Hospitals Learning: Better Care Is Cheaper Care

Story from the Wall Street Journal

Be it cereal or cars, buyers usually have an idea of how good the products are and how much they cost before they buy them.

That's not how U.S. health care works. Patients rarely know which hospitals offer top-quality lung or aortic surgery, and which are more likely to harm them. Hospitals don't compete on price and rarely publish measurements of their quality, if they measure it at all.

Except in Pennsylvania. For two decades, a state agency has published "medical outcomes" -- death and complication rates -- from more than 50 types of treatments and surgery at hospitals. The state has found that publishing results can prompt hospitals to improve, and that good medical treatment is often less expensive than bad care.

One reason is that high-quality treatment usually results in shorter hospital stays and fewer readmissions. The state has had less success in publishing hospital prices and has drawn criticism from hospitals that disagree with its reporting methods. But companies or unions in Pennsylvania that have agreed to work only with the best-performing hospitals say they have been able to drive down medical costs.

"High-quality care costs less -- always," says David B. Nash, a medical-quality expert and dean at Thomas Jefferson University's School of Population Health in Philadelphia. "If the federal government could behave like a savvy shopper, that would change the health-cost game overnight. But the government is a bill payer, not a savvy shopper."

Walter McClure, who helped spark Pennsylvania's efforts, was an early advocate of publicizing medical outcomes and fostering competition among hospitals.

The Senate Finance Committee could vote late this week on its sweeping health bill, seen as the backbone for any final legislation. That bill would make available $75 million annually for the U.S. Department of Health and Human Services to develop methods of improving quality, including potentially publishing outcomes.

Although at times premium care can be exorbitant, there's evidence some in Pennsylvania saved money using top-rated hospitals. Hershey Co. offered workers medical coverage based on the state agency's reported outcomes, and cut the company's expenses by 50% over several years. The Philadelphia police union's benefits-management company says it uses the state reports to steer officers to the best hospitals; as a result, it say its costs fall about 17% below those of comparable plans.

Tom Lamb, administrator of Philadelphia police health benefits, says he frequently explains to members why they should go to hospitals with better outcomes. "If an officer's 7-year-old daughter has to go in for surgery," he says, "I'll sit down with the father and say, 'Are you just going to shake your head yes when your pediatrician wants to send her to his golfing buddy?' "

Quality Ratings

The Delaware Valley Health Care Coalition, a group of union and municipal health funds covering 1.3 million people, is beginning the process of picking about 20 hospitals based on the state's quality ratings. Capital BlueCross in Harrisburg has designed a plan that selects hospitals based on the reports. Mark Dever, benefits manager at Duquesne Light in Pittsburgh, says his company recently got an offer from a hospital chain to treat the company's workers. But after reviewing state quality data and comparing prices, he rejected it.

An August 2008 study in the American Journal of Medical Quality reported that Pennsylvania in-hospital odds of death were 21% to 41% lower than those in other states. The research focused on heart attacks, congestive heart failure, brain hemorrhage, stroke, pneumonia and septic infections.

The Obama administration is allotting $1 billion for research to compare effectiveness of medical treatments. Some hope comparing hospital outcomes will be part of that. "As a patient," says Michael Pine, who runs a medical quality-measuring business in Chicago, "I would generally be more interested in whether Hospital A or Hospital B gets better results, more than whether drug A is more effective than surgery."

The theory underlying the Pennsylvania program is that, to create a truly competitive health-care market, consumers need hard information showing which hospitals perform better.

Curbing Infections

For example, Pennsylvania three years ago published its first report on hospitals' infection rates that arise largely from intravenous catheters and tubes left in too long. Infection numbers the following year fell 7.8%, as hospitals responded with steps designed to lower infections.

The average payment in 2006 for hospitalization where a patient acquired an infection was $53,915; with no infection, the average payment was $8,311, according to state reports.

By simply getting rid of preventable infections, Pennsylvania estimates its hospitals could lower expenses by nearly $1 billion.

Where are the insurance companies? They are the major payers. They should be driving this data collection and management of the system.

The White House is looking at publishing information possibly including medical outcomes as part of overhaul efforts, officials say. Quality data could also be used in existing programs. "There is a clear understanding from the Obama administration that both Medicare and Medicaid need to move in the direction of what's happening in Pennsylvania," says Jonathan Blum, director of the government's Center for Medicare Management.

The Philadelphia police health fund benefit-management company, covering 26,000 people, adopted a plan pegged to the state's hospital-quality results seven years ago. Mr. Lamb says the police fund has saved as much as $5 million a year using the information.

Sent Home

One retired Philadelphia police officer benefited from the state reports in an unusual way -- by learning he didn't need the coronary angioplasty he had been prescribed. Ed Gillespie, of Cape May, N.J., says he was told by his doctor six years ago that he needed angioplasty to clear out heart arteries. After consulting with Mr. Lamb, he learned state reports showed good results at Jefferson Medical College in Philadelphia. He decided to go there.

While he was on the gurney awaiting angioplasty, his cardiologist asked colleagues to study the films more carefully -- and concluded he could go home without treatment, Mr. Gillespie recalls. "I get checked every year, and I've been OK," he says.

