By JEFF GOLDSMITH
Though thoroughly smothered under 2900 pages of well meaning but poorly focused, expert-driven “good works”, the core of the Affordable Care Act was providing 30 million people subsidized health insurance coverage. As the country continues to decide how it feels about this monumental legislation, a major ideological divide persists over whether the aggressive coverage expansion in health reform was really needed or not.
Far from “selling itself,” as a overconfident White House aide suggested it would back on March 23, 2010, health reform remains strikingly unpopular. Only 37% of the public thinks the country will be better off as a result of health reform, and only 28% think their families will be better off, according to the May Kaiser Family Foundation tracking poll. There is a stark partisan divide over health reform. While 72% of Democrats have a favorable opinion of health reform, a substantial minority believes the bill could have done more (covered more people, provided a public option or path to single payer). Alternatively, 74% of Republicans have an unfavorable opinion of health reform; the same percentage favors repeal. Independents tend to break toward the Republican view of the bill (49% unfavorable vs. 35% favorable). Those opposed feel more intensely about health reform than those in favor.
The Ryan House Budget for 2012 zeroes out all new spending for health reform (while keeping ACA’s Medicare cuts, devoting them to deficit reduction!). The conservative narrative is that the problem of the uninsured was liberal mythology, not meriting major new spending. In the blogosphere, an analysis surfaced suggesting that the real uninsured problem is only about 4 million people. This apparently originated in a Heritage Foundation blog posting from late August, 2009. Other conservative analysts charitably suggest there may be as many as ten to twelve million uninsured worthy of federal help. To take care of this smaller number, you do not need a major coverage expansion, but merely to apply the familiar market oriented remedies: selling insurance across state lines, high deductible health plans, malpractice reform, high risk pools, etc.
How do you get from 51 million (the 2009 Census Bureau estimate derived from the Current Population Survey) to four million (the Heritage blog actually started at 46 million, the estimated Census number of uninsured for 2007)? Well, begin by subtracting those who are not uninsured for a full year. According to the Heritage blog, that gets you down to 36 million. Then subtract another 6 million children who are uninsured but eligible for Medicaid, and whose parents have not signed them up. That gets you down to thirty million. Then you subtract twelve million “illegal aliens” who are uninsured (down to eighteen), and the substantial number of “free riders” who come from “wealthy” households above $50 thousand in income and, voila, you’re down to four million “poor, sick uninsured for a lengthy period.” This facile exercise in people subtraction is riddled both with errors and questionable judgments.
It is true that the 51 million uninsured estimated for 2009, which derives from the Current Population Survey of the Census Bureau, over-counts the actual number of uninsured due to significant under-reporting of Medicaid enrollment. Subtract that out and you have about 46 million people who reported that at one point in time they were uninsured during 2009.
There is great fluidity in health insurance coverage, just as there is in employment status and also in income eligibility for public programs like Medicaid. Separate analysis using data from the Agency for Healthcare Research and Quality using the Census’ MEPS survey data suggested that in 2008 almost 41 million were uninsured for an entire year. In a two-year analysis using the same data series, a little more than thirty million people were uninsured for two complete years (2007-2008).
Why those who have short-term coverage issues should be less worthy of help than the “hard core” long term uninsured is unexplained by the Heritage blogger. Diabetics, or people with high blood pressure, or with depression who interrupt their medication because they cannot afford it even for a matter of months end up costing the entire society money in acute care for avoidable illness.
There is reasonable certainty that about a quarter of the uninsured are eligible for public programs (e.g. Medicaid or SCHIP) and are not enrolled. This number, 11-12 million, is scaring Governors and Medicaid program directors all over the country. Policy wonks ungallantly call them “the woodwork people”- that is, folks who will come out of the woodwork, like termites, in 2014 when the individual mandate requires them to have insurance coverage. Unlike those to be newly covered by the ACA Medicaid expansion, the cost of the woodwork people will be paid for at the existing match (which averages 43% from state general funds). States struggling with their present 53 million Medicaid enrollees will have to find a big chunk of new money.
The aforementioned MEPS survey found almost 6 million uninsured children in 2008 but not 100% of these are eligible for Medicaid or SCHIP, because many of them live in households above SCHIP’s income threshold. Many families are daunted by the public program enrollment process, either because of mistrust of the government or deliberate bureaucratic barriers. States in fiscal trouble have a powerful economic motive to make it complex or difficult for people to enroll.
Hospitals are actually the biggest “promoters” of public coverage both for adults and children, for the excellent reason that it reduces their bad debts. But you have to be sick enough or patient enough to use the hospital to get their attention. To suggest that public coverage is simply “there” and that parents are dilatory in not using it does not tell the whole story, given the program’s “welfare” lineage and bureaucratic inertia. There is clearly a problem here, but a different one than the Heritage Foundation blog analysis suggests.
A greater and less defensible leap is assuming that the entire “illegal alien” population is uninsured and since they shouldn’t be here in the first place, we shouldn’t worry about them. According to the Pew Hispanic Center, in 2008, there were about 11.9 million people in the US illegally. Almost 40% of the illegal adults actually have some form of insurance, whether provided by employers or, via false documentation, through public programs. In 2006, the National Institute for Healthcare Management estimated that there were only about 5.6 million uninsured undocumenteds in the US in 2006. The Congressional Budget Office arrived at an identical figure for the current uninsured undocumented in a March 2011 report.
The number of undocumented folk in the US has probably fallen significantly in the past three years due to the collapse of housing construction and the shrinkage of tourism in the Sun Belt- two major employers of undocumented workers. In some states like Texas and California, the undocumented may yet constitute as many as one-third of the uninsured. But the Heritage estimate of “12 million illegal uninsured” likely at least doubles the real number, as well as ignoring the on-the-ground reality – the public health threat posed by a large number of uncovered and highly mobile undocumented workers and their families. Congressman Ryan’s proposed 2012 budget not only zeroes out money for the coverage expansion, but also cuts the safety net expansion provided community health centers, which serve the undocumented population without complaint.
