENCY FOR HEALTHCARE RESEARCH AND QUALITY,

ROCKVILLE, MARYLAND

Dr. Clancy. Good morning, Mr. Chairman, Representative

Maloney. I ask that my written statement be entered into the official record.

Chairman Bennett. Without objection.

Dr. Clancy. Mr. Chairman, before I deliver my prepared remarks, I’d like to ask you and Representative Maloney, as well as

my fellow witnesses and members of the audience, to raise their

hands if you’ve looked for information about health or health care

quality on the Internet, in the library, or from any other source.

[Show of hands.]

And to keep your hands up if the information was what you

needed.

[No hands.]

I usually begin speeches by posing those two questions to the audience, and unfailingly, the number of people who look for information vastly exceeds the number who find what they need. This has

to change, and I commend you, Mr. Chairman, for recognizing the

significance of engaging consumers in their health care, and for

holding this hearing.

I don’t think I can overemphasize Secretary Leavitt’s and HHS’s

commitment to ensuring that all Americans can easily obtain understandable information about the quality and price of health

care. To realize this vision, Secretary Leavitt has articulated four

strategies for achieving this goal: Promoting quality transparency,

promoting price transparency, facilitating the greater use of health

information technology, and transforming health care so its incentives support a consumer-oriented or patient-focused healthcare

system.

My written testimony goes into great detail in how the Agency

for Healthcare Research and Quality, working in partnership with

the public and private sectors, is working on those strategies.

Consumers make two types of decisions. The first that we’re calling marketplace decisions, for example, involves selecting a health

plan, a clinician, a hospital, or a long-term care facility.

The second are decisions that patients and their caregivers must

make among alternative treatments in the management of clinical

conditions. Both types of decisions require unbiased, reliable, and

science-based information that’s user-friendly and readily accessible. AHRQ has a long track record of providing information to

consumers and other purchasers, and I’d like to highlight three lessons that we’ve learned in our efforts.

The first lesson is that informed choice only occurs when consumers can assess the value of a health care good or service, and

consumers can only assess value when they have information on

both price and quality.

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Research has demonstrated that the highest quality providers

are often not the most expensive. Therefore, consumers and purchasers need to have both types of information to make an informed choice.

I’d like to also note that there are other elements in consumer

choice. We all know that we make decisions based on other factors

such as personal preferences, tolerance for risk or uncertainty,

unique circumstances, and the assessment of acceptable trade-offs.

However, it’s important to have a foundation of objective scientific

facts for all decisions.

The second lesson is that transparency is critical for enhancing

consumer choice and improving competitiveness. Research sponsored by my Agency clearly demonstrates that where the message

comes from makes a profound difference. If you think about what

many people do when they make a major purchase like a car or appliance, they turn to a source like Consumer Reports, which is a

trusted source of unbiased information that reviews the quality and

value of a product based upon independent testing.

We need to create a similar, unbiased, trusted source of information for health care services. This is particularly important now as

consumers need to make more decisions about their health and

health care, and they grow increasingly skeptical of the vast and

growing array of information available to them on the Internet and

other sources.

The final lesson is that we simply can’t assume that providing

information is enough. In that well known movie, The Field of

Dreams, the refrain was, ‘‘If you build it, they will come.’’ That’s

not true for health care information.

Assuming that consumers and patients will come and get the information isn’t enough. We must ensure that information is available when and where consumers need it, and we also need to help

make them aware that information can help them get better health

care and play a more active role in their health and health care.

The best information for consumer choices needs to be linked

with decisions under patients’ control. For example, elective admissions to the hospital, questions they should ask, and other steps

that they can take to improve a health care encounter.

In a strange way, the problem we’re facing is not a lack of information. As the title of this hearing suggests, Mr. Chairman, the

need is for information that is pulled together so that alternatives

can easily be compared, easily understood, and easily acted upon.

And finally, we need to make sure that that information is easily

understandable. Our research has shown that some 90 million

adults have lower than average reading skills, or low health literacy, and are less likely than other Americans to get potentially

life-saving screening tests such as mammograms and pap smears,

flu and pneumonia vaccines, and to take their children for well

child care visits.

The bottom line is, we can’t possibly get to better value in health

care without the full engagement and participation of consumers.

They need to play an active role in their own health and health

care, and make informed choices about providers and treatments.

Thank you for your attention, and I’d be happy to answer any

questions.

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[The prepared statement of Dr. Clancy appears in the Submissions for the Record on page 38.]

Chairman Bennett. Dr. Milstein.

STATEMENT OF ARNOLD MILSTEIN, M.D., MPH, MEDICAL

DIRECTOR, PACIFIC BUSINESS GROUP ON HEALTH; WORLDWIDE PARTNER, MERCER HUMAN RESOURCE CONSULTING,

SAN FRANCISCO, CA

Dr. Milstein. Last fall’s National Academy of Sciences report on

the U.S. health care system estimated that 30 to 40 percent of

health care spending is what they described as waste. Many of the

large employers and labor unions with which I work believe that

estimate may be low.

Much of this waste could be eliminated by enabling the identification and reward of physicians who demonstrate more affordable

patterns of resource use and favorable quality. Over the past 10

years, methods have been developed to measure, for individual physicians in most medical specialties, both average total cost of health

care resource use per treatment, which I’ll refer to as relative affordability, and quality of care.

Though criticized by some as imprecise, pioneering employers,

labor unions and insurers that have used these methods have lowered their per capita spending by 2 to 17 percentage points compared to other regional payers without lowering quality of care

scores.

Any payer can generate these measures from health insurance

claims data, via off-the-shelf software. Measurements demonstrate

that at all levels of measured quality, physicians in the same specialty and in the same community vary up to 2× in their average

total cost of resources used per treatment, as demonstrated via the

chart on the easel.

Chairman Bennett. Let me give you a little extra time, and ask

you to walk through the easel. I have seen it close up, but I think

the people in the audience probably don’t get it from just having

you refer to it in that fashion.

So can you take a few minutes to walk through that?

Dr. Milstein. Certainly, Mr. Chairman.

Chairman Bennett. We’ll put it back on your clock.

Dr. Milstein. Thank you.

On the easel is an exhibit that was commissioned jointly by the

Boeing Company and the Machinists Union, who are working collaboratively to manage health care costs and quality in the markets in which Boeing has many workers.

This is a study that they commissioned that was implemented by

Regence Blue Shield in the Puget Sound area.

In essence, this displays physician performance on two dimensions. The vertical dimension is the quality of care dimension.

Chairman Bennett. So everything above the line is good.

Dr. Milstein. Right, above the dark line is defined as upper half

quality of care, meaning relatively high rate of compliance with evidence-based scientific guidelines for health care. The horizontal

axis is analogous to miles per gallon consumption of health insurance fuel. And the way it’s laid out is, as you move from left to

right, there is less total spending per episode of treatment.

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Chairman Bennett. So if you’re on the left side of the line,

you’re cheaper?

Dr. Milstein. Your fees may or may not be cheaper, but the total

amount of health insurance fuel burned per treatment is less. It is

not counting just physician fees.

Chairman Bennett. So I want to be above the line for quality

and to the left of the line for price?

Dr. Milstein. You want to be to the right of the line for total

resources expended. The far left side is the equivalent of burning

10 miles per gallon of health insurance fuel, and the right side of

the line is 30 miles per gallon of health insurance fuel.

Chairman Bennett. OK, so I want to be on the right side of the

line, and as high as possible.

Dr. Milstein. Yes, in the Northeast quadrant.

Chairman Bennett. The Northeast quadrant.

And all of the little dots clustered around the cross are all of the

doctors in Seattle?

Dr. Milstein. Like most health insurers, Regence Blue Shield,

even though it is the largest insurer in that region, only had

enough data to characterize the performance of about 40 percent of

the doctors. It’s a 40 percent sample of doctors.

Chairman Bennett. You’ve got a 40 percent sample, and you’ve

got as many doctors in each quadrant.

Dr. Milstein. Yes.

Chairman Bennett. So you’ve got doctors that are giving you

high quality and good value for your money in the Northeast

quadrant——

Dr. Milstein. Correct.

Chairman Bennett [continuing.] And just as many who are giving you low quality but high price in the Southwest quadrant.

Dr. Milstein. Correct.

Chairman Bennett. And as far as the individual is concerned

or the employer is concerned, without this information a doctor is

a doctor is a doctor.

Dr. Milstein. Correct. And I would also say from the perspective

of physicians, a doctor is a doctor is a doctor. The physicians themselves, before this profile, did not have any information telling

them where they stood in their community of peers.

Chairman Bennett. OK. Thank you. I appreciate your walking

through that, because I think this is a stunning piece of research

that informs what we’re talking about at the hearing.

Now you can go back, and let’s put another three, three and a

half minutes back on Dr. Milstein’s clock, because I’m the one who

burned up his time with that. But thank you for making that figure clear for us.

Dr. Milstein. Thank you, Mr. Chairman.

Most private payers lack a sufficient volume of claims data to

make valid comparisons for even half of a region’s physicians, as

I mentioned was the case in this particular example in Seattle.

Medicare could remove this barrier. The key is adding a new permitted routine use of the 100 percent Medicare claims data file.

Such a routine use would enable requestors to access a beneficiaryanonymized form of the data file, specifically for the purpose of proVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 C:\DOCS\29936.TXT DianeA PsN: DianeA
8

ducing physician performance measures by combining claims data

pertaining to multiple beneficiaries.

Americans already have relative affordability, or what some people would refer to as ‘‘total cost of ownership’’ measures for appliances and for automobiles. But not for physicians, whose patterns

of resource use consume a much greater share of American income.

If routinely paired with quality of care measures, such physician

relative affordability measures would comprise a new navigational

system by which patients, physicians, and health benefits sponsors

can lower health care spending growth rates for all payers, including Medicare, while improving quality of care.

Physician performance measures can be used to inform physicians, to engage consumers, to set payment policy or to set consumer cost-sharing. They can also send a pivotal upstream signal

to new biomedical technology developers, that innovations will be

judged not only on their unit price and clinical effectiveness, but

also on their contribution to lowering total health care spending

growth.

Thank you for the opportunity to describe how Medicare can

speed the private sector’s removal of large, but currently invisible

inefficiencies in American health care delivery, and foster the

emergence of a better, faster and leaner American health care system.

[The prepared statement of Dr. Milstein appears in the Submissions for the Record on page 45.]

Chairman Bennett. Thank you very much.

Dr. Parkinson.

STATEMENT OF MICHAEL D. PARKINSON, M.D., MPH, EXECUTIVE VICE PRESIDENT AND CHIEF HEALTH AND MEDICAL

OFFICER, LUMENOS, ALEXANDRIA, VIRGINIA

Dr. Parkinson. Good morning, Mr. Chairman, Mrs. Maloney.

I want to thank you for the opportunity to testify today. My

name is Mike Parkinson, I’m Chief Health and Medical Officer for

Lumenos, a pioneer in consumer-driven health care and a subsidiary of WellPoint.

My comments today are based on nearly 5 years of experience

with self-insured employers, and direct feedback from consumers

and patients enrolled in our consumer-driven plans.

At Lumenos, we created an integrated and incentivized health

improvement strategy, targeted at the major drivers of excessive

health care costs, with a particular emphasis on those with chronic

illness. In fact, 25 percent of our employers are full replacement clients, meaning that they only offer HRAs or HSAs account-based

programs to their employees.

In general, consumers and employers are highly satisfied with

the current information, tools and supports that Lumenos provides.

Year over year, both employers and consumers are seeking more

specific and actionable information about the cost and quality of

medical services.

To Carolyn’s point, however, reinforcement of why the information is important, how to access it, how to engage to better manage

one’s care; for example, health coaching, and how to use it in concert with one’s physicians are likely more important than the availVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCS\29936.TXT DianeA PsN: DianeA
9

ability, or in some cases, the specificity and accuracy of the data

itself.

Quality efforts to date have concentrated on plan and provider

administrative data rather than on consumer and patient knowledge, competencies and decisionmaking arising from better information and a partnering patient-physician relationship.

Defining generic and disease-specific qualities associated with effective and efficient medical services, and creating standardized patient surveys would be of great value in increasing the engagement

of patients and improving the marketplace of patient-relevant information for provider choice.

Providing cost data will become progressively more granular, and

transparent pricing by plans, providers, and facilities will increase.

The release of fee schedules for selected Medicare services and the

institution of transparency requirements for Federal health and

benefits programs will impact both the direction and pace of cost

transparency.

Consumer-driven care will accelerate clinical and business practice innovation. The provider community is showing evidence of

welcoming such innovation, and in some instances is calling for

wholesale reform of delivery and financing models.

Translating and publicizing the health and cost advantages of

patient-centric innovations will accelerate their adoption.

Consumers and patients will increasingly understand the quality

and safety value of health information technology. Deployment of

information technology could become a key provider, market

differentiator, and quality cost metric. Acceleration of national

technology standards for information and interoperability is urgently needed to promote widespread dissemination and decreased

price.

As consumer information on quality and cost of services becomes

more transparent, cost shifting, inexplainable cost differentials,

and inefficient clinical and business practices, will become more apparent. Health policy and societal questions, which have been

known and discussed for years, will become much more visible to

all stakeholders and hard decisions will likely have to be made

about the appropriate role of the private market sector versus the

government funded public sector in financing and delivering of

health care.

Thank you very much, and I look forward to your comments and

questions in the follow up.

[The prepared statement of Dr. Parkinson appears in the Submissions for the Record on page 62.]

Chairman Bennett. Thank you, sir.

Dr. Ginsburg.

STATEMENT OF PAUL GINSBURG, Ph.D., PRESIDENT, CENTER

FOR STUDYING HEALTH SYSTEM CHANGE, WASHINGTON, DC

Dr. Ginsburg. Mr. Chairman, Representative Maloney, and

Members of the Committee, thank you for the invitation to testify

at this hearing.

My organization, the Center for Studying Health System Change,

is an independent, nonpartisan health policy research organization,

funded principally by the Robert Wood Johnson Foundation, and

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affiliated with Mathematica Policy Research. Its mission is to provide policymakers with objective and timely research on developments in health care financing and delivery and their impacts on

people.

My statement makes four key points: First, engaging consumers

to be more aware of cost and quality issues in health care has the

potential to increase the value of health care. And by value, I mean

a superior combination of cost and quality, not only for the individual patients who use this information, but for the U.S. population as a whole.

I believe the greatest opportunities involve incentives for consumers to choose higher value providers, which in turn will motivate providers to increase value. Unfortunately, some are overselling the potential for progress in this area.

As Representative Maloney pointed out, many services are too

complex or urgent for effective shopping by consumers. Those patients responsible for the bulk of health care spending in any given

year are often beyond the reach of patient financial incentives in

typical consumer-driven benefit structures.

Realizing the potential in this direction will require a long-term

investment that collects and translates meaningful consumer price

and quality information, and the development of innovative benefit

structures that can improve on large deductibles.

Even if the potential is reached, however, empowered consumers

alone are not the hoped-for silver bullet to solve the health care

cost crisis facing this country.

I want to point out that health plans will play a key role in consumer shopping for price and quality. The health plan has long

been a powerful asset for both enrollees and purchasers; they negotiate substantial discounts with providers, and as benefit structures change to put more emphasis on price and quality comparisons, insurers will compete on innovation and tools to increase plan

value to consumers.

Insurers basically have the potential to employ their formidable

data and analysis resources to translate complex information on

price and quality into something that’s more usable by consumers.

But without the support of insurers, there are practical limitations

on the ability and willingness of consumers to become savvy health

care shoppers.

We’ve studied the consumer experience in self-pay markets, and

find that the experience has been romanticized by some advocates

of consumerism in health care. Of the markets we’ve looked at,

price shopping exists only for Lasix services, and there’s little information on quality in any of these markets other than word of

mouth recommendations.

Finally, I’d like to discuss the role of government. I believe the

greatest opportunity for government in promoting consumer choice

is in the areas of information on provider quality and the funding

of research on medical effectiveness. I believe there’s less potential

in providing price information directly to consumers.

I’m very optimistic about the potential of Medicare’s voluntary

program for hospital quality reporting to contribute valuable information for consumer choice, and to motivate hospitals to improve

their quality.

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As Dr. Milstein has recommended, I believe that making Medicare Part B claims files available to insurers can substantially increase their ability to provide information and incentives to enrollees that favors physicians who are higher quality and more efficient.

The Agency for Healthcare Research and Quality has developed

an excellent reputation for funding effectiveness research, but

funding for these activities has been extremely limited, especially

in contrast with what the Federal Government currently spends on

biomedical research overall.

I look forward to answering your questions.

[The prepared statement of Dr. Ginsburg appears in the Submissions for the Record on page 67.]

Chairman Bennett. Thank you very much.

Thank you all. I think we’re going to have a worthwhile discussion here; and my pattern is to try to get you talking to each other,

rather than individually talking to us, because I think we can have

some good interaction here.

I do have some questions, as I’m sure the other Members of the

Committee will have other questions.

Dr. Clancy, you emphasized price and quality. Dr. Ginsburg, you

were a little less excited about the price thing, and the main benefit would come from understanding quality.

Could you briefly either resolve that, or——

Dr. Ginsburg. Well, sure. I think that price is equally important

to quality. My point was that as far as what the government can

do, I thought that the government has the potential to do more important things in the area of information on quality than it does

in the area of information on price.

I believe that insurers are in a very good position, with a lot of

information on price, to really analyze that and translate it for

their enrollees into simpler decisions.

Chairman Bennett. OK. Yes, Dr. Clancy.

Dr. Clancy. I would agree. Right now, though, if you think

about it, almost all individuals who get health insurance through

their employer, including the Federal Government, are facing increasing out-of-pocket costs. And those incentives are really clear.

What to do with those incentives is far less clear. So for example,

a vast majority of Americans now face tiered pharmacy benefit arrangements, and yet it’s very difficult to find out information on

when it’s worth it to buy a brand name drug as opposed to using

a generic. And of course the throw-away line is, ‘‘Well, ask your

doctor.’’

And the sad part of it is that we’ve begun to make some small

dents in giving doctors the kind of information so that they could

help patients with comparative choices, but we’ve got a long way

to go.

Chairman Bennett. Yes. Well, one underlying theme here is

the complexity of these decisions, and so ask your doctor, ask your

pharmacist, whatever; and the point was made by you, Dr. Ginsburg, that the most expensive people—there are a few people that

take most of the money. We know that the 80/20 rule applies here;

80 percent of the money goes to 20 percent of the patients.

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My own experience, and it’s entirely anecdotal, but I’d like to get

your response to it, is that the use of this kind of information is

generational. When I get told I have a problem, I go to a doctor.

And if I want a second opinion, I go to a second doctor.

We’ve recently had, within our family, a fairly serious medical

situation arise for our daughter, who instantly went to the Internet. She wanted to get the information herself. And she was not

nearly as willing to listen to a doctor. Now her doctor told her,

‘‘Yes, you have this situation.’’ First thing she did was go on the

Internet and find out as much about it as possible.

