The article that inspired the initial blog on health care. Bitter Pill: Why Medical Bills Are Killing Us | TIME.com
[2/26/2013 3:41:14 PM]
Changing Our Choices
We should tighten antitrust laws related to hospitals to keep them from becoming so dominant in a region that insurance companies are helpless in negotiating prices with them. The hospitals’ continuing consolidation of both lab work and doctors’ practices is one reason that trying to cut the deficit by simply lowering the fees Medicare and Medicaid pay to hospitals will not work. It will only cause the hospitals to shift the costs to non-Medicare patients in order to maintainprofits — which they will be able to do because of their increasing leverage in their markets over insurers. Insurance premiums will therefore go up — which in turn will drive the deficit back up, because the subsidies on insurance premiums that Obamacare will soon offer to those who cannot afford them will have to go up.
Similarly, we should tax hospital profits at 75% and have a tax surcharge on all nondoctor hospital salaries that exceed, say, $750,000. Why are high profits at hospitals regarded as a given that we have to work around? Why shouldn’t those who are profiting the most from a market whose costs are victimizing everyone else chip in to help? If we recouped 75% of all hospital profits (from nonprofit as well as for-profit institutions), that would save over $80 billion a year before counting what we would save on tests that hospitals might not perform if their profit incentives were shaved.
To be sure, this too seems unlikely to happen. Hospitals may be the most politically powerful institution in any congressional district. They’re usually admired as their community’s most important charitable institution, and their influential stakeholders run the gamut from equipment makers to drug companies to doctors to thousands of rank-and-file employees.
Then again, if every community paid more attention to those administrator salaries, to those nonprofits’ profit margins and to charges like $77 for gauze pads, perhaps the political balance would shift.
We should outlaw the chargemaster. Everyone involved, except a patient who gets a bill based on one (or worse, gets sued on the basis of one), shrugs off chargemasters as a fiction. So why not require that they be rewritten to reflect a process that considers actual and thoroughly transparent costs? After all, hospitals are supposed to be government-sanctioned institutions accountable to the public. Hospitals love the chargemaster because it gives them a big number to put in front of rich uninsured patients (typically from outside the U.S.) or, as is more likely, to attach to lawsuits or give to bill collectors, establishing a place from which they can negotiate settlements. It’s also a great place from which to start negotiations with
insurance companies, which also love the chargemaster because they can then make their customers feel good when they get an Explanation of Benefits that shows the terrific discounts their insurance company won for them.
But for patients, the chargemasters are both the real and the metaphoric essence of the broken market. They are anything but irrelevant. They’re the source of the poison coursing through the health care ecosystem.
We should amend patent laws so that makers of wonder drugs would be limited in how they can exploit the monopoly our patent laws give them. Or we could simply set price limits or profit-margin caps on these drugs. Why are the drug profit margins treated as another given that we have to work around to get out of the $750 billion annual overspend, rather than a problem to be solved?
Just bringing these overall profits down to those of the software industry would save billions of dollars. Reducing drugmakers’ prices to what they get in other developed countries would save over $90 billion a year. It could save Medicare— meaning the taxpayers — more than $25 billion a year, or $250 billion over 10 years. Depending on whether that $250 billion is compared with the Republican or Democratic deficit-cutting proposals, that’s a third or a half of the Medicare cuts now being talked about.
Similarly, we should tighten what Medicare pays for CT or MRI tests a lot more and even cap what insurance companies can pay for them. This is a huge contributor to our massive overspending on outpatient costs. And we should cap profits on lab tests done in-house by hospitals or doctors.
Finally, we should embarrass Democrats into stopping their fight against medical-malpractice reform and instead provide safe-harbor defenses for doctors so they don’t have to order a CT scan whenever, as one hospital administrator put it, someone in the emergency room says the word head. Trial lawyers who make their bread and butter from civil suits have been the Democrats’ biggest financial backer for decades. Republicans are right when they argue that tort reform is overdue.
Eliminating the rationale or excuse for all the extra doctor exams, lab tests and use of CT scans and MRIs could cut tens of billions of dollars a year while drastically cutting what hospitals and doctors spend on malpractice insurance and pass along to patients.