The “high income” uninsured, who the conservative blogosphere assumes to be free riders, constitute a surprisingly large percentage of the long term uninsured. Of the more than thirty million uninsured who were continuously without coverage for the entirety of the first two years of the recession (2007-2008), somewhat more than 45% had household incomes over 200% of poverty ($42 thousand a year for a family of four) , and more than 40% earned over 400% of poverty ($84 thousand a year for a family of four). These are not small numbers. But the idea that there are massive amounts of unallocated free cash sloshing around in their household budgets that is available to pay health premiums is laughable.
By the time of the 2007-8 recession, American consumers had accumulated a staggering $14 trillion in consumer debt. When they ran out of cash, many consumers defaulted, creating a landslide of uncollectible accounts that caused our financial crisis. According to the Federal Reserve, only about a trillion of this unsustainable consumer debt burden has been liquidated, mostly by being written off or paid off. Thirteen trillion dollars in consumer debt remains a huge drag on the economy and a massive claim on future consumer income. (As late as 2004, the total consumer debt was only $8 trillion).
If consumers had free cash, they’d be spending it, and we would not have 9.1% unemployment. The idea that there are huge undiscovered cash reserves that would enable cash strapped consumers to take on a $14 thousand a year health insurance expense is delusional. Unless we were willing to write off the remaining $13 trillion in debt and insist that people spend any resultant free cash purchasing health insurance, the idea that tens of millions of “wealthy” Americans are “voluntarily” foregoing insurance coverage does not reflect the on-the-ground reality. There may be free riders here, but not fifteen million of them.
What’s the bottom line? While the headline number of 51 million uninsured probably overstates the magnitude of the real problem, there are presently tens of millions of Americans who cannot afford to purchase health coverage without help. It isn’t just a problem of the “sick and poor”, either. It’s the middle class, anxious and hurting, that is delaying seeking care because they either cannot afford health premiums or cannot afford the cost sharing their employer provided policies require.
The 4 million Heritage blogger’s number, faithfully reblogged by countless health reform critics, is a convenient rhetorical pretext for rolling back the Affordable Care Act’s coverage expansion, but not a credible estimate of the actual needs. One can legitimately quarrel with the large fraction of the expansion paid for by Medicaid, a broken program whose present covered population states cannot afford. One can quarrel as well with the unspoken premise that health coverage is a “human right.” It might have been a more efficient use of scarce societal dollars simply to expand the safety net directly.
But simply abandoning the thirty million people promised coverage by the ACA to the vagaries of the “marketplace” (and a very expensive care system) is not only bad politics (a Tea Party gift to a struggling President Obama), but also bad social and public health policy.
Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends. He is also the author of “The Long Baby Boom: An Optimistic Vision for a Graying Generation.”
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“but in most cases it requires gov’t intervention to intervene to restore competition. This is anathema to most conservatives today.”
MG I think you have this flipped, its government intervention that creates non functioning markets not the other way around. Can you name any examples to support your claim?
Lets look at a few markets that have never been over regualted by government;
Hamburgers or Fast food in general
Plumbing, AC, electrical or any of your skilled trades
Car Repair
etc etc
Now if you look at industries broken up by the government this supposed anathema to conservatives it was actually government that created it in the first place
Telephone
Departure gates for airlines
Trash Hauling
Cable TV
If you have any examples to support your argument I would like to reserach them but I can’t think of any time it has happened
“Liberals would in general expand public health to include self-contained,
long-gestating chronic diseases such as diabetes and high blood pressure, and catching cancers early when possible. (Arnold Kling calls this ‘premum medicine.’)”
They would also regulate how much sodium you intake, how many sodas your drink, what you fry your food in, and anything else they could even remotely related to or affecting health.
” may have the reasons why. In any event, weak price controls are not a fact of nature–just a fact in America.”
Price controls limit supply, as a freeer, enough E’s, market then those you mention we let the market decide price not central planning. This actually works better in some cases then central planning, i.e. generics. Its when we pretend to have a free market but regualte the heck out of it that we get some really inflated prices.
I am jumping into this string a little late, but let me add two comments for Jeff Goldsmith (who I have admired for years):
1. It may be time for a debate on the scope of public health.
Almost all factions would agree that public health should include contagious diseases, plus emergency care for broken bones, infections,
and life-threatening conditions such as stroke, heart blockages, impacted bowels, septic shock, etc.
But conservatives tend to stop here. (Avik Roy stated this well on one of his blogs last year.)
Liberals would in general expand public health to include self-contained,
long-gestating chronic diseases such as diabetes and high blood pressure, and catching cancers early when possible. (Arnold Kling calls this ‘premum medicine.’)
An honest conservative (such as Kling or Nate Ogden) would say that if chronic diseases are untreated and life expectancy goes down a couple of years, well, that is not a national tragedy. The conservative view is that government has no duty to prevent all deaths. A conservative would state that diabetes is not a public health problem. (and by the standards of America from 1789 to about 1970, it is not.)
This debate is muddled, of course, by Republican hypocrites –who expect seniors on Medicare to get premium medicine without question, but would deny it to anyone under 65 without a good job or money.
The debate on public health must also deal with the research on over-treatment and over-diagnosis for a number of common conditions. There are far more urgent public spending needs than preventing five thousand early deaths from a cancer, by testing absolutely everyone.
At any rate, it would not hurt to drive the debate on the proper scope of public health.
2. My second comment for Jeff refers to his point that price controls are always captured by powerful players.
This is true for the USA but it does not appear true at all for Germany, Japan, and France, just to mention three large countries.
Regulators in those places have pushed back big pharma many times.
Canada took a strike of doctors over its initial single-payor plan, and the doctors lost.
Someone like Paul Starr may have the reasons why. In any event, weak price controls are not a fact of nature–just a fact in America.
