Physicians

The Great Balance Billing Scandal By Eric Novack

Novack_sm_2In California, the possibility exists that the unelected
department of insurance, under pressure from the insurance industry and
patient advocacy groups, may fundamentally alter the way medicine is
practiced. In an effort to get a work around the
disgraceful- yet very culturally sensitive- single payer bill recently
vetoed by Governor Schwarzenegger, there is a move afoot to ban the
practice of balance billing.
 
What is balance billing you say? Sounds very wonkish and unimportant. Sounds like those unethical, over-utilizing, quality-unconcerned doctors are just trying another technique to scam the ‘system’. (But I thought the familiar refrain is that we do not have a health system? …) I will explain with an example.

If a doctor provides a service, she can set the fee for that
service. If
the doctor does not have a contracted amount for the provision of that
service, she can bill the patient for that portion not covered by
insurance. Bill breaks his wrist and goes to an emergency room. Dr.
Jones comes in and ‘reduces’ (realigns) the fracture. Bill has his
insurance through Blue Cross. Dr. Jones has no contract with Blue Cross.
 
Dr. Jones bills $1000 for his time, expertise, the procedure, and subsequent care. Blue Cross pays him $600. Dr. Jones bills Bill for the balance. This is balance billing.  Bill must pay Dr. Jones the remaining $400.
 
In California, they want to outlaw balance billing.<!–
D(["mb"," This means that no matter what Dr. Jones bills, or believes his service is worth, or that a patient thinks a service is worth, it does not matter. The doctor must accept whatever the insurance company wants (or does not want) to pay.
A win for the insurance company – no angry patients who could choose to switch plans. Only angry doctors who have already performed the service they- gasp- want to be paid for.
A win for patient advocates who believe that health care is a right—regardless what effect that ‘right’ might have on the ‘obligations’ of the physicians.
I desperately want someone to provide a cogent argument that, in a free society, requires the doctor to work only for whatever the dictating outfit chooses to pay— in 60 or 90 days.
Before you answer—note that insurance contracts for patients forbid them from paying for a service privately that the insurance company has denied. For example, if the insurer refuses to ‘authorize’ a MRI, and the patient decides to just pay out of pocket, he is in violation of his health insurance contract. Hmmm.
Eric N. Novack, MD
Phoenix Orthopaedic Consultants
5605 West Eugie #111″,1]
);
//–>
This
means that no matter what Dr. Jones bills, or believes his service is
worth, or that a patient thinks a service is worth, it does not matter.
The doctor must accept whatever the insurance company wants (or does
not want) to pay.
 
The insurance companies win.  How so?  They can
control their payouts.  It is clear that the one thing that insurers
actually fear is losing ‘insured lives’.  This means people switching
from one insurance company to another.  Disgruntled with their
insurance plan, employees, companies, and individuals switch companies
if they feel the insurer causes them too much grief.  But, under this
new world of no balance billing, the only people who would complain
would be doctors.  And, I can assure you, health insurance companies
are not nearly as concerned with physicians.  Doctors cause their
‘losses’ (aka paying for work)
 
A
win for patient advocates who believe that health care is a
right—regardless what effect that ‘right’ might have on the
‘obligations’ of the physicians.
 
I desperately
want someone to provide a cogent argument that, in a free society,
requires the doctor to work only for whatever the dictating outfit
chooses to pay— in 60 or 90 days.
 
Before you
answer—note that insurance contracts for patients forbid them from
paying for a service privately that the insurance company has denied. For
example, if the insurer refuses to ‘authorize’ a MRI, and the patient
decides to just pay out of pocket, he is in violation of his health
insurance contract. Hmmm.

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  1. Eric,
    I was wondering if I could get your input on this matter. I live in Nevada. I was insured under a self-funded insurance coverage program (“the company”). I had been paying high premiums and thought I was getting the best coverage possible. I had a baby, so the bills began to stack up. Having received Explanations of Benefits for all the physician and hospital charges, however, I assumed they were being properly paid. The EOBs indicated I was only responsible for a very small amount (copay/coinsurance). (Please note, all providers I used were contracted as preferred providers). A few months ago, I was notified that the self-funded company was not licensed. It was shut down by the state’s department of insurance. I also found out that the company had not paid many of the claims sent to them by my providers. Now the providers are after me for the full amounts the charged (not even the contracted amounts). I’ve been disputing everything telling them I am only responsible for what’s indicated as “patient responsibility” on my EOBs. Is this balance billing? Are the providers allowed to come after me?

  2. I know of a few companies that are developing a condum type sleeve that fits on a colonoscope to protect you from the prior patient that had the same scope used on them that is “supposed to be clean”. These sleeve would not be initial reimbursed by the insurance companies, so doctors may ask patients to pay $100 to have access to this sleeve. Does anyone have any comments on this?

  3. >>Chiron said ” the insurance company’s “allowable” amount is … in fact, based on data from the geographic region on that specific CPT code, and what other providers with the same credentials are charging for that CPT code.”
    Who fed you this line of BS? The insurance company? How is it possible then that the allowable amount is often less than the Medicare amount? Do you really think providers are charging less than Medicare? Get real! This is typical misconception of people who are outside the system and completely clueless as to what is going on, yet they spout off like they have an MBA. Oh wait, the MBA is the CEO of the insurance company who is making $30,000,000+ a year!

  4. >>Chiron said ” the insurance company’s “allowable” amount is … in fact, based on data from the geographic region on that specific CPT code, and what other providers with the same credentials are charging for that CPT code.”
    Who fed you this line of BS? The insurance company? How is it possible then that the allowable amount is often less than the Medicare amount? Do you really think providers are charging less than Medicare? Get real! This is typical misconception of people who are outside the system and completely clueless as to what is going on, yet they spout off like they have an MBA. Oh wait, the MBA is the CEO of the insurance company who is making $30,000,000+ a year!

  5. What about another scenario that relates to this. I went to a psychologist for a few sessions of therapy who accepted my PPO insurance plan yet insisted I pay the $120 upfront. She then stated she would bill for the service to my PPO and whatever the insurance company paid, which she thought would be around $80, she would turn over to me. Whether or not I get $80 back, the fact is that my copay (no deductible) was only supposed to be $15. Therefore, I actually will end up paying more ($40 instead of $15) to the therapist than if the therapist simply accepted my copay. Is the psychologist actually violating her contract with my PPO to accept my copay by charging me upfront for the whole fee? Is this even legal?

  6. Eric,
    Just to begin, let’s revisit the whole balance billing concept. “Balance” is not the difference between what the insurance company pays, and the physician bills. It is the difference between the amount considered “reasonable & customary” and what the physician bills. So even in the absence of some kind of bizarre legislation preventing balance billing, the patient would still be entirely responsible for everything the insurance company “allows” even if it paid zero because the patient has a high deductible.
    E.G. The bill is $1200, and the insurance company allows $1000. Patient A has an unmet $2500 deductible, and thus would still owe the doctor $1000. Patient B has no deductible, and the insurance company pays 80% for the service, so they pay $800, and the patient must still pay $200.
    Now that we have that little clarification out of the way, I think it is only fair that we consider the fact that the insurance company’s “allowable” amount is not cost insensitive. It is, in fact, based on data from the geographic region on that specific CPT code (the code that tells an insurance company what service exactly was performed), and what other providers with the same credentials are charging for that CPT code.
    Mind you, the “allowable” amount usually runs behind the actual cost index by a year or more, which means that what it cost the physican two years ago (plus whatever profits are being built into the fee for that particular service… on average in that geographic retion), is not what is being “allowed”. Hence in ongoing increase in billed charges for services, even when there is a contract with all of the local insurance companies that prevents the physician from collecting more than the allowable amount.
    It’s not quite as simple as the physician being unreasonably forced to provide a service at whatever arbitrary amount The Man (the insurance company) mandates.
    And the points being made about transparency of costs to the patient are entirely valid, and worse, symptomatic of what makes health care costs in the US such an ungainly burden on the whole economy. Most patients have no idea how much their insurance company is going to pay on a particular service, and are reasonably enough, nervous about how much of their bank account is going to be consumed by the treatment they are being advised to undergo. Add to that the reluctance of physicians to set a standard fee that everyone will be billed, whether they are self-pay or insured, and you have a whole lot of customers without the information necessary to make a rational decision on whether to commit to the service (and expenses).
    All that being said, I am happy to hear that the balance billing law was defeated. It is artificial economic constraints (just like contracts between the provider and insurance company) that ensure reasonable competition for patients based on quality of care outcomes, never happen.

  7. Your comments are not accurate. A patient can get an MRI whenever he/she wants, even if his insurer denies payment in advance. Also, in April 2006, a CA court ruled balance billing was ok.