Other options are more tongue in cheek, though they illustrate the absurdity of the hole we have fallen into. We could limit administrator salaries at hospitals to five or six times what the lowest-paid licensed physician gets for caring for patients there. That might take care of the self-fulfilling peer dynamic that Gunn of Sloan-Kettering cited when he explained, “We all use the same compensation consultants.” Then again, it might unleash a wave of salary increases for junior doctors.
Or we could require drug companies to include a prominent, plain-English notice of the gross profit margin on the packaging of each drug, as well as the salary of the parent company’s CEO. The same would have to be posted on the company’s website. If nothing else, it would be a good test of embarrassment thresholds.
None of these suggestions will come as a revelation to the policy experts who put together Obamacare or to those before them who pushed health care reform for decades. They know what the core problem is — lopsided pricing and outsize profits in a market that doesn’t work. Yet there is little in Obamacare that addresses that core issue or jeopardizes the paydays of those thriving in that marketplace. In fact, by bringing so many new customers into that market by mandating that they get health insurance and then providing taxpayer support to pay their insurance premiums, Obamacare enriches them. That, of
course, is why the bill was able to get through Congress.
Obamacare does some good work around the edges of the core problem. It restricts abusive hospital-bill collecting. It forces insurers to provide explanations of their policies in plain English. It requires a more rigorous appeal process conducted by independent entities when insurance coverage is denied. These are all positive changes, as is putting the insurance umbrella over tens of millions more Americans — a historic breakthrough. But none of it is a path to bending the health care cost curve. Indeed, while Obamacare’s promotion of statewide insurance exchanges may help distribute health-insurance policies to individuals now frozen out of the market, those exchanges could raise costs, not lower them. With hospitals consolidating by buying doctors’ practices and competing hospitals, their leverage over insurance companies is increasing. That’s a trend that will only be accelerated if there are more insurance companies with less market share competing in a new exchange market trying to negotiate with a dominant hospital and its doctors. Similarly, higher insurance premiums — much of them paid by taxpayers through Obamacare’s subsidies for those who can’t afford insurance but now must buy it — will certainly
be the result of three of Obamacare’s best provisions: the prohibitions on exclusions for pre-existing conditions, the restrictions on co-pays for preventive care and the end of annual or lifetime payout caps.
Put simply, with Obamacare we’ve changed the rules related to who pays for what, but we haven’t done much to change the prices we pay. When you follow the money, you see the choices we’ve made, knowingly or unknowingly. Over the past few decades, we’ve enriched the labs, drug companies, medical device makers, hospital administrators and purveyors of CT scans, MRIs, canes and wheelchairs. Meanwhile, we’ve squeezed the doctors who don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so gameable. And of course, we’ve squeezed everyone outside the system who gets stuck with the bills. We’ve created a secure, prosperous island in an economy that is suffering under the weight of the riches those on the island extract.
And we’ve allowed those on the island and their lobbyists and allies to control the debate, diverting us from what Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”
What follows is my response to an article sent to me by a fellow physician. The original article follows my response in a separate blog entry.
I think I generally agree with the article. The first fact to be faced is that it costs to provide care. Someone has to pay for it. It follows; I think, that the ultimate reduction in cost will be in providing less care. There are free market examples that demonstrate some success in increased quality of care at lower cost. I'm specifically thinking of cosmetic surgery and Lasik. The problem with holding these two areas as paradigms for the salvation of health care economics is that they are in the realm of commodities. High volume, highly desired products that the general population is willing to pay out of pocket to acquire. We still live in a society where one is likely to find the public willing to spend money on a new TV, car, jewelry but reluctant to pay fair value for items of necessity such as a new water heater, auto insurance premiums, and other costly items that add value to the quality of life but very little value to the quality of image or fun.
The problem and power of a representative democracy is that the choices are decided by the populist vote. Politicians want; and in the case of the good ones, must, stay in power. That is an expensive proposition. Therefore, the populist vote tends to swing decisions to the tyranny of the majority rather than the most pragmatic solution.