Pennsylvania's agency -- called the Pennsylvania Health Care Cost Containment Council, or PHC4 -- has its critics. Hospitals have complained its data are imprecise or unnecessary.

P.J. Brennan, chief medical officer of the University of Pennsylvania Health System, says that PHC4 reports -- even though they are adjusted for certain risk factors -- still aren't comprehensive enough to take into account the very sickest patients, the sort treated at academic medical centers. "These reports are very important for transparency, but I don't think you can look at a PHC4 report and conclude you should not go to that hospital," he says.

In the state's most recent report, the Hospital of the University of Pennsylvania performed well in many categories but had worse-than-expected death rates in treating septicemia, or blood infections.

State legislators have tentatively cut the PHC4's budget to $2.8 million this year from $5.4 million in 2008, largely because of a state deficit.

The program got its start in the 1980s. Alarmed by health-cost inflation, business and labor leaders sought out Walter McClure, a Minnesotan who had pioneered a medical-quality program. Dr. McClure, who has a Ph.D. in physics, made a presentation to the Pennsylvania Business Roundtable in 1985.

Dr. McClure called on the executives to foment competition among hospitals. "We used to say to a patient, 'Go anywhere, regardless of cost, and we will pay the bill,' " he said in his speech. "Quality was assumed. That was dumb."

In 1986, Pennsylvania legislators created the PHC4. Three years later, the agency published its first report comparing death rates at about 180 hospitals.

Hahnemann University Hospital in Philadelphia fared poorly at first on several quality measures. Its ratings were significantly "worse than expected" on eight of 55 procedures in the first PHC4 "Hospital Effectiveness Report." The report included data for July 1, 1989, to June 30, 1990.

John Russell, then president of the Hospital Association of Pennsylvania, says Hahnemann and others complained, but "within about six weeks, they cleaned up their act." In the second Hospital Effectiveness Report, Hahnemann improved its ratings on seven of the eight procedures. The hospital declined to comment.

PHC4's first report on infections in 2006 showed Hamot Medical Center in Erie with a relatively high infection rate, in part because the hospital was early to use computers to track such rates. Emily McCracken, the hospital's epidemiologist, says the report "put a spotlight on something that needed a spotlight."

The hospital has since lowered the infection rate by about 20% by cleaning IV catheters more often and removing them earlier.

Care Disparities

Over the years, PHC4 sought a wider variety of data and started producing reports on infection rates, readmissions and lengths of stay due to complications. The reports revealed startling disparities among hospitals and even individual doctors.

The hospital-performance reports use data compiled from medical records. Results are "risk adjusted," meaning the agency collects laboratory and medical-chart information about the age and overall health of patients so hospitals taking on difficult cases won't be unduly penalized.

The agency estimates the cost to the state's 172 acute-care hospitals of collecting the data annually is $7 million. The state's hospital association says it is $10 million or more.

The state agency hasn't been as successful in obtaining the prices that insurers pay to hospitals, information that would be important because it would allow patients and payers to factor in prices when choosing hospitals. The agency has legal power to get that information from insurers and publish it, but it has done so only for heart surgery. An agency spokesman says insurers didn't refuse, and that lack of manpower at the agency explains this omission. One person familiar with the events says many insurers wouldn't divulge prices.

Hershey came to rely on the state's hospital reports. In the early 1990s, medical costs for its 15,000 workers and dependents were soaring. "I told the human-resources department we needed to do something," says then-Chief Executive Richard Zimmerman.

Richard C. Dreyfuss, compensation and benefits manager, and his boss, William Lehr Jr., scrutinized the state's data for 23 hospitals. Mr. Dreyfuss ranked hospitals based 70% on medical outcomes and 30% on hospital prices, which the company obtained from insurers on its own. He focused on 21 costly procedures such as heart bypass and diabetes care.

Cost Correlation

Results shocked him. "The correlation between cost and quality was zero," he says. "You go in thinking that all hospitals are pretty much equal, but this was eye-opening. Generally, higher-cost hospitals had poorer outcomes."

Mr. Dreyfuss devised a plan called Health Styles in which only 10 hospitals would be included -- and 13 left out. Employees had other plans to choose from, but Health Styles was cheaper than the relatively inexpensive health maintenance organizations Hershey offered, Mr. Dreyfuss says.

The 13 excluded hospitals weren't happy -- especially the highly regarded Penn State University's Milton S. Hershey Medical Center, founded by the family that created the chocolate company.

C. McCollister Evarts, dean of the hospital's medical school, told Messrs. Dreyfuss and Lehr that the state agency's information was wrong and "you don't understand what an academic medical center does," Messrs. Dreyfuss and Lehr recall.

Dr. Evarts confirms his remark and says he believes such measurements have become far more precise over the years. In recent years, Hershey Medical was reinstated under the company's plans. The hospital declined to comment.

The Health Styles plan took effect in 1994. About 40% of employees in central Pennsylvania signed up. The company, which was self-insured, was able to hold its medical-care cost increases annually to 4%, about half the national rate, saving about $10 million in the first five years. "This thing was a real winner," says Mr. Dreyfuss. He and other former Hershey executives say the company cut its annual medical expense by 50% for several years.