I have a daughter-in-law who, with one of our grandchildren was

told, ‘‘This child has this problem.’’ The first thing she did was go

to the Internet. The next thing she did was argue with the doctor,

based on the information, and found another doctor who had a different point of view, and she very much took charge of this whole

situation based on her inclination that there’s information available to her.

And frankly, in my generation, that simply would never have occurred to me. And when something came up with respect to my

health, and I talked about it within the family, the kids all went

on the Internet and they started giving me advice and counsel.

Now I think we have a common theme here, in going back to Dr.

Clancy. It would be very, very valuable if we had, quote, a ‘‘Consumer Reports’’ close quote, for medical information, because I have

now discovered, when I go on the Internet, I can get whatever I

want, depending on my prejudice. I can get an Internet report that

tells me that eating dark chocolate is going to be really good for

me, and good for my health. And the Internet told me that taking

4,000 milligrams of Vitamin E would increase my chances of getting a heart attack, where Dr. Isold, the Capital physician, had

prescribed 400—not 4,000, 400.

And I went back to Dr. Isold and he says, ‘‘Yeah, that’s the way

medicine is. And we’re now saying 200. But at the time that I told

you 400, everybody was agreeing with 400, and now we’re saying

200.’’

My colleague, Senator Hatch, says I should be taking 1,000, and

I’m going to make that decision increasingly in this kind of world,

whether the medical establishment wants me to or not.

So we’re talking about not only transparency and availability,

but we’re talking about ultimately the kind of thing that Dr.

Milstein has put here, where you have some reliable measure, statistical.

Now I want to know, if I’m Seattle, one of those dots on that

chart is the doctor that I represent; I want to know where he is

on the chart, or she. And I’m assuming the doctor wants to know.

That the doctor will say, ‘‘Oh, boy, I’m above the line, but I’m way

over to the left. I don’t want to change my quality, but I’ve got to

figure out better ways to deal with the price.’’

And as you pointed out, the insurer wants to know. And the insurer then comes in and says, ‘‘Here we are.’’ I find it fascinating,

Dr. Milstein, that your study was co-sponsored by Boeing the employer, and the union, both sides of the management-labor divide

wanted to know this. Because the statistic that has come out that

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something from 30 to 40 percent of our health care dollar is being

wasted is a staggering wake-up call for all of us.

If we as politicians could somehow take 30 percent out of the cost

of Medicare, we would all be huge heroes, and we would solve the

Nation’s deficit problem overnight. We could build all the bridges

to nowhere we wanted to build on the savings that would come out

of that. And that’s why I’m so fascinated by the information that

you’re giving us here, and I thank you all.

Mrs. Maloney.

Representative Maloney. Thank you, Mr. Chairman. I think

your panelist really raised an important point, how the Internet

has really changed how we view health care, and every consumer

is on it, checking what their doctor has to say and comparing diagnosis and treatments with other doctors. I think it’s a whole new

phenomenon that is going to really change the way medicine takes

place.

I recall once a doctor told me I needed an operation, and I went

on the Internet and read all this and determined I did not need it.

So I think a lot of people—and then later, the entire medical establishment came and supported the decision that I had made in that

particular case.

So I think we’re really in a changing way now, with the Internet

there.

Dr. Ginsburg, you testified earlier that one of your key messages

is that giving consumers better information can provide benefits to

the patients themselves, and certainly to the U.S. population as a

whole; but that we shouldn’t, to use your words, ‘‘exaggerate the

extent of the savings.’’

Can you elaborate on that point?

Dr. Ginsburg. Yes. Well, even I can take off from Senator Bennett’s discussion about, you know consumers are more involved in

health care decisions, and it is a generational thing. It’s not universal. You know, if you look at survey data, you still see lots of

people not accessing health care information, but it’s one thing to

get involved in a decision about whether to have surgery, or whether to pursue the alternative treatments, but it’s another to get involved in every detail.

So that even if the consumer is more involved in that decision,

let’s say the consumer decides to do surgery, data like Dr. Milstein

has presented shows that physicians vary greatly in the efficiency;

and if his data were actually about a particular condition, a surgical treatment for a condition, I suspect that he could show that

physicians vary greatly in the resources and the quality that they

provide, when they’re pursuing this outcome.

So I’ve always thought that if we are going to engage consumers,

that probably the most important decision on price and quality that

consumers make is the decision about which provider to go with.

Because even if they’re making the choice about surgery versus

something else, there are all these follow-through decisions which

really are pretty much left to the physician. So that’s critical.

Representative Maloney. What if we moved more in the direction of consumer-driven health care with high deductible insurance

policies and more responsibility placed on the consumer.

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What is the evidence that we could achieve significant cost savings by giving consumers incentives to be savvy health care shoppers?

Again, Dr. Ginsburg, do you have any comment on that?

Dr. Ginsburg. Yes. I think there are some studies coming out

now on some of the early experiences with consumer-driven health

care. Many of them are not strong methodologically, but I think it’s

clear that there are savings.

And the issue is, if we generalize this to a broader population,

how much are we going to get? And considering the fact that over

a long period of time, spending per capita on health care rises at

two and a half percentage points a year more rapidly than the

growth of income or GDP per capita.

You really wonder if small changes would be too much as far as

addressing this long-term trend.

Representative Maloney. And I’d like to ask each member of

the panel the following question: To what extent are the benefits

of the kinds of information tools you’re talking about dependent on

what kind of health care system we have? Are they as valuable

within the existing system of health insurance as they would be if

we moved to a system of much higher deductibles and made consumers more directly responsible for how much they spend on

health care?

Any comments from anyone?

Dr. Milstein. I think the information availability that has been

supported across-the-board by the panel would improve performance under any vision of the American health care system, whether

it were continuation of what we have or movement to high deductible. I think giving the customer information on quality and what

someone referred to as ‘‘all-in’’ cost, not just what the doctor is

charging, would favorably impact almost any vision of American

health care or American health insurance.

Representative Maloney. Well, that is a common theme of this

hearing, that more information is a good thing. So my question is,

who is opposed to the kinds of ideas we’ve heard today? Is it a matter of entrenched special interest? Or are there legitimate concerns

that need to be taken into account in deciding what information

should be released and in what form.

Everyone agrees, on the panel, that more information is a good

thing.

Dr. Milstein. I can’t speak for them, but I have a sense that providers are not too enthusiastic about having a lot of information on

their performance very accessible to the public.

And I think there’s the overall issue of doing things that improve

information on price and quality that are really useful, rather than

just look useful. But then I suspect that if we’re talking about

major changes in information on providers, that they’re not going

to be that happy about it, and that’s where the opposition might

come from.

Representative Maloney. So the opposition is that providers do

not want to display what their fees are. Is that what it is, Dr.

Milstein?

Dr. Milstein. When I was clinically active, I would not have enthusiastically embraced any facet of my performance being publicly

15

released. Whether it’s my prices, the relative economy with which

I use health insurance resources or my quality of care. If I felt it

was coming my way, I would have insisted that it be postponed

until it was better perfected, and as far forward in the future as

possible.

I don’t think this attitude is unique among physicians. If you

look at the revolution in restaurant hygiene in Los Angeles, when

the Department of Health first proposed posting a gigantic A, B,

or C on the front door of every restaurant in Los Angeles based on

restaurant hygiene, the restaurant owners universally and strongly

opposed it.

But it had a very favorable impact on restaurant hygiene scores

in Los Angeles. The car manufacturers, when J.D. Power first

started out, were strongly opposed to their performance being systematically evaluated and publicly released.

Representative Maloney. Well, you then raised the question of

privacy. And maybe we need to pay more attention to that and talk

more about it. For example, making information about patient outcomes more widely available. Obviously you’ve always heard the

story, ‘‘The operation was a great success, but the patient died.’’

Making the outcomes more available to the public. Are there any

comments on that and the privacy concerns involved?

Dr. Clancy. This is a core part of the work, Representative

Maloney, and we can do that without violating privacy; and are

working very hard with the Department and also with research

contractors who have access to very large databases and who have

been doing this for a while, to make sure that this can be done in

such a way that people’s personal information is not betrayed.

You asked a moment ago about more and more information work

in our current health care system. I wanted to make two comments

there. One is that if the picture that Dr. Milstein drew were suddenly available and you knew about physician price and quality, a

real practical issue in today’s health care system is: You need to

know if they will take your insurance and if they had openings in

their panel size, and so forth. Actually, that turns out to be a nontrivial kind of challenge.

The other observation I would make is I don’t think it’s more and

more information. It’s information that’s organized in a way that’s

useful and comprehensible, so that people can understand ‘‘What

this means for me.’’ Then I think we’ll see the value of that.

Right now consumers in many, many plans have incentives to get

better information. What they don’t actually have is information

that is lined up to help them make the right kinds of decisions, and

I think we’ve got to get both of those together.

And I don’t think there’s information on patient outcomes out

there. There’s some information on patient outcomes, from work

that we support. We are now, thanks to the support from the Congress, actually putting out information on very common problems

confronting the Medicare, Medicaid, and SCHIP populations. The

first two reports are out, and they don’t say you should do this or

that; they say here’s the best science we have, and we will update

these reports as more science becomes available.

So the first report was on what clinicians call GERD; that’s

gastroesophageal reflux disease; the rest of us would call heartVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\29936.TXT DianeA PsN: DianeA
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burn. It focused on whether pills, and which kinds of pills, or surgery are better, and under what circumstances. The second report

looked at the use of specific types of tests for women who’ve been

found to have a suspicious growth on a mammogram; asking the

question, could you avoid the need for a biopsy? The short answer

today is No. But there will be more and more reports like this coming out over the coming year.

Representative Maloney. But I mean in shopping patient outcomes, if you were looking for doctors who do, I don’t know heart

surgery.

Dr. Clancy. Several states do this. And there’s been much debate about. Is it done fairly? But there’s been accumulated experience that makes this work.

Some of the demonstrations that CMS is now sponsoring have

shown that they can collect very good information on outcomes for

patients with hip and knee replacements, very common procedures

for the Medicare population. And other types of surgeries actually

can be done. And I think consumers really would value this information.

Representative Maloney. Thank you. My time is up.

Chairman Bennett. Representative Sanchez. I hope you’re over

your jet lag.

Representative Sanchez. Yes, of course, Mr. Chairman.

Good morning, and I’m sorry that I arrived late. I had some

other pending business in the House.

Dr. Milstein—and I didn’t get to hear all of your presentation, so

I’m sorry about that. Dr. Milstein, when you said provider, and you

were talking specifically about, I think the physician experience,

would you also say that the proprietor might be a medical group

or the hospital, or the pharmaceutical company trying to sell its

drugs, or the health care plan that one is under?

Dr. Milstein. Yes.

Representative Sanchez. So do you think they all have an interest in not really disclosing what the price of their product is?

Dr. Milstein. Yes, I think it’s a universal human and organizational trait. If somebody were to ask me, ‘‘Would I like my performance evaluation at work published on the Internet,’’ I would say,

no.’’ It’s universal and cuts across all those provider categories that

you described.

Representative Sanchez. I heard my colleagues talk about getting on the Internet or people getting on the Internet. A lot of people think that they get on the Internet and they do this, but we

know from surveying and understanding people’s time, that there’s

a lot of information out there, but the reality is not as many people

really get on the Internet unless it’s, maybe I’m going to die of cancer; if I got the notice today I was going to die of cancer, maybe

I would get on the Internet and try to find out everything.

But for a large part, we tend to really go with the flow and do

what our health care plan tells us to do, or our doctor or second

opinion, and that’s probably as far as we go. So do you think that

if we had something like a consumer report on the Internet that

people would begin to use that for something other than ‘‘my life

is really at stake? ’’

17

Dr. Milstein. I think that, as expressed by some of the other

panelists, some people would use it, and it would largely, but not

be totally generationally-driven. That said, I don’t think the Internet is only method by which we can avail consumers of performance information.

Again, I think the Los Angeles restaurant example is a wonderful example.

Representative Sanchez. So you think when I visit a hospital,

I should see an A, B, or C on the door of the emergency room?

Dr. Milstein. I personally would support it being not only on the

door of the emergency room, but also on the front door of every department within the hospital, so that interdepartmental variation

within a hospital would be known to any customer before, on nonemergency basis, they made a decision to be treated in that hospital department.

Representative Sanchez. People have talked about using the

Internet. You know, as a minority, and I represent a very diverse

population, including one of the populations that deal almost exclusively in their own language, for example the Vietnamese community, which I represent the largest Vietnamese community outside

of Vietnam in the world, for example. Especially in the older generation, very driven by their language.

Lack of Internet availability, especially to lower income arenas,

and lack of it in languages where—I mean, everything’s complicated. I get confused looking at some of these things.

If we were to look more at doing some sort of a rating system,

would you say—how would you say that we could push it out to,

in particular culturally and language different arenas and also low

socioeconomic arenas. How would you say that we might be able

to do that? Would you suggest that we would translate it into other

languages in specific areas?

And I’m asking everybody, I guess. Maybe we can start with Dr.

Clancy and go down the list.

And I say this because it’s my personal opinion that very, very

rich people probably do a lot of information gathering, and probably

spend money—the price is really not an object for them, so they’ll

go to Switzerland if they think they can get the lifesaving treatment; and the very low end seem to have a lot of these major dollars that we’re spending in our system. It’s almost like the middle

gets squeezed, and you don’t access this much health care.

Dr. Clancy. I wanted to comment on something Dr. Milstein just

said to you and then get to the very, very important question you

asked.

Right now the information that is reported on quality of care at

the level of hospitals and in some cases for physician groups, and

so forth, is not all that useful for individual consumers. However,

it has had a very important impact on the providers, and I don’t

think that we can overlook that.

We still need to learn a lot about making it more useful to consumers to guide their choices.

Representative Sanchez. On the providers in the sense that

maybe a provider won’t be able to get into certain hospitals because

the hospitals can see what the providers are doing?

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Dr. Clancy. To be very specific, for the past several years, nursing homes are required to report publicly on performance, and the

hospitals can volunteer. And if they don’t volunteer, they don’t get

their payment update, so it turns out that they all volunteer.

In our annual report on health care quality, we have seen much

more significant improvements in quality in nursing home care and

in hospital care than in many other aspects of health care. And

there are a lot of studies that support that kind of observation as

well.

Representative Sanchez. When people are watching, we tend

to be nicer.

Dr. Clancy. Yes, right. The schools, name your domain.

So Dr. Milstein’s right, most providers don’t line up for the opportunity, but it does actually have very positive impacts.

Regarding the question about how to reach multiple populations,

the overarching principle needs to be that good information, that

will help you get better health and health care, has to be impossible to avoid. That will require translation; in some cases it’s actually going to require a human interface to help people navigate.

I think the longest standing experience in the Federal Government for treatment decisions is at the Cancer Institute. And they

have a fabulous Web site for people who are very comfortable doing

that. They also have humans that you can call and help you navigate, and many of the people that you referenced that we would expect to have difficulty also have children and grandchildren, as the

Chairman referenced, who can sometimes play a very valuable role

there.

So when I speak to clinicians who practice in underserved settings, what they tell me is that drawing on family resources and

so forth, they’re starting to see that kind of divide narrow; which

I think ultimately is a very good thing for health care.

Representative Sanchez. Thank you.

Dr. Milstein. Two comments. First, in most families and most

social units, not everybody that even subscribes to Consumer Reports reads it. They often rely on one person who’s the conscientious or more experienced one in the family who reads it and then

describes it to everybody else. That’s the way it is in my family.

On your question about diverse populations, one of the examples

I put forward in my testimony was the Culinary Workers Union

Health Benefits fund in Las Vegas. I think that directly addresses

the population group that you referenced. It is a population with

average wages probably in the range of $10 an hour. More than

half of the population does not speak English as a first language.

And they were among the early heroes of the physician performance evaluation movement. They used measurements of physician

performance to encourage their members to move to the better

rated physicians. And as you can see in the materials that I provided, the percentage rise the fund’s health insurance cost in the

subsequent year was substantially less than any others in the Las

Vegas area.

What I didn’t reference in my testimony, is that quality of care

scores either improved or remained stable. So it was a very favorable outcome; in fact, an outcome so favorable that the Hotels and

the Culinary Workers Union, savoring unexpectedly large savings

19

that resulted, delivered a voluntary, out of contract, 55 cent per

hour raise for the workers, in addition to a better return for hotel

shareholders. It was a major victory for both management and

labor.

Dr. Parkinson. Ms. Sanchez, you hit the nail on the head. I look

at behavior change, with proven behavior change models. And really, at the end of the day, we’re talking about individual, family,

community, employer and national behavior change if we’re going

to get this right. And just going to a better doctor ain’t going to get

it.

I referenced the Ken Thorpe study in my paper; Ken Thorpe is

an economist at Emory, who said that 62 percent of the entire rise

in health care costs over the last 5 years are due to personal health

behaviors that we have chosen to treat medically with the latest,

greatest direct-to-consumer advertised drug or technology, in multiple languages, I’m sure.

The thing that I like about the movement now is that information is just an enabler; it does not change behavior unless you have

two other things present: First, incentives or ‘‘Why should I care?’’

It’s always been the employee’s money; they just never saw it as

such. It came out of their paycheck. And second, information makes

the incentive of ‘‘my own money’’ actionable.

There is a dissociation between the choices I make about my

health risk factors; do I smoke, do I move, and do I eat right? And

my awareness of the diseases those risk factors drive: cancer, diabetes, etc. For example, 9 out of 10 diabetics are lifestyle-related,

they don’t genetically have a bad pancreas.

So we have got to get the incentives right at the macro level and

build new infrastructure to support them. ‘‘Cash and Counseling’’

the Medicaid project is a wonderful demonstration. Medicaid disabled populations, given a choice using a culturally-sensitive counselor who helps explain to that Medicaid disabled person what

their options are for service and equipment, for activities of daily

living, actually make better choices for themselves than the usual

government purchasing practice (standard Medicaid) at lower cost.

Not everybody is going to go to the Web for information; it’s just

one source. You’ve got to have phone contacts. You probably have

to do what was done in China; it’s called the barefoot doctor. Who’s

the trusted agent in every community that’s a health resource?

How do we train those people to do better? What’s the role of the

health plan in the future to help partner with those people, to extend empowered consumerism and improved health behaviors without having to engage the medical system. So while we’re very

proud of our Web site, you really have to build whole new infrastructure linking information to people for assistance. And it’s got

to live in an incentivized environment. A lot of the good information that Dr. Clancy referenced has been around for quite a long

time in health care. But it’s not been acted upon, because we’re

missing the incentives and the infrastructure to make it understandable and actionable.

We try to look at the whole system and say, across the continuum of care, from health promotion, risk reduction, acute care,

chronic care, surgical decision support, inpatient hospital care, and

then end of life care in hospice; do we provide the consumer-patient

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with the incentives, infrastructure, and information to make a better decision?