  8. Texas will begin the same debate as to wheher to pass a bill to prohibit out-of-network physicians from balance billing patients. If this is passed, this will set a dangerous standard against providers. To date providers, use the balance biling of patients tactic to compel carriers to pay claims correctly and fairly. Most managed care contract arrangements are infavor of the plan and provide little to no recourse for the provider; but to cancel the contract and treat patients out of network. If plans would cease their deceptive trade practices, we would see more providers partcipating.
    In sum, this debate should not focus as much on fair contract rates, but more on the abuse and fraud that plans play on a daily basis. It is a patent fact that carriers have interal polices to underpay claims to contain costs. They realize many provider’s do not possess the time and talent to challenge the UCR rates. Therefore the provider simply bills the patient to get them involved. An angry patient is the most effective toll in garnishing payment from a carrier. Once this is removed, carriers will invent all sorts of skeems to underpay and delay payment. If this were the case, and I was CEO of Aetna, I would make sure my provider appeal process is so complex, no provider would dare spend the money to appeal an underpayment. This is the reality if a prohibition were place on balance billing patients.

  9. Reading your comments with interest. The development of health care policy understandably evolves, in part, from objective data, but have any of you ever faced the harsh reality of a life threatening chronic helath condition, loss of your job and the consequent loss of your group health coverage and insurability for life? Have you spent hours and hours on the phone with health care professionals, insurance company representatives and the almost completely uninformed Medicare representatives (you can hear them clicking away to find the script they need to read to you)that you are forced to deal with if you choose to be an educated consumer? I am a determined, luckily well educated, former litigator who has found the task daunting. For anything but the simplest of care you are expecting way too much of the “average consumer”. Clearly there need to be some huge paradigm switches to enable a fair and cost-effective health care system, but your discussion needs to recognize that the parties involved in health care contracting will never have equal bargaining power. Consumers cannot be expected to know whether the pathologist at hospital A is superior to hospital B, whether the Head and Neck surgeon in one practice exercises better judgement than that of another or whether one hypertensive med is better than another. You cannot measure the quality of judgment an excellent physician provides by evaluating their grades in medical school or their economic indicators.
    “High utilizing” patients? I know for myself and I am guessing the same is true for many “high utilizing” patients, that I cringe about having to take time out for another doctor visit, lab test etc. But I also know that the long term consequences for my personal health and cost to the health care system would be higher if I was not compliant and vigilant about performing these tasks.
    The notion of insurance company provided health care coaches/patient advocates when it comes time to treatment etc. raises a huge conflict of interest doesn’t it? When my insurance company assigned me a patient advocate there was no tangible benefit to anyone, not even her employer as far as I or any of my health care professionals could tell. Instead, her demands created another level of administrative beauracracy that wasted everyone’s time and money. She did not “advocate” on my behalf at all. Nothing happened that wouldn’t have happened without her presence.
    Of course people do not know what health care services cost. There is simply no easy way to find this information. See Michelle Singletary’s recent column on this issue. How do you expect people who work full time to even get there hands on this information? Many doctor’s offices close between noon and 2:00 p.m., exactly the time when an employed person might find time make such calls. And I can tell you from experience that you can make those calls and still not get the information you need.
    Policy making does need to be infused with the reality on the ground does it not?

  10. As a concerned health care user, what does one do when one is in an emergency situation and goes to a preferred provider hospital expecting to be serviced by preferred providers and then is slapped with balance billing. The insurance will only pay 90% of what they have contracted with their preferred providers. Most common people are struggling to meet their families many needs and are not planning to get slapped with several thousand dollars worth of bills, especially when they are already paying extensively for their health care coverage. What is the consumer to do in a life threatening situation? Say I am sorry but you can’t work on me because you are not on my plan, and even if they could, would they still have a choice? Isn’t there something unethical in this? Any answers?

  11. I am following some of the CMS activities, Eric, and if they want to reduce motorized wheelchair reimbursements by 35% it’s my guess that there is significant fat and overbilling in them. After the dust settles, and they’ve listened to the industry’s arguments, I doubt the number will be that high.
    >>> “But spending on these devices has increased 2700% over 8 years. Who do you blame? Doctors for being ‘too easy’, patients for being ‘too sick’, for profit companies for being ‘too greedy’, government for being ‘too corrupt’? Who would you blame?”
    My answer is all of the above, and I’d curtail it under S-P the same way every other country with S-P has curtailed it, and the same way the VA has curtailed it. It is a gold mine in the US for the reasons we have been debating, and CMS has set out to change that. It is my guess that they want to trim the fat by making it less profitable. As a consumer and taxpayer I expect that and applaud them.
    Of the 600,000 physicians I’d guess there are less 5% taking home over $2 million per year. But even that’s too much because they are making it by over utilization. Using your number of 10% share of the industry, when a physician orders unnecessary tests that net him $1M per year, then the “system” is paying an additional $9M in other costs.
    But it’s not just the $4M doctor that is overutilizing; to achieve the $600 billion in waste (30% of $1.8 trillion) it is likely the majority of them in various degrees. And that’s because physicians usually (but not always) get a piece of the profits on the revenues they generate.
    Of the $130K of school debt for graduating doctors, I believe if they were in the top 10% in grades they should be 100% reimbursed by the taxpayers. Perhaps a sliding scale for lesser achievers, except for those under a C average. And I agree with Barry on this; physician grades should be public information.
    >>> “Allow for private contracting — your new docs might charge less.”
    We effectively have private contracting with Medicare. It has set rates and the physician can opt in or opt out. Take it or leave it. Some have walked.
    >>> “Allow for truly portable health insurance.”
    I agree 100% on this. But that would take away the free-market you and Barry support by requiring insurers to take 100% of the applicants after they’ve changed jobs.
    >>> “end the tax favored status of employer insurance, allow light to shine on total employee compensation, and watch the creation of a real individual insurance market.”
    Better yet, totally eliminate the employer’s health care burden, as Canada and virtually every other industrialized country has done. Why are jobs leaving the US? Why are the Big Three making more cars in Ontario than in Detroit? Because the health care system has driven them out of the country. The same with other industries (though we can’t give unions and high employee benefits a free ride on this).
    (Side note: It is interesting that high employee wages and health care have negatively affected our economy, but high CEO wages and perks have not. It’s funny how that works.)
    Eric, the public is indeed losing trust in physicians, and they would even more so if we had greater transparency. But most physicians have failed to see the handwriting on the wall, and those who have are making their millions as fast as they can. The current system is unsustainable, and will eventually be taken over by the MBAs and CEOs and shareholders. Professional physicians will be a thing of the past.

  12. “Unfortunately, Barry, getting interest groups that are for-profit corporations to do anything that would harm shareholder profits would violate their legal responsibilities to those shareholders.”
    Jack — Managements have wide latitude in how they manage the business. Shareholders have both short term interests and long term interests. The better managements are trying to build value over the LONG TERM and recognizes that they often must incur short term costs to do so. Wal-Mart’s recent initiative to reduce the price of several hundred generic drugs to $4 for a 30 day supply is a classic example of this. I meet with senior executives frequently and always make it clear that my organization prefers to see management build value over the long term and ignore the Wall Street types that are only interested in short term performance.
    Furthermore, any decent company will tell you that it has numerous other constituencies including customers, employees, suppliers and the communities where its facilities are located. Most companies try to strike a reasonable balance among these conflicting interests as best they can.
    As for CEO’s, I agree that compensation is higher than it needs to be, especially with respect to stock options. However, many more CEO’s are getting fired these days by their Boards.
    Finally, the Tax Reform Act of 1986 is a good example of a wide variety of interest groups taking some hits in exchange for lower tax rates. There were plenty of winners and losers, but fundamental reform can happen. In that instance, President Reagan provided the leadership on the Republican side while Senator Bill Bradley and Congressman Dan Rostenkowski, along with Richard Gephardt, provided it for the Democrats. Bipartisan cooperation was the key. It can happen in healthcare too, but probably not before 2009.

  13. Jack- hopefully you are following the CMS plan to reduce payments for motorized wheelchairs by 35%.
    The outcry from industry and patient advocates has been loud, and will get even louder as the final decision time approaches.
    But spending on these devices has increased 2700% over 8 years.
    Who do you blame? Doctors for being ‘too easy’, patients for being ‘too sick’, for profit companies for being ‘too greedy’, government for being ‘too corrupt’?
    If your answer to the question is ‘all of the above’, how will your single payer system solve this?
    You are right– there are other national priorities that are purely in the realm of government, like securing our borders and police functions.
    Of the 600,000 practicing physicians in this country, how many ‘take home’ $4million/year? Please provide me a real number, or at least an educated guess.
    A real number is $130,000. That is the median school debt for graduating doctors. I number that often grows during residency. Remember, it is a median– as many have more as have less. And that number is growing.
    Where does your top 10% come from? Who should pay? Where will that money come from?
    When governments set prices, and react to changes in the marketplace slowly — everyone loses and costs go up.
    Allow for private contracting — your new docs might charge less some some things, but more for others. Put the regulatory burden on patients to file and refile claims — then see how insurers react. Allow for truly portable health insurance. Break the monopoly of a few insurers on the marketplace. And, most difficult, end the tax favored status of employer insurance, allow light to shine on total employee compensation, and watch the creation of a real individual insurance market.
    Oh, and eliminate the subsidies for medicare part c and part d to insurers and see if they can make it on their own.
    Medicine has to embrace its fallibility– we do not have all the answers, we cannot solve every pain, every condition does not have a perfect diagnosis or magic pill. The public would respect us much more than it does today.