Dennis Bomberger, business manager of Chocolate Workers Local 464, says Hershey's Health Styles "was an excellent plan" that "employees liked the best."

The plan was discarded two years ago, however, when a new Hershey management team changed health coverage, Mr. Bomberger says. A Hershey spokesman declined to comment.

Former Hershey vice president Mr. Lehr is now chairman and chief executive of Capital BlueCross, where he has installed a plan for customers that would use PHC4 data to select hospitals. He would like to see hospital-quality information available across the country. "I would ask officials in Washington to push for mandatory compiling of medical data."

England Eases Rules On Assisted Suicide

Story from the Wall Street Journal

LONDON -- English authorities made it easier for a family acting out of compassion to help a terminally ill relative to commit suicide, marking a victory for advocates of assisted suicide.

While it will continue to be illegal to help someone commit suicide, England's top prosecutor said the state will be unlikely to prosecute someone for helping a relative who had a clear wish to die, and also a terminal illness or "severe and incurable physical disability."

Keir Starmer, director of public prosecutions for England and Wales, said the state will be more likely to prosecute cases in which the victim wasn't mentally able to make up his own mind, or where the victim was pressured, or didn't have a "clear, settled and informed wish to commit suicide," or was under 18 years old.

Mr. Starmer issued the guidelines after a court ordered him to this summer. The new guidelines, which also apply to Wales, went into force Wednesday, though they are technically interim guidelines that will be open to public debate before final guidelines are issued next year.

Multiple-sclerosis sufferer Debbie Purdy, left, with her husband in July.
Ms. Purdy has fought to force England to clarify assisted-suicide rules

Debate about assisted suicide has come to a head here in recent years, as a number of families have helped terminally ill or paralyzed relatives travel to Switzerland to commit suicide at a clinic called Dignitas

This has put the relatives in a legal gray area. England has never chosen to prosecute any families for this, but the threat of prosecution has hung over them. That has led to calls for the chief prosecutor to clarify the rules.

Dignity in Dying, a nonprofit group that supports assisted suicide, welcomed the new guidelines. "In order to protect the public there will understandably be some situations where prosecutions are warranted. The guidelines sensibly distinguish between compassionate behavior and behavior which is potentially malicious," said Sarah Wootton, chief executive of Dignity in Dying, in a statement.

But she added that England should still change the law to clearly legalize assisted suicide when it is motivated by compassion. Thus far, attempts to change the laws have either stalled or been shot down in Parliament.

England is the latest country to grapple with the ethics of assisted suicide. Several European nations, including the Netherlands, Luxembourg and Belgium, have passed laws in recent years allowing for some forms of doctor-assisted suicide. In the U.S., Oregon has made it legal for doctors to prescribe life-ending drugs to some mentally competent but gravely ill people.

H1N1 Vaccination Program Starts At A Crawl

Reuters

Vaccination against the H1N1 swine flu is off to a slow start in the United States, but states have ordered more than 2 million doses of mostly nasal spray for the first patients, a top health official said on Tuesday.

Every state has ordered a share of the pandemic vaccine, Dr. Thomas Frieden, director of the U.S. Centers for Disease Control and Prevention, told a news briefing.

"This week, as of yesterday, about 2.4 million doses were available for ordering," Frieden told reporters in a telephone briefing. He said states had ordered 2.2 million of the doses -- a painstaking process because they must specify which vaccine they want and have a plan in place for delivering it.

The U.S. Food and Drug Administration must inspect each lot of vaccine as it is packaged. "Each day as more vaccine is cleared, more vaccine becomes available for ordering," Frieden added.

"I think what we are seeing now is the tap beginning to flow. We are seeing a substantial amount of vaccine beginning to get out."

The first batches available are AstraZeneca (AZN.N) (AZN.L) unit MedImmune's nasal spray vaccine, which is approved for people aged 2 to 49 without asthma or other lung conditions.

Many states are opting to vaccinate healthcare workers first, who have a high risk both of being infected and of passing infections along to vulnerable patients.

WAITING FOR SHOTS

But at least three Chicago-area hospitals that have received the nasal spray vaccine said they would not be using it to immunize hospital staff because it is made from a weakened version of a live virus, unlike shots, which are made using a killed virus, and there is a very small chance of infecting someone with a weak immune system.

Dr. John Segreti, an infectious diseases expert at Rush University Medical Center, said the hospital had received 2,000 doses of the nasal spray.

"We're going to be distributing it to clinics that see children. We're not using this for our healthcare workers. We're waiting for the inactivated vaccine for our health workers," he said.

Officials at Northwestern Memorial Hospital and the University of Chicago Medical Center said they also will be waiting for the shots to immunize hospital workers.

The U.S. government has ordered 250 million doses and, given that many Americans skip flu shots every year, the CDC believes this will be enough to fill demand.

"What we have decided to do is make vaccine available as soon as it comes off the production lines," Frieden said. "That means it is becoming available in lots. It is a little bit of a messy process and we do expect it to be a little bit bumpy in the next few weeks."