I don't think that a general push toward redistribution of wealth will ever solve the health care issues because there will never be enough wealth if the system is free to mandate more and more expensive care without regard to the ultimate cost. I saw this all too often in my years as a Navy Physician where the "free care" prompted expensive visits so that patients could obtain a prescription for a free bottle of aspirin. What is there to stop such abuse and flagrant waste if the consumer is unchecked.
In contrast, what motive is there for true advancement in care if the profit for research and development is siphoned off to pay for care. Have you ever been to a medical meeting in a country with socialized care? I noted an almost absolute absence of product promotion in Ophthalmic meetings in Canada while I would have seen a great deal of world wide product representation in a meeting in the US. The reason was obvious. The Canadian physicians could not afford to invest in or adopt new technology or techniques. Many of these "products" were relatively affordable, quite innovative, and clearly beneficial to the patient. So who lost? The patient lost. Much as the individual who decides that a TV set is a better use of their household capital versus investing in indoor plumbing.
Realigning the incentives to health care coverage is complex and starts at the roots of financial appropriation. Along with an honest assessment, in my opinion, that health care is a privilege born of adequate affluence to pay for it, rather than an inalienable right such as those perceived by the founding fathers. We need reform in congress that separates the financial gain for voting for legislation from the public benefit of the legislation in question. As long as a legislator has to keep his financial war chest (and personal financial status) funded via the contributions of public and private organizations, we will never overcome the propensity to vote for the "highest bidder".
To date, campaign finance reform appears to have been punitive. Term limits that threaten job security. Who wants a job that leaves them knowing that they have to find a way to support their family in 8 years regardless of their performance? Attacks on benefit packages in what is a relatively underpaid, highly responsible position. Excluding the relative few who make large sums with PAC money and maintain a strangling power base. What incentive is there to attract talented, intelligent people to office for a mere pittance compared to the private sector. Does it cost the American economy so much in benefits that it is worth losing the access to the most talented. I propose that the concept of term limits be abolished; much of the real knowledge and experience required to make decisions in a very complex society take years to acquire. You don't train your best executives and then send them packing just as they achieve the necessary skills to be effective in their jobs. To that point, terms of 2 years for congressmen is counterproductive to the point of being ludicrous. No one can learn that job in 2 years; particularly in an environment where job one seems to be acquiring enough cash to mount a reelection campaign. How can one be expected to actually acquire the skills to provide meaningful insight in the work for which one was elected? I propose that the congressional term be extended to four to six years. The reduced number of election campaigns would actually reduce the economic burden on the electoral process and allow more time for new congressmen to establish a record of performance.
In related areas of job security; on a percentage basis, how much does it really cost the government to guarantee health care for a legislator and his family? Sure, tie it to the kind of care that the general population has available. The reality check is valuable. But don't tell the head of a family that their health care security is at risk and then expect to attract the brightest talent. In similar issues; does guaranteeing a pension for time served cost that much? We need legislators who are willing to leave the private sector and give two to six years at a minimum, hopefully more if they become good at their jobs. In that time, they lose seniority and competitiveness in the private sector. If we truly want talented people, we should be willing to compete for that loss of private sector mobility by guaranteeing a level of "retirement compensation" that is competitive. The colonial days of the agrarian legislator are long past and it is time to align the benefits of being in the legislator with the modern economy.
In short; let's revert to the time when becoming a US legislator was something to be admired and not derided. Lets recognize the complexity of the work, compensate for it and expect results. Let's actively work to realign the incentives to attract the best most dedicated minds to the job, rather than leaving the position as one that all too often seems to be defaulting to a mediocre attorney.
And as we align the benefits for legislators to fit the demands of the job; lets then assess and realign the role of the many other "players on the field". Lobbying efforts are self serving; but they often speak for a portion of the economic and social arena with real issues that need appropriate, and accurate representation. Who speaks for the physician, the carpenter, the medically disabled; and provides much needed perspective and factual insight if not for many of these groups. It seems the larger problem goes to the need to pay for the time to get the legislator's attention, rather than the quality of the message. And that problem goes directly back to how we manage our legislators compensation and job description at this time.
So a few, possibly, simplistic thoughts on the state of American legislature.
Dennis Breene MD
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