And I think the good work that Carolyn Clancy’s agency is doing

is going to get much more sophisticated, so that that patient

achieves better outcomes at lower costs.

Anecdotes are powerful. An 85-year-old women sitting next to me

at a Lumenos consumer dinner in Dallas asked, ‘‘Are you Dr. Mike?

Because I’m in a Lumenos plan.’’ She said, ‘‘I love your plan. All

the information you’ve got about prices of drugs. But you know

what I really want? I’d love to be able to talk to somebody like me

who has a husband who just had that tube put in his heart.’’

I said, ‘‘You mean a stent? ’’ She said, ‘‘Yes. He was so depressed.

He was so angry. He was on six medications. I was lost.’’ Now

that’s a new value proposition for a health plan. Better engagement

by patients and their families has been shown to drive down unnecessary worry, depression, utilization, and costs. So we have a huge

opportunity here.

Information is part of equation, but patient centricity, new infrastructure, new types of culture-sensitive health coaches are whole

new things we’ve got to create. I think it’s exciting, but we can do

it.

Dr. Ginsburg. I just have two quick points, and I think these

are consistent with what some of the other panelists have said.

I think a key thing is that many people need agents to help them

sort through this information, rather than go and get the raw,

original information. And whether it’s a union, an employer or a

health plan, there are agents to massage this data.

Dr. Milstein’s example in Las Vegas really shows how the union

was a key player in massaging this data to communicate to the

workers which are the high value physicians to go to.

And the other point I want to make is that I think people, you

don’t need to get 100 percent of patients or the consumers using

this information, making good decisions, to get some real movement on the part of the providers to improve their quality, to improve their value. You may only need 10 percent, and that’s actually an optimistic thing that—you know, we tend to think about the

gains that the individual gets by making this, going to this provider versus that provider, how much they save, whether the quality was better.

But for society, I think the big potential is where the providers

that aren’t the best see that they’re losing patients and see that in

public domains their scores aren’t as good as others, and they are

motivated to improve what they do; and this really improves care

for everybody.

Representative Sanchez. May I ask one more question, Mr.

Chairman?

You know, when I did go on the net or when I’ve had friends go

on the net, I mean, anybody can put anything on the net. And most

people don’t know what they’re talking about, especially when it

comes to medicine. Yet people read, you know they read and they

see.

So the worry is, how do you make sure people are looking at the

right thing? And I also include in this, for example, these commercials by the drug companies, where they’ve got some drug they’re

21

promoting today, and the guy is flying over the wheat fields—I

don’t know what the drug does, but god, I want to get that. And

I know that they must be going into the physician and saying,

‘‘Well, I saw this thing and it’s going to make me fly over the wheat

fields.’’

Information is powerful, but it can also be very detrimental. So

what are the safeguards we have to think about as we look at this

information issue?

Dr. Parkinson. If I may, this is one of my favorite topics. I oftentimes say I learn more about health care and the business of

health care from Dorothy Hamill than I ever learned from medical

school professors. Dorothy trained a whole generation of people to

ask for a drug that by and large they probably didn’t need; and

now lo and behold we’ve got some safety issues.

We built something called the Department of Defense

Pharmacoeconomic Center that still lives in San Antonio, Texas to

judge one drug against another, because we couldn’t afford all the

drugs that were coming out of the pipeline being advertised directly to consumers. And we concluded, back in ’97 or ’98, I forget

the year, that this drug, Vioxx, was not much better than

Naprosyn.

But as long as the decision to see a drug or not was imposed

upon people, by saying ‘‘You can’t have it’’ or ‘‘You’ve got to go

through a rheumatology referral on a five-tiered formulary to get

it’’ it was a seen as a takeaway or bad medicine.

Rather, what if we provided access to the information, gave it to

the consumer, to support evidence-based guidelines to the doctors,

and said, ‘‘Here’s the information and full cost of your choice. Here

are your options. Talk with your doctor. And oh, by the way, can

we talk a little bit about weight loss, perhaps, a little bit more

physical activity, which likely impact the need for drug as well?’’

So the role I think of all of us here is to appropriately counterdetail what I call the health care industry that creates and markets new technologies, with comparative, accurate value-added information.

For example, the University of Oregon just compared the effectiveness and costs of drugs for 10 leading classes of pharmaceuticals. You can access that information through Consumer Reports.

If we’re going to ‘‘ride the rails’’ of consumerism, then we need

health information technology standards and some trusted source

of comparison out there. And right now you’re paying for that; all

the health plans do it themselves; they largely have some different

methodologies. Often one hears complaints about a health plan saying, ‘‘This is investigational’’ based on their internal analysis.

‘‘What do you mean it’s investigational? It’s licensed by the FDA,’’

the consumer or physician complains.

An authoritative, neutral analysis is needed to assert the consumer better. If I’m going to be the advocate of the consumer, and

the employers who entrust me with their health, I’ve got to have

good information to say, ‘‘You know what? Ms. Sanchez deserves

the best information to make an informed choice’’ and in large part,

it’s not there today.

Representative Sanchez. Dr. Clancy, you had a——

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Dr. Clancy. I think the information that you’re talking about

has to come from a trusted source. What’s very interesting is that

cancer patients, for example, learn to get very skeptical and good

at evaluating whether what they’re seeing on the Web or hearing

about from others has a funny smell to it, and they know to ask

the right questions. If it’s coming from a dot-com they know that

there might be a profit motive and all that kind of thing.

But ultimately, we need a trusted source that lets people know

that the information is based on science, or it’s based on belief. The

information can be all over the Web and in many other places but

it must be very clear to either individuals or their agents, what

this is based on, what’s the source. And what is the potential conflict of interest.

Representative Sanchez. Anybody else?

OK, thank you, Mr. Chairman, for indulging me with the time.

Chairman Bennett. Thank you very much.

Thank you to the panel. I think it’s been a very useful discussion,

and we’ve gotten a lot of good information out of it.

I just leave you with this one last thought. I was giving speeches

when I was first elected to the Senate that were absolutely brilliant

with respect to health care, and always well-received. And then a

woman came up to me and said, ‘‘I really enjoyed your speech, but

of course you understand you don’t have the slightest idea what

you’re talking about.’’

And I said, ‘‘OK, help me understand.’’ And I think this kind of

runs through where you are. She said, ‘‘The problem with the poor

is not money. The problem with the poor is not access. The problem

with the poor is that they can’t navigate the system.’’

She said, ‘‘You walk into the Salt Lake clinic and you know

which desk to go to, which questions to ask, and which procedures

to fill out.’’ She said, ‘‘I deal with the homeless, I deal with the

poor. They walk into a medical facility of that kind and they’re totally baffled. And they walk out.’’

And if you’re going to make health care truly accessible to them,

you have to have a navigator that will take them through and help

them understand; and Dr. Parkinson, your navigator would talk to

them about their lifestyle and their habits, and try to get them to

do healthier things.

Dr. Ginsburg, I think you’re right, there is no silver bullet here.

But the common theme that runs through her comments to me and

your comments here today is: The more people know, the better off

they’re going to be. And the more they know, the more empowered

they will be to take control of their own lives and their own health

care situations.

So it’s been a very valuable panel, and I thank you all for your

willingness to contribute to it.

We’ll now move to the second panel. The Committee will take a

3-minute recess as the second panel assembles itself.

[Recess.]

Chairman Bennett. The Committee will come to order. And we

welcome the members of our second panel. Douglas Cave of Cave

Consulting Group, I have him listed, I assume—he stepped out for

a minute. Donald Kemper of Healthwise, and Walton Francis, a

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longtime primary author of CHECKBOOK’s Guide to Health Plans

for the Federal Employee.

We appreciate your being here. Let me discuss—let’s see. Mr.

Francis, you’ve been a pioneer in looking at systematic comparison

of health insurance plans, and we appreciate your being here. And

Mr. Kemper, you’re chairman and CEO of Healthwise, founding

chair of the Center for Information Therapy, Board of Directors.

And you’ve put forward the idea that offering every patient the

right information prescription is part of the process of care. And we

appreciate your pioneering effort there. Mr. Cave, President of

Cave Consulting Group, you’ve worked with large employer group

coalitions and health insurers to develop a consumer-driven health

care model.

So we appreciate the three of you, and we’ll hear from you in

that order, starting with Mr. Francis.

STATEMENT OF WALTON J. FRANCIS, MA, MPA, MPP, AUTHOR

AND INDEPENDENT CONSULTANT, FAIRFAX, VIRGINIA

Mr. Francis. Thank you very much, Mr. Chairman.

I’m going to hit just a few highlights from my testimony, if I

may, and try to relate them to some of the dialog that’s already

heard in this hearing, because some of the points are so important.

First, it’s essential to understand when we talk about customer

information, it’s not just that Joe Blow, a consumer, is going to use

that information; it includes the ability of his friends, his family to

use it; it includes the provider as a trusted intermediary to use it.

When I’m thinking of getting a surgical procedure and I consult my

primary care physician about where might I go, I want him to have

a copy of that chart we’ve talked about so much, before he picks

or suggests a couple of specialists——

Chairman Bennett. With a name for every dot.

Mr. Francis. Right. And of course we all benefit when the market has changed and quality is enhanced and prices reduced, we all

get the benefit of competitive markets, even if we’re not the most

savvy shopper personally.

So what’s at stake here is huge. And it doesn’t have to be something that we can predict with great precision as to how the information will turn out to be valuable to us all; it’s just without it

being available, it can’t be valuable.

Another general point. There are many barriers in the system,

and I cover this by type of—I’m not going to go through all the

types of consumer information; they’re in my testimony. But there

was some earlier discussion of providers resist providing information. Yes, they do. And they all have incentives not to have their

performance known to others.

But that doesn’t mean we can’t overcome those barriers, and

there are a variety of ways to do it. And indeed, ultimately the role

of government may be to play a part in that process. Though an

awful lot of it does not require the government.

When I started CHECKBOOK’s Guide, the government had

nothing to do with it. As a different example, I’m today involved

in the Medicare Part D drug benefit in a variety of ways, one of

which is, I was a minor contributor to and I’m a heavy user of the

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Plan Finder tool on the Web, that Medicare has provided that helps

people pick the best deal drug plan.

Millions of people have used this tool already. Millions of people

who would have been hopelessly confused had they tried to do this

by hand, have found themselves guided to the least costly health

plans for their needs. You know, it’s hard work to do something

like that, but it can be done and we’ve got proven results from several insurance comparison systems.

There is also an angle here: We have an immediate need by approximately 50 million Americans, not just the few million in high

deductible health plans, but the 45 million uninsured who have

faced the highest deductible of all, to get better price information.

I take some mild disagreement with Dr. Ginsburg’s earlier comments that price information alone or price information wasn’t as

high a priority, maybe, as the total value package. And I certainly

endorse the package that gives information on outcomes as well as

price and cost.

But the reality is, people find it extremely difficult to shop, and

there are lots of less costly providers out there and lots of less costly treatments.

When I was preparing this testimony, I got one of the plan Web

sites—and that’s a huge breakthrough recently, the plans themselves sponsoring Web sites with consumer information, unfortunately for their members, not for those 50 million people I’m talking about. And for the first time in many years of seeking I was

able to find out what having a baby costs in America. I assure you

this information is not freely available today on the World Wide

Web. If you Google search for maternity and cost, you will not find

out what it costs to have a baby. But if you go to the Aetna Web

site, if you’re an Aetna member, you’ll find that, on average, it

costs $7700. That includes the price of the hospital, the obstetrician, the drugs and so on.

That’s important information. There’s also some low-hanging

fruit out there, and I’ll conclude with this one example: Medicare

pays virtually all health care providers in America. Now the Medicare rates are somewhat artificial in their methods of derivation,

but the fact is they are used by health insurance companies and

others in setting their rates; and furthermore, the fact that Doc

Sawbones or Hospital X accepts the Medicare rate is potent information, if I’m a consumer.

What we need to do is get the Medicare payment rate information, which is free and available, out there in consumer friendly

forms so that people can actually go to Doc Sawbones and say,

‘‘Well, if you’re giving the rest of your consumers this cheap rate,

why can’t I get it?’’

This has been a particular issue in the area of hospital costs.

There was a notorious case at Yale University Hospital in New

Haven where poor persons were being charged triply or quadruply

over what preferred provider consumers and clients were being

charged. There is also the California hospital rate experience. The

law in California that forces hospitals to publish their charges has

been an eye opener in terms of the incredible disjuncture between

what the privileged people, who are using preferred providers

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through health plan pay, and what the 45 or 50 million people who

face really high deductibles have to pay.

That concludes what I have to say. I’ll be glad to answer any

questions you have.

[The prepared statement of Mr. Francis appears in the Submissions for the Recored on page 72.]

Chairman Bennett. Thank you very much. I will say I do remember our first born child cost $500. It was very neatly divided;

$250 for the hospital and $250 for the OB-GYN. Things have

changed a little.

Mr. Kemper.

STATEMENT OF DONALD W. KEMPER, MPH, CHAIRMAN AND

CEO, HEALTHWISE, INC., BOISE, IDAHO

Mr. Kemper. I know. My first son was born in a military hospital and it cost us $16, but you get what you pay for.

I’m pleased to be here, Mr. Chairman, Ms. Sanchez. My message

is pretty simple; it’s just that the greatest untapped resource in

health care is the consumer, and that we have to find a better way

to inform and engage people in their own care.

The message is a little less on helping people become great shoppers as it is on helping people become great decisionmakers and

great managers of their own care. It is aligned with what your

daughter and daughter-in-law have done in their families, what

you’ve done, and what Mrs. Maloney had done for her own surgical

decision.

More technology alone is not the answer; cost-shifting alone is

not the answer. Greater transparency is not the complete answer.

The answer really involves helping people do more for themselves.

More to avoid illness in the first place, or to avoid medical errors.

More to avoid unnecessary care, and more to ensure that they get

the care that will really make a difference to them and their families.

For 31 years, as CEO of Healthwise, I’ve relentlessly pursued

ways to improve the consumer’s role in health care. In the 1970s

I helped to start the medical self-care movement in this country.

In the 1980s, I was at the beginning of the national wellness movement. In the 1990s, I helped to make sure good consumer health

information got put on the Internet.

And today my organization, not-for-profit Healthwise, provides

information for most of the major health Web sites on the net. We

have about 70 million patient visits, if you will, per year to our information.

Each of these efforts has made a difference, a big difference; but

they’ve not been enough. The recommendation I’m making today I

think is far better than all the rest. And, it is a simple message:

Let’s prescribe information to every patient. Prescribe information

to every patient at every moment in care. Simple idea.

Today, patients are left in the dark much of the time. Our doctors have neither the tools nor the time to help us learn what we

can do for ourselves. Plus when we do get the information, we forget about half to four-fifths of it instantly, and what we remember

by the time we get home is about half wrong.

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We need to find a better way to communicate with the patient.

Mr. Chairman, imagine a world in which your doctor prescribed to

you the information you needed to make decisions about health

care. Imagine that the information about your care was considered

to be an essential part of your care, and imagine that your doctor

could prescribe decision aids and action plans that would actually

help you improve your health.

What you’re imagining we call ‘‘information therapy’’ and this is

how it works. It starts with information triggers already known

about your diagnosis, or the treatments that you’ve received or the

tests that have been ordered for you. These triggers can predict

your moment in care—where you are in that diagnosis. When we

know your moment in care, we can pretty well predict the questions you might have and the decisions you’ll be facing.

Then, it’s a relatively simple process to prescribe information

that will help you answer those questions and help support your

decisions.

Group Health Cooperative in Seattle is already today giving information therapy prescriptions to every patient. Kaiser, the VA,

the DoD, all have information therapy initiatives started. Information therapy is coming, but an enlightened Federal policy could

help get it here a lot faster. In my written testimony I’ve laid out

10 ways that Congress could accelerate this movement toward information prescriptions.

In the time I have, I’d just like to focus on one area, and that

is what we could do in Medicare. I think that we can start by making sure that Medicare.gov includes good consumer health information, so people can get it. Next I’d say that we have the information

to prescribe to each Medicare patient a good prevention guide that

is personalized to their comorbidities and to their sex, age, and interests.

And then finally, for every Medicare member who is diagnosed

with a chronic disease, we can prescribe a self-management plan

that can help improve their health.

The consumer is the greatest untapped resource in health care,

and information therapy is the way to tap it. Thank you.

[The prepared statement of Mr. Kemper appears in the Submissions for the Record on page 81.]

Chairman Bennett. Thank you very much.

Dr. Cave.

STATEMENT OF DOUGLAS G. CAVE, Ph.D., MPH, PRESIDENT,

CAVE CONSULTING GROUP, FOSTER CITY, CALIFORNIA

Dr. Cave. CC Group is a company that’s focused on improving

efficiency and effectiveness in the health care system. We work

with some of the largest health plans in the country, in the areas

of consumer health care transparency, and pay for performance

programs.

Most health plans recognize the need to produce more detailed

consumer health information. Today, many are in the process of developing a program that provides physician level efficiency and effectiveness information. The employer benefit consulting community and large employers have been very vocal to health plans

27

about the urgent need to present this type of health information to

consumers.

Most health plans are attempting to meet this strong market demand, but each health plan is going about it in their own unique

way. To date, the most commonly offered comparisons have been

limited to unique procedures, diagnostic tests, and prescription

drugs. With respect to these services, the information has been on

a unit price basis, and that’s important. We’ve been talking about

price a lot.

Where we believe we need to go is that the information needs to

be presented on a longitudinal episode of care bases, where we’re

not only taking into account for medical condition treatment the

price, but the volume and the intensity of service.

There are several main reasons, though, why health plans have

elected to start their consumerism efforts with only unit prices.

One of these reasons is that health plans generally do not have

enough claims experience data to measure enough network physicians to have an entirely successful physician performance program; and we heard this from the first panel as well.

The question becomes, how do health plans obtain enough claims

data to accurately and reliably rate the performance of most physicians. One answer is that CMS provide access to the full Medicare

claims data base. Initial testing shows that CMS data bases, the

full data bases, will be able to measure the performance of 80 percent of all practicing physicians in all geographic regions.

This percent of physicians measured is more than enough to provide consumers with meaningful physician-level performance information. However, it is important to recognize that even in using

the full CMS claims data bases, many of the measured physicians

will have a low volume of assigned episodes of care. We have to

keep in mind that there’s the law of low episode numbers, because

when we develop and implement methodologies to accurately measure physician performance, we have to do it accurately.

There are several methodologies being used in the market that

do provide accurate and reliable physician performance data. But,

on the other hand, there are a good number of methodologies that

are being employed, where you’ll obtain a physician efficiency

score, and you will obtain a physician effectiveness score; but the

scores will not be accurate or reliable.

I provide three examples in my written testimony of studies that

illustrate the lack of agreement and reliability within and between

these measurement systems.