And it will be a strain to keep up with the virus. "As of today, influenza is widespread in most of the United States," Frieden said. "We are seeing it continue to increase in some areas."

Nonetheless, he noted, when H1N1 goes through a community, it infects about 5 percent of the people, leaving 95 percent vulnerable to a fresh round.

"You don't know what the rest of this long flu season is going to hold. We haven't had a flu season like this in at least 50 years," Frieden said.

Canada's Risky Swine Flu Plan

Story from the Victoria Times Colonist

Among the many concerns about swine flu, one grows larger by the day. Canada's public health managers are running considerable risks with their strategies.

When it became clear that the new H1N1 flu virus threatened a pandemic, many countries decided on an accelerated response. They chose a vaccine type that is quick and easy to develop.

But Canadian officials preferred a double-barrelled serum that both repels the virus and boosts the patient's immune system.

That was a controversial decision, because the more complex vaccine takes longer to develop. Countries that opted for the simpler approach are now ready to begin distribution. Some have already started.

But it will be at least mid-November before the Canadian vaccine is available and it could be January before everyone is treated.

That would be slow even for the regular flu cycle, which peaks in the early new year. But recent evidence suggests the H1N1 flu epidemic is accelerating faster than expected. There's a good chance that a million or more Canadians will contract the disease before the medication reaches them. Although the H1N1 virus has proved less dangerous than feared, some will die.

Swine Flu Cases - As Of May 2009

It's possible the double-barrelled vaccine will eventually save more lives than are lost. But in going this route health officials are taking a calculated chance.

Then there is the uncertainty about whether to offer regular flu shots before the swine flu vaccine is available. It's an important question. Every year around 20,000 Canadians are hospitalized with regular flu and up to 8,000 die.

On the one hand, Canada's chief public health officer insists swine flu poses no additional risk to patients who have already received regular flu shots.

Yet his colleagues in several provinces, including B.C., have concluded there could be a risk. They cite unpublished research that suggests patients who have received a regular flu shot might be more vulnerable to H1N1.

On that basis, most regular flu shots will be delayed until early next year in B.C. (People over 65 and residents of nursing homes can receive them right away.)

This is a momentous conclusion to base on limited information. Experts in other countries have been unable to confirm the research.

There's also considerable uncertainty about how priorities will be implemented when the H1N1 flu vaccine does arrive. The B.C. government has said first choice must go to pregnant women, people under 65 with chronic ailments, residents of isolated communities, pre-school children and front-line health workers.

But how is this to be done? Will people who do not meet these criteria be turned away in the early stages of the campaign? Physicians and clinics haven't received those kinds of instructions.

The question is moot if enough supplies arrive for everybody. That is what health officials are counting on.

They might be right. When the vaccination program was in the planning stages, the federal government ordered 50 million doses. At that time, it was thought each patient might need two shots. It now appears most adults will require only one dose.

But what happens if the serum comes late, or the epidemic comes sooner?

There is always a degree of trial and error in developing new vaccines. But in this instance, there is more than the usual level of confusion and uncertainty. Canadian officials have chosen a different approach than many western countries. Let's hope it turns out to be the right one.

The Potential Of Nanotech

Story from Business Week

Through a combination of nanotechnology and biotechnology, scientists may be able to eliminate disease and aging, Ray Kurzweil tells Computerworld

In 30 or 40 years, we'll have microscopic machines traveling through our bodies, repairing damaged cells and organs, effectively wiping out diseases. The nanotechnology will also be used to back up our memories and personalities.

In an interview with Computerworld, author and futurist Ray Kurzweil said that anyone alive come 2040 or 2050 could be close to immortal. The quickening advance of nanotechnology means that the human condition will shift into more of a collaboration of man and machine , as nanobots flow through human blood streams and eventually even replace biological blood, he added.

That may sound like something out of a sci-fi movie, but Kurzweil, a member of the Inventor's Hall of Fame and a recipient of the National Medal of Technology, says that research well underway today is leading to a time when a combination of nanotechnology and biotechnology will wipe out cancer, Alzheimer's disease, obesity and diabetes.

It'll also be a time when humans will augment their natural cognitive powers and add years to their lives, Kurzweil said.

"It's radical life extension," Kurzweil said. "The full realization of nanobots will basically eliminate biological disease and aging. I think we'll see widespread use in 20 years of [nanotech] devices that perform certain functions for us. In 30 or 40 years, we will overcome disease and aging. The nanobots will scout out organs and cells that need repairs and simply fix them. It will lead to profound extensions of our health and longevity."

Of course, people will still be struck by lightning or hit by a bus, but much more trauma will be repairable. If nanobots swim in, or even replace, biological blood, then wounds could be healed almost instantly. Limbs could be regrown. Backed up memories and personalities could be accessed after a head trauma.

Today, researchers at MIT already are using nanoparticles to deliver killer genes that battle late-stage cancer. The university reported just last month the nano-based treatment killed ovarian cancer, which is considered to be one of the most deadly cancers, in mice.

And earlier this year, scientists at the University of London reported using nanotechnology to blast cancer cells in mice with "tumor busting" genes, giving new hope to patients with inoperable tumors. So far, tests have shown that the new technique leaves healthy cells undamaged.