  14. Eric, I’m against for-profit health care corporations that by law must put their shareholders above all else, even the patients. Even if there wasn’t a law the CEOs of these corporations would see to it that they got a disproportionate piece of the pie. The more money in the system, the better and easier it is to extract and distribute.
    I’d also be against for-profit fire departments, police departments, National Guard, etc. That 1 out of 6 dollars are generated by the health care industry is not a plus, it’s a shame. A symptom of the disease, especially when other countries are providing better care at 50% lower costs. Health care is consuming 15% of the national pie, and growing. Executives are getting rich and some doctors are getting rich, all while this one-time professional service has turned into a money-making commodity.
    I think physicians should be well paid, but not on the basis of how many tests they perform. When unnecessary tests occur, not only must the doctor’s charges be offset, but also those of the administrators, technicians, equipment manufacturers, and God knows who else. These unnecessary tests consume 30% of our health care dollars, though I’ve seen higher estimates.
    That take home pay for physicians is 10% of healthcare spending matters not. I know some who are taking home $4M after expenses, all while 45 million Americans are going without insurance and 18,000 per year are dying because they can’t afford insurance. If these guys were not being overpaid and too many tests weren’t being ordered, many of these 18,000 would live normal lives.
    I also know children that can no longer go to Major League baseball games because of high player salaries, but in those cases they are just staying away. People are not dying.
    On your question of physician education, those students in the top 10% should get free medical training. So should nurses and scientists.
    Eric, this is not just a physician problem and I don’t want to make it that. But few would criticize salaries that range from $100K to $1M. Is that not enough? How much of GDP do you feel should be given to the health care industry? Which industries should the resources be taken from? Education and teacher’s salaries? Firemen? Police? Border Patrol?
    How much is enough?

  15. Eric — I absolutely agree that we should keep track of high utilizing patients as well. Perhaps, Medicare, Medicaid and private insurers could send annual statements showing how much has been spent (by the insurer) on the patient’s behalf by year and cumulatively.
    I’m not sure exactly what can be done about high utilizing patients, though. Presumably, some have legitimate complex and expensive to treat medical problems as a result of birth defects or accidents, others may be hypochondriacs, while still others may be suffering the consequences of poor and undisciplined lifestyle choices.
    In the case of Medicare beneficiaries, perhaps a case could be made for making a claim against one’s estate to reimburse taxpayers for medical spending above some reasonable base level but only after the beneficiary’s spouse (if any) has also died and only to the extent to which assets are above, say, a half million dollars. To deal with the issue of giving assets away shortly before death, there should be a lookback provision that would subject assets given away within 3-5 years of death to reclamation.

  16. My ego requires that I post comment #50…
    I am in favor, in principle, of identifying high vs low utilizers among doctors and institutions (like the NYT expose on the cardiologists near Cleveland).
    However, the world of medical liability, patient demands, and uncertainty would require an equally agressive identification and, if necessary, punishment of high utilizing patients.
    And, if insurance were truly focused on the individual– to which the insurer is ulitmately accountable– vs. the employer or the government, then excessive utilizers of premium money could be punished as well– by people choosing to get insurance with another company.
    No one ‘magic bullet’ exists. No one piece of legislation, sorry Jack, will come close to solving our healthcare system problems. It will require an approach reminiscent of Alexander Hamilton’s approach to developing the federal banking system in the early 1790’s: several pieces of bold, innovative legislation that are interelated for success, that recognize that the federal government has a role, but that it ought to be a ‘guiding wind’ rather than a set of poorly constructed, incomplete railroad tracks. (colorful analogies all mine)

  17. Eric — While your figures are correct, I think it is also important to not that doctors drive virtually all healthcare spending through hospital admissions, referrals, ordering tests, prescribing drugs as well as consulting with patients and performing procedures themselves. This is why I suggested in an earlier post that we utilize modern information technology to track healthcare expenses that reflect what each individual doc is responsible for. There are enormous variations in practice patterns within a given specialty that can be attributable to everything from defensive medicine to utilizing expensive equipment that the doctor owns to just the way things are done locally. High utilizers should be challenged where appropriate, especially when there is no discernible difference in outcomes among their patients vs the patients of lower utilizers. Patients, for their part, should be informed that some docs are more cost-effective than others and given tools to allow them to identify who the high utilizers and the more cost-effective doctors are.

  18. Jack- are you against for-profit corporations in healthcare only, or in general. The reason it is siginificant is because 1 out of every 6 dollars of economic activity in the US is related to healthcare. Payment for physician services (gross) accounts for about 22% of the total. Average physician overhead at this point generally exceeds 50%.
    Put another way, take home pay to physicians accounts for about 10% of healthcare spending. Essentially the rest pays for other pieces of the system. This includes such for-profit companies as Dell Computer, OfficeMax, and the local public utility companies.
    Other than making physicians servants of the state — on salary (BTW- who should pay for the education of your new forced public servants?), how do you propose to remove the evil profit from US healthcare?

  19. Unfortunately, Barry, getting interest groups that are for-profit corporations to do anything that would harm shareholder profits would violate their legal responsibilities to those shareholders. It won’t happen.

  20. Jack — I think there are thousands of things in our society that we would organize differently if we could start with a clean sheet of paper from healthcare to the tax system to whether we should have cumbersome and distorting rent controls in New York City to the gold plated health and pension benefits that we have agreed to pay our public employees but can no longer afford. All of these probably made at least some sense once upon a time, but times change. It’s always hard to change the system because it creates lots of losers as well as winners. We tend to make necessary adjustments eventually, but the process is often painfully slow and usually requires the perception of a crisis to galvanize the bipartisan cooperation necessary to move forward.
    In my New York City rent control example, wealthy real estate interests give lots of money to state politicians who have jurisdiction over the rent control regs, but there are a lot more tenants than landlords, liberal democrats have long controlled the State Assembly, and the real estate interests always lose (though they have been thrown a few bones).
    Trying to change the health and pension benefits for newly hired state and local workers runs into a buzzsaw of opposition from public employee unions. Greedy corporations and CEO’s don’t have much influence here.
    On something like Social Security reform, the AARP says that “adjustments” in benefits are needed along with raising the wages to which the payroll tax applies. However, while I know exactly what they want in the way of higher revenues, I have yet to year the organization list any of the “adjustments” in benefits it is prepared to accept.
    With respect to healthcare reform, try to get hospital to embrace pricing transparency, try to convince consumers to give up the tax preference afforded employer provided healthcare, try to get trial lawyers to accept health courts to resolve medical disputes, or try to convince doctors (especially RAP’s) to work with hospitals to more easily facilitate package pricing for an episode of care. It’s not easy when everyone digs in their heels to protect their own turf, perks and privileges.
    While political money may be part of the problem, I think basic selfishness even among consumers who never give politicians a dime is an even bigger hurdle to reform. This is why I have suggested in the past (more than once) that we directly challenge interest groups to come up with ideas that will cost them some money and/or power in the short run but will lead to a better, more cost-effective and efficient healthcare system in the long term. We would then either get some solid input from the experts on the firing line who know the system best or expose them as selfish hypocrites.

  21. What I said was “The more I participate in these discussions, Barry, the more I become convinced that the best system is a properly-funded socialized system with all physicians paid a salary rather on the basis of how many tests they perform. The VA provides excellent care under those terms.”
    I have not changed that view, though I recognize it is politically unacheivable. At least as long as the $100 million in cash flows from health care interests to politicians. That’s a terrible way to achieve the status quo, but that’s the way it is.
    I think we have to ask, if political money were not changing hands is this the system we’d chose? The answer is clearly no, as a national referendum would demonstrate.

  22. “Why don’t we just do it right the first time around and be done with it.”
    Jack — You commented in an earlier post that the more you read on this subject, the more convinced you are that single payer is the way to go. I, and I’m sure others, read the same material and reach a different conclusion. As a country, we’re still a long way from a consensus, and I would bet a lot of money that nothing substantive will happen in the next two years. Therefore, we should at least continue to experiement with different approaches — Massachusetts’ effort, CDHP, pricing transparency movement, etc. and get as much real world experience as possible before the 2008 presidential election cycle. When I listen to people debate an issue like this, I’m reminded of the saying (paraphrasing here): sometimes wrong but never in doubt!

  23. Jack— the other half is 2006/07/an_outcomes_pri.html
    alternatively, place “outcomes primer” into the search box on the upper right of the page.

  24. I’ve got to say, Barry, that as reasonable as that sounds we are sure beating around the bush, trying to find anything, anything at all, that isn’t a universal health care system. Why don’t we just do it right the first time around and be done with it. That’s where we will be 10 years down the road. Let’s just do it now and go on to tackling the other policy messes this administration has created!

