20130228

The state of our health

I recently saw a really long, and well-researched, article from Time (of all places, who'd'a thunk it?) about the state of the medical industry.

One thing I didn't really know about, beforehand: the use of the chargemaster (well, I assumed something like that existed, and I knew insurance companies always negotiated significant discounts off of it, but had no idea how disconnected from reality it was.

Out of work for a year, Janice S. had no insurance. Among the hospital’s charges were three “TROPONIN I” tests for $199.50 each. According to a National Institutes of Health website, a troponin test “measures the levels of certain proteins in the blood” whose release from the heart is a strong indicator of a heart attack. Some labs like to have the test done at intervals, so the fact that Janice S. got three of them is not necessarily an issue. The price is the problem. Stamford Hospital spokesman Scott Orstad told me that the $199.50 figure for the troponin test was taken from what he called the hospital’s chargemaster. The chargemaster, I learned, is every hospital’s internal price list. Decades ago it was a document the size of a phone book; now it’s a massive computer file, thousands of items long, maintained by every hospital.


I also hadn't realized how much consolidation there is among hospitals and healthcare providers (I've seen some signs, like the DC hospital where my kids were born being bought out by Johns Hopkins hospital just before my son was born, but had no idea how widespread it is). I also hadn't thought too much about nefarious effects coming out of that:

But insurers are increasingly losing leverage because hospitals are consolidating by buying doctors’ practices and even rival hospitals. In that situation — in which the insurer needs the hospital more than the hospital needs the insurer — the pricing negotiation will be over discounts that work down from the chargemaster prices rather than up from what Medicare would pay.


Other nefarious effects are how lab work is a major profit center for hospitals, plus I had no idea how much more profitable outpatient care was vs inpatient at a hospital.

Put simply, inpatient care at nonprofit hospitals is, in fact, almost nonprofit. Outpatient care is wildly profitable.


I also learned a lot more specifics about how little administrative overhead there is in medicare (I thought the overall number was about twice what he quoted, but knew none of the specifics of how they keep that overhead so low).

That’s an overall administrative and management cost [for Medicare] of about two-thirds of 1% of the amount of the claims


As a sidenote, the Bush administration, some years back, set aside $8M to track down Medicare fraud. They found a couple hundred thousand dollars worth. Love that ROI.

One question that was never answered (or even addressed) was how non-profit hospitals were making consistent profits. That is, non-profits get special tax status, but the return for that is that they pay very high taxes when they do turn a profit. And he makes the claim that they are, in fact, making very high profits. I don't know the verity (or lack thereof) of that claim, but I do know that if it is true, they will pay very high taxes.

The rest of what I liked about the article are that it is fact-based, rather than ideological, and most of it has a very practical focus.

The one part I wonder about is the claims about tort reform. I know some states have attempted to tackle tort reform via claim limits, and those have resulted in no tangible benefits. I'm a little bit skeptical about the safe harbors suggestion for tort reform, only because liability comes out of judicial standards, rather than statute (that is, is isn't due to changes in law that a drunk person can end up falling down on a sidewalk, hurting themselves, and successfully suing the city. Instead, it comes from judges deciding that the standard the city must protect against isn't a competent person). Having said that, I guess it wouldn't hurt to try it.

Oh, and there was also the claim that,
Then again, however much hospitals might survive or struggle under that scenario [single payer system], no doctor could hope for anything approaching the income he or she deserves (and that will make future doctors want to practice) if 100% of their patients yielded anything close to the low rates Medicare pays.


This seems completely bogus to me. Do European countries, with salaried doctors and single payer healthcare, have trouble recruiting doctors? I very much doubt it (and certainly have never heard any indication of it being true).

Other than those quibbles, the only other things I would disagree with are the lack of mention of a couple of things in the concluding paragraphs. The first of these is the statement, in the close
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.


What's wrong with this? First, Obamacare does make some improvements to costs (I saw another report, quoting OMB, that said projected medicare costs had already dropped by $500B by 2020; I can't find my source on that one). But the real reason it bugs me is that, earlier in the article, there were mentions of Obamacare saving money. I'll grant that the bill could, and should, have done better, but to say it did nothing is certainly not true.