With this kind of work going on now, Kurzweil says that by 2024 we'll be adding a year to our life expectancy with every year that passes. "The sense of time will be running in and not running out," he added. "Within 15 years, we will reverse this loss of remaining life expectancy. We will be adding more time than is going by."

And in 35 to 40 years, we basically will be immortal, according to the man who wrote The Age of Spiritual Machines and The Singularity Is Near: When Humans Transcend Biology.

Kurzweil also maintains that adding microscopic machines to our bodies won't make us any less human than we are today or were 500 years ago.

"The definition of human is that we are the species that goes beyond our limitations and changes who we are," he said. "If that wasn't the case, you and I wouldn't be around because at one point life expectancy was 23. We've extended ourselves in many ways. This is an extension of who we are. Ever since we picked up a stick to reach a higher branch, we've extended who we are through tools. It's the nature of human beings to change who we are."

But that doesn't mean there aren't parts of this future that don't worry him. With nanotechnology so advanced that it can travel through our bodies and affect great change on them, come dangers as well as benefits.

The nanobots, he explained, will be self-replicating and engineers will have to harness and contain that replication.

"You could have some self-replicating nanobot that could create copies of itself...and ultimately, within 90 replications, it could devour the body it's in or all humans if it becomes a non-biological plague," said Kurzweil. "Technology is not a utopia. It's a double-edged sword and always has been since we first had fire."

Mandated Health Insurance Squeezes Those In The Middle

Story from the Wall Street Journal

BOSTON -- President Barack Obama and his congressional allies have made insuring nearly all Americans a major goal of overhauling the nation's health-care system. One of their toughest challenges will be trying to cover people like Ron Norton of Worcester, Mass.

Mr. Norton, 49 years old, is an adjunct professor at a local community college who earns about $40,000 a year. He's also one of roughly 200,000 Massachusetts residents who remain uninsured despite a state law requiring residents to have health insurance.

"I can't use up all of my savings just to buy mandatory insurance," Mr. Norton says. It's like penalizing "the homeless for refusing to buy a mansion."

As lawmakers hammer out legislation aiming to extend coverage to the country's 46 million uninsured, one of the most sweeping proposals has so far stoked relatively little debate: a requirement that nearly all Americans carry health insurance, much like drivers are required to have car insurance.

All of the major health bills winding through Congress feature a so-called individual mandate similar to the one in Massachusetts. Mr. Obama supported the idea in his speech to Congress last week. Such a mandate, proponents argue, is necessary to keep premiums affordable: The healthy, who are relatively cheap to cover, help pay for the sick.

Subsidies for premiums would help low-income families gain coverage, while the prospect of fines would prod others to buy insurance.

But people like Mr. Norton show how difficult it could be to bring into the insurance pool the millions of consumers who make too much money to qualify for assistance, yet not enough to bear the full cost of new policies on their own.

Three years after Massachusetts's ambitious universal-coverage law went into effect, two-thirds of its previously 600,000 uninsured residents have coverage, according to state data. It has the lowest rate of uninsured in the country -- about 3% according to a state survey, compared with 15% nationwide. But the remainder -- many younger, male and fairly healthy -- has proved tougher to cover.

Costs to expand insurance coverage in the state are growing rapidly because of higher-than-expected enrollment in free and state-subsidized plans, and rising health-care costs. Critics say the Obama plan could face similar problems, contending it doesn't do enough to control costs.

In 2007 -- the first full year of the program -- the state exempted from the mandate 76,000 people it determined couldn't afford the cheapest plans available to them. An additional 68,000 had to pay a penalty for going without coverage -- a fine that has risen to $1,068 for the 2009 tax year.

On a national scale, pulling off an individual mandate could be more difficult. The Congressional Budget Office has estimated that as many as nine million legal American residents might still go without insurance under the initial House legislation released in July, despite its subsidies. The leading proposal in the Senate would place more restrictions on assistance, likely increasing the number who might go without insurance.

"If you're talking about millions of people who will have to buy insurance by themselves, this could be a difficult political issue," says Robert Blendon, professor of health policy and political analysis at Harvard University. "Unless subsidies are substantial, you're going to have middle-class resistance to this."

The current House bill calls for subsidies to individuals who earn as much as $43,000, or up to $88,000 for a family of four. That level is four times the federal poverty level. It would require many people who don't buy insurance to pay a 2.5% levy on their adjusted income.

A bill the Senate Finance Committee is drafting would limit subsidies to people earning as much as $32,500, or $66,000 for a family of four. That level is three times the federal poverty level. The bill would levy much stiffer penalties: from $750 to $1,500 a year for people earning less than the income cutoff point, and up to $3,800 for families that earn more than that threshold.

An independent contractor, Mr. Norton doesn't get benefits through the state-run Quinsigamond Community College where he works. His wife's employer, a dental practice, covers her, but not dependents. With a combined income of between $60,000 and $70,000, the family goes without cellphones for Mr. Norton and his teenage daughter, and a needed roof repair, but still makes too much to qualify for subsidies.

The cheapest plan available to him and his 16-year-old daughter costs $464 a month, or $5,568 a year, and comes with a $2,000 deductible per person.