  25. Jack — I would also be in favor of offering high deductible plans to Medicare beneficiaries, but I am concerned about the issue you raised — wanting to switch back to the low deductible plan if one’s health deterioriates. To address this issue, my solution would be to require a one time surcharge amounting to five times the difference in premium between the high deductible plan and the low deductible plan if the switch back is made within five years of signing up for the high deductible plan. A surcharge of that magnitude would impose a cost sufficiently high to mitigate the temptation to game the system by waiting until you get sick to sign up for the comprehensive plan.

  26. It would then be fair, Barry, that if the person continues paying into the Medicare system they should clearly be allowed to switch over at 65. I’m not sure this changes the dynamics, however, and the same pluses/minuses exist. If in the meantime they develop a need to switch to ordinary insurance the pre-existing disease issue will pop its head up.

  27. “But I still ask, what is the YOYO going to do as he ages? Will he then want to go onto the Medicare system he has not been contributing to?”
    Every working person pays 1.45% of total wages (uncapped) into the Medicare system, while the employer pays an additonal 1.45%. Any reputable economist will tell you that the employee actually pays both halves of the Medicare tax (along with both halves of the Social Security tax) in the form of lower wages than he or she would have been paid if the tax didn’t exist. An additional almost 45% of Medicare’s budget comes from general federal revenue which, in turn, comes mainly from federal individual and corporate income taxes. Beneficiary premiums cover approximately 25% of the cost of Part B, a smililar percentage of Part D, and none of Part A. Medcaid is paid for by general federal and state revenues. Whether indivuduals have high or low deductible health insurance plans has nothing to do with the extent to which they are or are not supporting the current Medicare and Medicaid programs.
    Most people with high deductible plans get them through their employer, and some employers offer high deductible plans only. Their alternative is often to not offer health insurance at all. Only 16 million people nationwide get their health insurance through the individual insurance market (as opposed to through their employer, Medicare or Medicaid).

  28. >>> “As for young healthy HSA buyers draining the insurance pool, the law of large numbers is critical here…… Insurance companies are in the business of making these forecasts for large populations.
    But that’s the problem, Barry. We are not talking large populations, we are talking YOYOs. They are individuals, and every individual is on their own. If they make the wrong choice going in, and they develop a costly disease, they must at least be able to afford the $5000 deductible, and then hope like hell their disease is not excluded.
    But I still ask, what is the YOYO going to do as he ages? Will he then want to go onto the Medicare system he has not been contributing to?

  29. Jack — I appreciate your comments, and I hope you keep them coming. Here’s a few comments regarding your last post.
    Retail pharmacies and PBM’s do a good job of flagging drug interactions on drugs that move through those channels. Indeed, the chain drug stores tell me that the single most valuable function its pharmacists performs is the DUR (drug utilization review) and consulting with the patient. For drugs that are dispensed in hospitals and other institutional settings, electronic health records are key so all doctors involved in a patient’s care know what the others are doing.
    With respect to your comment about YOYO’s and WITT’s, on health care, as a supporter of high deductible plans and markets generally, I am a YOYO. It may surprise you to hear, however, that despite 35 years in the money management business, I was always opposed to private accounts for Social Security. Like CD’s and savings accounts, there is some money that absolutely, positively has to be there. Stocks are fine for 401-K’s, IRA,s and regular taxable accounts, but I view Social Security as the equivalent to the foundation of a house — it should be solid and secure so the rest of the house can be safely built on top of it.
    As for young healthy HSA buyers draining the insurance pool, the law of large numbers is critical here. People can be perfectly healthy today but have an accident or a heart attack or be diagnosed with cancer next month. Insurance companies are in the business of making these forecasts for large populations. Furthermore, when self-funded health plans offer high deductible policies for a lower premium, do not fund an HSA, and stand ready to cover the high cost cases (with or without stop loss protection from insurers), they WILL save money vs the cost of providing their entire employee population with low deductible, comprehensive coverage.

  30. Barry, you site a lot of ways to measure surgeons, and certainly outcomes can be more easily measured there, although they’d be even more accurate if a patient survey were included. Who better than they will know recovery times and complications? But if there is an infection, does the physician take the hit for hospital sloppiness? And then, how do you assess the many other specialties and general practices? I think you have your hands full coming up with a workable system, and then figuring out how much it is going to add to the overall health care costs. But I agree that some form of transparency could be developed.
    And you are absolutely correct on the ability of information technology to track the cost effectiveness of doctors within a given specialty. But I see the need for IT more in making sure prescription drugs do not conflict with current meds, are appropriate for the disease being treated, and reducing practice variation. Malpractice tracking and disclosure is another excellent application.
    I cringe when I think of the misinformation that can also be given to the patient, but what we have now is clearly not working.
    >>> With respect to draining the insurance pool as healthy people opt for high deductible plans, there is no reason why insurers can’t price these policies appropriately.
    I think HSAs are an insurance company magic wand (first introduced by Golden Rule, a heavy campaign contributor). I believe they saw the successes of Kaiser Permanente and others and felt the need to redirect the business their way before they lost it.
    In Jared Bernstein’s All Together Now, he describes two major factions in the US: the Yoyo’s (You’re On Your Own) and the WITTs (We’re In This Together). The Yoyo’s like individual SSI accounts and HSAs, and are willing to trust the stock market and investment bankers with their retirement. The WITTs like the success and security of the pools that are government run and protected.
    So my question is this: For all of those people who opt out of the government pool and go with HSAs, are they going to live with their decision or want to opt back into Medicare when they get old?
    >>> The money in the pool to pay for the high cost cases will be the same because its lower revenue will be offset by the claims costs now paid by the insureds who opted for the high deductible policy.
    Not true, because the only people opting for the HSAs will be those who are young and healthy and do not currently drain the pool.
    >>> Just look at overcrowded emergency rooms which many Medicaid patients, along with the uninsured, treat as their family doctor. They perceive it as free because they know that EMTALA requires ER’s to treat them whether they can pay or not. Huge numbers of these visits are for minor problems that could be handled by a walk-in clinic.
    ER’s are not required to “treat” patients; they are only required to stabilize them. Many do that, and then ship the patient elsewhere. And if they do treat them, they may also bill them for that treatment, which then drives up the bankruptcy costs to the public and cost shifting to other insurers.
    >>> One thing I haven’t heard you or anyone else talk about in connection with a single payer system is that it implicitly values the patient’s time at zero. It’s OK to make them wait.
    Having just waited two months for an appointment with a knee surgeon and another two months with an eye doctor, let me assure you, we have wait times here too.
    >>> Personally, I like the fact that I can now get a stress echo in my cardiologist’s office with a one or two week lead time instead of going to the hospital after a six week wait before he had the equipment.
    And your cardiologist likes that too, because it is a very profitable test that he no longer does in the hospital. That, incidentally, has reduced wait times in hospitals, so you might want to try rescheduling there.
    >>> Finally, if the government is just going to be a big dumb payer, it will be ripped off right, left and sideways unless it develops a culture of caring about fraud and a willingness to develop and use the information systems that will allow it to combat fraud aggressively including prosecuting offenders to the full extent of the law.
    The more I participate in these discussions, Barry, the more I become convinced that the best system is a properly-funded socialized system with all physicians paid a salary rather on the basis of how many tests they perform. The VA provides excellent care under those terms.

  31. Jack — I’m afraid neither of us can prove our case in court, so to speak, as to how our proposed system would work in the real world of the U.S. economy, culture and diversity of its population until we have the benefit of actual experience here (as opposed to Canada, UK, etc.). That said, I want to make a few comments in response to your last post.
    With regard to outcomes data, I think the docs will have to be instrumental in developing these metrics. I believe it would be most difficult to measure the quality and effectiveness of PCP’s. The concept lends itself better to surgical procedures where we can tell if the patient survived, had complications, how long it took to recover, and come up with risk adjustments for age, multiple conditions, etc.
    I do think there is enormous potential to harnass the power of information technology to track the cost effectiveness of doctors within a given specialty. How many tests do they order (whether performed in house or outsourced to an independent lab), how often do they prescribe a branded drug when a generic would be just as good? If Dr. A drives three times as much cost per 100 patients as Dr. B, all else equal and there is no discernible difference in outcomes, this is a result that should be flagged, challenged and publicized. The same is true for doctors that have been successfully sued for malpractice more often than their peers. If we can’t get the really bad docs out of practice altogether, at least let’s inform the public about their record.
    Regarding the tax shelter aspect of HSA’s, I said repeatedly that I think the entire tax preference currently given to employer provided healthcare should be eliminated, and health benefits should receive the same tax treatment as salaries and bonuses. We could lower other taxes to maintain revenue neutrality, and high deductible plans would probably become much more attractive.
    With respect to draining the insurance pool as healthy people opt for high deductible plans, there is no reason why insurers can’t price these policies appropriately. If an insurer thinks it could shift $1 million of claims cost to 1,000 insureds who select a high deductible plan, it will likely price those policies about $1,000 each below the comprehensive plan. The money in the pool to pay for the high cost cases will be the same because its lower revenue will be offset by the claims costs now paid by the insureds who opted for the high deductible policy.
    On the issue of offering a single payer plan with no co-pays or deductibles, I think it is very probable that demand for medical services will be much higher than you think. Just look at overcrowded emergency rooms which many Medicaid patients, along with the uninsured, treat as their family doctor. They perceive it as free because they know that EMTALA requires ER’s to treat them whether they can pay or not. Huge numbers of these visits are for minor problems that could be handled by a walk-in clinic.
    One thing I haven’t heard you or anyone else talk about in connection with a single payer system is that it implicitly values the patient’s time at zero. It’s OK to make them wait. If they have to wait six weeks for an MRI to rule out cancer or make a separate appointment to go to an independent lab or hospital rather than get the test in the doctor’s office with a much shorter lead time, it’s perfectly OK to inconvenience and stress out the patient as long as we can save a little money. Personally, I like the fact that I can now get a stress echo in my cardiologist’s office with a one or two week lead time instead of going to the hospital after a six week wait before he had the equipment.
    Finally, if the government is just going to be a big dumb payer, it will be ripped off right, left and sideways unless it develops a culture of caring about fraud and a willingness to develop and use the information systems that will allow it to combat fraud aggressively including prosecuting offenders to the full extent of the law.