One other thing not mentioned about the ACA (Affordable Care Act) is that it put forth incentives to try new models. In Vermont (California is also looking into this), this is being used to implement single-payer healthcare. But in the private sector, it is also being used to find alternatives to the current fee-for-service business model. One (not applicable to all health problems) that seems pretty good is called fee-for-care, where, for example, a pregnant woman pays one fee to cover the entire pregnancy. If complications arise, the provider pays the additional money, so that some risk is pushed back onto the provider, and the patient has much more cost surety.

The second is, when mentioning practical things to do to save money (again, in the conclusion), allowing Medicare to negotiate drug and durable good prices is missing. Again, earlier in the article, it was pointed out how much this would save.

And as a side note, my pet idea for improving the healthcare system is one where the government will pay for someone to go to medical school. After graduation, that person will work for the government (on salary) for X number of years, treating only medicare/medicaid patients. Obviously, it's modeled after ROTC, and I can't claim to know what X should be. One important feature is that it would be only (or at least the vast majority) for general practitioners.

The one part I wonder about is the claims about tort reform. I know some states have attempted to tackle tort reform via claim limits, and those have resulted in no tangible benefits. I'm a little bit skeptical about the safe harbors suggestion for tort reform, only because liability comes out of judicial standards, rather than statute (that is, is isn't due to changes in law that a drunk person can end up falling down on a sidewalk, hurting themselves, and successfully suing the city. Instead, it comes from judges deciding that the standard the city must protect against isn't a competent person). Having said that, I guess it wouldn't hurt to try it.

Oh, and there was also the claim that,
Then again, however much hospitals might survive or struggle under that scenario [a single payer system], no doctor could hope for anything approaching the income he or she deserves (and that will make future doctors want to practice) if 100% of their patients yielded anything close to the low rates Medicare pays.


This seems completely bogus to me. Do European countries, with salaried doctors and single payer healthcare, have trouble recruiting doctors? I very much doubt it (and certainly have never heard any indication of it being true).  Did the US have trouble back when doctors made only a little more than teachers?

Other than those quibbles, the only other things I would disagree with are the lack of mention of a couple of things in the concluding paragraphs. The first of these is the statement, in the close
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.


What's wrong with this? First, Obamacare does make some improvements to costs (I saw another report, quoting OMB, that said projected medicare costs had already dropped by $500B by 2020; I can't find my source on that one). But the real reason it bugs me is that, earlier in the article, there were mentions of Obamacare saving money. I'll grant that the bill could, and should, have done better, but to say it did nothing is certainly not true.

One other thing not mentioned about the ACA (Affordable Care Act) is that it put forth incentives to try new models. In Vermont (California is also looking into this), this is being used to implement single-payer healthcare. But in the private sector, it is also being used to find alternatives to the current fee-for-service business model. One (not applicable to all health problems) that seems pretty good is called fee-for-care, where, for example, a pregnant woman pays one fee to cover the entire pregnancy. If complications arise, the provider pays the additional money, so that some risk is pushed back onto the provider, and the patient has much more cost surety.

The second is, when mentioning practical things to do to save money (again, in the conclusion), allowing Medicare to negotiate drug and durable good prices is missing. Again, earlier in the article, it was pointed out how much this would save.

And as a side note, my pet idea for improving the healthcare system is one where the government will pay for someone to go to medical school. After graduation, that person will work for the government (on salary) for X number of years, treating only medicare/medicaid patients. Obviously, it's modeled after ROTC, and I can't claim to know what X should be. One important feature is that it would be only (or at least the vast majority) for general practitioners.

One other problem with current healthcare, not discussed in the article, is that we have too many specialists, and too few GPs. This gives another way to move away from fee-for-care, and increases the supply of GPs. It might also allow Medicare/Medicaid to cut costs a little bit more.

But despite those quibbles and problems, I highly recommend reading the original article.

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