Bob Hertz – The Health Care Crusade
Margalit –
All or none contracting is exactly what the powerful hospitals insist on now. This includes large systems with multiple hospitals that refuse to let insurers contract with some of their hospitals but not others and even try to resist tiering which strikes me as particularly obscene. Why should a hospital be able to get away with telling an insurer that it can’t charge its own members a higher co-pay than the member would pay to go to a competitor’s hospital? This is another area that probably has to be dealt with via regulation, along with the pricing of care delivered under emergency conditions where the choice of hospital is not possible or practical.
If I remember correctly, according to the large for profit hospital chain, HCA, about 70% of its inpatient revenue is from medical care and only 30% is for surgical care. Quality differences on the medical side probably relate more to differences in infection rates and readmission rates which are often completely uncorrelated with market power. In the case of cancer treatment, I’m told that as much as 80% of it can be dealt with perfectly well in a community hospital setting. People don’t need to go to Memorial Sloan-Kettering or M.D. Anderson for every cancer and, if they do, they are most likely to receive a full court press whether they want it or not because that’s the culture at those institutions.
Barry,
Why would a Center of Excellence agree to be put in a special tier by the insurer and give up its bread and butter so to speak?
If I was running on of those, I would tell the insurer that it’s all or nothing, and if I was big enough and excellent enough, it would be all, I presume.
Steve –
I don’t know how much difference there is geographically in the price actually collected per procedure nor do I know whether there is any correlation between the number of insurers and medical prices. I do know that within a given market, a dominant insurer will pay less than competitors with a much smaller market share.
Regarding the growth rate of medical costs, I think it is driven by such trends as advances in technology, including new cancer drugs, the aging of the population, secular upward creep in coding intensity, and, of course, the increase in the price of services, tests, procedures and drugs.
My preferred way to build countervailing power against powerful hospitals and large physician groups is the use of tiered networks and limited or narrow networks. If we can demonstrate to the patient that, for most care, the high priced hospitals are no better than their less well paid competitors, it’s legitimate for payers to require the member to share more of the cost to access the high cost, comparable quality provider. For procedures for which the high priced hospitals have earned a Center of Excellence designation, payers could put them in the preferred tier for those. As both employers and people who buy their insurance in the individual market perceive health insurance as increasingly unaffordable, tiered network and narrow network products are finally starting to gain more traction in the marketplace and it’s about time. As I’ve said many times, easy to use price and quality transparency tools are necessary to make this all work as well as it can for both patients and referring doctors.
Separately, I’ve never heard that PA insurers pay full charges. Why would they do that? My own insurance is with Highmark Blue Cross but I live in NJ and most of my doctors are in NYC near my work. Payment rates are determined by the local Blue (Empire in NY and Horizon in NJ) and Highmark then pays that contract rate under its Blue Card system.
This is the myth of the free market in many industries/aspects. The end point of a mature and long-existing market place is a marketplace dominated by a single company/entity or a small handful of companies/entities that will use their position, clout, and leverage to ensure that position remains unchallenged. Now maybe their stranglehold is ended through some market force (substitution, etc) but in most cases it requires gov’t intervention to intervene to restore competition. This is anathema to most conservatives today.
Margalit –
Yes, I know about the cooperatives. I think Premier Inc. is the largest, but I’m not sure if member hospitals use it to purchase expensive devices or not as that’s a decision driven mainly by surgeons at each hospital, I believe.
As for the ACO’s, I’m not familiar with the intricacies of the regulations though much of the provider feedback seems to be negative so far. In theory, assuming they have sufficient critical mass and interoperable electronic records systems, they should be able to achieve some cost savings in care coordination, especially through the elimination or reduction of duplicate testing and adverse drug interactions.
If ACO’s were willing to assume the financial risk inherent in capitated payments and if there were at least two in each urban and suburban market to compete for business, there is potential to improve upon the status quo. Payments would need to be risk adjusted and the risk adjustment state of the art isn’t where it needs to be yet, in my opinion. The existing system still overpays for the healthy and underpays for the sick.
The closest thing we have to a large scale ACO today is Kaiser but their insurance premiums are not much lower than their competitors’. I don’t know, however, to what extent that is due to a different membership mix – older and/or sicker than competitors’ insured populations. If we wind up with very large ACO’s in many markets, it could indeed lead to even greater concentration of market power than we have now so even capitated payments, if driven high enough by near monopoly market power, could result in healthcare costs even greater than they are now under fee for service payment.
At the end of the day, I’m not very optimistic about the ACO concept’s ability to drive medical cost growth lower. There could be some quality improvements, though. As I’ve said before, to really attack costs, we need to stop paying for services, tests, procedures and drugs that either don’t work or cost more than they’re worth. We need meaningful tort reform to reduce defensive medicine over time. We need a more sensible approach to end of life care and we need good, user friendly price and quality transparency tools. We also need more reasonable and realistic patient expectations than we have today. If all that fails, we will probably eventually wind up with explicit rationing, most likely age based.
So , since as I pretty much expected, there seems to be wide “bi-partisan” consensus that these large health systems should be split up to more manageable size, how do you view the ACO movement, which only makes big organizations bigger, and encourages those that are still small to consolidate, or perish? Will the savings/losses they realize for Medicare (if any) be swiftly shifted to the private market? Or will the very large ACOs just turn into narrow networks for private HMOs? Or both?
Hospitals already use these purchasing cooperatives. They are called GPO – Group Purchasing Organizations and they deliver everything from hardware to laundry services, including medical supplies. Some of these GPOs are very large national organizations, and other are small regional ones.
Steve –
When it comes to patented drugs, even Wal-Mart doesn’t have nearly as much negotiating power as you might think. Big Pharma’s attitude is that if the doctor prescribes a drug, you, the pharmacy, need to carry it. So, our price is our price. As for the device manufacturers, they deliberately keep their prices very opaque to the point of requiring hospitals to sign confidentiality agreements precluding disclosure of how much each paid to any other hospital outside their system. All such confidentiality agreements should be illegal. The more price transparency we can have, the better. Finally, just as small employers should be able to band together to purchase health insurance on more favorable terms, hospitals should be able to form purchasing cooperatives to buy devices and other supplies on more favorable terms than they could as stand alone entities.
