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HEALTH PLANS/HOSPITALS: Maverick pulls hosptials out of HMOs

This medical maverick,  (or that’s what the paper’s calling him) owns three hospitals in The OC (California) and has cancelled all his HMO contacts—going after Medicare patients and charging HMOs and PPOs full fare for those admitted via the ER (and being very difficult about transferring them out).

My two questions are:

1) What happens when the HMOs won’t pay the full charge for ER and post ER care—if they feel they have to, that has very interesting anti-trust implications. Why shouldn’t all hospitals cancel their HMO contracts and just charge the Medicare rate? (at least in areas like Orange County where Medicare pays more than the HMOs do)

2) He owned a medical group that got bought by Phycor which then went bust, so that his stock was worthless. So where did the money come from to buy his helicopter and the hospitals?

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  1. The defenders of “free market” call it the greatest system in the world…but it ain’t a free market. How can they be so proud of what we have.
    Old people get free care. Children get free care. Poor people get free care. Government workers get government health care. Military get government health care.
    Everybody get free care except those who work.
    For a free market system, there sure are a lot of government regulations.

  2. free market = meeting of minds, supply reaching demand
    cartel = ctrl of supply OR why docs dont drive taxis…?

    artificial scarcity:
    http://www.usatoday.com/news/health/2005-03-02-doctor-shortage_x.htm

    middle class sln:
    Minute Clinics, overseas
    http://www.samitivej.co.th/index_en.aspx
    comprehensive >40yo female check-up.
    $368 for total exam including eye, chest xray, EKG, mammogram, abd ultrasound, labs

    price gouging:
    1000% markup is not a business model, its robbery
    (see Costco’s 15% markup max coded into operations)
    an insiders experience with gouging-
    As I mentioned about six weeks ago, I ended up going to the hospital while I was on vacation in California. Of course one of the hospitals lost my insurance info so they sent me an itemized bill instead. I’ve posted it here so we can all laugh together at how much they’ve charged me for a few things. I’ve not included a couple of things because they didn’t seem terribly unreasonable to me.
    Promethazine 25AMP: $37.88
    Sublimaze (fentanyl) 100mcg injection: $47.50
    1000mL Normal Saline: $99.01
    Contrast with Exam: $412.00
    CT scan/body:
    CT W/W/O Contrast: $2629.69
    CT Pelvis W/W/O Contrast: $2355.70
    Emergency Room
    Level 3 w/ MD/Nurse procedure: $699.43
    Admin of IV Injection: $184.71
    ——————————
    Self-pay adjustment: -$1321.54
    First off, Promethazine is cheap. Dirt cheap. I don’t have the AWP for the injectable form, because I forgot to look it up, but it’s very inexpensive. Probably less than $1 in the quantities hospitals buy it in.
    Secondly, Sublimaze has an AWP of 45 cents. I’m all for charging more than AWP to people, but not 105.56x over cost. In fact, it’s likely that the hospital pays much less than 45 cents per dose for Sublimaze.
    Normal Saline. One liter. $99? You’ve got to be kidding me. One liter of normal saline runs less than a dollar. I can’t check the AWP for this, because we don’t sell it at all. Anyway, I don’t appreciate being charged, once again, at least 100x what the actual cost is.
    Contrast, AKA Barium Sulfate. I consumed two 473mL bottles: 946mL of the stuff, which has an AWP of ~$64. In the quantities that hospitals buy it, I’m sure they’re charged less than that. A 640% markup.
    Administration of IV injection. I don’t know precisely what that means, but it seems incredibly expensive.
    Of course I won’t actually be paying these prices, because they’ve been able to successfully bill my insurance company. My insurance company won’t be paying these prices either — the little “Self-Pay” discount that they gave me is hilarious because it’s not really much of a break at all. The reality is that if I were a big insurer, I’d be getting a much bigger break than that.
    You’d probably see the price of the saline drop to zero. Not even a penny. You’d probably see the cost of the barium drop somewhere down to AWP, along with the cost of the Sublimaze. Promethazine would probably drop to around 10 cents. I’m sure the CT scans would be billed at a much lower rate as well, probably around $1000 a pop. I know this because I’ve seen what my insurer paid for these things when I had them done before back home in Boston.
    my sln:
    catastrophic insurance (just expect to be treated as a subhuman by the ER and it’ll be a breeze)
    + go overseas for the rest (wow, now thats service)
    + Minute Clinics(timely treatment for the small stuff)
    = shafting arrogant cartel

  3. I contine to be amazed when someone attempts to give the HMOs a taste of their own medicine how the armchair quarterbacks come to the aid of a system that has ripped off California providers for years. California is luck is has not had a hospital/physician provider revolt!!