"It's insurance you can't possibly use," he says, referring to the thousands of dollars he'd pay in premiums and deductibles before the coverage would kick in.

Mr. Norton says he worries about not having insurance for himself or his daughter, but so far they've been lucky. They pay for routine checkups, he says, and have had minimal health-care expenses.

Last year, Mr. Norton paid a penalty of nearly $1,000 for going without coverage, cutting into the family budget that includes a mortgage and $3,600 in recent years for his daughter's orthodontic bills.

A spokesman for the state said that while it has achieved near universal coverage, Massachusetts always recognized there would be "some people for whom coverage would not be considered affordable." He said that based on Mr. Norton's income, the state would likely waive the penalty for Mr. Norton if he appealed for an exemption. He hasn't done that.

When it became the first state to require residents to have health insurance in 2006, Massachusetts provided free or heavily subsidized coverage to people with incomes up to 300% of the federal poverty level.

The majority of its newly insured, or some 264,000, are in free or subsidized plans.

All but the smallest employers were required to offer employees insurance or pay toward the coverage of low-income residents. That helped push nearly 96,000 people into health plans sponsored by their employers, state officials say.

"The real success story is that neither the employer or individual penalties are that rigorous but they work," says Bruce Bullen, chief executive of Harvard Pilgrim, one of the state's biggest health insurers.

About 46,000 residents have bought full-price insurance plans on their own. About half purchased those plans through a program set up by the state to make it easier and cheaper for individuals to buy nonsubsidized health coverage.

Michael Kovner, a self-employed health-care technology consultant, is one of them. Mr. Kovner, 53, had been on the plan of his old employer, IBM, until benefits he maintained for a temporary period under the federal Consolidated Omnibus Budget Reconciliation Act, or Cobra, expired this year.

It took him half an hour to go online and purchase a plan for $442 a month -- slightly more than his Cobra premiums. "It was as easy as ordering from Amazon," said Mr. Kovner, plus, he didn't have to answer any questions about his medical history.

Nationwide, the average cost of an individual plan for someone of Mr. Kovner's age was $302 a month in 2007, according to the trade group America's Health Insurance Plans. But those typically carry higher deductibles and fewer benefits than what's required in Massachusetts, and exclude many people with medical problems.

In Massachusetts, rising health-care costs, already among the highest in the country, threaten the insurance mandate's long-term viability. The state's costs to expand coverage have swelled nearly 70% to an expected $1.75 billion in fiscal 2010 from a base of $1.04 billion in 2006, about half of which is supported by federal funds, according to the Massachusetts Taxpayers Foundation, a nonprofit policy research group.

Private health-insurance premiums in Massachusetts have been traditionally higher than the national average, fueled by the state's concentration of doctors and expensive academic medical centers, and continue to rise at 5% to 10% annually. State officials say the number of people who remain uninsured is small enough that their exclusion from the risk pool doesn't affect its costs.

As the state embarks on a revamp of the way doctors and hospitals are paid, state officials agree that the ability to control costs will ultimately make or break the universal-coverage initiative.

"If it's not affordable, it's not sustainable," says Jon Kingsdale, executive director of the authority that oversees the state coverage plan.

Already, rising premiums have started to push some out of the insurance pool.

Peter and Kirsten MacDonald of Brockton, Mass., are the kind of young, healthy individuals Massachusetts needs in the system to spread the risk and help pay for it. But the MacDonalds have calculated that they're better off without coverage.

They bought their own insurance in 2006, after Mr. MacDonald, a 39-year-old computer consultant, lost his job and began to work as an independent contractor. Insuring the couple and their four children then cost $650 a month, or $7,800 a year, and didn't include prescription-drug coverage. It was "a lot, but something we could afford," Mr. MacDonald says.

The next year, premiums rose to $750 a month and to about $900 a month in 2008. The MacDonalds say their actual medical costs hadn't come close to the premiums they were paying. "What are we getting for it?" Ms. MacDonald says they asked themselves before canceling.

Now they put aside $750 a month to cover medical costs as they arise, plus the $1,068 penalty each adult would pay for going without coverage. The biggest expense came last year, when their then 4-year-old son, James, fell and cut the bridge of his nose. The five stitches and care of a plastic surgeon cost $2,000, which the MacDonalds said they were able to pay from reserves they'd set aside.

Mr. MacDonald said he'd be inclined to buy insurance if he could buy cheaper catastrophic coverage, but such policies don't count in the Massachusetts plan.

The mandate hasn't always worked as intended. Early on, the state combined the small-business and individual insurance markets to lower the price of individual premiums in the program the state set up to make it easier for people to buy nonsubsidized care. Insurers agreed to eliminate waiting periods and pre-existing condition exclusions for individual customers.

Now, one insurer, Harvard Pilgrim, says it's discovered about 40% of people who bought an individual plan through the program in a 12-month period left after less than five months. While they had the coverage, they incurred an average $2,400 in monthly medical bills -- six times the plan's projections.