Let me close by pointing out that there is an important opportunity for Congress to assist in promoting consumer health information. Congress could assist health plans with obtaining access to

the full CMS Medicare dataset, as long as the access continues to

protect Medicare beneficiary privacy under HIPAA and the Privacy

Act. Thank you.

[The prepared statement of Dr. Cave appears in the Submissions

for the Record on page 96.]

Chairman Bennett. Thank you very much.

I’m interested, Dr. Cave, in your emphasis on the number of procedures performed. At a previous hearing or examination of this

kind of issue some years ago, I remember someone saying a heart

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bypass operation at a high volume facility like the Mayo Clinic or

some equally well-known place where they do a lot of them costs

$30,000. A similar operation at a rural hospital where they do very

few of them costs $80,000. The $30,000 operation is substantially

better than the $80,000 operation.

Now this is a fact of life in the manufacturing world. I’ve spent

more of my life as a businessman in the manufacturing world. One

of the rules of thumb is that every time you double your output,

you lower your real cost by 20 percent, just on the experience. So

the first car that they produce is $10 million; the second one is $8

million. The fourth one is $4 million and so on, and by the time

they’ve produced 5 million Tauruses or whatever car it is we’re

talking about, they have seen their manufacturing costs come down

20 percent every time the number doubles.

And I think what you’re saying here is that a similar sort of effect occurs in medicine; the more they do it, the better they get, the

more they learn. And the cost comes down.

Now am I up in the night on this, or have I picked up on something that is genuine?

Dr. Cave. I think that there’s a lot of evidence that says volume

is very associated with quality, particularly for higher cost procedures.

Another key component part of that statement, or an ancillary

component part, is that with the Medicare claims data can examine

the practice patterns of 80 percent of all the physicians.

Now in respect to higher-cost procedures, the prevalence rate

tends to be low, and you need many episodes of care to examine

appropriate practice patterns. Asthma is a good one, where you can

have enough episodes to measure enough physicians to really rank

their efficiency and effectiveness very well.

Going back to your main point that volume is associated with

quality, yes absolutely, volume generally is related to a reduction

in cost and increased quality. That’s been proven by some studies.

Chairman Bennett. That implies a systemic change in that we

ought to be moving toward high volume operations in particular

procedures. In other words, here’s a hospital which does nothing

but heart transplants.

Dr. Cave. That argument has been made, yes.

Chairman Bennett. OK. Now we get resistance to it, and I

don’t want to get into that too much. But let’s go down that line

in terms of the subject of this hearing, which is consumer information.

Do you anticipate a Web site or a 1–800 number or whatever

that would tell people ‘‘This particular facility has the highest volume of doing the procedure that you’re looking at, and is probably

worth the travel costs and the motel expenses’’—we want to discuss

the whole cost here, not just the unit cost, as you say—but you

should consider, even if you live in rural Utah, that it’s worth your

money to travel to Minneapolis or wherever it might be, even including your travel costs and your motel room and all of the rest

of it, because this is a high volume circumstance where the price

will come down, the quality will go up, and this is customer information in a perfect world. Do you see that kind of thing happening?

29

Dr. Cave. Yes, as a matter of fact today on the inpatient facility

and outpatient facility side, there has been a strong emphasis by

at least three organizations to publish that type of information, and

the health plans actually will contract with those organizations to

present that information on their Web site.

And you can now find the volume of most procedures by hospital,

because consumers are pretty savvy to that point already. It is

available right now. That information you’re talking about is out

there, on the hospital side.

It’s the physician side we want to try to move toward also.

Chairman Bennett. The physician side, OK.

Mr. Francis, do you have those kinds of data in your guide?

Mr. Francis. Mr. Chairman, I do something slightly differently,

but in effect I’m doing that. What I do is show people—I’m rating

insurance plans, and the primary function of an insurance plan is

to pay your bills; and you want to minimize the cost of your outof-pocket and your premium. And I rate health insurance plans

against each other in terms of how hard they hit your wallet.

That’s exactly what I do.

We also do have quality information about insurance plans, but

there’s sort of an inherited limited ability—if the insurance plan

pays its claims on time, and that’s kind of an awful lot—there’s not

a lot more to be said about that plan, usually; though there are

other kinds of differences that matter, and we do have consumer

satisfaction data, for example, and we use it. If I could just pick

up on two points that have been made:

First, there is a fair amount of institutional performance data

out there for hospitals; CHECKBOOK, for example, publishes hospital death rates—the ultimate outcome measure, for all Medicare

participating hospitals. And there are bits and pieces. You mentioned heart transplants; there’s a Web site at HHS that actually

rates every heart transplant center in America with quality adjustments; and yes, it often makes sense, in terms of lifesaving, not to

use your next door transplant center.

Chairman Bennett. I misspoke. If I said transplant, I meant

bypass. You don’t get a transplant for $30,000.

Mr. Francis. No.

Chairman Bennett. I meant bypass surgery.

OK, go ahead.

Mr. Francis. Several witnesses have mentioned the question of

using Medicare data, the claims data; and they’re absolutely right,

that it’s a gold mine of information. The problem that faces HHS

right now is that under the privacy act, as it’s been interpreted by

one court, releasing data on the performance of individual physicians would violate their privacy, OK?

It’s not a patient privacy issue, it’s a physician privacy issue.

And it may take—I don’t know where the lawyers at HHS are on

this, I’m not one of the parties to that issue, but this may be an

area where the Congress may have to help the Department do

what I’m sure it would like to do.

Chairman Bennett. Yes. We talked in the first panel, and you

made reference to it, about people who are resisting. And we heard

the story about the restaurants in Los Angeles and the A, B, C,

and I think as soon as that went up, every restaurant became an

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A very quickly. Because who wants to eat in a restaurant where

the sanitary condition is C? Whether they wanted to or not, they

made the investment to bring themselves up to an A.

You take me back to two experiences of my own business life. I

was a Washington representative—fancy word for lobbyist—for a

retailer back in the 1960s, and one of the main issues that was

prominent among retailing—we were a dry goods retailer; I worked

for J.C. Penney—so we just observed this. But one of the prominent

issues among grocery retailers was labeling, nutritional labeling,

and unit cost. And they fought it as hard as they could.

And I would say to my fellow lobbyists in the quiet of our conversations, ‘‘Why are you against this? This is good for the consumer, and ‘‘Well, it’s going to cost money and we’re going to have

to’’—I said, ‘‘Look, that’s unsustainable as a public posture for you

to say you don’t want to tell your consumer how much sugar, how

much protein, how much whatever is in this particular product. Or

you don’t want to tell them how much it costs per ounce, lest they

would figure out that Brand A is cheaper than Brand B. You don’t

want to do this.’’

And they would look at me and say, ‘‘You’re right, we’re very uncomfortable up there on the Hill, fighting against this.’’ And now

everybody does it, and somehow the grocery market world didn’t

come to an end when they started putting nutrition labels on food

and unit costs on their various items. Their consumers got happier

and their sales continued going on, and the costs were easily contained.

And I think that’s a demonstration of what could happen to providers if we say we’re going to start putting names on those dots.

Well, I don’t want my name on a dot that’s down in the Southwest

quadrant, I’d better change my practice or whatever, so that pretty

soon we’re all where we ought to be.

Representative Sanchez, do you have questions, comments for

this panel?

Representative Sanchez. No.

Chairman Bennett. In the spirit of these hearings, do you have

anything you want to say to each other? Again, I like to get the

panels going back and forth, and we had some back and forth in

the first panel. Do either of you, any of you, have a comment you’d

like to make to the other in the testimony that’s been presented

here?

Mr. Kemper. Yes, sir.

Related to the issue of getting a quality score for your doctor, one

of the facts of life is, not everybody can go to the best doctor. I

think what Carolyn Clancy was saying is that the real benefit of

these scoring systems is that it makes everybody want to move toward, at least to the center and maybe beyond. It’s kind of Lake

Woebegone, where we’d all be above average, if we could be.

The issue though for the consumer is, that they can make their

doctor a better doctor. Medical mistakes are going to happen, but

they don’t have to happen to you if you’re really tuned in to what

your care is about.

One of the challenges is that most of us already have our doctors,

and what we want to do is to work with that doctor so that we get

the best possible care for the problems that we have. We can do

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that if we have the right information and if we develop that

partnering relationship with the doctor. I think the doctors are

ready for that.

Chairman Bennett. Any other comment?

Dr. Cave. Yes. I think there’s really a two-pronged approach

that’s going on. First, the health plans aren’t sitting back and letting medical consumerism drive their role, and giving up. They’re

actually in the process, many of them, of developing or have developed what are called high performance networks. It’s those physicians that Dr. Milstein was talking about in the upper right hand

quadrant.

But these identified physicians are not all perfect there, either.

And there’s still the ability to improve the performance from the

efficiency and effectiveness side; and that’s where the health plans

are really looking for the consumer to help out.

It’s not that they’re depending on the consumer to do 100 percent

of the shopping themselves, the health plans are trying to continually improve their performance. But, there aren’t enough physicians if health plans only contracted with the top 10 percent for

physicians.

So even with tiered networks and high performance networks,

where a high performance network is based on evaluating physicians price and the volume of services, and then also quality or effectiveness. Not all physicians are perfect. Medical consumerism

will help to improve the performance.

But we still need to have the consumer to drive that enhancement as well.

Chairman Bennett. OK, thank you. You trigger another memory. At Intermountain Health Care, which is a major provider in

my State, they were looking at the question of infection following

operations. And at the time, the national standard—we’re talking

about information here—was 2 percent. If you had less than 2 percent of operations that developed an infection after, you were acceptable as the national standard.

And they decided to try to find out if they could do better than

that. And so they tried a number of things; trial and error, back

to the old days, foundation of medicine, ‘‘Try this and see if they

get cured.’’

And they discovered, if I have it right, if they gave the antibiotic

used to prevent infection within a certain time period after the

operation——

Mr. Kemper. Before, I believe.

Chairman Bennett. Before the operation, OK. Just by changing

the timing, they dropped the infection rate at their hospitals to .02

percent, and then made that standard throughout their whole organization.

Well, they were talking to me about that when we were having

a discussion about health care. I as a consumer, if I now were to

go to GW, or Georgetown, I want to know if they were following

that particular protocol. Now undoubtedly they are; that got out in

the world, you picked it up, you’re saying they’re not.

Mr. Kemper. Increasingly they are, but your chances are still

iffy.

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Chairman Bennett. OK. And this is one case where as a consumer, I could say, I could have an impact on what’s going to happen.

Mr. Kemper. Mr. Chairman, what I’d like to do is to prescribe

information to everybody scheduled for surgery to know that, so

they could talk with their doctor about it in advance of the surgery.

Chairman Bennett. OK, that’s where you’re coming from, and

I think that’s a wise thing to say.

Mr. Francis. If I may, Mr. Chairman, just to answer that, right

now something like this is being done, though not anywhere near

this personalized way, which in many cases may be far and away

the most effective. I’m not denigrating that idea at all. But the payfor-performance data on hospitals that Dr. Clancy mentioned earlier, that’s posted on the CMS Web site, and is already influencing

hospital behavior, happens to be largely composed of measures of

things hospitals should do that they often don’t do, like giving people an aspirin upon admission for a heart attack; and we’re seeing

already substantial changes in hospital behavior.

As a prudent consumer, back to your point about that, I wouldn’t

go in a hospital without taking a look at that Web site first.

Chairman Bennett. OK. Thank you very much. We appreciate

your contributions. The Committee is adjourned.

[Whereupon, at 11:45 a.m., Wednesday, May 10, 2006, the hearing was adjourned.]

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Submissions for the Record

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35

36

37

38

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Mr. Chairman, thank you for inviting me to join you for this important hearing

on ‘‘Arming Health Care Consumers with Better Information and Incentives.’’ Ensuring that consumers have the information and tools they need to make the health

care choices that are right for them is a high priority of this Administration and,

especially, of the Department of Health and Human Services (HHS). HHS is committed to ensuring that Americans can easily obtain understandable information

about the quality and price of health care. To realize this vision, Secretary Leavitt

has articulated four objectives: promote quality transparency, promote price transparency, facilitate the greater use of health information technology, and transform

health care so its incentives support a consumer-oriented—or patient focused—

health care system.

The Agency for Healthcare Research and Quality (AHRQ), which I direct, is a

science partner or the Centers for Medicare & Medicaid Services (CMS) and other

HHS agencies to advance these objectives. As a science partner, our job is to assure

that Department priorities are based on valid, unbiased, credible science. As consumers seek to play a more active role in decisions about their health and health

care, there are multiple opportunities for providing them with customized, scientific

information. My comments today will focus on consumer information intended to

help consumers make market and treatment decisions.

AHRQ’S EXPERIENCE WORKING WITH CONSUMERS: THREE LESSONS

I want to begin my testimony by emphasizing three lessons from our work with

consumers. First, informed choice only occurs when consumers can assess the

‘‘value’’ of a health care good or service, and consumers can only assess value when

they have both price and quality information. In fact, Secretary Leavitt has made

Health Care Value Incentives a HHS Priority.

He has stressed transparency for information on both quality and price because

both are essential to good decisionmaking. I should also note that while this factual

information informs consumer choice, only the consumer can make the most appropriate decisions after weighing this objective information against his or her preferences, tolerance for risk or uncertainty, unique circumstances, and assessment of

acceptable tradeoffs.

Second, transparency is critical for enhancing consumer choice and improving

competitiveness. My agency’s research on consumer choice demonstrates that where

the message comes from makes a profound difference. The increased availability of

information on health and health care means that consumers are increasingly skeptical of the impartiality of the information they receive. As my colleague CMS Administrator Mark McClellan has stated, such transparency is just as critical for physicians. Measurement is at the heart of public reporting and potential value-based

purchasing initiatives, but physicians and other providers need to know that these

measures are valid, appropriate, and widely accepted.

Finally, we must not assume that we can approach consumer choice as a ‘‘Field

of Dreams.’’ To paraphrase the movie’s tagline, we cannot assume that by providing

consumers with more information that they will necessarily use it. For many health

care consumers, the problem is not a lack of information. It is, Mr. Chairman, as

your hearing title suggests, a need for better information: information that is pulled

together so that alternatives can be easily compared, easily understood, and easily

acted upon. Unfortunately, it is not easy or simple to develop or present information

in these ways. But I am delighted to report we are making progress.

PROVIDING CONSUMERS WITH BETTER INFORMATION

Mr. Chairman, my testimony is organized around the two broad types of decisions

that consumers make. The first are marketplace decisions, in which consumers or

purchasers need to select a health plan, a clinician, a hospital, or a long-term care

facility. The second are decisions that patients and their caregivers must make

among alternative treatments and the management of their conditions. It also includes the types of benefit design decisions that health plans and purchasers make

so that their benefit packages support health care that works. For both types of consumer decisions, we need good evidence on what works and effective strategies to

ensure that this information is available and that it can be used or implemented.

MARKETPLACE DECISIONS

Some of the most basic and important marketplace decisions are: Which health

plan that my employer offers is right for me? How do I know which primary care

physicians, specialists, or health care facilities provide quality care? If my father

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needs a cardiac bypass procedure, how do I know which surgeon and which hospital

are the best?

For developing information for these types of decisions, the Consumer Reports approach to evaluating alternative goods or services is a helpful practical model. We

take on faith with Consumer Reports what we are now struggling with in health

care: that the measures address the most relevant factors, that the measures are

applied fairly and consistently, and that the results are portrayed in ways that are

valid and easily understood.

Measuring the Right Things Well. Mr. Chairman, I will address public reporting

and valuebased purchasing in a moment. But since neither can succeed unless we

measure the right things well, I want to provide three examples of the types of

measures that AHRQ develops and validates. AHRQ is a leader in this area. Many

of the reporting and value-based purchasing experiments across the country are relying, at least in part, on our work.

Over a decade ago, AHRQ responded to concerns that there was often a ‘‘disconnect’’ between the satisfaction surveys developed and released by health plans

and the experience of enrollees. Our response was not to develop a government-administered survey but to create a tool that would ensure a valid assessment of enrollees’ experience with their health plans and make it available for use by public

and private sector plans and purchasers. By consumer experience of care, I mean

such issues as whether patients received the right care, how quickly, were they

treated with respect, whether their caregivers communicated with them in ways

that they could understand, and whether they were invited to participate in decisionmaking regarding their care.

AHRQ developed the Consumer Assessment of Health Providers and Systems—

or CAHPS—survey, and it is now accepted as the industry standard. Today, over

123 million Americans, including Federal employees and military dependents, can

use CAHPS data to make decisions about their health plans. Mr. Chairman, you

and your staff have access to CAHPS data to make decisions about your Federal

Employees Health Benefits Program coverage. AHRQ does not collect CAHPS data

but provides technical assistance on how to communicate the findings.

As the health plan survey evolved into the industry standard, CMS and others

urged us to provide similar tools for the industry to use in other areas. We have

now developed, tested, and validated survey instruments for assessing children with

special health care needs, behavioral health, and learning more about why Medicare

beneficiaries disenroll from managed care plans. Over the next 18 months we will

complete development of survey instruments that will address additional settings,

populations, and types of services. As with our prior work, these will not be AHRQconducted surveys; these survey instruments will be in the public domain for use

by others. These include hospitals, Medicare prescription drug plans, in-center

hemodialysis, clinicians and group practices, Preferred Provider Organizations, and

recognizing that some nursing home residents are cognitively impaired, we are developing both a survey for residents and their families. CMS recently asked us to

work with them on development of a survey for home health care services.

To assist hospitals in their clinical quality improvement initiatives, AHRQ also

developed four sets of Quality Indicators. Inpatient Quality Indicators examine mortality, utilization, and volume for leading conditions and procedures. Patient Safety

Indicators identify post-operative complications and iatrogenic (physician-caused)

harms. Pediatric Quality Indicators are focused on those 17 years old and younger.

For systems, which include hospitals and primary care practices, Prevention Quality

Indicators measure ambulatory care sensitive conditions, i.e., conditions for which

a patient should rarely need to be admitted to the hospital if the primary care system is working properly. In the last 3 years we have seen an increasing trend by

States and others to use the Quality Indicators for public reporting, and at least

one CMS demonstration project is using them to test whether the quality of inpatient care for Medicare beneficiaries improves when financial incentives are provided.

AHRQ has also launched an exciting project to develop and validate efficiency

measures. Nearly every report promoting public reporting calls for the addition of

efficiency measures, but there are few, if any, efficiency measures for which there

is widespread support. This is a high priority for purchasers, but providers have expressed concerns. The provider community believes that efficiency measures should

support, and not undermine, our shared goal of encouraging appropriate high quality care. AHRQ agrees. For example, primary care practices should have incentives

to help those patients who have one or more chronic illnesses learn to effectively

manage their condition(s) in an efficient manner, in order to avoid risks to patient

health, and large costs from avoidable emergency room visits, hospitalizations, or

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complications. Appropriately constructed measures need to take such issues into account in determining efficiency.