  32. Eric:
    I have no idea why it is in there. Probably the same reason there are references to Methuselah in them, they are ancient documents that are evergreened and health plans now amend them by reference. I’ve just never heard of a single case ever where the scenario you talked about has actually come to pass.

  33. Barry, if you could come up with a mechanism that would allow patient evaluation of a physician’s outcomes without having it skewed by
    the physician himself (by gaming the system and misreporting his results, classifying everyone as ‘difficult’ to improve his outcomes, and refusing the really difficult patients so as not to harm his stats), I suppose that could provide at least some comfort to folks thinking they have this thing called ‘transparency.’ But I think it is worthless data, and if it adds cost it is
    doubly bad.
    >>> It’s the same principle of low deductible vs high
    deductible health plans. Just because some people cannot afford a high
    deductible does not mean that the option should be unavailable.

    There are two issues beyond “choice.” First, these
    plans are tax shelters and thus mean that the lost taxes must then be made
    up elsewhere, and secondly, they draw the young and healthy away from the
    health care pool. I think they are wasteful options when compared to a
    universal health care plan.
    As well, when patients do finally get sick and have
    to dole out $5K I suspect we’ll see a lot of conversions, providing
    “pre-existing” clauses don’t block them and they are not tied up in
    bankruptcy court.

    >>> First, large employer groups already have low
    administrative costs in the range of 4% to 5% of total expenditures. Moving more
    people into large group plans could reduce costs significantly, I believe.

    Then let’s do it. They can take in the uninsured and
    Medicaid patients, though I suspect they’ll want a profit margin on them.
    But it begs the real issue: employers should not be providing health care
    and adding their costs to their product prices. Like GM, Ford and Chrysler,
    they’ll just start sending their manufacturing jobs to other countries. They
    cannot remain competitive under the current system.

    >>> Second, if there were no deductibles and no co-pays,
    demand for healthcare services could be potentially infinite, and there will be
    many frivolous visits to the doctor.

    I could live with co-pays, but Health Affairs and
    others have pointed out that they cost as much to administer as they
    collect, and the cost of deterring patients in this way simply postpones
    treatments until they are more costly to treat. Nothing is gained by this,
    except for the feel-good aspects of it.

    >>> I still like the idea of high deductibles with
    targeted help, mainly in the form of healthcare stamps (similar to food stamps),
    to allow low income people to cover most of the deductible.

    Well, it adds the cost of another currency and fraud
    potential, but that’s a call we have to make. Other forms of means-testing
    might be easier.

    >>> the high deductible plan, coupled with robust price
    and quality transparency, is the most cost-effective approach to providing
    health insurance. Personal responsibility must count for something.

    Well, there will clearly be more bankruptcies as
    people actually end up getting sick and dipping into the extra $5K they
    aren’t able to spend that year, or start putting it on their credit card at
    20% interest rates.

     

  34. I understand your concern about turnover times, Eric, but I’d hope you could solve that by switching hospitals rather than bringing the services into the physician’s clinic. Those competitive forces should bring hospitals in line with patient and physician needs. But I’m sure that staffing and nurse shortages are a driving force here. Physicians should quit hiring away their best nurses.
    >>> “Would you have doctors ‘forced’ to work in hospitals under your national health scheme?”
    I would propose that physicians be allowed to refer patients to any hospital or free-standing independent and qualified lab in which they do not have a financial interest.
    On your 6-point plan:
    >>> 1. allow private contracting for covered medicare services.
    Wouldn’t that exist under a Medicare-for-all system?
    >>> 2. create truly portable health insurance by passing the Health Care Choice Act (introduced in house by John Shadegg), which would allow you to buy health insurance from any state; also allow for association health plans (the AHP bill was watered down and blocked by democrats in the Senate this year)
    Frankly, even being an “old Republican,” I’d be suspicious of anything the “new Republicans” proposed. But buying insurance from another state creates competition but doesn’t eliminate the high inefficiencies common to our current system.
    >>> 3. medical liability reform — stricter penalties at all levels (RN, MD, hospital) for ‘NEVER’ events like incompatible transfusion or wrong site surgery; health courts, allow for HSA equivalents for docs to insure (currently this can be done with an off-shore account)
    I could not agree with you more on this one. Medical liability should be judged by a three-person medical review board consisting of retired or out-of-town physicians and nurses.
    >>> 4. increased responsibillity for health care for medicaid patients — eg. in exchange for the society paying for your healthcare, you must make an effort- smoking, diet, etc.; eliminate loopholes for asset transfer for medicaid services
    I agree.
    >>> 5. convert from the concept of wages + benefits to ‘total compensation
    Don’t know what you mean here.
    >>> 6. the big issue — eliminate the tax exclusion for business for health insurance and create a real individual insurance market.
    I partially agree here. Health care should not be a business expense; it should be a taxpayer expense like it is in every other country we compete with. But I think we must eliminate the 1500 insurance companies and the inherent inefficiencies they bring to the system.
    >>> also — when you are buying a new couch, you check out many stores; we have system where people accept the first medical advice as gospel. Getting additional opinions should be something people do routinely. The docs who are threatened by this are likely ones to be avoided.
    Who is to pay for these multiple opinions? You’d at least need three to draw a consensus.
    >>> keep a copy of your important medical records with you and at home.
    What if you are not at home when you have an emergency? Or in another state? A national IT system offers many protections for the patient, like cross-checking new prescriptions and reducing practice variations, even helping to train new physicians.

  35. Jack — I appreciate your viewpoint and perspective regarding patients researching their medical condition, etc. However, I believe robust price and quality transparency, research tools, health coaches, and the like are just another part of the theme of maximizing consumer choice which is consistent with our national culture. If choices and transparency are available, people are still free to not use them. Afterall, not everyone who buys a new car consults Consumer Reports first. Just because some (even many) people are not really qualified to make an intelligent healthcare choice does not mean it is unwise to make the tools available. It’s the same principle of low deductible vs high deductible health plans. Just because some people cannot afford a high deductible does not mean that the option should be unavailable.
    Reagrding the single payer system and the potential to sharply reduce administrative costs, eliminate billing, etc., advocates will likely be disappointed in the savings for a couple of reasons. First, large employer groups already have low administrative costs in the range of 4% to 5% of total expenditures. Moving more people into large group plans could reduce costs significantly, I believe. Second, if there were no deductibles and no co-pays, demand for healthcare services could be potentially infinite, and there will be many frivilous visits to the doctor. If we introduce co-pays to deal with that issue, liberals will argue that many poor people cannot afford the co-pay and will not seek care until they are really sick. And so it goes. It is clear, at least to me, that there is no perfect system. I still like the idea of high deductibles with targeted help, mainly in the form of healthcare stamps (similar to food stamps), to allow low income people to cover most of the deductible. From a macroeconomic standpoint, I am willing to bet with my tax dollars and healthcare premium dollars that the high deductible plan, coupled with robust price and quality transparency, is the most cost-effective approach to providing health insurance. Personal responsibility must count for something.
    Eric — I agree with most of your six point approach but not the creation of an individual insurance market, because the administrative costs of selling health insurance to one customer at a time are astronomical vs selling to a large group. John Fembup has spoken eloquently on this elsewhere. I do support eliminating as many state mandates as possible, allowing Association Health Plans, and doing away with the tax preference for employer provided health insurance.