Harvard Pilgrim's Mr. Bullen isn't sure why the people dropped out or why their bills were so high. He suggests some people may have signed up for coverage to take care of known medical needs, then canceled after they received care. Others, he suspects, might have had insurance, but briefly doubled up to take advantage of broader coverage the state requires individual plans to offer, such as some fertility treatments.

Massachusetts has tried to prevent people from dropping private insurance for state-subsidized plans, something federal lawmakers also want to avoid. The state disqualifies people whose employers offer coverage from getting subsidies. That's caused another group of uninsured to fall through the cracks.

Nestor Nunez, a 53-year-old driver for a private bus company, earns between $35,000 and $40,000. That would qualify him and his wife, Aymara, for a state-subsidized plan with $232 in monthly premiums, something he could afford.

But he has access to coverage through his employer. The problem is, those premiums would cost between $381 and $588 a month, more than he can pay, he says, so he goes without coverage. "The state doesn't make me pay a penalty, so they admit I can't afford this," he says of the automatic waiver he gets based on his income and the premium he'd have to pay.

Now, Mr. Nunez pays for his diabetes and blood-pressure medication on his own and reports results of his daily at-home blood-sugar tests to his doctor to avoid lab fees.

Still, he recently got a $1,010 bill for other lab work, and the Nunezes aren't sure how they'll pay it. They've begun using less air conditioning and cutting down on small luxuries, such as the elaborate cakes Mrs. Nunez often bakes. "Now we need to watch every penny, because we don't know when we're going to really need it."

Medical-Device Makers Scramble to Avert New Fees in Health Bill

Story from the Wall Street Journal

WASHINGTON -- The $100 billion medical-device industry is scrambling to reverse billions of dollars in fees proposed by the Senate Finance Committee, but it faces trouble because its reluctance to offer concessions alienated some lawmakers.

A draft of a broad health-overhaul bill in the Finance Committee calls for device makers to pay $40 billion in fees over 10 years, with the specific amount based on each company's market share.

The relatively high fees resulted from a lobbying move that some senior congressional aides and industry officials say represented a strategic error on the device industry's part.

Device makers were among the health-related industries that went to the White House this spring to volunteer financial concessions as part of an overhaul. They were then asked to offer a dollar amount in savings, representatives of the device industry and congressional aides said. Instead, the companies suggested that the government levy a tax on their adversaries: hospital-purchasing groups that negotiate for lower prices on medical supplies and some devices.

Some senators, including Finance Committee Chairman Sen. Max Baucus (D., Mont.), were troubled that the device makers were "offering up other people's money," said a person close to the negotiations. This person cited a line that has come to represent the maneuvering among health-care industries, the White House and Congress: "You either come to the table early, or you end up part of the dinner."

Mr. Baucus is planning to make public his bill on Tuesday, and aides said the new fees on device makers' revenues are likely to remain part of it. According to a letter sent to Mr. Baucus by the Advanced Medical Technology Association or AdvaMed, the main device-industry group, the proposal would assess all manufacturers at a rate, based upon their U.S. sales, necessary to generate $4 billion annually beginning in 2010. Industry representatives are lobbying senators to trim the fees.

Michael Mussallem, president of heart-device maker Edwards Lifesciences Corp., said the $40 billion tax would cut into research and hurt companies' ability to add jobs. "We were working overtime to come up with ideas. When we learned about the tax over Labor Day, we were shocked," he said.

He said the tax details are too vague. "What is 'market share?' Whose market? What is the base year for comparison?" asked Mr. Mussallem. Senate Finance aides said those details are being worked out.

Device companies that make imaging and X-ray equipment are already upset at the health-overhaul legislation, because most versions include significant cuts in Medicare reimbursements for diagnostic imaging such as CT scans and MRIs. At General Electric Co., about $10 billion of the health-care division's $17 billion in revenue comes from imaging-related products and services.

A GE spokesman, Peter O'Toole, said the company is negotiating with senators and their staff. "We're optimistic," said Mr. O'Toole. "We want to ensure that patient access to these critical, life-saving technologies is maintained."

A person close to the negotiations argued that device makers will get "huge benefits" from an overhaul, because wider insurance coverage will bring them more customers. As a result, the White House wants savings commitments to help pay for the package.

After the White House and Senate Finance Committee sent requests for concessions this spring, the first group to step forward was the pharmaceutical industry. It proffered $80 billion in savings in June, including helping more seniors get prescription drugs. Hospitals offered concessions worth $155 billion a few weeks later.

But device makers didn't suggest a specific number. Lobbyists at AdvaMed urged the Senate to tax the group purchasers for hospital chains, telling negotiators that the purchasing co-ops could then "pass through" some or all of that tax to the device makers.

AdvaMed President Stephen Ubl, a former Senate Finance staffer, said his group did its part by suggesting ideas that would count as "scorable" by the Congressional Budget Office, meaning the agency could estimate their effect on federal spending. "We did not walk away from the table," said Mr. Ubl. "We put forward a policy that would have produced billions in scorable savings which the committee did not accept."

The Health Industry Group Purchasing Association, representing purchasers, reacted angrily in a letter in August to AdvaMed. "Advocating proposals that affect another industry to the benefit of your own...can not be considered real beneficial healthcare reform," its president, Curtis Rooney, wrote. He said AdvaMed didn't respond to the letter.