In markets where there is only one hospital, if insurers can not come to terms with the hospital on how much it will pay for various services, tests and procedures, it should probably just tell it’s members that it couldn’t reach an agreement with the hospital and it will reimburse members at, say, 110% or 115% of Medicare for whatever care the member requires. Let’s see hospitals try to collect two or three times that amount from lower middle class, middle class and even upper middle class wage earners. I’m sure the hospitals will love the publicity when the media exposes their heavy handed collection tactics if hospitals use them.
In a free market, both sides will seek to optimize market power. In most states, insurers have already consolidated, ahead of providers (excepting California). Costs have still risen. I have no problem with setting some limits on these provider consolidations, I am just surprised that a free marketeer would be willing to do so. Of course, there will remain the hundreds of small hospitals/clinics that are the sole source of care for millions of people.
Also, consolidation of facilities is how hospitals gain enough market power to negotiate lower prices with drug companies, device makers and implant makers. If you split them up, what is the unintended consequence of these hospitals not being to obtain those lower prices?
Steve
Barry- You describe the current situation. Most states are dominated by one or two insurers.
http://www.businessweek.com/magazine/content/09_31/b4141022519011.htm
http://www.americanprogress.org/issues/2009/11/insurance_market.html
As far as I can tell, there is no linkage between costs and number of insurers. States like Arkansas are dominated by one insurer. New York has its coverage spread more among different insurers. Both have premiums rising. It appears that even when insurers approach having a monopsony, that providers still have more market power.
As an aside, commercial insurers must be different in NYC. In PA they pay full charges. We love to see the commercials.
Steve
Its about giving the residents/consumers a choice not possibly giving the insurance companies an advantage. There are multiple insurance companies, in your logic why doesn’t that give the hospitals an advantage?
Further doesn’t the term free market sorta require an actual market with competition to be free?
“Are you guys suggesting that those corporations should be broken up?”
Margalit –
Yes, they should be broken up. There are surprisingly few economies of scale in running multiple hospitals. As you can see from the New York magazine article that Steve linked to, labor costs are 60% of the costs of operating a hospital. There may be modest economies when it comes to supplies which are about 15% of costs. Since most hospitals are non-profit, even access to capital is not as big an advantage as it might be. Overall financial health is more important there. The only reason hospitals aspire to achieve local or regional market dominance is pricing power, pure and simple. To pick on Partners in Boston for a moment, there is no reason why MGH and B&W need to or should be owned by the same corporate entity let alone their outlying satellite community hospitals that are also part of their system.
Separately, on the issue of where you should be able to go for what care irrespective of cost, we can measure outcomes, hopefully with risk adjustment, for things like heart, brain and orthopedic surgery, organ transplants and cancer treatment. When it comes to the frequent flier with CHF or the alcohol or drug abusing patient with mental illness, I doubt that the quality of care is hugely different between community hospitals and AMC’s. Where we can measure outcomes, let’s see the data as well as the prices charged and actual insurer reimbursement rates received. Both referring doctors and patients should have as much useful information as possible at their disposal.
“except that we will use the coercive power of big government to give insurance companies an edge in negotiations? “
Steve –
The NYC metropolitan area in particular has lots of doctors, including surgeons, who do not accept any commercial insurance. If you’re practicing in a locality where the majority of your patients have Medicare or Medicaid, you’re already accepting federal or state dictated prices. In markets where there is only one hospital for miles around and a commercial health insurer with a dominant local market share, the negotiation should be a fair fight.
“Some health systems have way to much power. If there are two hospitals in town and they are owned by the same company they need split.”
Free market economics, except that we will use the coercive power of big government to give insurance companies an edge in negotiations?
Steve
“and now you want me to go to Joe’s Med Shack for health care,”
Until recently University Hospital was 30% lower then Cleveland Clinic and every bit as good. There are a number of suburban hospitals that are a fraction of the cost of Cleveland Clinic with equally good outcomes.
Remember the Government and Dartmouth are about politics, not value.
“to save you a couple more pennies?”
Actually it doesn’t save me or most payors even a penny, our income is so much per employee per month regardless of how much you spend. It does save you money though, either directly or via your employers cost which supposedly part of your compensation. Its also far more then pennies, when hospital care accounts for 40% of cost and they are being paid 3 to 5 times cost we are talking big bucks.
But the government is telling me, and “everybody” knows that this is true, that Cleveland Clinic and Mayo and all those Dartmouth Atlas endorsed centers of excellence are providing “highest quality care at costs well below the national norm”, and now you want me to go to Joe’s Med Shack for health care, to save you a couple more pennies?
I assume I can start going to those big name Clinics two years before I drop dead, or do I drop dead two years after I start going there…. Very confusing…
“Are you guys suggesting that those corporations should be broken up?”
I won’t speak for Barry but yes. Some health systems have way to much power. If there are two hospitals in town and they are owned by the same company they need split.
“What you are suggesting, Barry, is regulations, not what I understand as market forces.”
If I sell a policy that clearly excludes XYZ drug the market allows people to buy that policy or one that does cover it. What you can’t have is the courts or politicians demand we provide that drug to someone that didn’t pay for it then got sick. We should never deny anyone treatment they are able and willing to pay for. We also can’t be expected to provide unlimited treatment to everyone like PPACA requires.
Life’s outcomes are not equal or fair, we are only required to give everyone equal access and opportunity.
“Basically, consumer decisions are either irrelevant, or undesirable, and either way those must be restricted as much as possible.”
I don’t think we should ever restrict a consumers decision, we should be allowed to only provide what they pay for though. If someone insist on going to Cleveland Clinic and paying a facility fee for streep throat they should be allowed to do that. The insurance company shouldn’t be forced to pay for it. A Medical Home that can educate as well as treat would be invalueable in this sitution.