  36. Jack– I am certainly not for the status quo. I am also certainly not in favor of protecting hospitals. Physicians have left hospitals, in part, because they have made few efforts to provide the efficiencies in care that doctors have begged them to do. For example, ‘turnover time’ between surgical cases should take no more than 15 minutes, but routinely takes 45 min- 1 hour. That is lost productivity, lost opportunity to spend time with family or on any other activity. Doctors have naged their collective heads against the wall so much that they have sought to leave the hospital for good.
    Hiistorically, hospitals have made llittle effort to genuinely improve these sorts of things. Waiting time in emergency departments is often not a doctor problem, but rather a hospital problem — waiting for xray, waiting for labs, waiting for transport personnel to arrive, etc.
    Would you have doctors ‘forced’ to work in hospitals under your national health scheme?
    Let’s be clear: I am not in favor of a status quo, as my many posts at THCB over the last 2 years will attest.
    Let me give you a an outline of a 6 point plan:
    1. allow private contracting for covered medicare services.
    2. create truly portable health insurance by passing the Health Care Choice Act (introduced in house by John Shadegg), which would allow you to buy health insurance from any state; also allow for association health plans (the AHP bill was watered down and blocked by democrats in the Senate this year)
    3. medical liability reform — stricter penalties at all levels (RN, MD, hospital) for ‘NEVER’ events like incompatible transfusion or wrong site surgery; health courts, allow for HSA equivalents for docs to insure (currently this can be done with an off-shore account)
    4. increased responsibillity for health care for medicaid patients — eg. in exchange for the society paying for your healthcare, you must make an effort- smoking, diet, etc.; eliminate loopholes for asset transfer for medicaid services
    5. convert from the concept of wages + benefits to ‘total compensation
    6. the big issue — eliminate the tax exclusion for business for health insurance and create a real individual insurance market.
    also — when you are buying a new couch, you check out many stores; we have system where people accept the first medical advice as gospel. Getting additional opinions should be something people do routinely. The docs who are threatened by this are likely ones to be avoided.
    ps- beware the theory that a national health it system ‘is a must for the patients’ sake’. Instead, keep a copy of your important medical records with you and at home. Works just as well, does not cost billions, and protects your medical records from being stolen, modified, or used for commercial purposes.
    I do not beieve I have all the answers— if a patient takes a supplement and it works— great!

  37. I’ve been retired for three years, Eric, but have remained as a consultant for the company that bought my company. Things have indeed changed in that period: they have gotten worse, with more and more doctors diverting their patients from the hospital to their own clinic’s high-tech services.
    If the number you claim as being 50% of the industry is Government-paid (Medicare, Medicaid, VA, etc.), it tells me that the other 50% that is free-market is the driving force behind the spiraling costs. At least with Medicare there is some cost control. So what we are faced with is a battle between those who want to keep the system as it is and those who want positive change. I count myself in the latter group.
    I do not begrudge physicians top wages, and would seek a range from $100K for newbies to $1M for specialists. But I know surgeons taking home $4M per year after expenses, and I think that’s a bit much. These docs are often the ones abusing the system and turning away Medicare patients, and I blame physicians for not adequately policing their own profession.
    I also believe that once a physician finishes his training with satisfactory grades and commits to two years of supervised public service, his educational debt should be wiped clean. And I believe that physician reimbursements should also be tied to the MEI, but that they aren’t just means that physicians have not paid off the right congressmen. That’s our corrupt political system I’m also fighting in my retirement.
    I don’t like the thousands of ICD-10 and CPT codes, but if the system is ever to take advantage of a national medical records IT solution, which it must for the patient’s sake, those codes or a reasonable semblance of them are necessary. But many of those codes are needed for billing, not for managing the patient. Get rid of the billing system, which could only be done with salaried physicians under a socialized VA type of system, and those codes go away.
    >>>> Eric: “how about the patient picks up the phone and calls around himself to see if there is a difference in cost.”
    Barry has made the point that patients can’t easily obtain this data, but I’d add that even if they could it wouldn’t fix the problem and could indeed drive the patient away from the lowest bidder and into the hands of the doctor who games the system.
    When you say that a true free market would get real competition between providers, I disagree for the reason above. I’ve seen non-medical services (in the real free-market) price themselves higher to give the impression that they are better even when they aren’t.
    >>>> “There is a theme that the public is not smart enough to make healthcare decisions. What about the herbal, ‘natural’ supplement market? What about other alternative therapies?”
    Eric, that pretty much proves my point. I’m not one for taking herbs that have not passed legitimate physician review and instead have gained notoriety on the basis of hype. It boggles my mind that these do not require FDA review. As a physician I’m sure you’ve rolled your eyes plenty of times when patients wanted to control their treatment in opposition to your educated regimen.
    Tell me how a patient is going to determine his best line of care when he visits an orthopedic surgeon for a bad knee (which I am about to do). Should he walk in already knowledgeable that a minimally invasive knee replacement has higher risks of complication than the other approach, or that Synvisc may prolong the need for surgery, or that a cortisone shot is best? Even if he has done this research he does not have the qualified experience of the surgeon, and in most cases will follow the physician’s advice (which in itself may be slanted by his training or practice pattern).
    Barry, I take full blame/credit for being the only one in this thread to speak out against the wisdom of patients to research their own medical needs. I do not believe in the free market when it comes to patient intelligence. In my 25 years of trying to teach patients how to use a simple two-button cardiac event recorder or Holter, I have found a wide range of skills and capabilities. We on this thread are at least skilled and willing to test the depths of our capabilities. Most patients aren’t in that category, as Eric can attest.

  38. Eric,
    I am a strong believer in markets and always have been. I have consistently argued that people can and will act in their own best interest if given adequate information, and we should trust them to do so. It’s people with a nanny state, government knows best, consumers are stupid mentality that argue the other side.
    On the general issue of pricing transparency, my major concern relates to hospital charges, surgeons fees, and imaging costs because that is where the big dollars are. I am not as concerned about what a PCP charges for an office visit, but the more complete pricing transparency we can have, the better. In the case of hospital charges, Medicare pays on the basis of DRG’s (essentially case rates) with special provisions for outlier situations. Both United Healthcare and Wellpoint tell me that well over 80% of their insured hospital admissions are paid based on either case rates or per diem. In some cases, like orthopedic surgery, there may be a carve out for the device and a per diem payment for the rest of the hospitalization.
    On calling around to get prices, I have tried this, and it is virtually impossible. I will either be asked: what insurance do you have or who are you and why are you calling? If I can manage to extract a price from them, it will be the absurd list price and not the much lower price they routinely accept as full payment from Medicare and all private insurers with whom they do business. Sometimes I have even been treated as though I were trying to penetrate a CIA database! I know there are thousands of codes, and ICD-10 will increase the number tenfold. However, if the hospital industry is already accepting case rates or per diem payments for most of its admissions, why can’t it make that simplified approach available to everyone? Surgeons, for their part, should be prepared to quote a price for, say, a gall bladder removal. While a few may be more complicated than expected, there is no reason why they can’t set an average price that will provide reasonable overall compensation and just accept the risk that a few will be more difficult than average. If mistakes are made by the hospital and/or the doctor, they certainly should not be compensated for correcting them if they shouldn’t have made them in the first place. Fixing them at no charge is the automotive equivalent of warranty work.
    Finally, with respect to anesthesiologist charges, I have had several surgeries over the last 10 years or so. In 2004, the in network fee that the surgeon was paid was less than the non-network fee (list price) that the anesthesiologist was paid (by insurance). Given the difference in skill required, this strikes me as fundamentally unfair on its face.

  39. We all need more aerobic activity on a Saturday… but:
    Jack — do not know for how long you have been retired, but the health care world is a rapidly changing place over the last few years.
    Medicare= health care by special interest. That is to say, who ever does the most effective lobbying wins. Just look at the CMS attempt to change the reimbursement structure for hospital payments this year– scuttled due to efforts by the hospital association and implant manufacturers. Lots of science there.
    Look at the Medicare part A schedule — tied to the MEI,or medicare economic index, which is close to the CPI (consumer price index). In other words, it goes up yearly to at least closely mimic inflation. Compare that with medicare part B, which is based upon the arbitrary SGR, which is tied to GDP growth and spending. You are aware that a significant piece of the formula is based upon the cost of medications, even though there is now a separate medicare drug program, funded separately. The SGR will result in nearly a 45-50% reduction in real dollar reimbursement over the next 5 years.
    Is that the Medicare that you want at work? Should hospital reimbursement automatically go up while doctor reimbursement goes down?
    Not sure how to convince you that US healthcare is not a ‘free market’ system. Rather, would ask you that for any industry, if 50% of the dollars come from government and government is the single largest purchaser of the service, would you consider it a free market?
    Barry/Jack — when you have thousands of codes from which to choose, it becomes essentially impossible for doctors/ hospitals/ patients to ever become educated. The system is doomed.
    By truly simplifying the system — and I challenge you to find me a doctor who believes the current coding system (or ICD-10 which has over 200,000) is simple. How about giving the providers of care the ability to publicize a simple set of fees, free of government, third-party bureaucratic complications? How about empowering the public to ask the important questions? Through government and insurance schemes, we have made people dependent upon medicince, not remotely intelligent users of medicine.
    Another point on which I would love your thoughts-
    There is a theme that the public is not smart enough to make healthcare decisions. What about the herbal, ‘natural’ supplement market? What about other alternative therapies? Should the public be free to purchase these services with there own, precious and too few, dollars when the public can’t possibly understand if a ‘correct’ or ‘good’ or ‘evidence-based’ decision is being made?
    Barry- do you know what medicare’s reimbursement is for anesthesiologists in particular? So far below any ‘market’ value that hospitals in very high medicare dense population centers must employ the anesthesia docs to get them to work there. The rate is about half what it would cost to get your toilet snaked by a pumber on the weekends. There are a few who abuse the system– but only a bureaucracy punishes all to impact the few. A true free market would get real competition between providers— the best should be able to charge more than the others— and not 2% more, but as much as he or she thinks she is worse. Similarly, newcomers ought to be able to discount their services to increase business and gain reputation and experience.
    And in response to (3) above— how about the patient picks up the phone and calls around himself to see if there is a difference in cost. Cash paying patients do it all the time.

