OMB Director Questions Insurance Giant's Approach to Reform

By David S. Hilzenrath
Washington Post Staff Writer
Tuesday, July 21, 2009; 3:04 PM

What do insurers offer that will improve quality or reduce costs in health care?

That's a question that President Obama's budget director, Peter Orszag, recently posed to Aetna, one of the nation's largest insurers. In response, Aetna pointed to evidence of progress through information technology. But the research Aetna cited wasn't entirely encouraging.

The report, describing an experiment conducted in 2001, found that the software reduced consumption of medical services by 6.1 percent. Almost all of the savings were in the hospital setting.

"One cannot reject the hypothesis that the true effect . . . on outpatient and Rx [prescription] charges is zero," the report said.

As Congress struggles to craft legislation that will cover millions of uninsured Americans without increasing the federal budget deficit, Orszag's question cuts to the heart of the debate. Obama and his supporters in Congress are counting on future efficiencies to keep costs in check. The Congressional Budget Office, official judge of the budgetary impact, has expressed skepticism that such savings will materialize.

Meanwhile, insurers are trying to squash a proposed public health insurance option, saying competition from the government would threaten their own efforts to advance quality and efficiency.

As Aetna chief medical officer Lonnie Reisman told it, Orszag wanted to know what Aetna brings to the party.

Office of Management and Budget spokesman Kenneth Baer confirmed the gist of their conversation.

Reisman gave Orszag a study published last year in the Journal of Health Economics analyzing a controlled experiment conducted years ago on a population of 40,000 HMO patients. The experiment involving software developed by a company called ActiveHealth Management, which Reisman co-founded and formerly headed. Reisman was also a co-author of the study.

The software analyzes patients' medical records and alerts doctors if it finds reason to stop a drug, add a drug, or do a test.

"Our findings suggest that the experiment did not reduce all professional charges, but only those associated with hospitalization," the study said.

That may be because the software alerts generated more frequent visits to the doctor's office, which in turn helped reduce the need for hospital care, Aetna spokeswoman Jill Griffiths said.

Orszag was so impressed with the study that he urged Reisman to show it to the CBO, Reisman said. In contrast to a multitude of studies offered by various parties to advance their cause, this one was designed to meet the most rigorous scientific standards, Reisman said.

Orszag was impressed "because not many people come into his office and say, 'Here's a peer reviewed article for you to consider,' " Baer said. "There is plenty of research to be done to understand what steps we can take to bring down health care costs and boost quality."

What the study means for the debate over a government-run health insurance option isn't clear.

Aetna had nothing to do with developing the software. It began using it in 2002 and bought the company that developed it in 2005. Aetna has already brought the software to bear on 19.2 million people -- members of its own health plans and others.

If a government-run health plan developed the proper infrastructure, it could use the software, too, Reisman said.

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