We already are consulting all of the interested parties and leading experts and

reviewing existing knowledge regarding efficiency measures. We expect to complete

development and evaluation of efficiency measures by the end of this year. This will

be an important addition to public and private sector initiatives because it will enable them to do what they cannot do now: compare the efficiency of their practice

or their facility with the competition.

Public Reporting. A number of public reporting initiatives are drawing on our

work. Of the States that have public reporting of health quality information, at least

8 States are using one or more sets of Quality Indicators that my agency developed.

The states are: Colorado, Florida, Massachusetts, New York, Oregon, Texas, New

York, and Utah.

To provide actual examples of reports of quality information created by a number

of organizations, AHRQ will soon make available on our Web site,

www.TalkingQuality.gov, a Report Card Compendium, a directory of over 200

sources of comparative information on the quality of health plans and providers.

This directory provides in a single location an easily searchable data base of report

examples, which will allow report developers to explore and assess different approaches to formatting information, displaying data, and explaining why quality information is important to consumers and other purchasers. Since it also provides

(with their permission) information on the organization and individuals who developed each report, the Compendium will allow users to locate and network with one

another concerning new strategies and ideas for report development. This is critical

because information relating to how these reports cards were developed, how they

were disseminated and used, and how they were received is rarely published. The

Report Card Compendium includes reports on health plans, hospitals, medical

groups/clinics, individual physicians, managed behavioral health organizations,

nursing homes, home health agencies, and dialysis facilities.

I am delighted to report that the health care industry and health professional societies have stepped up to the plate to help develop public reporting initiatives. The

Ambulatory Care Quality Alliance (AQA) is a consortium of private sector groups

that I chair. Eighteen months ago, the American Academy of Family Physicians, the

American College of Physicians, and America’s Health Insurance Plans asked AHRQ

to serve as a neutral convener for this collaborative effort to determine how to promote uniformity in quality measurement and reporting in outpatient settings across

public and private payers. Substantial physician leadership in AQA now includes

the American Medical Association and many major medical societies.

In addition to enthusiasm for identifying common measures to promote uniformity

and facilitate improvement efforts, physicians are interested in their validity and

use. Specifically, physicians want assurances: that measures are based on the best

science and will be updated as the science changes; that we will address unanticipated consequences such as reports that discourage physicians from seeing the most

difficult patients; and that any incentives will be fair and equitable. Not surprisingly, physicians are more willing to trust measures that are developed by neutral

scientific parties.

AHRQ and CMS are also active participants and partners in the Hospital Quality

Alliance, a public-private partnership that is committed to developing and making

available standardized measures of hospital quality. Over the last 3 years, the Alliance has built a system of quality reporting for hospitals. The result is the HHS

Web site, Hospital Compare (www.hospitalcompare.hhs.gov ), which provides easily

accessible comparative quality information. We are very pleased that the Hospital

Quality Alliance will use the Hospital CAHPS survey, which we have developed for

CMS to provide information on consumers’ experiences with their hospital care. The

survey is now being field tested. We are especially pleased that the Alliance has

publicly stated that HCAHPS, ‘‘represents a quantum leap toward the goal of consumer-directed health care decisionmaking.’’

Value-Based Purchasing. Value-based purchasing is the concept of rewarding providers based upon their quality and efficiency. There are, of course, financial incentives inherent in all payment systems, so the issue is not incentives versus no incentives. As Secretary Leavitt points out, the challenge is that existing incentives are

often poorly aligned; all too often they do not support our goals of improving efficiency and promoting quality.

AHRQ is working with CMS, the Blue Cross plans, the RWJ Rewarding Quality

Initiative, and others to provide technical assistance and to assist in the evaluation

of the value-based purchasing experiments now underway. Some of these experiments, such as the CMS Premier quality incentive demonstration, are using our

Quality Indicators as part of their measure sets.

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As interest began to grow in value-based purchasing initiatives, AHRQ undertook

a synthesis of the existing literature. While the evidence was not conclusive when

we released our report last year, the gaps in evidence are beginning to fill in. The

evidence shows that measurable improvements have been seen in large-scale tests

that reward increased use of preventive screenings and other processes that improve

quality and safety. We developed Pay for Performance: A Decision Guide for Purchasers to Consider, which we released last week. These efforts underscore the importance of understanding how value-based purchasing programs are designed, so

that all participants understand the rules.

TREATMENT DECISIONS

Let me now turn to treatment decisions.

Understanding What Works and For Whom. As I noted, one of AHRQ’s basic activities is to understand what treatments and interventions work and do not work.

There are three reasons why AHRQ’s work is critical in assessing health care’s

state-of-the-art. First, with our increasing investment in basic and biomedical research, there has been an exponential increase in the number of scientific findings,

and a similar increase in the proportion of clinical decisions where there are two

or more treatment options. This makes it increasingly difficult for physicians to

keep abreast of the literature and put the latest findings into perspective. Second,

research shows that that there is a 17-year time lag between discovery and when

most Americans benefit from that discovery. AHRQ and other HHS agencies are

committed to reducing that time lag. Finally, academia rewards original research,

not synthesis of existing knowledge. So synthesis of our exploding knowledge base

is the exception, rather than the rule.

Section 1013 of the Medicare Modernization Act (MMA) significantly expanded

AHRQ’s ability to develop state-of-the-art evidence syntheses for the conditions and

interventions of significance for Medicare, Medicaid, and State Children’s Health Insurance Programs. To respond to the MMA mandate, we established the Effective

Health Care Program to provide current, unbiased evidence about the comparative

effectiveness of different health care interventions. Where the Effective Health Care

Program breaks new ground is how we undertake these syntheses: the process is

transparent, they will be routinely updated as warranted by new discoveries, and

consumer-friendly versions will be produced of every finding.

Our initial report compared the effectiveness of treatments for gastroesophageal

reflux disease (GERD). This report is a good example of the opportunities for greater

patient involvement in decisionmaking. The report found that patients who had surgery to treat GERD did so in the hope that they would no longer require ongoing

medication. Yet despite the costs and risks, nearly two-thirds needed to continue

taking medication. For patients receiving pharmaceutical therapy, there was a large

difference in the cost, but not in the effectiveness, of the different classes of medications.

This information is already being used by purchasers to improve the quality of

their health benefit plans. For example, the National Business Group on Health, in

its work supporting the National Committee on Evidence-Based Benefit Design, has

summarized the information for purchasers and identified benefit design options for

health benefits managers.

Translating Knowledge Effectively. Communicating information to patients and

consumers about medical decisionmaking can be daunting. The subject matter is

often complex; statistical odds or risks of developing a disease or complication are

extremely difficult to communicate; and the end result, all too often, is misunderstanding. It can often be difficult to reach consumers who are ‘‘health illiterate’’ or

who have reached a saturation point with health care information.

A member of our National Advisory Council, Judy Hibbard, a professor in the

University of Oregon’s Department of Planning, Public Policy, and Management, is

an expert in the field of patient and consumer communication. We have relied on

her insights in developing many of our products. She has identified three major factors that affect whether a consumer uses this type of information:

• Consumers need to understand the importance of the information to their lives.

The information must be understandable, salient, and framed in ways that consumers can easily grasp.

• Consumers often need specific skills to understand and use the information. For

example, health literacy and the ability to understand numerical information like

the odds of developing a disease or complication are important.

• Finally, motivation of consumers to use the information is critical. In fact, a

high level of motivation can compensate for a low level of these skills.

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We have come to appreciate that the task is not merely translating a document

into a specific reading level. What is required is a better understanding of the audience for the information: what will make specific health messages meaningful to

those who need to act upon them. We also need to make the action steps concrete.

We are beginning to address these challenges. We are structuring the recommendations of the U.S. Preventive Services Task Force, which AHRQ sponsors,

so they can be used digitally. By the end of the year, we will have a web-based

interactive program where an individual can type in his or her age, sex, or other

relevant information and understand more clearly what services the Task Force recommends they receive, and how often.

Interestingly, the issue of clarifying action steps extends to clinicians. As decision

support systems—whether in Personal Digital Assistants or desktop computers—become more pervasive, we are discovering that these programs do not easily accommodate findings that are framed in terms of factors that physicians need to consider. The information must be reformatted to provide specific action steps that

match the demographics of the patient being treated.

In the short term, we are restructuring our recent findings so that they can be

more easily incorporated into decision support systems. In the long term, it is clearly more efficient to incorporate this focus into our work from the outset. So we have

begun to change our process for developing evidence syntheses so that the results

can readily be used by patients interactively on the Web or by caregivers in decision

support systems. Our first prototype is an interactive data base of articles on the

costs and benefits of health IT; we will now apply this approach to the work of the

U.S. Preventive Services Task Force. Over the next 3 years, we expect this approach

will become an integral part of all of our synthesis work. This should make an important contribution to reducing the 17-year time lag between discovery and widespread adoption.

Patients with Chronic Illness. A substantial proportion of health care expenditures

are focused on caring for individuals with multiple chronic illnesses. Judy Hibbard

is also helping us to think through the challenge of motivating chronically ill patients to take an active role in the management of their care. While most health

plans have developed or incorporated disease management strategies into their programs, this is only the first step in what is a much longer process. We sometimes

forget the often overwhelming myriad of decisions and actions that a chronic care

patient must take. Combined with the difficulties of navigating a highly complex delivery system, it is not surprising that few patients actually try. When you consider

that fewer than 50 percent of patients actually quit smoking after a heart attack—

an event that should motivate even the most intransigent smoker—it seems less

surprising that it can be difficult to motivate chronic care patients to take an active

role in managing their care and their lifestyle. AHRQ will increasingly focus attention on how we can effectively engage patients with chronic illnesses in their care.

CONCLUSION

Mr. Chairman, in closing, I believe that we are making significant progress toward our shared goal of enhancing patient choice. The industry deserves great credit for creating the Hospital Quality Alliance and Ambulatory Care Quality Alliance

to advance public reporting. Similarly, the leadership of Dr. Mark McClellan and

his team at CMS has played a critical role in the progress we have made to date.

As I noted during my opening remarks, we need to keep our eye on the ball: ensuring that all of us—as consumers and taxpayers—are getting real value for our

health care dollars. Second, we need to recognize that all of these efforts succeed

or fail based on the transparency of the process. The more transparent we make

measuring the right thing well, the more likely that health care providers and consumers will accept the results. Third, we need to be realistic about the challenges

of getting consumers to use this information in making health care decisions. This

will not occur magically. We need to focus on how to best engage consumers more

effectively in their health care decisions.

My closing observation is that we must not overlook the significant response of

the provider community to public reporting already. Health care systems are increasingly looking at how they can redesign their systems and processes for quality

and value. We are supporting or providing technical assistance for a number of exciting projects intended to help build the evidence base for how systems can improve. For example, we are providing support to a public system’s effort to apply

the automotive concept of ‘‘lean’’ processes to health care, another project to more

effectively measure waste, and a large collaborative effort to reduce avoidable injuries, in a first step toward developing ‘‘fail safe’’ hospitals. As we explore public reVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00047 Fmt 6601 Sfmt 6621 C:\DOCS\29936.TXT DianeA PsN: DianeA
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porting and value-based purchasing, interest in redesign for efficiency, quality, effectiveness, and safety will only increase.

By serving as a ‘‘science partner’’ for these efforts, we will ensure that the lessons

learned from these cutting edge initiatives will be rapidly shared throughout the

health care industry. In fact, we will launch a web-based Innovations Clearinghouse

later this year to serve as a platform for rapid dissemination. We also hope to make

additional contributions through the types of system redesign projects I just mentioned, our continuing work in patient safety, and our support for the Administration’s broader health IT agenda.

Mr. Chairman, this concludes my prepared statement. I will be delighted to answer questions.

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1KE Thorpe, ‘‘The Rise in health care spending and what to do about it’’ Health Affairs, Nov/

Dec 2005.

PREPARED STATEMENT OF MICHAEL D. PARKINSON, M.D., MPH, EXECUTIVE VICE

PRESIDENT AND CHIEF HEALTH AND MEDICAL OFFICER, LUMENOS, INC., ALEXANDRIA, VIRGINIA

Mr. Chairman and members of the Committee, thank you for the opportunity to

testify today regarding health care information for consumers. My name is Michael

D. Parkinson, and I am Executive Vice President and Chief Health and Medical Officer for Lumenos, a pioneer in consumer-driven health care and a subsidiary of

WellPoint, the largest publicly traded commercial health benefits company in terms

of membership in the United States. I have long been concerned about the health,

productivity and economic impact of health care costs on employers and on our nation in general, and am honored to share my thoughts with the Committee today.

PERSPECTIVE

My comments reflect my experience as a physician, former leader in the Air Force

and Military Health System and as the head of our health improvement and clinical

strategy at Lumenos. My clinical training and practice experience is in primary care

and preventive medicine/public health. My comments are based on Lumenos experience with self-insured employers (generally 200 employees or more) and direct feedback from consumers and patients enrolled in either Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA) plan designs.

I believe, and an increasing body of evidence supports, that consumer-driven

health care, both in its current form and as it rapidly evolves and grows, has great

potential to improve the health of patients and consumers, the effectiveness of medical care and the efficiency of the health care system. However, better consumer engagement, more patient-centered care, greater ownership of resources expended on

healthcare and improved quality/cost information will have predictable consequences

on the health care system. These consequences and system deficiencies should be

anticipated and addressed.

ADDRESSING THE TRUE DRIVERS OF EXCESSIVE HEALTH CARE COSTS

A properly designed consumer-driven health care program assists and supports

the consumer/patient to understand and address the primary drivers of poor health

and excessive medical costs, which are personal health behaviors and ineffective and

inefficient health care. The flexibility of account-based benefit designs to promote,

educate, incentivize and financially reward improved health behaviors, preventive

care and evidence-based medical practices is unique. A recent study by leading

health care economist Ken Thorpe concluded that 63 percent of the rise in real U.S.

per capita health spending is due to the increasing prevalence of health risk factors

which are medically treated rather than prevented or improved through health promotion and disease prevention strategies.1

The inherent ‘‘rollover’’ of funds in account-based designs from year-to-year reinforces improved health behaviors, appropriate self-care and better care management

for chronic conditions. Prevention and evidence-based care particularly for those

with chronic disease are clearly prioritized and financially rewarded. Both our HRA

and HSA plans cover evidence-based preventive services at 100 percent without

copays or deductibles. In addition, 60 percent of Lumenos employers cover tobacco

cessation and 30 percent cover weight management as preventive care services at

100 percent.

Consumer-driven models have the power to incent three major actions by all individuals and patients that improve health, medical care and outcomes. Specifically,

each of us needs to understand our health status (our risk factors and current medical conditions), agree to participate in a program or activity (risk reduction program

or ‘‘disease management’’) if we have significant risk factors or chronic disease and

understand and master our care, in partnership with our physician to optimize outcomes and care.

At Lumenos, we created an integrated and incentivized health improvement strategy, targeted at major drivers of excessive health care costs, which meets the needs

of the full range of health risk and users, with a particular emphasis on those with

chronic disease and high utilization.

INFORMATION, TOOLS AND SUPPORT SERVICES AVAILABLE TODAY

Lumenos and its partners provide a comprehensive array of information, tools and

personal support services for consumers to understand and better engage in their

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2McKinsey & Company, ‘‘Consumer-directed health plan report—early evidence is promising’’

acessed at www.mckinsey.com/clientservice/payorprovider/Health-Plan-Report.pdf. 2005

health and health care decisions. We have found that web-based information is an

important enabler of better decisionmaking, but not the sole or most important factor in assisting consumers and patients. The organization, timing, linkage, ability

to access at the point-of-decision and content delivery method are important as well.

Communication is required to reinforce the use of the health, clinical, and quality

and cost information. Ideally this communication would occur initially and repeatedly throughout the year using multiple modalities. In both formal surveys and in

face-to-face focus groups with hundreds of Lumenos consumers, members are surprised and appreciative of the wealth of organized information and support available

to them. We have found that consumers are seeking more accurate and actionable

information over time. Of interest, the consensus answer to the open-ended question, ‘‘What could Lumenos do better for you?’’ is to create a means to connect with

other patients with similar medical conditions or with consumers with shared health

interests.

In general, consumers and employers are highly satisfied with the current information, tools and support that Lumenos provides. Year-over-year, both employers

and consumers are seeking more specific and actionable information about the cost,

quality (and necessity) of medical services. Communication and reinforcement of

why information is important, how to access it, how to engage to better manage

one’s care (e.g., health coaching) and how to use it in concert with one’s physician

are likely more important than the availability, or in some cases, the specificity and

accuracy of the data itself.

HOW IT’S WORKING FOR EMPLOYERS AND HEALTH SYSTEMS

In general, Lumenos’ experience for both employers who adopt ‘‘account-based

plans’’ as a full replacement strategy and for those who offer them on an optional

basis reflects the findings of the McKinsey study.2 Increases in preventive care, decreases in the cost of prescription drugs, and decreases in outpatient and ER visits

lead to significant employer health care cost trend mitigation relative to other benefit designs. Particularly when accompanied by financial incentives, patients with

chronic illness become engaged either through health risk assessments or direct selfreferral to a health coach. Unlike the McKinsey study, which showed low satisfaction with the information and support provided to consumers, Lumenos has consistently experienced high satisfaction with both information/support/communications

and re-enrollment.

One of my personal goals, and a major reason for the American Medical Association’s support for Health Savings Accounts and consumer-driven care in general, is

to better support patient-physician relationships. Consumer-driven models have two

inherent value propositions for providers: improved clinical care and outcomes

through the better informed and engaged patients and reduced administrative burdens relative to ‘‘traditional’’ care.

In addition to providing care, health systems and hospitals are also employers

purchasing and providing health care services for their own employees. These employees often have among the highest risk-adjusted health care costs of any industry. Lumenos has suggested, and some leading health systems who are now full replacement clients agree, that consumer-driven health care has great potential not

only to appropriately mitigate excessive health care costs, but also to catalyze clinical and business practice innovation.

Employers, as well as a growing number of health care systems, are adopting consumer-driven health plans on either an optional or full replacement basis. Health

care cost mitigation, increases in preventive care and in engagement by those with

chronic disease can be accompanied by high enrollee and employer satisfaction when

information, tools and support are designed, implemented, communicated and reinforced.

IMPROVING APPROPRIATE CONSUMER AND PHYSICIAN DECISION MAKING

There is a growing awareness and tailoring of information, tools and support to

address the preference and price sensitivities of medical care. If the health of individuals, the care of physicians and the performance of the health care system are

to improve, then the behavior of each entity needs to be better understood and addressed using approaches which predispose, enable and reinforce desired outcomes.

The creation of a ‘‘health care marketplace’’ with improved information on cost and

quality will impact health care decisions and players differentially and will likely

occur incrementally, which, in my opinion, is desirable. At Lumenos, we have delibVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00067 Fmt 6601 Sfmt 6621 C:\DOCS\29936.TXT DianeA PsN: DianeA
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erately built an incremental approach to quality and information collection and dissemination.