  40. Eric,
    I did not advocate a statute approach for hospitals to get more control over docs. I advocated a closer working relationship to enable hospitals to more easily offer total package pricing for an episode of care. I think this would be especially useful in the case of expensive surgical procedures that will require a hospital stay, the surgical procedure itself, an anestehsiologist, possibly rehab and imaging, prescription drugs, etc. In the case of the RAPs, I suggested that the docs make their fees known to the hospital and, perhaps, agree to limit them to some reasonable percentage above Medicare rates as a part of the hospital’s decision making process in awarding practice privileges at its facility. If you were an anestehsiologist, who the patient had no role in choosing, and then presented a bill that was 30 times Medicare rates, could you really look that patient in the eye and say: my fee is reasonable and I expect you to pay it in full?
    I do advocate a statute approach (as a last resort) to eliminate confidentiality agreements that stand in the way of pricing transparency including allowing insurers to disclose what they actually pay hospitals and doctors or that prohibit hospitals from disclosing to other hospitals what they actually pay for expensive devices used in cardiac and orthopedic surgery, among other applications. In both cases, so-called list prices are absurdly high and bear little or no relationship to what is typically paid.
    With respect to the health coach concept, whether provided by the insurer or an independent infomediary, services would include the following: (1) recommendations regarding appropriate diet and exercise programs to manage conditions like diabetes and heart disease, (2) helping the patient sort through the risks, benefits, and cost-effectiveness of various treatment options such as how best to deal with prostate cancer given the individual’s circumstances, and (3) recommending the most cost-effective of 3 or 4 or 5 local imaging centers to get an MRI.

  41. Eric, I can only give you first-person examples of the services I provided before I retired (cardiac monitoring and echocardiography), in which the government-set reimbursements were “fair.” The rest of the stories are third-person and come from your colleagues who agree that in most cases Medicare is fair but in some cases they need upward adjustment. But people in general, not just physicians, believe that “fair” is not usually enough when it comes to compensation.
    I mentioned elsewhere that I provided a mobile echo service (which included a $150K machine, a $50K van for travel, and a credentialed technician). We spent 30 minutes performing the test and charged $300. The docs spent 5 minutes reading the echo and on private pays marked the charge up to $1800. I think that’s a bit much, especially when we did all of the work and s/he only provided the patient. Medicare reimbursed $450, which I believe is a fair mark-up.
    I indeed believe we have a free market now; and in fact, that’s the problem. Hospitals don’t compete amongst themselves; their biggest competitor is the doctor or clinic that brings the most expensive and most profitable services in-house, and then proceeds to order tests in sufficient volumes to pay for the equipment many times over. This, all while the hospital’s equipment now sits unused or poorly used, thus driving up their costs.
    I agree that hospitals do not control physicians; it’s the other way around. Physicians control the patient referrals and can change hospitals at a moments notice. That’s why hospitals are beginning to employ their own physicians, a conflict of interest that was once considered fraudulent.
    What I don’t understand is why doctors do not see the handwriting on the wall. What is it about “he who has the gold, rules” that they don’t understand? The businesses that are getting gouged today are forming coalitions to change the dynamics of the health care industry. That means they will form their own health care services (like Kaiser Permanente) and the boutique docs will be on the outside looking in. I’d rather trust my career to Medicare than to CEOs who must satisfy their shareholders first.
    I’ve written “How doctors are yielding their profession to the CEOs” at http://www.throwtherascalsout.org/How_doctors_are_yielding.htm, and would encourage you to follow the dominoes as they most certainly will fall.
    When you ask “should individuals and companies be free to value their work or product as they choose,” the answer is “sometimes.” Should we privatize the police and fire departments and let them set their own fees and fines?
    We must decide whether we want health care to be a social service or a market commodity. If we were dealing with a remodeling firm where the consumer can assess hourly charges and view their past work, I’d vote for privatization. When we are dealing with patients who don’t have eight years of medical training, don’t understand the medical options, and are at the mercy of the physician who gets paid on the basis of how many tests and surgical procedures performed, I’d take a government-run system any day.

  42. Jack — please give me the ‘where’s the beef’ portion of your comments. Particularly, give me specific examples of how the medicare fee schedule doesn’t ‘limit the reasonable, [it] only caps the unreasonable’. Also, I would love specfics about your statement about medicare rates: ‘some errors exist, but they offset each other.’
    Jack — the United States does not have a free market healthcare system. You admit that by recognizing the role the government set fee schedule (medicare) has on the ability of hospitals and doctors to set rates. 50% of the healthcare dollars in this country come from government. This is not a free market.
    Barry– please explain how, by statute, you plan to give hospitals greater control over physicians. The current regulations are actively driving doctors out of hospitals altogether. Just look at specialty coverage of emergency rooms.
    I do not really understand the comment about an ‘insurer provided health coach.’ How would you set it up that the person ‘does not have to accept the recommendations’?
    Alex– 1. balance billing does not apply to contracted physicians because they have agreed (often kicking and screaming) to a fee for a service. 2. please explain why the disputed provision is in health insurance contracts.
    To all — question: for non-medical services, should individuals and companies be free to value their work or product as they choose, or should the government decide? Do not use the public utilities as examples, since no one doctor has a monopoly on a market for a service.

  43. >> The charges these providers demand are often 4 times higher than Medicare and I’ve seen as high as 30 times more than Medicare.
    Alex, I think this is outrageous, but I also know it to be true. And with this all, physicians expect the freedom to set their own rates? It’s like the old saying; it’s not because they must, it’s because they can. Limits don’t limit the reasonable, they only cap the unreasonable.
    I would not be bothered by a private charge 50% higher than Medicare, Barry, but some physicians would be irate at even that. Medicare has set its rates not on the basis of “usual and customary,” but on actual costs per region of the US. They need to be updated, and some errors exist, but they offset each other. Even a Medicare-only doctor would do okay in the business.

  44. Jack — I agree that an objective third party infomediary would be preferable, but an insurer provided health coach is probably a lot better than nothing. Besides, the consumer does not have to accept the advice or recommendations.
    Alex makes a good point regarding the RAPs practicing in a hospital setting. Perhaps these fees should be capped by statute at, say, 150% of Medicare or require the docs to submit bids quantifying what they will bill patients as a percentage of Medicare as part of the criteria used to decide whether they will be allowed to practice within the hospital or not. If we ever move, hopefully, toward package pricing for hospital based services, tests, and procedures, hospitals should care more about how much these doctors bill and would be in the best position to exert some influence.

  45. That there are not multiple test cases of physicians being sued by insurers or dropped from plans for violations of this does not mean that it is not there for the express reason of being able to do it in the future.
    It does probably mean that your interpretation of this provision is incorrect.
    The cogent argument for banning balance billing is that in-network physicians have agreed to it. There is no cogent argument for banning balance billing by out-of-network physicians, save one.
    Balance billing is primarily a problem involving hospital-based doctors, the RAPs. In most cases, hospitals have granted exclusive privileges to these physician groups. This artificial monopoly creates a system in which these providers cannot be avoided by the patient and have zero incentive to contract with insurers. The charges these providers demand are often 4 times higher than Medicare and I’ve seen as high as 30 times more than Medicare.

  46. Barry, I can see where giving low-income folks a break on deductibles is certainly doable and acceptable. But I’d draw the line at allowing the payers to guide the consumer. Perhaps a third-party patient advocate, but not the guy writing the check.
    This does beg the real issue, though, and that’s what Eric calls limits and I call overcharging.

  47. Jack,
    I think you and I differ on the consumer’s ability and willingness to act rationally and in their own best interest. To the extent that choosing among healthcare options is not clear cut, more and more insurers are offering heatlh coaches to help people navigate the system and make wise and appropriate choices.
    With respect to high deductible plans leading people to not seek care until they are sick and incur higher costs, I keep hearing this from you and others, but I’m still skeptical. If in a group of, say, 10,000 people, 20% really can’t afford the deductible because their income is very low but the other 80% can afford it, we should be able to give the low income people targeted help and incentivize as many people as possible to be wise, cost conscious consumers of healthcare.

