The Health Shopper

California's health reform plan, which had been pushed heavily by Governor Arnold Schwarzenegger, was defeated this week due, in large part, to cost concerns particularly in the midst of a larger state budget crisis. Based largely on reform efforts in Massachusetts, the $14.9 billion plan would have required as many as 5.1 million state residents to purchase health insurance. The bill would have required insurers to sell health plans to anyone in the state, regardless of pre-existing conditions, and would have offered subsidies to lower income individuals to buy coverage.

Some observers believe that the defeat of the bill will discourage state level health reforms and encourage national plans. In contrast, the Los Angeles Times calls the defeat of the plan "a poor omen" for health care reform efforts put forth by Democratic presidential candidates Barack Obama and Hillary Clinton, which are broadly similar to the California bill.

DNA testing has received renewed attention in recent months, as companies have begun to sell direct-to-consumer genetic tests and doctors have openly fretted in the New England Journal of Medicine about how to explain those test results to patients. Will consumers buy the tests? Will the tests yield enough genetic data to lead to breakthrough medical cures? Vimo's latest report, "The Promise and Perils of Personalized Medicine," examines the hype surrounding genetics and medicine and looks at how the fragmentation of health care spending will hinder the shift toward genetic testing and treatments.

A recent study has found that Americans are spending approximately $174 billion annually on treating  diabetes and related health problems, which is 32 percent more than Americans spent on treating the disease in 2002. The total cost of treatment neared the cost of treating cancer, even though cancer causes twice as many deaths as diabetes. According to the study, providing routine treatment for diabetes is relatively inexpensive, but "The real expenses come from uncontrolled diabetes, which can lead patients to require dialysis and kidney transplants."

According to the USA Today, employers-particularly small businesses-are increasingly experimenting with doing away with group insurance plans in favor of making defined contributions to help employees buy insurance on the individual market. Employer contributions tend to range from $50 to $200 a month, and in addition to saving businesses money, the contributions can often cover most of the costs of premiums for individual plans. Critics of the shift worry that without reforms to the individual insurance market, older people and individuals with health problems will find it difficult to buy insurance.

Blue Cross of Massachusetts has proposed paying doctors and hospitals fixed annual fees to treat patients in an effort to limit the rate of spending growth while improving preventive treatment. Under the proposal, the insurer would generally allot a set, risk-adjusted amount of money each year to pay all providers for treatment and would offer bonuses to providers whose patients made significant health improvements over the course of the year. Blue Cross officials say they hope that the fee restructuring would encourage hospitals and doctors to provide better follow-up care, which would ultimately limit hospitalizations and reduce costs. Critics worry, however, that fee limits could reduce consumer choice in picking doctors and hospitals, and could cause hospitals to deny treatment in order to save money.

Two new studies have found that pharmaceutical makers overstate the benefits and downplay the risks of prescriptions medications. One study, which focused on claims about treating pre-osteoporosis in older women, has found that drug company researchers often state the benefits of their drugs in relative, rather than absolute terms. In effect, this means that women are told that osteoporosis drugs will lower their bone fracture risk by half, "But in women with pre-osteoporosis, the risk of fracture is very low, say 1 percent a year, so if you lower that by half, you go down to an 0.5 percent absolute reduction." Or, in other words, there is a one out of two hundred chance that osteoporosis medication will help someone with pre-osteoperosis.

A separate study in the New England Journal of Medicine has found that makers of anti-depressants either avoid publishing negative data about their drugs, or publish it in such a way that it "conveyed a positive outcome." While approximately half of all studies of anti-depressants showed positive effects for the drugs, 94 percent of anti-depressant studies that actually appeared in medical journals were positive.

A new report by the consulting group Milliman Inc. has found that hospitals in California charge private insurers significantly different amounts for the same treatments, and on average, private insurers reimburse hospitals at a level that is 40 percent above hospital costs. In total, private insurers spent $18 billion on $13 billion worth of care.

According to the East Bay Business Times, hospitals that charged higher prices were not necessarily doing so because they treat an especially high number of uninsured patients or because they are teaching hospitals, but that treatment prices have "everything to do with market conditions." In general, rural hospitals can charge more than urban hospitals due to a lack of competition.

CNN and the Wall Street Journal highlight efforts by the American College of Surgeons to get patients to take a more active role in talking to and vetting a surgeon prior to an operation. Among other recommendations, American College of Surgeons' Director of Quality Dr. Clifford Ko advises patients to verify a doctor's credentials, ask about potential complications from the surgery, and openly communicate any concerns. As Dr. Thomas Russell, Executive Director of the American College of Surgeons told the Wall Street Journal, "Patients should feel free to ask their surgeon anything they want answered about the operation or the surgeon's competency to perform it… There are no questions that should be off the table."

Following Medicare's lead, Aetna and Wellpoint have begun experimenting with refusing to pay hospitals for "never events," which Aetna's Chief Medical Officer describes as mistakes that are so bad that "there can't be any argument that they should ever happen." For example, Wellpoint is testing the effort in Virginia, where it will deny claims for surgeries performed on wrong body parts or for leaving surgical objects inside a patient. The insurance companies will be structuring their contracts with hospitals to require that hospitals-and not patients-pay for the costs of errors.

A number of states, including New Mexico and California are following Massachusetts' lead by looking into individual insurance mandates as a means to create universal coverage.  While recent estimates suggest Massachusetts has dropped the ranks of the uninsured by 300,000 people, the state is now focusing on lowering costs to try to make insurance more affordable for the 400,000 or more residents who cannot afford insurance, focusing largely on reducing medical errors to limit hospital expenses and improving treatment for patients with chronic conditions, such as diabetes, and reducing the number of unnecessary diagnostic tests and scans.