The savings would come from companies such as MedAssets Inc. of Atlanta, which negotiate bulk purchases of equipment for hospitals, lowering hospital costs.

In an interview, MedAssets Chief Executive John Bardis criticized device prices as "inflated" and added, "More importantly, their pricing is not transparent to buyers."

AdvaMed spokeswoman Wanda Moebius said a recent industry study showed that "price transparency would actually raise prices." She said device prices are highly competitive.

Eli Lilly & Co. Set To Cut Jobs As Patents Expire

Story from the Wall Street Journal

Eli Lilly & Co., confronted with the possibility of a steep revenue decline because of looming patent expirations, on Monday said it plans to reduce its work force by nearly 14%, or 5,500 employees, and revamp its operating structure.

The job cuts and other measures would reduce Lilly's costs by $1 billion by the end of 2011, excluding planned strategic additions in emerging markets and Japan, the Indianapolis-based company said. Lilly expects its work force to decline to 35,000 by the end of 2011 from 40,500 today and 46,000 at its peak in 2004.

Between 2010 and 2013, drugs accounting for more than half of Lilly's current revenue will face generic competition as U.S. patents expire on four of its five top-selling products, including the blockbuster antipsychotic medication Zyprexa. Sales of those drugs -- nearly $11 billion last year -- could decline by as much as 80%.

Lilly, which doesn't have the product array to offset the lost revenue, also had some notable setbacks in recent weeks in its efforts to bring new drugs to market.

In August, the company discontinued development of arzoxifene, an experimental osteoporosis drug, because of side effects and a lack of effectiveness in a clinical trial. A few weeks earlier, Lilly said the experimental multiple-sclerosis drug dirucotide, which it licensed from BioMS Medical Corp., didn't help patients significantly in a clinical trial. Analysts had estimated that each drug had the potential to exceed $500 million in annual sales.

Chief Executive John Lechleiter, in an interview on Monday, said the drug-research setbacks "certainly were part of our consideration" in the restructuring, but he said Lilly probably would have made significant changes even if those drugs hadn't failed. He noted that Lilly faced both internal and external challenges, including higher standards for regulatory approvals of new drugs.

Rival drug makers, including Pfizer Inc. and Merck & Co., have engineered large-scale acquisitions to address their challenges, but Mr. Lechleiter has eschewed a large deal in favor of smaller purchases. On Monday he reiterated his intention to avoid a large-scale combination, saying such deals "provide short-term relief but don't fundamentally address the issue of innovation and how to make pipelines more productive."

Still, if Lilly sidesteps a large merger, it probably would need to pony up billions of additional dollars on midsize acquisitions or drug-licensing deals to fill its pipeline gap. J.P. Morgan analyst Chris Schott said that while Lilly's moves are a step in the right direction in addressing costs, the company doesn't have a research pipeline sufficient to offset revenue losses from patent expirations.

The job cuts will be spread across the company, both in the U.S. and abroad, a spokesman said. Lilly hopes to achieve some of the reductions through retirements and voluntary departures but can't rule out layoffs.

The company will reorganize its operating structure into five global business units: oncology, diabetes, established markets, emerging markets and the Elanco animal-health unit. Lilly expects the new structure to be in place in January.

Lilly also created a development center within its research arm, which it hopes will help streamline drug development.

Lilly has had some research success. In July, the Food and Drug Administration approved Effient, an anticlotting drug Lilly co-developed with Daiichi Sankyo Co., of Japan.

Russia Denies Swine Flu Death

(AFP)

MOSCOW — Russia's health authorities Monday vehemently denied that the country had recorded its first fatality from the A(H1N1) virus, contradicting a top doctor's claim that a woman had recently died of swine flu.

"Not a single case that had a fatal conclusion -- in other words, death -- has been recorded on the territory of the Russian Federation," said Deputy Health Minister Veronika Skvortsova, quoted by news agencies.

She said that the woman, a 46-year-old Russian doctor who recently returned from Bulgaria, had died of pneumonia aggravated by a heart condition and not swine flu.

Earlier Dmitry Lvov, head of the Russian Academy of Sciences' Institute of Virology, said that not only had Russia recorded its first swine flu death but that the number of cases could be in the tens of thousands.

"We immediately diagnosed (the woman with) swine flu," Lvov was quoted as saying by the Interfax news agency.

"We could not take any measures because she died the very next day."

Lvov also warned that the total count of people infected with the virus could be much higher than the 381 cases that Russian health authorities had acknowledged so far.

"By my count, it can be as high as the tens of thousands. I cannot prove it yet, but in a few weeks I will be able to and will say so," Lvov said.

"The time when we could say that our border was secure is past. For the flu virus it is a sieve," he added.

The Russian authorities have been pointing out that the country remains relatively unaffected by the virus and have urged citizens to take strict precautions when travelling abroad.

The World Health Organisation announced on Friday that the global flu death toll has reached 3,486, up 281 from a week ago.

Experts have previously predicted that about one third of the world's population of more than 6.5 billion people could be affected by the A(H1N1) virus, but they stress that so far most victims are suffering only mild symptoms.