A health care typology that has been useful in shaping our information and support strategy includes health risk factor identification, maintenance and reduction,

clinical preventive services, acute/episodic care, chronic disease management, surgical decision support, emergency/catastrophic care and end of life needs. Similarly

health care can be parsed by care that is proven clinically effective, care that is preference-sensitive and care that has shown to be ‘‘supply sensitive’’ (e.g., wide variations in practice typically associated with oversupply of providers or facilities relative to other geographic areas). Provider-specific issues that relate to care and business practices can also be evaluated and impacted through a consumer-driven

‘‘prism’’ as noted previously.

Making the right thing to do clinically also be the easy thing to do will require

realignment of thinking, infrastructure and incentives among the consumer/patient,

provider and ‘‘the system.’’ Better information and tools for quality and costs should

be informed by a more specific understanding of how patients use or could use such

information and support across the spectrum of the different health care needs and

in different geographic and economically over- or undersupplied provider markets.

WHAT’S MISSING: STANDARDIZED CONSUMER-FOCUSED TOOLS AND INFORMATION FOR

ENGAGEMENT

Patients with serious medical conditions or chronic illness want to know whether

other patients with the same condition understand their disease, are able to improve the likelihood of a favorable outcome and are they treated humanely in the

process. Currently available information is not adequate to answer this question.

Furthermore, the medical literature supports that knowledge, outcomes and even

more judicious use of resources are more likely to be acquired in the context of a

healthy physician patient relationship with shared decisionmaking.

New performance indicators of quality around consumer acquisition of competencies by physicians, medical groups or health systems could complement existing, administrative (claims-based) measures of quality and efficiency. For example,

the disease specific, evidence-based guidelines developed by the Institute of Medicine would be useful for consumers if translated into language designed for lay people. What for example, does the newly diagnosed colon cancer patient need to know,

do and act upon in concert with her physician? What knowledge, competencies and

proposed actions are appropriate for a patient with diabetes in patient terms, which

reflects the evidence-based guidelines promoted to patients and measured by accreditation and other quality efforts?

A standardized, generic patient satisfaction questionnaire, or ‘‘ambulatory

HCAPS’’, that includes the major elements of an effective shared decisionmaking relationship (i.e., ‘‘Does your physician offer and discuss options, share the pros and

cons, consider your preferences, etc.’’) would also be very useful to consumers. Aggregated standardized survey information on the physician’s practice style would be

most valuable to consumers to help them determine which provider or group is likely to improve their engagement, care skills and health outcomes.

Quality efforts to date have concentrated on plan and provider measurements

from administrative data rather than on consumer and patient knowledge, competencies and decisionmaking arising from information access and a partnering,

shared-decision making patient-physician relationship. Efforts to define both generic

and diseasespecific qualities associated with high quality, high value and safe medical practices which can then result in standardized patient surveys could be of

great value in increasing the effective engagement of patients, and over time, improving the ‘‘marketplace’’ of patient-relevant quality information for provider

choice.

WHAT WE NEED TO DO BETTER: QUALITY AND COST INFORMATION

Consumers spending ‘‘their own money’’ for healthcare are asking for more information, access and convenience. Providing estimated expenses for episodes of care

will become progressively more granular and transparent pricing by providers and

facilities will increase. Making sure that quality is measured consistently will be important in order for consumers to compare ‘‘value’’ as they do currently for prescription drugs. The anticipated Federal release of physician and hospital reimbursement

for selected Medicare services and the requirement for transparency prices of a core

set of services in order to bid on Federal employee health benefits programs will

undoubtedly impact the direction and pace of the provider and payor’s approach to

cost transparency.

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3 American College of Physicians Position Paper, ‘‘Reform of the dysfunctional healthcare payment and delivery system.’’ Accessed at http://www.acponline.org/college/pressroom/as06/dysfunctional-payment.pdf. 2006.

A promising approach is the NCQA Physician Recognition program, which allows

physicians to volunteer and be reviewed for compliance with evidence-based guidelines for diabetes and heart disease. Additional recognition is awarded for implementing an electronic medical record or system for tracking and improving evidencebased care and patient outcomes. Lumenos displays this information today to help

inform patients about those physicians interested in and evaluated for these chronic

conditions.

ACCELERATING INNOVATION IN CARE DELIVERY AND FINANCING

Consumers, patients and health systems deploying consumer-driven care for their

own employees and physicians are likely to embrace value-added innovations and

avoid lower value services or practices. For example, group visits for chronic disease

management, reimburseable e-visits for established patient-physician relationships,

and behavior change and disease management programs have traditionally not been

demanded by consumers/patients or built by physicians or health systems. Consumers paying ‘‘with their own money’’ and employers, trying to maximize the productivity of their work force, are more likely to see value in new ways to connect

with providers and health information outside the too often ineffective, rushed, brief

face-to-face physician visit. The major health care systems that Lumenos serves are

building these capabilities largely in response to the consumer-driven market both

internally, for their own employees, and externally, for the patients and employers

they serve. Some hospitals are now providing enhanced information to inform patients about their actual out-of-pocket costs and/or total price of selected procedures

and treatments (e.g., OB, outpatient surgery, gastroenterology services, rehab, etc.).

Primary care providers, already concerned with declining reimbursements for primary care and chronic disease management, are now seeing the rapid expansion of

acute care clinics in retail and drug stores with transparent, all-inclusive, reasonable pricing for acute or routine conditions. Chronic disease patients who are looking for consistent, compassionate, evidence-based service and expertise may be an

important lever to help drive the reinvigoration of comprehensive, longitudinal primary care and the creation of an ‘‘advanced medical home.’’ 3 Surgical hospitals and

new centers or systems for specialized chronic disease management may also arise

and be welcomed and sought by more engaged consumers.

Consumer-driven care will likely accelerate clinical and business practice innovation as patients better understand their options and seek greater assistance, convenience and value for their time and money. The provider community is showing evidence of welcoming such innovation and, in some instances, is calling for wholesale

reform of current clinical, delivery and financial models. Publicizing the value of

these innovations and translating them into meaningful health and cost advantages

will further accelerate their dissemination and adoption.

ACCELERATION OF HEALTH INFORMATION TECHNOLOGY

Consumers are generally not aware of the health or cost impact of seeing a physician or being admitted to a hospital or facility that does not deploy state-of-the-art

health information technology. Consumer and patient focused messages need to be

developed and disseminated to create market demand for the safer, more effective

and efficient care that electronic/personal health and medical records, electronic prescribing and hospital physician order entry can provide. Creating a marketplace

with accurate information about the health information technology status of providers is important and evolving. However, health information and interoperability

standards are needed urgently to facilitate both rapid adoption and lower price

points for providers, particularly those in smaller practices, to acquire needed technology.

Consumers and patients will increasingly come to understand the safety, health

and cost value of health information technology from their providers. This could become a key market differentiator and ‘‘quality/cost metric’’ in the near term. Acceleration of technology standards for information and interoperability is critical and

urgently needed to promote widespread dissemination and decrease price.

MAJOR HEALTH CARE ISSUES TO BE ANTICIPATED AND POTENTIALLY ADDRESSED

There are numerous major healthcare issues, needs and practices that will be

highlighted and catalyzed by the growth of consumer-driven health plans, consumerism and greater transparency in cost and quality.

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4M Porter, ‘‘Fixing competition in US health care,’’ Harvard Business Review, June 2004.

(1) Need for improved, standardized assessment of therapies and technologies.

Currently the military, VA, health plans, foundations and consumer groups all attempt to assess the health and economic marginal value of new treatments and procedures without any consistent methodology and with inefficient use of resources;

(2) Malpractice reform to decrease unnecessary, defensive medical services;

3) Shifted and hidden costs for graduate medical education. Who should pay for

the education of a qualified health professional workforce?;

(4) A discussion of an optimal mix of market-based versus public sector functions

of health care; and

(5) Statutory and regulatory reforms to foster an appropriate health care marketplace. Michael Porter’s recent characterization of a health care marketplace and

what would be needed to create one is a useful framework for what consumers, providers and payors all should consider, describe and work toward.4

As consumer information on quality and costs of services becomes more transparent, cost-shifting, unexplainable cost differentials and inefficient clinical and

business practices will become more apparent. Health policy and societal questions

which have been known and discussed for years will become more visible to all

stakeholders and hard decisions will likely have to be made about the appropriate

role of the private, market sector and public sector in financing and delivering

health care.

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68

Mr. Chairman, Mr. Vice Chairman and members of the Committee, thank you for

the invitation to testify about the next generation of consumer health information

tools. My name is Paul B. Ginsburg, and I am an economist and president of the

Center for Studying Health System Change (HSC). HSC is an independent, nonpartisan health policy research organization funded principally by The Robert Wood

Johnson Foundation and affiliated with Mathematica Policy Research.

HSC’s main research tool is the Community Tracking Study, which consists of national surveys of households and physicians in 60 nationally representatives communities across the country and intensive site visits to 12 of these communities. We

also monitor secondary data and general health system trends. Our goal is to provide Members of Congress and other policymakers with objective and timely research on developments in health care markets and their impacts on people. Our

various research and communication activities may be found on our Web site at

www.hschange.org.

My testimony today will make three points:

• Engaging consumers to be more aware of cost and quality issues in health care

has the potential to increase the value of health care not only for individual patients

but also for the U.S. population as a whole. But some are overselling the magnitude

of this potential. And achieving this potential will require investment in collecting

and translating meaningful consumer price and quality information and encouraging innovative benefit structures. And even if this potential is reached, it will not

be the hoped-for silver bullet that solves the health care cost crisis in this country.

• For most consumers who are insured, their health plan has long been their

most powerful asset in shopping for lower prices, and insurers have the potential

to become even more effective agents as they develop more sophisticated benefit

structures and information tools to support consumers in choosing effective treatments from higher-quality, lowercost providers.

• There are practical limitations on the ability and willingness of consumers to

become savvy health care shoppers. Markets for self-pay health services, such as

LASIK, are often cited as a model for consumer engagement, but our research indicates that consumers’ experiences with self-pay markets have been romanticized

and do not offer much encouragement as a roadmap for effective health care shopping without either a large role for insurers or regulation.

The current policy interest in price and quality transparency is essentially the

second stage of the evolution of consumer-driven health care. The first stage was

financial incentives for consumers in the form of greater cost sharing—high

deductibles and coinsurance. Tax-sheltered savings accounts—health savings accounts (HSAs) and health reimbursement arrangements (HRAs)—may be useful

tools to make increased cost sharing more palatable to consumers, but they do not

reinforce consumer incentives to economize on health care—they actually temper

them.

Now industry and policymakers are focusing on the tools needed by consumers to

make informed decisions on reducing the costs of their care or ascertaining the quality of care. As insurers compete vigorously to sell consumer-driven products, they

seek to differentiate their products on the basis of the tools offered to consumers

to compare price and quality across providers. Policy makers are interested in exploring government’s role in fostering greater costconsciousness and a more favorable environment for consumers to make informed choices about health care services.

Traditionally, health insurance has either removed or sharply diluted consumer

incentives to consider price in choosing a provider or treatment strategy. It is difficult for consumers to get price and quality information from providers—traditionally they have shown little interest in competing for patients on this basis. Likewise,

there is little information available to help patients examine the effectiveness of

treatment alternatives. Lack of quality information understandably makes consumers reluctant to choose a provider solely on the basis of a lower price. It is one

thing to realize after the fact that you chose a poor-quality provider when price is

not an issue but another to have that result from choosing on the basis of price.

Similarly, lack of information on effectiveness of treatment alternatives makes consumers more reluctant to consider price in the choice of treatment. Consumer difficulties in weighing alternative treatment approaches reflects not only difficulties

in accessing what is known about medical effectiveness but also a failure of government to make adequate investments in effectiveness research. Even with better information on price, quality and effectiveness of different treatments, there are

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1 An HSC study documented how few consumers seek health information, especially those

with low education levels. See Tu, Ha, and J. Lee Hargraves, Issue Brief No. 61, Seeking Health

Care Information: Most Consumers Still on the Sidelines, Center for Studying Health System

Change, Washington, DC (2003).

strong indications that many consumers are unable and/or unwilling to seek health

information from sources other than their physicians.1

Unfortunately, much of the recent policy discussion about price and quality transparency downplays the complexity of decisions about medical care and the dependence of consumers on physicians for guidance about what services are appropriate.

It also ignores the role of managed care plans as agents for consumers (and purchasers of health insurance, such as employers) in shopping for lower prices.

POTENTIAL FOR EFFECTIVE PRICE SHOPPING

If you define effective shopping as obtaining better value for money spent, then

consumers do have the potential to be more effective shoppers for health care services. There are direct and indirect benefits of choosing providers that offer better

value. The direct benefits are simply the cost savings, for example, of choosing the

lower-cost of two providers of comparable quality.

But the indirect benefits are potentially more important. If enough consumers become active in comparing price and quality, this will lead to market pressure on providers to improve their performance on both cost and quality dimensions. Providers

that measure up poorly on the value dimension will lose market share and will be

motivated to revamp their operations to remain viable. Our market economy offers

many examples of competitors responding to loss of market share by making difficult changes and regaining their edge, and examples are starting to appear in

health care as well. The gains from providers improving their operations will accrue

broadly to the health care system.

But we need to be realistic about the magnitudes of potential gains from more

effective shopping by consumers. For one thing, a large portion of medical care may

be beyond the reach of patient financial incentives. Most patients who are hospitalized will not be subject to the financial incentives of either a consumer-driven health

plan or a more traditional plan with extensive patient cost sharing. They will have

exceeded their annual deductible and often the maximum on out-of-pocket spending.

Recall that in any year, 10 percent of people account for 70 percent of health spending, and most of them will not be subject to financial incentives to economize.

When services are covered by health insurance, the value of price information to

consumers depends a great deal on the type of benefit structure. For example, if the

consumer has to pay $15 for a physician visit or $100 per day in the hospital, then

information on the price for these services is not relevant. If the consumer pays 20

percent of the bill, price information is more relevant, but still the consumer gets

only 20 percent of any savings from using lower-priced providers. And the savings

to the consumer end once limits on out-of-pocket spending are reached.

In addition to those with the largest expenses not being subject to financial incentives, much care does not lend itself to effective shopping. Many patients’ health

care needs are too urgent to price shop or compare quality. Some illnesses are so

complex that significant diagnostic resources are needed before determining treatment alternatives. By this time, the patient is unlikely to consider shopping for a

different provider. We need to build on the fact that even under scenarios in which

consumers play a much more active role in their care than is the norm today, that

for those who are sickest, who account for the lion’s share of health care spending,

physicians will be playing a major role in directing their care. So choosing a physician—or a medical practice—may well be the most important consumer choice.

The significant role that physicians play in patients’ treatment choices means that

advocates of consumerism should focus on the importance of choosing a physician

before the onset of major medical problems. Some of these constraints could be addressed by consumers’ committing themselves, either formally or informally, to providers. Many consumers have chosen a primary care physician as their initial point

of contact for medical problems that may arise. Patients served by a multi-specialty

group practice informally commit themselves to this group of specialists—and the

hospitals that they practice in—as well. So shopping has been done in advance and

can be applied to new medical problems that require urgent care. This is a key concept behind the high-performance networks that are being developed by some large

insurers.

When consumers choose treatment strategies, the absence of neutral financial incentives for providers is a serious problem. The most typical situation today is one

where the provider gets paid on a fee-for-service basis, so the incentive is to recVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00073 Fmt 6601 Sfmt 6621 C:\DOCS\29936.TXT DianeA PsN: DianeA
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2 In testimony before the U.S. House of Representatives, Committee on Energy and Commerce,

Subcommittee on Health, on March 15, 2006, I explain how publication of price agreements between hospitals and insurers is likely to result in higher prices for hospital care. The testimony

can be accessed at http://energycommerce.house.gov/108/Hearings/03152006hearing1813/

Ginsburg2770.htm.

ommend more services, especially those that have higher unit profitability. Increasingly, physicians have an ownership interest in services, such as imaging, beyond

their usual professional services, creating an additional conflict between physicians’

interests and those of their patients.

INSURER ROLE

Much of the policy discussion about price transparency has neglected the important role that insurers play as agents for consumers and purchasers of health insurance in obtaining favorable prices from providers. Even though managed care plans

have lost clout in negotiating with providers in recent years, they still obtain sharply discounted prices from contracted providers. Indeed, in my own experience as a

consumer, I often find that the discounts obtained for the preferred provider organization (PPO) network for routine physician, laboratory and imaging services are

worth more to me than the payments by the insurer.

Insurers are in a strong position to further support their enrollees who have significant financial incentives, especially those in consumer-driven products. Insurers

have the ability to analyze complex data and present it to consumers in more understandable ways. For example, they can analyze data on costs and quality of care

in a specialty and then offer their enrollees a simple incentive to choose providers

in the high-performance network. Insurers also have the potential to innovate in

benefit design to further support effective shopping by consumers, such as increasing cost sharing for services that are more discretionary and reducing cost sharing

for services that research shows are highly effective.

Insurers certainly are motivated to support effective price shopping by their enrollees. Employers who are moving cautiously to offer consumer-driven plans want

to choose products that offer useful tools to inform enrollees about provider price

and quality. When enrollees become more sensitive to price differences among providers, this increases health plan bargaining power with providers. Negotiating

lower rates further improves a health plan’s competitive position. One thing that insurers could do that they are not doing today is to assist enrollees in making choices

between network providers and those outside of the network by providing data on

likely out-of-pocket costs for using non-network providers.

Some health plans are now experimenting with ways to communicate to their enrollees the fact that certain hospitals have particularly high or low negotiated fees,

without violating their agreements to hospitals and their desire to maintain the confidentiality of their price negotiations.2 For example, Blue Cross of California, which

tends to rely heavily on coinsurance in its benefit structures, has been posting ratings of the costliness of hospitals for PPO enrollees. It follows the approach of Zagat

guides to restaurants, where ‘‘$’’ is assigned to the lowest cost hospitals and ‘‘$$$$’’

is assigned to the highest cost hospitals. This approach not only maintains the confidentiality of contracts with hospitals, but it also engages the formidable actuarial

resources of the plan to simplify complex and voluminous hospital data for consumers. Humana Inc. has presented hospital price information to some of its Milwaukee enrollees that maintains confidentiality by using ranges and combining hospital costs with physician costs. I expect that insurers will come up with more innovative ways to present price information to enrollees.

SELF-PAY MARKETS

Many have pointed to markets for medical services that are not covered by insurance to show the potential of consumer price shopping. Since these services are not

medically necessary—the basis for their not being covered by insurance—they

should be prime candidates for more effective consumer price shopping. HSC has

studied markets for LASIK, in-vitro fertilization (IVF), dental crowns and cosmetic

surgery by interviewing providers, consultants and regulators in these fields. Our

findings are not as encouraging as one hears from advocates of consumerism.

