How Obamacare inadvertently threatens the financial health of small businesses, and what states should do about it — Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

From Forbes

Starting in 2016, push comes to shove for small businesses under the Affordable Care Act, better known as Obamacare. As of January 1, small businesses, broadly defined as firms with 50 to 100 full-time employees, must comply with the ACA’s employer mandate and provide qualified health insurance to their workers or face stiff penalties. But this requirement poses a big threat to the financial stability of small employers—and not for the reasons you might think.

Obamacare includes a myriad of regulatory incentives and exemptions that define the parameters of the employer mandate. However, these have inadvertent consequences. Most important, exemptions in the ACA encourage small firms to self-finance their health care plans—that is, pay their workers’ health care bills directly, rather than covering them through a traditional insurance policy. Most large companies in America (above 3,000 employees) engage in self-funding, but that is done now by only about 16% of small companies of between 50 and 100 employees. According to my research, that number is set to rise.

It’s understandable that small companies see self-funding as the superior option. By financing their own health care plans, they stay exempt from the community rating requirements that restrict how much insurers may vary premiums based on factors like age and smoking status; they also stay exempt from the federal and state taxes on most health care premiums that are paid to traditional insurers.

Read More »

‘Health care loans’ for Hep C cure — Andrew Lo and David Weinstock

MIT Sloan Professor Andrew Lo

MIT Sloan Professor Andrew Lo

From Boston Globe

A new class of medications was recently approved that cures more than 95 percent of people with Hepatitis C in only six weeks at a cost of about $84,000 per person, and new therapies with price tags that are likely to exceed $1 million per person are now available or coming soon. How can patients possibly afford them?

In an article published in the journal Science Translation Medicine, we outline a feasible market-based solution that could immediately expand access to transformative medications, including cures for Hepatitis C and cancer. The basic concept is to convert a large upfront medical expense into a series of more affordable payments, akin to getting a mortgage when buying a house. The challenge of curative medications that only require a short course of therapy is that the whole price is paid upfront — how many homeowners could buy their houses using only cash? Instead, most home buyers get a mortgage and make monthly payments for as long as they benefit from owning the house or until the full amount is paid. We propose the same solution to overcome the liquidity problem that prevents access to curative medications, which we call “health care loans,” or HCLs.

The second problem with upfront payment is the possibility of buying a “lemon.” Patients could unexpectedly relapse, die, or suffer a terrible side effect, in which case there’s no opportunity to recoup a portion of the upfront payment. Therefore, we propose that amortized payments stop if the benefit stops (i.e., if the “cure” doesn’t cure), thereby linking payment more closely to therapeutic value.

There are, of course, many complex ethical considerations and social ramifications related to the pricing of highly effective therapies above a threshold that permits universal access. Price gouging — like the recent 5,000 percent increase for a generic medication by Turing Pharmaceuticals — is a concern. To address this, some politicians and advocacy groups have proposed that prices be capped by legislation. Capping prices would stifle innovation and disincentivize drug development, the exact opposite of what we need.

Our HCL proposal has many advantages over price caps. It incentivizes (rather than disincentivizes) the development of highly effective therapies, because the greater the benefit, the greater the payment. And it can be implemented immediately. Our calculations indicate that bonds with competitive return characteristics could be raised to support HCLs across a range of financial scenarios. The creation of a large and liquid market for HCLs would give payers and lenders greater negotiating leverage with drug makers to get better pricing. Linking payment to value would establish a paradigm in which medications that offer very little benefit, like many of the recently approved cancer therapies, could not have exorbitant prices.

Read More »

What Apple’s standoff with the FBI means for your medical records — Zen Chu and Maulik D. Majmudar

MIT Sloan Senior Lecturer Zen Chu

MIT Sloan Senior Lecturer Zen Chu

From Fortune

The data privacy debate is overlooking a very important issue.

The issue of data privacy on mobile phones has been brought to public and judicial debate again with Apple’s AAPL 0.56% refusal to create a backdoor into its operating systems. The debates so far have failed to highlight that granting governments access to mobile phone data opens access to not only sensitive financial and personal information, but also the crown jewels of healthcare: patient health records. Now that the majority of patients and doctors are accessing, storing, and transmitting healthcare information via mobile phones and connected medical devices, smartphone security has become a lynchpin of patient data security.