“And how do you create price competition for major items, that continue to be insured, and which are largely not discretionary and not directly influenced by consumer choice, again without “regulation”?”
Scheduled benefit plans are very good at this. If you need a hip replacement we pay $X thousand, you can take that to any hospital you want to have the procedure done. Then it would be on the facility to justify why they cost twice as much as the hospital across town and why the member should pay the difference out of pocket. We should never tell someone they can’t pay the difference that should be their decision.
I am forced to conclude that I don’t understand what market forces are.
What you are suggesting, Barry, is regulations, not what I understand as market forces.
What Nate is suggesting is interesting, but again, I don’t see how the lack of first dollar coverage for consumers has any transformational value on that arrangement.
Basically, consumer decisions are either irrelevant, or undesirable, and either way those must be restricted as much as possible.
On a different note, I don’t quite understand the ant-trust enforcement on the provider side. As far as I know, providers who are not clinically integrated are not allowed to negotiate together. The large systems that everybody seems to think are the best solution to all problems, are single business entities, so anti-trust is not applicable. They just “happen” to be so big that they practically monopolize the market and obliterate any competition. Are you guys suggesting that those corporations should be broken up?
Margalit and Jeff –
Regarding the treatment of the 20% of the population that accounts for 80% of healthcare costs in any given year, I think we need to do the following two things: (1) stop paying for services, tests, procedures and drugs that either don’t work or cost more than they’re worth and (2) work toward universal availability of palliative and hospice care for patients in end of life situations and encourage the execution of living wills and advance directives as well as the appointment of a healthcare proxy with the information stored on a registry so it’s available to doctors and hospitals when needed. For those who have not executed a living will and don’t have a healthcare proxy, we need to change the default protocol from “do everything” to apply common sense depending on circumstances without providers having to worry about being sued if they didn’t do everything technically feasible or possible.
For the 80% of relatively healthy patients that account for 20% of costs, we need to reset patient expectations so they don’t keep demanding unnecessary or marginally useful care including expensive imaging and the latest drug they saw advertised on TV. We also should enact sensible tort reform that would take medical dispute resolution out of the hands of juries and give it to special health courts while also legislating robust safe harbor protection from lawsuits for doctors, NP’s and others who follow evidence based guidelines where they exist.
In the case of both populations, more aggressive anti-trust enforcement on the provider side, especially hospitals, would also be helpful as would good user friendly price and quality transparency tools that would be available to both referring doctors and patients.
” How do you then increase payments for primary care, without keeping supply down artificially, or without regulating prices?”
Lets say a payor is spending $100 PEPM currently for outpatient physician services. $30 PCP and $70 SPC. If a PCP came to me and said I want to sell my Medical Home services for a capitated rate of $50 PEPM and will lower your total OP Physician PEPM to $80 effectivly cutting my SPC spend to $30 and ssaving me $20 I would jump all over it.
If they were to get really sophisicated and assist us in managing imaging cost, Rx, and hospital choice I could easily pay them $70 or $80 and still cut premium substantially.
I can’t get to the patients side when they make healthcare decisions. Now my best hope is to educate them and provide them tools to make efficient decisions. If the PCP was serving this role they could be compensated very farely and still help substantially lower cost.
Jeff,
I assume that the prohibition of first dollar coverage is the mechanism by which market forces are to be applied to medical care. Since the vast majority of people at any given time (80%) are incurring only a small part of expenses (20%), it makes sense that most of us can indeed shoulder first dollar coverage until we cross the threshold and join the expensive 20%, and I can see how market forces can work for this large segment of people, but small segment of medical care.
From what I see and read of the private market, such out of pocket responsibility indeed reduces utilization across the board. Disregarding quality for a moment, do we know if decreased utilization in the already small 20% expenditures segment, will have a cost reducing effect on the 80% expenses down the line, or is the opposite true, or perhaps no effect is to be expected?
Since most Americans will need some sort of comprehensive coverage once they join the minority which consumes most services, either due to major illness or trauma, how do we propose to unleash market forces on this large segment which will have to continue being paid by third parties?
Basically, it seems to me that best case scenario will allow market forces to exist in the large volume, small price, segment of the market, which consists mainly of primary care and some specialty and diagnostics. How do you then increase payments for primary care, without keeping supply down artificially, or without regulating prices? And how do you create price competition for major items, that continue to be insured, and which are largely not discretionary and not directly influenced by consumer choice, again without “regulation”?
We need more health plan choices, especially in the “single payer” states . . . We need physicians to step up and take capitated risk, which they are increasingly disposed to do, as opposed to shifting their risk to hospitals thru salaried employment. We need more multi specialty physician groups.
We need to challenge anti-competitive behavior both in hospital and physician care with aggressive anti trust enforcement. We need to have the courage to re-align technical vs. professional fees for Medicare, and in the process roughly double what we pay for primary care physician services. We need to outlaw first dollar coverage type supplemental plans for Medicare, so that older people are exposed to some point of care cost risk, based upon their ability to pay. We need to redesign Medicare to make the program easier to use, but clearer about what things actually cost. That’s just for starters.
Emphatically disagree with your premise that market forces in medical care are “not morally acceptable”. What’s unacceptable is state franchised monopolies . . .
” and “free market” in medical care is not morally acceptable,”
Not morally acceptable to who? Free market healthcare can work for 85 to 90% of the population. If Government would stay out of what works and concentrate on the 10-15% of people that truly need help we wouldn’t have any problems.
So what is the solution? If government cannot regulate prices to affordable levels, and government cannot use taxation to spread the burden across various populations, and “free market” in medical care is not morally acceptable, what do we do?
Tinker at the edges until the entire thing collapses on somebody else’s watch?
Dr. Mike is right. Price controls are inevitably captured by those powerful enough to prevent their income from falling. The hospital rate setting process in Maryland, highly touted by the policy wonks, is run by Johns Hopkins and U Maryland. Per above comments, Medicare’s fee regulation is run by the high earning specialists. This was my job as a lobbyist and it was surprisingly easy.
