HEALTH CARE: WHY DOES IT HURT (OUR BUDGET)?

While I am very much against the Patient Protection and Affordable Care Act, or Obamacare as it has become know, I still give Mr. Obama credit, as I did with the Clintons, for at least trying to do something about the barriers that impede access to health care in the US.

While I have heard different opinions on plans in other nations (I worked with a French national for several months who could not say anything good about the plan in gay Paris, but had a recent exchange of comments on the Tossing It Out blog with a lady from Canada who loves her plan), I am against a Federal plan simply because that is not one of the powers delegated to the Federal government by the Constitution.

I also think that the debate is focused on giving Americans insurance, and insurance clouds the issue.

 

Insurance is a transfer of risk.

 

We drive cars, we acknowledge we may be liable if we cause an accident, so we buy insurance to indemnify ourselves from that liability.

 

We buy iPads, we acknowledge that we may drop them, so we buy insurance to cover that loss (I don't actually-those point of sale plans are incredibly profitable for insurers-unless you have a history of breaking stuff, don't let them scare you into it).

 

We need health care, we acknowledge that we may be so sick that the cost will be catastrophic, so we buy insurance to cover those costs.

The Obama solution, and the Clinton solution before that was predicated on two assumptions that I disagree with.

(1) Everyone is entitled to health insurance

(2) Health insurance is an employer's responsibility

I would posit that health care is an individual's responsibility, and while I would disagree that everyone is entitled to health care, I think that should be the discussion.

Because the sooner we get past the insurance discussion, the sooner we can talk about the true problem with health care in America.

It costs too much.

Our health care system is famous for its excessive costs, with drugs costing hundreds of thousands of dollars and costly heroic care efforts at the end of life.

I have been one of many who put these extraordinary services forth as an explanation for our $2.7 trillion annual health care bill, but it turns out that the high price tag of ordinary services may be the bigger driver.

I read in a series of articles on medical costs about a recent colonoscopy at a surgical center on Long Island, where a gastroenterologist assisted by an anesthesiologist and a nurse performed the routine cancer screening procedure in less than an hour, and billed $6,385.

That is fairly typical: in Keene, N.H.,a colonoscopy was billed at $7,563.56, a Chappaqua, N.Y. screening generated $9,142.84 in bills, and in Durham, N.C., the charges came to $19,438, which included a polyp removal. While insurers negotiated down the price, the final tab for each test was more than $3,500.

In many other developed countries, a basic colonoscopy costs just a few hundred dollars and certainly well under $1,000. That chasm in price helps explain why the United States is the world leader in medical spending, even though numerous studies have concluded that Americans do not get better care.

Colonoscopies offer an interesting study, as they have become the most expensive screening test that healthy Americans routinely undergo.

Data from the Centers for Disease Control and Prevention suggesting that more than 10 million people get them each year, adding up to more than $10 billion in annual costs.

Largely an office procedure when widespread screening was first recommended, colonoscopies have moved into surgery centers.

Outpatient surgery facilities were created as a step down from costly hospital care. I worked for an insurance company that owns a large group medical practice, seeing more than 150,000 patients annually in more than 20 locations in a major metropolitan area.

In the 1980's, we added these outpatient facilities to keep our patients out of costlier inpatient settings (we were also the insurer at risk on most of our patients). 

 A funny thing happened. In the 1990's, with a lot of capacity in our outpatient surgery facilities, we realized we could use them to generate revenue.

And all  across the healthcare industry, outpatient surgery centers became a lucrative step up from doctors’ examining rooms. Colonoscopies, for example, are now billed like a quasi operation.

The high price paid for colonoscopies results not from top-notch patient care, according to interviews with health care experts and economists, but from business plans seeking to maximize revenue; haggling between hospitals and insurers that have no relation to the actual costs of performing the procedure; and lobbying, marketing and turf battles among specialists that increase patient fees.

While several cheaper and less invasive tests to screen for colon cancer are recommended as equally effective by the federal government’s expert panel on preventive care,  and are commonly used in other countries, colonoscopy has become the go-to procedure in the United States.

 “We’ve defaulted to by far the most expensive option, without much if any data to support it,” said Dr. H. Gilbert Welch, a professor of medicine at the Dartmouth Institute for Health Policy and Clinical Practice.

If the American health care system were a true market, the increased volume of colonoscopies — numbers rose 50 percent from 2003 to 2009 for those with commercial insurance — might have brought down the costs because of economies of scale and more competition.

 Instead, it became a new business opportunity

When popularized in the 1980s, outpatient surgical centers were hailed as a cost-saving innovation because they cut down on expensive hospital stays for minor operations like knee arthroscopy. But the cost savings have been offset as procedures once done in a doctor's office have filled up the centers, and bills have multiplied.

Hospitals, drug companies, device makers, physicians and other providers can benefit by charging inflated prices, favoring the most costly treatment options and curbing competition that could give patients more, and cheaper, choices.

The United States spends about 18 percent of its gross domestic product on health care, nearly twice as much as most other developed countries. The Congressional Budget Office has said that if medical costs continue to grow unabated, “total spending on health care would eventually account for all of the country’s economic output.” The CBO identified federal spending on government health programs as a primary cause of long-term budget deficits.

While the rise in health care spending in the United States has slowed in the past four years — to about 4 percent annually from about 8 percent — it is still expected to rise faster than the gross domestic product. Aging baby boomers and tens of millions of patients newly insured under the Affordable Care Act are likely to add to the burden.

The amounts that employees and employer collectively pay in premiums would be more than sufficient to cover a family’s medical needs in most other countries. Many Americans have habits or traits that arguably could put the nation at the low end of the medical cost spectrum. Patients in the United States make fewer doctors’ visits and have fewer hospital stays than citizens of many other developed countries. The American population is younger and has fewer smokers than those in most other developed countries. Pushing costs in the other direction, though, is that the United States has relatively high rates of obesity and limited access to routine care for the poor.

A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor. Many other countries deliver health care on a fee-for-service basis but they set rates as if health care were a public utility or negotiate fees with providers and insurers nationwide, for example.

Consumers (the patients) do not see prices until after a service is provided. There is little available data to help consumers shop for price, and since patients with insurance (normally) pay a tiny fraction of the bill, there is little incentive for the consumer to try to lower costs.

Even doctors often do not know the costs of the tests and procedures they prescribe. When Dr. Michael Collins, an internist in East Hartford, Conn., called the hospital that he is affiliated with to price lab tests and a colonoscopy, he could not get an answer. “It’s impossible for me to think about cost,” he said. “If you go to the supermarket and there are no prices, how can you make intelligent decisions?”

Instead, payments are often determined in countless negotiations between a doctor, hospital or pharmacy, and an insurer, with the result often depending on their relative negotiating power. Insurers have limited incentive to bargain forcefully, since they can raise premiums to cover costs.

As a result, Americans pay more for almost every interaction with the health care system.

Our utility companies have to get their rates approved.

Maybe instead of focusing on how give everyone insurance, a better strategy might be to look at actually controlling costs.