LASIK has the greatest potential for effective price shopping because it is elective,

non-urgent, and consumers can get somewhat useful price information over the telephone. Prices have indeed fallen over time. But consumer protection problems have

tarnished this market, with both the Federal Trade Commission and some state attorneys general intervening to curb deceptive advertising and poorly communicated

bundling practices. Many of us have seen LASIK advertisements for prices of $299

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per eye, but in fact only a tiny proportion of consumers seeking the LASIK procedure meet the clinical qualifications for those prices. Indeed, only 3 percent of

LASIK procedures cost less than $1,000 per eye, and the average price is about

$2,000.

For the other procedures that we studied, we found little evidence of consumer

price shopping.

For dental crowns and IVF services, many consumers are unwilling to shop because they perceive an urgent need for the procedure, and other consumers are discouraged from shopping by the time and expense of visiting multiple providers to

get estimates. In cosmetic surgery, a limited amount of shopping does occur, facilitated by free screening exams offered by some surgeons. However, quality rather

than price is the key concern to most consumers in this market; in the absence of

reliable quality information, most consumers rely on word-of-mouth recommendation

as a proxy for quality, instead of shopping on price.

ROLE OF GOVERNMENT

Governments can support consumers in their efforts to shop more effectively for

price and quality in health care by providing information on providers’ prices and

quality. The greatest opportunities may lie in the areas of information on provider

quality and the funding of research on medical effectiveness.

Medicare’s voluntary program for hospital quality reporting has succeeded in obtaining participation by almost all hospitals and likely will grow in sophistication

over time. HSC’s recent community site visits found that quality reporting to Medicare and the Joint Commission on the Accreditation of Healthcare Organizations

(JCAHO) have stimulated hospitals to place a much higher priority on quality improvement. Hospital respondents envision a day when consumers and insurers will

use publicly reported information to choose hospitals or for payment. An untapped

resource is the Medicare Part B claims files. The Business Roundtable recently

called for making this data available to insurers—with protections for patient confidentiality. This would permit greater statistical power for insurer assessments of

physician efficiency and quality and would support their role as agents for consumers.

Most accept the Federal role in funding research on medical effectiveness as a

classic ‘‘public good’’ activity. The Agency for Healthcare Research and Quality has

developed an excellent reputation in carrying out this role. But the funding for these

activities has been extremely limited, especially in contrast with what the Federal

Government spends on biomedical research overall.

I believe that government provision of price information to consumers has less potential. For those with health insurance, health plans are better positioned to tell

people what they really want to know—patients’ out-of-pocket costs for different

services. Efforts by some states to provide hospital price information have been limited by the complexity of the information—the difficulty of translating it into what

it will cost an individual for what they need. And few who are uninsured have the

wherewithal to pay for a hospital stay, even if they choose a less expensive hospital.

CONCLUSION

The need for consumers to compare prices and quality of providers and treatment

alternatives is increasing and has the potential to improve the value equation in

health care. But we need to be realistic about the magnitude of the potential for

improvement from making consumers more effective shoppers for health care. Whatever the gains from increased shopping activity, rising health care costs will, nevertheless, price more consumers out of the market for health insurance and burden

governments struggling to pay for health care from a revenue base that is not growing as fast as their financing commitment.

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PREPARED STATEMENT OF WALTON FRANCIS, MA, MPA, MPP, AUTHOR AND

INDEPENDENT CONSULTANT

THE PRICE OF EVERYTHING AND THE VALUE OF NOTHING

I am pleased to be able to provide this Committee with my diagnosis as to where

we are and where we need to go in providing information on the price and value

of health care to consumers. I think that improving ‘‘transparency’’ (how about just

plain ‘‘access’’?) to price and value information on health care is the most important

budgetary and economic issue facing America. It is vital to Medicare reform, and

to avoid the train wreck of impending insolvency of that program, but more broadly

vital to reducing the unsustainable and crippling problem that rising health care

costs impose on all Americans in all income classes, whether they pay by taxes, premiums, cost sharing, or going ‘‘naked’’ without insurance.

During the many years that I have authored the annual CHECKBOOK’s Guide

to Health Plans for Federal Employees, I have watched in amazement the inability

of either the market-driven Federal Employee Health Benefits Program (FEHBP) or

the legislatively and bureaucratically micro-managed Medicare program to halt the

seemingly inexorable rise in health care costs, year after year, at a rate higher than

either inflation or per capita income. This doesn’t mean that these programs are

failures at cost control. Quite the contrary, they have in their quite different ways

achieved cost containment results worth many billions of dollars annually. But what

they are able to accomplish in the dysfunctional American healthcare ‘‘market’’ (sic)

has been palliative, not curative.

If there is one point on which virtually all health care economists agree it is that

the fundamental cause of the rise and level of health care spending is the prevalence of health care insurance that is not pure insurance, but instead prepaid, firstdollar health care. Even with modest copayments, most health care for most Americans is virtually free. Some call the resulting waste ‘‘moral hazard.’’ Others simply

call it the results of demand and supply curves intersecting where the price to the

consumer is set by payers near zero. Whatever one terms it, the result is immense

waste. Shifting some insurance policies to a consumer-driven model with high

deductibles and hence restoring some semblance of fiscal discipline is an important

reform. But it is less than half the needed reform. And the bigger half is simply

better price and value information for consumers.

Lady Windermere, in Oscar Wilde’s play, said ‘‘a cynic knows the price of everything and the value of nothing.’’ Through no choice of their own, American consumers have been forced to become and remain something worse than cynics, allowed to know neither the price nor the value of health care. The essential problem

is that without price and quality signals, or incentives to use them, consumers have

no way to compare either treatments or providers and to impose market discipline

to reward efficiency and drive down prices and costs.

The presence of intermediary ‘‘middleman’’ insurance organizations both complicates and presents opportunities for reform. Those organizations have a strong

incentive to control costs at least as well as their competitors, and they have price

and outcome data. But they have to attract broad provider panels, and pay more,

to compete in a world where customers do not directly obtain the savings from narrower provider panels and other economies. The 1990s rebellion over heavy-handed

‘‘gatekeeper’’ HMO requirements, that reversed the trend to HMO insurance and led

to the vast rise in PPO insurance, illustrates the potency of the problem. In the final

analysis, insurers are in a market where deep pocket payers—employers and taxpayers—routinely pay the going rate, however high that is, to maintain the status

quo. Something has to change.

Meanwhile, there are roughly 45 million uninsured (most voluntarily so), and another 5 million or so who face significant cost sharing. In total some 50 million people have to cope with a market that provides virtually no functional price signals

as to how to save money by choosing lower cost treatments or providers, and only

weak quality signals.

In assessing this data chasm, its possible bridging remedies, and their possible

outcomes, it is useful to draw sharp distinctions among various categories of information. Consider a consumer with a diagnosis that will involve high costs, such as

childbirth, breast cancer, severe carpal tunnel syndrome, or prostate cancer. Suppose this consumer has no health insurance but an option to join or change plans

in open season. Such a consumer would need need six categories of consumer information. Together with his or her own preferences, such information would enable

an informed choice among options. Far more importantly, if all consumers had such

information this would drive the health care market over time to more effective and

efficient outcomes. The six categories are:

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(1) Alternative courses of treatment,

(2) Likely outcomes of those alternative treatments,

(3) Monetary and other costs of such treatments on average,

(4) Costs of using particular providers,

(5) Quality and outcomes using particular providers, and

(6) Estimates of which health insurance plan is the best buy, taking into account

both premiums and out-of-pocket costs, for the next plan year.

Today, I will cover briefly the current availability of consumer information on

each of these topics, recent progress and efforts under way, problems and opportunities in filling gaps, and long run consequences of filling those gaps. I will try to illustrate some of my findings and conclusions with examples using the diseases or

conditions mentioned above, and a few other situations.

Current availability of Consumer Information. Consumer information across these

six types today ranges from scarce to nonexistent to abundant but flawed.

There are innumerable books, articles, and learned opinions on (1) alternative

courses of treatment. For example, for a woman expecting no complications of maternity, using a midwife represents a huge saving compared to hospital delivery. There

is abundant information on the very low risks of delivery, and a slim but not insubstantial body of literature on the slightly larger risks of using midwives. For a

woman with breast cancer, there is abundant literature on the various mastectomy

and lumpectomy alternatives, taking account of different stages of disease progression. For prostate cancer, there are four major treatment modalities, one of which

is benign neglect (old age will usually kill the patient faster than this cancer). For

carpal tunnel syndrome, there are several inexpensive treatment options with expensive surgery the only effective option in many severe cases.

While medical science is constantly advancing, and there are huge gaps in information, to say nothing of diseases for which there are not yet any effective treatments (e.g., Alzheimer’s disease), it is fair to say that consumers and their advisors

(notably physicians) do not lack access to whatever information exists. One could

fill libraries with medical advice literature, on or off the Internet, in books, articles,

and snippets from disease-specific Web sites, and more.

The Internet has greatly advanced low-cost access to this information by consumers, through sources such as Medline, trusted Web sites such as WebMD, and

forums for patient groups.

The Healthline Web site (www.healthline.com), of which you are hearing something today, is itself proof that treatment information is there—Healthline specializes in sifting through the vast Internet resources to find the best information. But

even without the Internet, the information is available. Books and journals are

available in public libraries and bookstores throughout America.

Likewise, there is abundant information on (2) likely outcomes of alternative treatments. This information deals not only with straightforward measures such as survival rates, but also with qualitative outcomes important to patients. Many women

(though a small minority) positively prefer the experience of childbirth at home with

a midwife. Breast cancer alternatives differ hugely in preservation of women’s perceived attractiveness and potential complications. Prostate cancer treatments differ

in major ways not only as to prognosis but also as to such complications as incontinence and impotence.

Access to treatment outcome information is almost as widely available at low cost

as information on treatment options. There is far less outcome information, but consumers have access to whatever is known, in print or on the Web.

There is also a recurring problem with respect to outcome information, a problem

that grows progressively worse as we move from overall outcomes to provider specific outcomes. Data that are not risk-adjusted or case-mix adjusted can be very misleading. Breast and prostate cancer outcomes depend on the stage of progression of

the disease, the condition of the patient, and other variables. For example, in both

of these cancers the age of the patient has a huge effect on whether or not drastic

surgery is indicated.

Information on the (3) average monetary costs of treating diseases or conditions

is, in sharp contrast, almost nonexistent for consumers. I have repeatedly used

Internet search engines to try to find, for example, the cost of an appendectomy or

childbirth. Google and other search engines will find thousands of ‘‘hits’’ when terms

such as ‘‘cost childbirth’’ are entered, but the links found are invariably dry holes.

A relative of mine recently had surgery for carpal tunnel syndrome. I ran a Google

search on ‘‘carpal tunnel surgery cost’’ and obtained a half million hits. After skimming a few hundred of them I found none that provided any data whatsoever about

price or cost, and gave up.

A major development in the last several years has been the provision of treatment

costs on the Web sites of some major insurance firms. These include Aetna and

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Tufts, for example. Consumer-driven health plans such as Lumenos (see

www.lumenos.com for a useful demonstration) also provide such information, as you

are hearing today. These information sources are tightly restricted to plan members,

and hence unavailable to virtually all of the 50 million Americans who need such

information for obvious financial reasons, and another 240 million insured Americans who might wish to impose lower costs on their fellow insureds, even though

they save little or nothing. There are also some far small firms that are beginning

to provide such data, though often restricted to enrollees (see, for example,

www.healthia.com and www.healthmarkets.com).

A recent Business Week article (February 20, 2006) praised Aetna for the best

consumer information on its Web site of three major insurance firms compared. I

haven’t reviewed all of these or other sources, but I certainly agree that Aetna is

developing a fine set of information for its enrollees. However, the reality is that

the Aetna Web site only covers about 60 conditions, albeit with different levels of

severity for most of them.

Of the several conditions I have previously mentioned, the Aetna Web site divulges that the estimated cost of an uncomplicated pregnancy, with either vaginal

or cesarean delivery, is approximately $7,700 ($3,600 for the hospital, $2,600 for the

physician, $100 for prescription drugs, and $1,400 for tests.) You are reading this

estimate today in a breakthrough public disclosure. Just try to find such an estimate in any other document. You can find many Web sites that sell maternity insurance, but none of them estimate the cost without insurance. In preparing this

testimony I ran a Google search on ‘‘maternity cost’’ that found almost 9 million hits

and no discernable information on price or cost. Alas, Aetna provides no cost estimates for breast or prostate cancer (or for that matter, for any other cancer) or for

appendectomy or carpal tunnel surgery, and no estimates for alternative treatment

modalities, such as nurse midwives.

In other words, even for Aetna enrollees, the information is profoundly limited.

For the rest of us even this limited information is simply unavailable. And this is

the state of the market! In sum, so far as I can determine consumers today cannot

find reliable information on the costs of major medical conditions and their treatments from any publicly available free resource.

Nor do consumers have ready access to information on the costs of most individual

procedures. Aetna provides some such information to its enrollees, but only for

about three dozen of them. These are among the most common (e.g., ‘‘office consultation for moderate to severe problems’’ with a specialist, or ‘‘new patient office visit

for moderate problems’’ with a generalist), but there are approximately 10,000 ambulatory procedures and the listed procedures are but a drop in that bucket. No surgical procedures are listed.

Turning to (4) information on the costs of using particular providers, information

is even sparser. Perhaps the greatest innovation of the Aetna information for its enrollees is the provider-specific charge information available on its Cincinnati Web

site. Assuming, illustratively, that Aetna has thirty percent of the Cincinnati market, and that this market comprises one million individuals, approximately one

tenth of 1 percent of Americans have access to information on provider-specific

prices. Even adding in Tufts and Lumenos and a few other firms, as a practical matter information on the charges of specific providers is essentially unavailable to the

public today. There are a few seeming exceptions, such as California hospital

charges, but as a practical matter that information is unusable by consumers (see

the Anderson testimony referenced below).

Contrast this with the situation for medical procedures not ordinarily covered by

insurance. Lasik is the fashionable example, but there are many others. See

www.beyourbest.com for price quotes on breast augmentation ($3,000), liposuction

($2,000), and many other plastic surgery procedures at ‘‘guaranteed lowest prices.’’

Where consumers pay, price matters. Contrast medical procedures with other major

purchases, such as automobiles or airline tickets or any of the thousands of goods

sold on e-Bay or through department stores. Not only is price information routinely

available, there are many services specializing in enabling consumers to quickly

compare prices before making a choice (e.g., Orbitz and Travelocity, among many,

many others for airline, hotel, and rental care prices). Imagine using Healthline not

only to obtain treatment information, but also for price and cost information.

This is not a trivial gap for the approximately 50 million American consumers

who shop for health care with no insurance or with insurance gaps. As notoriously

shown by the recent California requirement that hospitals make their charges available to consumers, charges to uninsured individuals are typically double, triple, or

quadruple the charges to clients of major insurers (a description of the utter irrationality of hospital charges as they have developed over time, and a good deal of

sensible advice on price transparency issues can be found in the testimony of Gerard

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Anderson of Johns Hopkins University before the House Energy and Commerce

Committee in March of this year at http://energycommerce.house.gov/108/Hearings/

03152006hearing1813/Anderson2771.htm).

The availability of information on the (5) outcomes of using particular providers

is actually far greater. In one of its most important actions for consumers ever

taken, the Centers for Medicare and Medicaid Services (then HCFA) made available

about 20 years ago data on hospital mortality and adverse outcome rates for all

Medicare-participating hospitals (i.e., virtually all hospitals), both overall and for a

dozen or so major types of procedures. Originally CMS published these data. In the

last decade it has simply made them available as data files. At least two organizations, Washington Consumers CHECKBOOK and HealthGrades, continue to use

those files to make risk-adjusted data available, for sale (e.g. Consumers’ Guide by

Hospitals, by the editors of Consumers’ CHECKBOOK Magazine, 2002, also available online and updated at www.checkbook.org). While these data are not free, they

are available to all American consumers.

While the risk of an adverse outcome is certainly the single most important measure of hospital quality, there are many others. CHECKBOOK surveys physicians to

see which hospitals they rate highly. In effect, experts are used to rate other experts.

More recently, CMS has led a major reform effort to initiate the collection of data

from Medicare-participating hospitals on a set of quality measures that focus on the

most common hospital procedures, and those shown by research to be among those

most prone to failure. For example, the failure to provide Aspirin to patients admitted with a heart attack is a major and not uncommon quality failure. As another

example, this initiative also addresses one of the most vital steps owed to all patients: whether they are given discharge instructions when they leave the hospital.

With collaborative partners, most notably the Hospital Quality Alliance and the

Agency for Health Care Research and Quality (AHRQ), CMS now makes available

a wide range of performance measures (see http://www.hospitalcompare.hhs.gov/).

These measures are also used in ‘‘Pay for Performance,’’ a major initiative now set

in statute that conditions up to 2 percent of a hospital’s payment from Medicare on

it performance on measures of quality in comparison to other hospitals. Expansion

of Pay for Performance in traditional Medicare is arguably as, if not more, important to future restraint on the growth of health care spending than the addition of

Medicare Advantage plans as alternatives to traditional Medicare.

Early reports show that this collaborative but competitive system has had major

effects in upgrading the quality of hospital performance. The consumer information

is not just static, read by some consumers and ignored by most, but a spur to improved performance by hospitals that cannot afford, literally and figuratively, to be

regarded as inferior.

CMS also now publishes on the Web comparative data on the quality of performance of other providers, such as Nursing Homes and Home Health Agencies.

There are more specialized efforts that indicate both the potential and the problems of developing outcome/quality measures for providers. For many years the

United Network for Organ Sharing (UNOS) has devoted substantial resources to developing measures of patient and organ survival, by institution, that would not only

allow consumers to compare outcomes and quality, but also provide them risk—or

case mix—adjusted data that would account for the differences among hospitals in

the severity of patients that they serve. In the world of transplants, sufficient expertise and consensus has been developed to allow a robust system of comparing provider outcomes for each type of transplant (www.srtr.org). Any transplant candidate

can compare the performance of every transplant center in the United States before

deciding where to ‘‘list’’ for a transplant.

But there are few if any other complex medical procedures for which comparable

data are publicly available today. One notable bright spot is the Pennsylvania

Health Care Cost Containment Council, with quality information on a number of

procedures including provider-specific data on coronary bypass surgery (http://

www.phc4.org/default.htm).

The big gap in quality-related outcome data has been in the performance of individual physicians and physician groups. While CMS and AHRQ are diligently working to develop outcome-related measures of ambulatory quality through the Ambulatory Care Quality Alliance (AQA) (see www.ahrq.gov/qual/aqastart.htm), the only

widely available quality measures today use such crude measures as board certification or disciplinary actions, or what is arguably the best measure of all: ratings

by other physicians. For example, CHECKBOOK publishes what is essentially a national system of physician ratings, by specialty, in Consumers’ Guide to Top Doctors

(2002, updated on the Web at www.checkbook.org). The Washingtonian magazine,

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and other publications, also use surveys to rate physicians in particular metropolitan areas.