Once government gets involved in regulating peoples’ incomes, everyone gets grandfathered in- even those whose claims on society’s dollars are weak empirically. People who posit government as a stabilizing force in markets usually forget it’s OUR government- the for-sale part- e.g. Congress- that does the regulating.
Only what Medicare and Medicaid pay, private insurance does not have the shelter of rugulation to cap their liabilities or expenditures.
Yes, and that RUC needs to change. However, what also needs to change is the fact that some facilities are paid multiples of what other facilities can get, for the same exact service, at similar and sometimes better quality. This is not due to some free market competition effect. It is due to power concentration, backroom “negotiations” and arm twisting. And then there is the price of drugs and devices, which is also highly inflated.
Thanks for the link. Fascinating article….
@ Margalit
Correct me if I am misunderstanding, but I thought that the government (in cahoots with the AMA) was already regulating the prices for nearly all medical services via the RUC. I believe money is the root cause of the problem – specifically the money the flows to EVERY politician from the very industries that they are supposedly regulating. That is why I harp against partisanship so often – we are the root of the problem when we support legislation just because it contains a few elements that move in the right direction and fail to hold the politicians accountable for the elements that make things worse.
NYC has lost 17 hospitals since 2000. Nationally, a number of hospitals are closing.
http://nymag.com/news/features/68991/
Steve
They are facing debt because they are bailing out their banks. The European banks were more highly leveraged than our own. (Greece, as a special case, has been in default for 150 out of the last 200 years and its problems largely arise from tax avoidance.) They spend much less on health care than we do, so not sure why their current problems should be attributed to their health care systems.
Steve
well said, the root of high cost is high claims and until that is resolved nothing will change. Where do we find a politician to champion it, you interested Margalit?
While we debate all these philosophical things regarding nanny states, personal responsibility, illegal aliens, uninsured by choice or by necessity, and whether we want one system for all, or a charity system for the poor and a paid-for system for the rich, and all sorts of other insurmountable and divisive concepts, why can’t we just use government to regulate the root-cause of the problem – inflated unit prices for some medical services?
It’s not fee-for-service that is driving prices up. It’s wrong fees for wrong services, and no amount of external bundling is going to solve the problem, just like DRGs did nothing of consequence. You can certainly reduce utilization by barring access and dumping an ever increasing portion of costs on individuals, but how is that easier and more politically feasible than regulating what hospitals can charge? When was the last time a hospital had to find ways to manage its costs down or go out of business?
“Nearly every other OECD country insures all of its people.”
True and nearly every other OECD country is enacting austerity measures becuase they can’t afford their present debt and benefits. What good is replacing one unsustainable system with another unsustainable system?
Do we want to be greece or Portugal 5 years from now? Do we want NHS, did you hear about the latest guy to die in the hallways from a preventable illness? You can’t suggest we go to these other systems with out acknowledging they are also falling apart.
“ed consumers to take on a $14 thousand a year health insurance expense is delusional. ”
The idea that the average cost of insurance for these people would be any where close to $14,000 is even more delusional. Most of them could have insurance for a couple thousand a year, not nearly as provocative of a number is it.”
They fall into several separate groups. Those young, healthy and w/o kids could get insurance for a couple thousand. Those with kids, or with illnesses in the family will pay lots more. Those with real significant disease, probably wont be able to get any kind of insurance. Also, COBRA costs vary quite a bit.
“We can’t afford to give every person a first dollar health plan with low co-pays so they take their hypertension meds.”
Nearly every other OECD country insures all of its people. If you want people to take their HTN meds, probably better to go to VBID.
Steve
Ding, ding, ding, we have a winner.
“Why are so many obsessed with funding the major insurance corporations?”
Asked and Answered.
Apropos of the economics of all this, the 2005 words of noted medical economist J.D. Kleinke could have been written yesterday, with just a few adjustments in some NHE numbers.
http://www.chimss.org/downloadlibrary/doclibrary/Kleinke.pdf
Where are the people who are able to think and speak independent of the party that comes closer to their own views? Throwing your weight behind an idea just because it comes from “your” party is just so stupid. If I think that Ryan’s ideas or the PPACA are horrible ideas, that doesn’t mean I don’t want all Americans to be taken care of. Why are so many obsessed with funding the major insurance corporations? Why does a person believe that giving a corporation money to “take care of” a fellow American is so much different and so much better than providing the means for their fellow Americans to get themselves taken care of directly? Are you really looking for the collapse of the system? Really? If so admit it, if not why do you support industry over the individual? The political parties do not understand health care. Giving in to this reality and throwing your support behind either party’s ignorant proposals is not helping to care for your fellow Americans.
The best way to care for an un-cared for person is to simply provide care. I don’t see how anyone can argue that throwing in layers of bureaucracy between the patient and their care is ever better. It is not one size fits all – stop worrying about the haves and find a solution for the have nots that doesn’t try to force them into the same system that barely works for the haves.
The divide between left and right is only as deep and wide as our own partisanship. Calling yourself a Democrat or Republican has to be one of the most un-American things you can do. The politicians have to choose a party, we do not.
As an investment, there is no return for caring for sick people, so the country should not invest public money in sick people.
As an individual, you have seen your family go through its own health issues and you can buy coverage for the things that your family tend to have. You will have extra money so save or spend. If you received the money your employer uses to buy “benefits” for you, then you could buy the coverage you want. Insurance companies would have to design real value into their products.
The rest of healthcare spending is from fear mongering politicians and insurance companies who profit from the hysteria and scare people into seeking care they do not need and allowing the purchase of insurance that they do not need and which provides bad coverage in the first place
Why worry about spending 14k per year for something you do not need?
The majority of the uninsured are not sick, but they all are political pawns for every do-gooder with an agenda.
We have so much spending that does not change anyone’s life span. All this spending is someone’s income, however. Eliminating excess spending is like any other economic slow-down. It will slam the economy. And like every other addiction, when all the money stops there will be withdrawal, big time.