Healthcare data breaches are a real and serious threat and have already led to identity theft, financial loss, civil rights and employment discrimination, and even a risk to patient safety. In addition to the moral responsibility of protecting these data, the Health Insurance Portability and Accountability Act (HIPAA) specifically mandates that patient data be encrypted and assigns meaningful fines to violations. These breaches by hospitals, companies and doctors can add up to multi-million dollar liabilities.

Last year saw the active theft of over 100 million health records, as reported in Health IT Security, with the vast majority from malicious hacking. These data breaches involved electronic medical records, which can sell for more than 20 times the value of a stolen credit card. Today, most hospital and medical records systems have created smartphone apps and web portals for both patients and doctors to access via the smartphone in their pockets, enabling smartphones to be the new weakest link protecting personal health information.

Healthcare records contain mission critical and sensitive information, including social security numbers, financial information, diagnostic test results, medical diagnoses, and the correct dosages of hazardous drugs. Dr. John Halamka, a professor at Harvard Medical School and CIO of Beth Israel Deaconess Medical Center, wrote about his hospital’s experiences with internet-connected drug infusion pumps, which have been compromised. In extreme cases, malicious hacking also could be used to disrupt the workings of a heart pacemaker or drug infusion pump to deliver the wrong amounts of hazardous drugs.

Read More »

The challenges of using social media for marketing purposes — Catherine Tucker

MIT Sloan Professor Catherine Tucker

MIT Sloan Professor Catherine Tucker

In an era when marketers spend billions on managing social media, is that investment worthwhile? Should firms actively guide, promote and shape online conversations, or leave them to grow organically?

To investigate this, my colleague Amalia Miller from the University of Virginia and I recently studied what happens when hospitals started to actively manage their profiles on Facebook. We focused on Facebook because it’s the most visited media site in the U.S., accounting for 20% of all time spent on the Internet. We also chose it because the Facebook Places initiative created a page for every single hospital in the U.S., allowing organizations to choose whether to actively manage their pages or not.

Read More »

How big data can be used to improve early detection of cognitive disease — Cynthia Rudin

MIT Sloan Asst. Prof. Cynthia Rudin

MIT Sloan Asst. Prof. Cynthia Rudin

From The Health Care Blog

The aging of populations worldwide is leading to many healthcare challenges, such as an increase in dementia patients. One recent estimate suggests that 13.9% of people above age 70 currently suffer from some form of dementia like Alzheimer’s or dementia associated with Parkinson’s disease. The Alzheimer’s Association predicts that by 2050, 135 million people globally will suffer from Alzheimer’s disease.

While these are daunting numbers, some forms of cognitive diseases can be slowed if caught early enough. The key is early detection. In a recent study, my colleague and I found that machine learning can offer significantly better tools for early detection than what is traditionally used by physicians.

One of the more common traditional methods for screening and diagnosing cognitive decline is called the Clock Drawing Test. Used for over 50 years, this well-accepted tool asks subjects to draw a clock on a blank sheet of paper showing a specified time. Then they are asked to copy a pre-drawn clock showing that time. This paper and pencil test is quick and easy to administer, noninvasive, and inexpensive. However, the results are based on the subjective judgment of clinicians who score the tests. For instance, doctors must determine whether the clock circle has “only minor distortion” and whether the hour hand is “clearly shorter” than the minute hand.

In our study, we created an improved version of this test using big data and machine learning. For the past seven years, a group of neuropsychologists have had patients use a digital pen to draw the clocks instead of a pencil, accumulating more than 3,400 tests in that time. The pen functions as an ordinary ballpoint, but it also records its position on the page with considerable spatial and temporal accuracy.  We applied machine learning algorithms to this body of data, constructing a data-driven diagnostic tool. So rather than having doctors subjectively analyze the pencil-drawn clocks, the data from the digital pen drawings goes into the machine learning algorithm’s model which provides the result of the test.

Read the full post at The Health Care Blog.

Cynthia Rudin is an Associate Professor of Statistics at the MIT Sloan School of Management in Operations Research and Statistics.