In summary, quantitative measurement of quality and outcomes for ambulatory

care providers generally, and physicians in particular, remains a work in early

stages of progress. Performance of several other major types of providers, such as

hospitals, is further advanced. But progress is certain to be slow, expensive, and

complex.

I have for almost three decades provided consumer information on (6) comparing

health plans, in my annual CHECKBOOK’s Guide to Health Plans for Federal Employees. My Guide provides information to approximately 8 million Federal employees and retirees on which of the health plans they can join provide the best value.

In essence, this is simply a matter of comparing the total costs of consumers of enrolling in plan A versus plan B, assuming that each plan pays the promised proportion of medical bills incurred. The Guide performs this calculation, and shows every

year that family enrollees who select the best deals available can save (a) a thousand dollars a year or more by choosing an HMO, and which HMOs provide such

savings and how much savings, or (b) a thousand dollars a year or more by choosing

the lower cost PPO or FFS plans, and which ones provide these savings and how

much. These dollar savings estimates take account of both premiums (a ‘‘for sure’’

expense) and expected out-of-pocket costs at various spending levels.

The Guide also rates plans on several quality measures. In the early years, I focused on ‘‘quit rates’’ as a measure of service. Office of Personnel Management data

on disenrollment rates grew increasingly unreliable over the years, and I had to

abandon this measure (which, incidentally, required complex statistical adjustments

using multivariate regression analysis.)

In more recent years we have included customer survey data on satisfaction with

plans. Unfortunately, such data as currently published suffer from two inherent defects: (1) only a relatively few plan enrollees face life- and wallet-threatening events,

and hence the most severe cases get negligible weight in overall ratings that count

all consumer equally, and (2) elderly enrollees on average rate health plans far more

highly than younger enrollees. As a result of these defects, and the failure of national accrediting organizations to address them by appropriate statistical techniques, customer satisfaction data as published today are extremely weak as measures of plan quality.

Another major approach to health plan comparison has been pioneered by CMS.

For prescription drug expenses, which for most people are stable from year to year.

CMS has developed a ‘‘Plan finder’’ tool (see plan comparison at www.Medicare.gov)

that shows how much each participating Medicare prescription drug plan costs enrollees for the drugs they use today. Like the Guide, this tool takes into account

both premium and out-of-pocket costs. Unlike the Guide, the approach is ‘‘current

usage’’ specific rather than actuarial. In essence, it assumes that drug costs will

usually not change, while the Guide assumes that future hospital, medical, and drug

costs are only partially predictable, and always subject to random events. Both approaches have substantial strengths, and both approaches have saved millions of enrollees a great deal of money by steering them to plans that are better buys.

The CHECKBOOK Guide is available for a fee; the Medicare Plan finder at no

charge. Historically, the Guide was sold in paperback to individual employees and

retirees. However, at present the majority of Federal agencies provide ‘‘free’’ copies

to all employees. Unfortunately, most agencies do not broadcast the availability of

the Guide effectively, and lose the very substantial savings they could realize if a

larger fraction of employees realized how much they could save and chose plans

with lower employer as well as employee premiums.

For both Medicare and the FEHBP, data are available showing that even with

a minority of consumers using plan comparison information, consumer choices

among plans to select better buys save billions of dollars to both enrollees and payers.

Unfortunately, plan comparison tools such as these have only limited applicability. The vast majority of Americans do not have available a wide range of plans.

Federal employees and retirees typically have about 15 or 20 plans to choose from.

Medicare beneficiaries typically have about 40 or 50 plans to choose from. Most

workers are provided at most two or three plans by their employers, such as one

HMO, one PPO, and one fee-for-service plan. Since one of these three plan types

is usually strongly preferred for reasons other than cost, the effective range of choice

is usually one plan.

As a result, until or unless most Americans are given a broader range of insurance plan choices, powerful plan comparison decision tools such as these are of limited help in improving the health care market.

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Problems and Opportunities in Filling Gaps. As the analysis above suggests, the

availability of consumer information varies significantly by category.

Arguably, the most important gaps to fill are (a) data on provider payments or

prices by procedure or condition or both, (b) the same information on a provider specific basis, e.g. ‘‘what this doctor would charge compared to that doctor,’’ and (c) data

on ambulatory care provider quality and effectiveness.

Are the consumers there to use the information? Most consumers have no incentive to seek information on costs, and to reduce costs by shopping, in a world of first

dollar coverage. Nonetheless, with approximately 50 million people having a vital

interest in keeping their costs low, it is clear that there are plenty of willing consumers of price information, if there were not other barriers to its dissemination.

All 290 million consumers have a substantial interest in quality and effectiveness

information.

‘‘Consumer-driven’’ health care through high deductible plans and Health Savings

Accounts adds to this potential demand, and brings a substantial number of higher

utilizers (sicker and older) and well-educated consumers to the missing market for

price information. But growth in consumer-driven plan enrollment is neither necessary nor sufficient given the substantial numbers of consumers who need such information already. What is needed is rapid rather than glacial movements by the

insurers, both public and private, who have the data on payments and outcomes.

Overall payment and price data are simultaneously easy and difficult to provide.

Every insurer in American knows what it pays each physician in its network. The

data could be made available on the Web virtually overnight.

However, what each insurer pays is a trade secret. If competitors learn the payment rates, they could offer slightly better rates to attract preferred providers, or

bargain harder with providers, or both. Providers know what they charge patients

(usually different rates depending on which insurer is involved). However, they have

an equally grave problem. It is not in their interest to make it widely known that

they have settled for price X from payer A and price Y from payer B. Payers can

use this information to ratchet down rates. A major firm, Subimo, today makes a

great deal of its revenues from the sale of price data to insurance companies and,

to a far lesser degree, to consumers (www.subimo.com). While Subimo and others

could prosper from a different business model (imagine free price information with

revenue from advertisements paid by low cost providers), there may be legal and

other impediments to such a transformation.

The one player with no self-interest barrier to wider discloser of payment information is HHS. HHS provider payment systems are calculated using statutorily mandated formulas and procedures, and within specified geographic areas are ‘‘one size

fits all.’’ However, HHS faces a potential barrier in disseminating physician (but not

hospital) payment information by the contractual agreements, long since struck,

that commit it to using proprietary medical procedure codes that have been copyrighted by the American Medical Association (AMA). The AMA position, enforced by

a willingness to impose major legal costs by suing alleged violators, is that ‘‘Common Procedural Treatment’’ (CPT) codes can only be used with AMA permission.

Such AMA permission is never given to anyone who would publish procedure prices

for broad consumer use. This posture is largely rationalized by the traditional ethical strictures against price competition in medical care. Other motives can be inferred.

In a case decided almost a decade ago, the AMA position was upheld against a

private publisher by the Ninth Circuit Court of Appeals (Practice Management Information Corporation v. American Medical Association, 121 F.3d 516 as amended at

1333 F 3d 1140). The Supreme Court denied cert.

HHS could practicably publish consumer-friendly versions of its physician, outpatient, and inpatient payment schedules. These schedules are currently online, but

require fairly substantial computer expertise to download and translate into understandable units, such as ‘‘What does it cost in dollars in my area and nearby?’’

Therefore, as a practical matter they are currently unavailable to consumers. Unfortunately, it is possible that the physician procedures would have to be recoded and

presented in terms of ICD–9 or ICD–10 codes (alternatives to CPT) to meet legal

concerns. This in turn raises issues about which codes would be used in practice and

hospital management and billing systems, and some very expensive changes. I think

that these issues could probably be decoupled, and the public information provided

without depending on future code system decisions, but the job may be harder than

I predict. One option might be to publish information coded under all three systems

simultaneously, which would work for most procedures, but would require a good

deal of work.

Procedure payment amounts are arguably not as useful as estimates of the costs

of treating a disease or condition, but these serve different purposes. A consumer

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seeking to save money could seek a low cost obstetrician and low cost hospital as

separate decisions, constrained only by physician privileges. Moreover, in the case

of hospitals the CMS reimbursement system is primarily based on condition (‘‘Diagnosis Related Group’’) and hence avoids most of the problems posed by itemized

charge systems. The bargaining mode for a woman seeking a good price for maternity care should be ‘‘Let’s start with the Medicare payment that you already accept.’’

Providing disease and condition-specific cost information taking into account all

types of provider and service is harder, since it requires an additional step. However, it is possible to search any major public or private insurer’s payment records

to find one or several common clusters of services. Presumably, this is what Aetna

did to create its estimate of maternity costs.

In either case, what might otherwise be a gargantuan problem is greatly simplified by starting with relatively limited numbers of procedures and disease. The

most common 100 physician, 100 outpatient, and 100 inpatient procedures, and the

100 most common diseases or conditions, would be a relatively easy starting point.

This in essence is what Aetna, Lumenos, and some other insurers are doing. The

problem is that they are providing the information only to their own customers, who

represent only a small share of those facing strong incentives to use price information. By definition, none of the uninsured has access to information limited to those

enrolled in a company’s insurance plans.

Provider-specific price, charge, or payment rates are arguably both the most needed and most difficult information to provide. However, they are quite likely to

emerge over time as a by-product of shopper behavior using system-wide rates.

Competition begets competition and there is no reason why we could not expect to

see in the future advertisements such as ‘‘Use Doctor A and Hospital B for your

pregnancy and delivery and get the bargain rate of $6,300, 20 percent off and $1,400

less than the average cost of maternity care.’’

But we need not await that development. A consumer with access to Medicare

payment rates, knowing that the great majority of providers accept these rates for

Medicare patients, wields a potentially mighty club. ‘‘Hospital B (or Doctor A), why

shouldn’t you give me the same deal you give most of your other patients? If you

won’t I can try one of your competitors.’’ So far bargaining tactics have met with

limited success, but consumer efforts have barely begun, and the Medicare payment

rates are a vital tool for future bargaining.

Meanwhile, Aetna, Tufts, and others are experimenting with providing providerspecific payment rates to their enrollees. Armed with three pieces of information—

average rate for a procedure in the network, average rate outside the network, and

the precise rate charged by Doctor A and Hospital B—enrollees are given the vital

information they need to decide whether, and how hard, to shop further around.

Data on provider quality and effectiveness is the most difficult challenge by far.

Without these data consumers cannot complete the ‘‘value’’ equation.

HHS, primarily through AHRQ and CMS, is devoting immense intellectual capital

with its alliance partners to creating such information. There are valuable systems

already in place for some dimensions of hospital and nursing home quality. Other

and more ambitious efforts are underway through the Hospital Quality Alliance and

the Ambulatory Care Quality Alliance. I am sure that Dr. Carolyn Clancy is addressing those in her testimony today in great detail. Dr. Mark McClellan, the CMS

Administrator, has testified several times on these issues before other Committees

of the Congress.

One of the biggest problems in developing such measures is that without case-mix

adjustment they may often mislead. The best surgeon may take the hardest cases

and wind up with success rates lower than those of the average surgeon. Statistical

validity also requires a significant sample size (rarely fewer than 25 or more cases)

and many procedures are not performed in high volume by most physicians. There

are also substantial issues in developing actual quality measures, especially for procedures that do not usually lead to simple outcomes. For these and other reasons,

efforts to create quality and effectiveness information that will be genuinely useful

to consumers must be measured in years, and will indeed never be complete.

Luckily, we already have a good deal of information on both ambulatory and inpatient quality. It resides in the heads of physicians and other health professionals,

who observe their peers directly and through their informal information networks.

It is made available to consumers through direct advice from their own physicians

on questions such as ‘‘Which specialists would you recommend as the next step for

me to take, and how would you compare them?’’ It is also available through publications such as CHECKBOOK’s Consumers’ Guide to Top Doctors, which surveys physicians themselves as to whom they would recommend most highly in other specialties.

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Health plans make decisions on which physicians and other providers to enlist as

preferred providers, based on both willingness to accept the insurer’s payment rates

and appraisals of performance. These appraisals may be crude and simple, or may

reflect statistical analysis of insurance records over time, but in either case serve

as an important check to weed out poor performers. Thus, simply using preferred

providers is an easy quality (as well as financial) rule for consumers. (Unfortunately, some of the very best physicians often opt out of such panels over payment

levels—a problem that would lessen over time if plans would be more flexible in

paying more for higher quality, which in turn requires new quality measures.)

There also remains the possibility of using insurer data to provide more information. For example, simply knowing the volume of a certain procedure performed is

often immensely valuable to the consumer because for a large number of procedures

research has shown that high volume correlates strongly with quality. Such information is readily available in Medicare files. For many procedures (though a small

proportion of the universe of procedures) the information could be reasonably used

with minimal statistical refinement. According to recent press reports (Robert Pear,

in the New York Times, April 10, 2006), employers are now pushing HHS to disclose

these and other Medicare data on physician performance. Unfortunately, it appears

that HHS feels constrained by a 1979 court case that interpreted the Federal Privacy Act as preventing the release of records identifying individual physicians. However, that case dealt with an entirely different situation that could not arise under

current Medicare payment procedures. It is also arguably irrelevant given that the

Congress has since 1979 mandated a wide range of quality measurement and improvement efforts by CMS. CMS now has a legal duty to use information on provider quality, and without public access to that information, the performance of

CMS itself cannot be evaluated. Under the Freedom of Information Act, an evaluative purpose arguably trumps the Privacy Act. Moreover, the 1979 decision was a

District Court decision, never affirmed by higher courts. The outcome of further

legal analysis, or court action, remains to be seen.

Consequences of Filling These Gaps. Some analysts denigrate the value of making

price, payment, and quality, information available to consumers. They argue, for example, that most medical care costs are spent on high-cost cases that are fully insured, and that as a result market forces will be greatly attenuated. These pessimists may be right. Even if they are right these reforms should be made, however,

simply because some 50 million Americans will get substantial benefit.

But the pessimists are most likely wrong. Market forces, if unleashed, will drive

behaviors of consumers and providers, and insurers, in ways that we simply cannot

predict. It is not just a matter of a minority of consumers haggling and bargaining

with a minority of providers:

• Some providers may seek the opportunity of using market information to position themselves as cheaper and better (‘‘I am Doc Sawbones and I score 99 percent

on the official government quality measure and charge only three-fourths of the average payment rate.’’).

• The invention of lower—rather than higher-cost technology may be spurred.

Why pay for the $20,000 pacemaker from your health saving account or on your

credit card when there is a $10,000 model available that has fewer features but is

more reliable?

• New forms of low cost health care organization may arise (we may need to look

no further than the health care centers that Walmart is installing).

• Medicare is already moving in a significant way to ‘‘Pay for Performance’’ for

hospitals rather than ‘‘one price fits all.’’ This has revolutionary implications if it

can be expanded to more Medicare payments, to other insurers, and to additional

measures of hospital outcomes. Few conceivable payment systems are more lunatic

than those so widely used today by Medicare, Medicaid, and most private insurers,

that in effect pay more for less effective service.

• Quality and outcome measures are particularly important for insurance reform.

Consumers can select providers based on reputation. Third party payers need more

objective, measurable information.

• Consumer advice on dealing with health problems would be able to include comparative information integrated in ways that steer consumers to high value courses

of treatment, and help them control costs.

• If price information becomes widely available as a point of comparison, providers may elect to bundle services at a discount.

• Providers may simply be forced, by the existence of lower cost competitors, to

accept lower payments. We see this already in the growing numbers of American

patients going to India or the Caribbean to obtain high quality care at a fraction

of the price in the United States. What happens to overall spending when conVerDate 11-MAY-2000 09:11 Jan 10, 2007 Jkt 029936 PO 00000 Frm 00083 Fmt 6601 Sfmt 6621 C:\DOCS\29936.TXT DianeA PsN: DianeA
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sumers see that high quality alternatives are available at half or less the going

rate?

All these potential effects loom larger because of the unsustainable growth rate

of health care spending in America. We need not dwell on the impending Medicare

insolvency data (estimated as 2018 for the hospital trust fund in the just-released

Trustees report) to consider that the average cost of a family health insurance policy

providing first dollar coverage is today approaching $10,000, and that the average

cost of a Medicare beneficiary for hospital care, medical care, and drugs already exceeds $10,000, and will within a few years exceed the cost of the average Social Security benefit.

At the same time, the Dartmouth experts estimate that one-third of Medicare

spending is wasted on unnecessary care (E.S. Fisher et al, ‘‘The Implications of Regional Variations in Medicare Spending,’’ Annals of Internal Medicine, February 18

2003, http://www.annals.org/cgi/content/full/138/4/273).

We cannot predict how rapidly or how far direct market forces using price and

quality information will operate to reduce the growth in health care costs or improve

health outcomes. But we cannot afford not to try. The other alternatives such as

direct rationing, triple-digit premium increases (in contrast to the double-digit increases we see today), or draconian tax increases, are unpalatable in the extreme.

It certainly appears that the current Administration ‘‘gets it.’’ Drs. McClellan and

Clancy have worked tirelessly and effectively for years on these issues. The White

House has opined forcefully. HHS Secretary Leavitt recently assembled hundreds of

executives of his Department to issue his top priorities for the next 3 years, and

No. 1 on the list was ‘‘Health Care Value Incentives’’ aimed at restraining the

growth of health care costs ‘‘because consumers [should] know the comparative costs

and quality of their health care.’’ However, I do not think that this is a partisan

issue. In the usual disjuncture between public policy reforms and subsequent outcomes, it is likely that the next Administration, of whichever party, will not only

endorse, but get much of the credit for the reforms begun in the first years of the

21st century.

As a concluding comment, there are a number of bills pending in the Congress

that deal with these issues in one fashion or another. Former Speaker Gingrich has

mentioned the possibility of ‘‘right to know’’ legislation that would require doctors

and hospitals to post prices. (For hospitals, that would stimulate immediate change

because hospital charges generally bear little or no relation to either their costs or

what insurers pay them.) Congressman Shadegg is sponsoring a bill that would enable health insurance to be sold across state lines, and make other reforms that

would open up consumer-driven insurance to millions of consumers, including many

of the currently uninsured who are prohibited by State law from buying the insurance plans available to most Americans. There is a companion Senate bill. And both

the Ways and Means and Senate Finance Committees are considering pay for performance legislation. I have not studied these bills and have no specific recommendations on details of legislation at this time. However, in the light of the substantial legal difficulties that HHS faces in releasing payment and performance information in a form that would either be directly useful to consumers or be useful

after analysis by expert researchers, I suggest that if any bill nears enactment it

include provisions that will help in overcoming any legal barriers.

Disclaimer: I have affiliations with three organizations mentioned in this testimony, Washington Consumers CHECKBOOK, the Centers for Medicare and Medicaid Services, and the United Network for Organ Sharing. Nothing in my testimony

represents the views of any of these organizations, or relies in any way on information that these organizations do not provide to the public at large.

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