US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.
” Our health system is too damned expensive for most of us to use without health insurance.”
I agree with this but the solution is not to give them health insurance. Government programs, subsidies, etc etc is what made insurance unaffordable for all. If we are concerfned about public health we should be talking about public health not the number of uninsured.
We can’t afford to give every person a first dollar health plan with low co-pays so they take their hypertension meds. Its a $7000 solution to a $50 problem. Preventive health should never be a justification for expaning insurance, preventive health should not even be insured.
“I still think there’s a problem here and it is not one merely of individual irresponsibility. . .”
On a cash basis with a flexible schedule how much should an annual exam cost? I think in most markets you could have it for under $50. Throw in 2 $4 a month generics to treat almost any condition and your talking $146 per year. I have grown up with, worked with, and known a lot of poor people on public assisance and those just getting by and I can’t think of one who could not afford $146 a year. I’m sure there are some out there but they are the exception. You don’t solve the exception by screwing up the 95%.
After we require individual responsibility and are left with 4-10 million people that truly need help I’m confident we can find a way to not only help them but help them fully like they should be.
Unfortunetly since 1965 we have never tried to help those that need it only those who politically benefit from it.
They need to be diagnosed first. Someone needs to write the script. It’s a team effort. As you know, you cannot just go get the drugs yourself.
I’m definitely in favor of personal responsibility, as well as most of the items that create more competition and more options for consumers in the health system that Republicans have argued for (high deductible plans, overriding state coverage mandates, malpractice reform, tightened fraud and abuse enforcement, etc.) And I’m definitely not a liberal. I’ve worked in state government, and in the health system and in business, for thirty five years (including, briefly, in your business, as an equity owner).
It isn’t just people who are presently generating claims that we have to worry about. There are lots of people who aren’t generating claims who nonetheless have controllable health risks, and if they don’t have health insurance, they won’t get very far in controlling them.
There is an elephant in the room, a very hungry elephant. Our health system is too damned expensive for most of us to use without health insurance. Half of the country basically cannot afford to use the health system we have- between people who lack health insurance for whatever reason, people who have no cash who cannot afford the patient share of the cost of their insurance and people on Medicaid. The reason why patient visits, hospital admissions, even imaging visits, are off right now is that people are out of cash and cannot afford to use the health system. This problem will not go away when we have a recovery.
My suspicion is that MOST of the privately insured population would have economic difficulty covering the patient share of a major illness, like cancer, or a major trauma. That’s basically what the Kaiser tracking poll said. 37% not confident they could cover the cost of a major illness. It would be a problem for me and I’m definitely not poor.
I don’t want to live in a nanny state, and as my opening comments suggested, I didn’t like the heedless expansion of government’s role in our lives embodied in ACA. It was a sprawling, paternalistic exercise in do-goodism. I still think there’s a problem here and it is not one merely of individual irresponsibility. . .
” Giving those people the (now largely generic) drugs that, for a few pennies a day,will help them control those problems before they flower into the large claims you worry about, doesn’t require a massive, rich benefit package. We’re screwing ourselves as a society, and them as citizens,”
Jeff, if a person can’t assume enough personal responsibility to take a generic drug that cost pennnies per day how can you put that on society? At a certain point individuals’ shortcommings are just that, individuals’ short commings, we need to stop looking for ways for society to be everyone’s mom and make people responsible for themselves. The way your talking isn’t far off from irobot(that will smith movie), for their own benefit we need to remove all personal choice. If your going to solve this for them what wont you solve?
” Unfortunately, 30 million people uninsured for two years or more strikes me as a serious issue”
if they are healthy and have coverage options available that they choose not to sign up for becuase they are healthy but can as soon as they need them then why are you concerned?
The real problem with entitlements is the health system’s entitlement to an income is the real driving force.
It isn’t the 4 million people who are sick right now that concerns me. It’s the tens of millions of diabetics, millions of whom are undiagnosed and therefore untreated, who don’t get their insulin or a decent testing set-up to control their blood sugar. It’s the tens of millions of people with controllable hypertension or hyperlipidemia, which isn’t all obesity driven, but largely genetic in origin. Giving those people the (now largely generic) drugs that, for a few pennies a day,will help them control those problems before they flower into the large claims you worry about, doesn’t require a massive, rich benefit package. We’re screwing ourselves as a society, and them as citizens, by not figuring out a way to do this.
Coverage is a blunt instrument, and buying fifty million people access to in vitro fertilization, or the latest $90 thousand a year cancer drug that extends peoples’ lives by two months, is sort of where the default public insurance option gets us.
Somewhere between your four million and the “liberals” 51 million is the right number. Unfortunately, 30 million people uninsured for two years or more strikes me as a serious issue, and that the number is somewhat north of the people with big claims right now.
You can’t drive very far looking in the rear view mirror.
When arguing that X million uninsured can’t get the insurance they so badly need why do they assume these people are immune from the acturial realities that apply to the other 200 americans under 65?
In a given insured population under 65 40-50% of members will have no claims, another 30-40% will have small to moderate claims.
That leaves 20% of the population that incurs 80% of total cost. What 20% of 40 million americans? 8 million. Not far off.
Factor in that even you admit those that have large claims and are in the hospital and are enrolled then the number of people with any significant amount of claims is much closer to 4 million.
You can get to 4 million people a number of ways, you can’t get anywhere close to 30 million people that need help.
With liberals its never been about acually helping people anyways.
” This apparently originated in a Heritage Foundation blog posting from late August, 2009.”
Wow you should be wrtiing for NYT or 60 minutes with this reserach. This argument actually goes back as far as liberals have been claiming we need to implement X Healthcare Reform for the sake of X million uninsured.
From 2003
“A 53-page study by Families USA claims an eye-popping 74.7 million people under the age of 65 in the United States went uninsured “for all or part of a two-year period from 2001 to 2002.” Ron Pollack, head of Families USA, uses this figure to call for “real and meaningful action to expand health coverage.”