  48. We are getting away from Eric’s post, but requiring higher co-pays on name brands than generics is wise and acceptable, because the generic is not sub-standard. I personally am not bothered by higher deductibles because I can afford them. But those that can’t afford them will cut back on care in the early stages of disease and the final cost will be higher as a result. Prenatal care and cancer screening are two good examples. As we’ve discussed before, I do not support consumer directed health care, because consumers are not qualified to make the tough decisions.

  49. “John, you are right but it doesn’t have to be that way.”
    I think that is what I have been saying also. But information and education alone won’t do it. People are much more likely to pay attention when they are able to make choices, and when those choices have financial consequences to them. For example, if you choose a brand-name medication vs. a generic – you will pay more for it. That is the kind of choices and consequences I mean. I think this suggests it is preferable for insurance to requires more cost-sharing vs. less cost-sharing and in that sense so-called “consumer directed” health insurance policies are probably on target strategically – even if consumers in fact say they prefer the opposite.

  50. John, you are right but it doesn’t have to be that way. We can and should better educate patients as to the true cost of each visit to the doctor. But there is no easy way to do that. It is a moving target. And they should also be advised that the care they receive during unnecessary visits may cost them health wise if the care was inappropriate or mistakes were made. Certainly the fact that 98,000 people die each year because of hospital errors should make them think twice about their visit.
    I am bothered that our free-market system – by definition – is fractured. Everybody is doing their own thing and unwilling to share with their “competitors.” It sure makes a VA-type of system more attractive, where they’ve transferred the money they saved on billing to an IT system that reduces medical errors.

  51. “Ever try to get an insurance company to tell you up front what your out of pocket will be?”
    Yeah, well, so?
    The insurance company does not perform the health care service. The insurance company does not set the fee for the service and the insurance company does not send out the bills. The provider of the health care service does these things.
    The fact is that few people bother to ask the provider of service what the likely cost will be, prior to obtaining the service. And I think most people don’t ask because they don’t care. And they don’t care because they are secure in the knowledge that, whatever the true cost of their health care, someone else will be paying 80% or more of it.

  52. Posted by: John Fembup
    “Somehow it’s considered OK to purchase medical services without even an approximate inkling of an estimate of what the charges could maybe possibly turn out to be.”
    So who’s fault is that? Ever try to get an insurance company to tell you up front what your out of pocket will be? They won’t say – it’s a secret.
    “Perhaps that’s because insured people – that’s most people – know that someone else is paying up to 80% or more of their medical bills. Almost no one has a subsidy like that for other necessities of life.”
    Say what? How about the auto or home insurance market. Those are usually regulated by states with oversight as to rates and practices. Last year I got a rebate from my auto insurance company because the state commissioner had determined that the insurers had made too much money. I’m guessing Eric your state does the same – any complaints there?
    As to extra billing, Who determines what the fair market value is after the insurance is paid – no one but the doc, because healthcare has been rigged not to be a function a free market. What factors does the doc use to set his/her price?

  53. As well, Eric, I think this just changes the law to bring reimbursements more in line with Medicare, which prohibits physicians from billing more than the approved amount but does not prohibit them from collecting deductibles. Of course, a socialized system with salaried physicians would eliminate this problem, though I prefer a Medicare-for-all approach.
    If you are interested I have written “Eleven facts about our health care crisis” at http://www.throwtherascalsout.org/How_doctors_are_yielding.htm

  54. “should this be considered excessive and should the patient be legally obligated to pay for it?”
    Since an echocardiogram should appropriately be billed at a rate of about $500, the answer to the first question is yes.
    If the service has already been rendered the answer to the second question is probably also yes – unless one’s economic theory is that the buyer is entitled to set the price.
    I also think that most people don’t consider themselves as “buyers” when purchasing medical services, and thus don’t purchase medical care in the same frame of mind and in the same way as other services – say, roofing a house, or ordering a book from Amazon.com. Somehow it’s considered OK to purchase medical services without even an approximate inkling of an estimate of what the charges could maybe possibly turn out to be. Perhaps that’s because insured people – that’s most people – know that someone else is paying up to 80% or more of their medical bills. Almost no one has a subsidy like that for other necessities of life.

  55. Eric,
    Having come from the cardiac monitoring field let me refer to the service of echocardiography. An echocardiogram should appropriately be billed at a rate of about $500, but I’ve seen cardiologists bill as much as $1800. So let me put on my bleeding heart liberal hat for a moment: If the insurer appropriately pays $500 and the physician wants to bill an extra $1300, should this be considered excessive and should the patient be legally obligated to pay for it?
    Jack

  56. Eric,
    Regarding your point about insurer liability in the case of the mass that was deemed not medically necessary to remove but turned out to be a malignant tumor, it seems that the insurer is better off if the insured pays cash and the cancer is discovered at Stage 1 vs nothing being done and not discovering the cancer until Stage 4, no? Presumably, the doc has no liability if insurance won’t pay and the patient can’t or won’t pay either. Maybe John could speak to this, but it seems to defy common sense to me to not allow the patient to pay out-of-pocket (at contract rates) if the insurer refuses to pay for a covered service no matter what reason it offers to justify its decision.

  57. John– the notes referenced do pertain to PA. But there are cases from Maryland as well. I will check some of my contracts here in AZ.
    Barry — the contract is the issue. The contract states that the doctor may not receive payment for a covered service above what the insurer is willing to pay. It means that the doctor can do the procedure— but must do it for free. That there are not multiple test cases of physicians being sued by insurers or dropped from plans for violations of this does not mean that it is not there for the express reason of being able to do it in the future.
    The reasoning is as follows– by severely limitng the ability of providers and patients to privately contract for covered services, the insurer (1) protects its position in the relationship financially (since no ‘middleman’ can be much cheaper) (2) the insurer fears that it has liability if, for example, the patient has a mass that the doctor feels ought to be removed but the insurance company denies it. The patient just pays for excision of the mass with -gasp- cash. The mass is malignant… the insurer is now exposed to liability for denying the service.

  58. Eric, thanks for the information. The info you post does not support an assertion that “The language in the contract is boilerplate for provider agreements across the country.” It pertains to Pennsylvania alone.
    I don’t think Aetna provided a good explanation of the Pennsylvania statute – a cogent explanation of that statute is needed before conclusions can be drawn. I also echo your plea for an explanation of the apparent eagerness in California to confiscate the labor of physicians – or how that action would mitigate health care access problems.

  59. Eric,
    I read the e-mail exchange from your link, and I conclude as follows:
    1. The employee is perfectly free to self-pay for any non-covered services.
    2. The provider must accept the insurer’s contract rate as full payment for covered services and can bill the insured for co-pays, deductibles, etc.
    3. The key area of contention is when the insurer determines that a covered service or procedure was not medically necessary and, therefore, refuses to pay. It seems the solution could be to either (1) pre-certify and get the insurer’s agreement that the procedure is medically necessary before services are rendered or (2) let the insured pay ahead of time at contract rates and then submit the claim to the insurer. If the insurer refuses to pay because it determines the service was not medically necessary, the insured implicity assumed that risk in paying up front and will not be reimbursed or have the charge count toward the deductible.

  60. “insurance contracts for patients forbid them from paying for a service privately that the insurance company has denied”
    Eric, I’ve never heard of this – is this a California thing? Where can I find out more about it?
    The only insurance agreement I’m aware of that I sign as a patient is with my doctor or other medical provider, acknowledging financial responsibility for my own expenses to the extent that insurance does not pay for them (deductibles, copays, and patient “coinsurance” excepted – by definition, patients always reimburse these).
    The HMO I’m in does not permit providers with whom it has contracted to “balance bill” patients for amounts in excess of the contracted rates (again, excepting deductibles, copays, etc). And I am not required to pay any such balance billing I may receive. But I certainly do not believe that I am forbidden to pay for services I may elect to receive from an out of network provider or, for that matter, the charge of an in-network provider for a service that the HMO simply does not cover (e.g., a medication that is not on the HMO formulary). I’m pretty sure that’s how my HMO works, and I thought the same applies universally to other HMO’s and other types of plans too.
    I’d be very interested in finding out more about the payment restriction you refer to,
    Thanks –

  61. Eric,
    I find it hard to understand why an insurance company should care whether or not I choose to pay for an uncovered service out of my own pocket, especially when it doesn’t even count toward my deductible. The transaction costs the insurer nothing anyway you look at it.
    With respect to balance billing, I think the docs would be on more solid ground if they helped to drive the system toward robust, user friendly pricing transparency, even though it would not have been relevant in the ER example that you cited.
    It would be especially helpful if docs and anesthesiologists worked more closely with hospitals to enable hospitals to provide package prices for a total episode of care which, in the case of surgical procedures, would vary somewhat depending on which doctor was performing the surgery and whether he or she has a contract with the insurer or not.

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