Number overstated for 12 years
“WASHINGTON – The government’s estimate of the number of Americans without health insurance fell by nearly 2 million Friday, but not because anyone got health coverage.
The Census Bureau said it has been overstating the number of people without health insurance since 1995. The bureau blamed the inflated numbers on a 12-year-old computer programming error.”
From 1998 study on uninsured
“This is a study of why health insurance coverage varies across the country and within a state. While individual characteristics of the uninsured are well known, relatively little research has been devoted to explaining the systematic variation in state and county-level rates of uninsurance. Since these aggregate rates are the targets of many recent policies — health insurance market reforms, Medicaid expansions, high risk pools –”
“our results strongly suggest that guaranteed issue plus nongroup premium rating restrictions in tandem work to decrease overall and private health insurance coverage. Thus, while they surely helped some individuals who are likely to be high risk, state nongroup reforms appear to have decreased coverage.
Other policy findings of note are that mandates for alcohol or drug abuse treatment decrease coverage”
For decades the uninsured have been used as political pawns as justificaiton for thousands of reforms yet oddly most times action is taken on their behalf their fate worsens.
“Why those who have short-term coverage issues should be less worthy of help than the “hard core” long term uninsured is unexplained by the Heritage blogger.”
This is political hackery. Any experience at all in the insurance business would answer the question for you with out the misleading projection. Tens of millions of workers switch jobs every year. Most of them have a new job already lined up when they leave. They choose to take a calcualted gamble for the 30-90 days until their new coverage kicks in. If they were sick and needed coverage during that time help is already provided, they choose to save the money. Further this non help you don’t appear to know about even gives the ex worker 60 days after notice of their COBRA right to go back and elect coverage, in this case if someone has an unforeseen acccident they can still stick it to their old boss.
Its dishonest arguments like this that show how politically motivated the far left is in pushing these bogus numbers.
“The idea that there are huge undiscovered cash reserves that would enable cash strapped consumers to take on a $14 thousand a year health insurance expense is delusional. ”
The idea that the average cost of insurance for these people would be any where close to $14,000 is even more delusional. Most of them could have insurance for a couple thousand a year, not nearly as provocative of a number is it.
“faithfully reblogged by countless health reform critics, is a convenient rhetorical pretext for rolling back the Affordable Care Act’s coverage expansion,”
What year are you living in? There has been no coverage expansion from ACA. In fact tens of thouands if not hundreds of thousands have already lost insurance due to ACA, between the additonal cost, benefit limitations, and other provisions groups that use to offer coverage have had to drop it and groups that want to offer coverage have been unable to.
There is a foolish hope that ACA might cover more people, we have seen that hope 3-4 times in the past 2 decades, how has it worked out then?
” simply abandoning the thirty million people promised coverage by the ACA to the vagaries of the “marketplace”
Medicare promised to prevent the 13% of seniors that needed help from losing the shirt off their back, that number is now up to 19%. History shows americans would be far far further ahead if they were abandoned by liberal reform.
I don’t think any large numbers on the left, or even moderate numbers, would be willing to give Medicare vouchers and Medicaid block grants a shot. Similarly, I don’t think any significant numbers on the right would consider single payer or even a well appointed public option.
Strangely enough, the ACA is probably the one place where most left and most (sane) right can unhappily meet, but meet nevertheless.
“annual maximums that barely cover an appendectomy? How many of those folks do we have?.”
My educated guess it maybe a couple hundred such policies in the entire nation, in other words not even enough to make it worth mentioning. And usually they are policies not meant to be sold alone but as supplements.
” but $42,000 a year for a family of four IS poverty,”
In many parts of the country you can have a nice house for $600 a month leaveing you $30,000 to spend on other “needs”, the fact that a family of four making $42,000 would pay next to no federal taxes helps as well. I get the impression everyone making under $250,000 is suffering in poverty in your opinion.
Speaking for myself, I dont think the gap is unbridgeable. While I think that most of the right of center ideas will not work, if they are just going to torpedo the ACA, I sincerely hope that they put in action their own plans. I doubt this will happen as the GOP ignores health care reform when in office (excepting vote buying deals like Medicare Part D). I think that a large number on the left would be willing to give those plans a shot, if they would actually pass them, and pass them as health care reform w/o packaging in tax cuts for the rich in the bill.
Steve
I don’t know what “poverty” really means, but $42,000 a year for a family of four IS poverty, and depending on where you live $84,000 may leave you not a dime for anything other than immediate necessities.
And how about those who think they are insured, only to find out that there are annual maximums that barely cover an appendectomy? How many of those folks do we have?.
I know “non profit” health systems that pay their CEO’s $3 million a year and fly them around in private jets. You’d be very disappointed to learn how much corporate lifestyle gets generated in alleged non-profit enterprises
Jeff
As always, well done.
Just as an aside, you are aware, I am sure, of what the Heritage blog author is up to nowadays:
http://www.dhs.wisconsin.gov/aboutdhs/oos/bio.htm
Good or bad for his non-continuously insured flock? Dont know, I dont plan on moving there.
Brad
“It could be that there is room for both in our society”
Exactly, but it seems to always dishonestly get framed as one or the other.
Largely agree with Dr. Lippin.
The Left v. Right dichotomy is false. The real dichotomy is medical care as a for-profit enterprise v. non-profit basic human service. It could be that there is room for both in our society, but we desperately need more in terms of basic services being essentially free or low-cost.
Excellent blog piece. But I am going to triangulate here and say that both left and right are missing the big picture.
What is that big picture? That the Enterprise of Medicine doesn’t have as much impact on health outcomes as we have been led to believe. In short the politicians and the US citizenry has been royally duped by Organized Medicine and the mega-industries that support and sustain it.
For the real story on what impacts your health- see http://www.unnaturalcauses.org
It’s time we all stop believing THE BIG LIE about what the Medical Enterprise can do for us