  4. >>> “Wait, increased demand led to higher prices? Get out of town!”

    Wow, Pid, what century are you living in. In case you haven’t heard the rumor, health care costs are increasing at the rate of 15% per year. Well beyond inflation and well beyond population growth.
    OF COURSE the “cost per test” has remained relatively stable, BUT the number of tests have increased dramatically because increased test volumes adds substantially to the physician’s bottom line. And no, it is not all physicians, but it is enough physicians to substantially affect the system.

    >>> “The rest of that paragraph makes no sense. It is one huge non-sequiter.”

    I provided a link to http://www.rand.org/news/press.06/01.11.html that demonstrates that as deductibles on drugs increase, the patient’s were less likely to comply. It had the reverse effect and drove costs up. By reducing the deductible they could avert 80,000 hospitalizations. What is it about this do you not understand?
    Some claim here that over-ordering is caused by defensive medicine and you are claiming that it really ain’t that bad? Okay, Pid. Pick whatever number you want, or deny it totally. I’ve seen the number as high as 50% and don’t believe it. I picked a more likely 30%. You pick your number.
    You claim that you should be lobbying Congress on behalf of our patients. I agree that increased R&D is necessary, but first we need to eliminate the conflicts that exist between the physicians being paid by the drug and device companies who are funding the research. R&D should be 100% funded by NIH and the results owned by the taxpayers and contracted out to qualified manufactures. Opps! The right wing won’t like that!

    >>> “First of all, profit is not a dirty word. It is absolutely essential and the key to future provision of services, growth, continued investment, and maintenance of capability. Without profit, enterprise dies.”

    I agree that reasonable profit is necessary and desirable. I ran at 10%. But excessive profits are destroying our healthcare system.
    Second, they are free to do “whatever they damn well please” within a set of considerable constraints. They are highly regulated. Their labor costs are quite high. Incentives are totally backwards with inefficient/dangerous process being financially rewarded if they produce rework and additional utilization. They are increasingly relied upon to provide uncompensated care for the uninsured. They cannot set their prices with any meaningful flexibility. In fact, they pretty much get told what they’re gonna be paid. I’m sure I’ve left out a bunch, but other than that…sure, they’re free to do what they want.

    >>> “How would your fantasy system cap demand? How would it manage supply? How can it hope to scale from about 8,000 physicians with 18 million mostly older male patients to over 300,000 physicians and 300,000,000 patients of all ages and sex. This is not a simple linear growth in complexity.”

    I’d probably handle it the same way every other single-payer system in the world handles it. Yes it is 15% of the economy in the US, but less than 10% everywhere else. How you can justify that is beyond comprehension.

  5. >>> “You mean that giving people stuff for less cost increases demand/consumption?!! I’m shocked. SHOCKED!”
    Yes, and the unintended consequences were that costs went up, not down. So HSAs and other methods of deterring patients are going to see some very negative consequences.

    Wait, increased demand led to higher prices? Get out of town!
    The rest of that paragraph makes no sense. It is one huge non-sequiter.

    If Medicare were the only coverage you can bet your bottom dollar they would reimburse fairly, or they’d have hospitals closing and physicians becoming plumbers.

    If that’s enough to help you sleep at night, bless you. I don’t really take much comfort from that assertion. If they spend the money in the Social Security trust fund there might not be enough…wait…where did I put that paperwork for that IRA?
    The only thing that saves us from the bureaucracy is inefficiency. An efficient bureaucracy is the greatest threat to liberty. – Eugene McCarthy
    A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned — this is the sum of good government. – Thomas Jefferson

    And yes, I recognize that Medicare is trying to cut costs, though the last time they threatened my industry with a 5% cut we got a 2% increase. But Medicare would do better to cut physician over-ordering and waste, which accounts for 30% of costs.

    First of all, the assertion that physician over-ordering causes 30% higher costs…I really am going to have to ask for data to back that up. If you’re right, those guys running the HMOs were absolutely incompetent. That was their entire business model: wring out the waste. They got some low-hanging fruit, but the “revolution” stalled. Largely b/c they couldn’t produce the anticipated cost savings.
    CMS isn’t threatening anything really. They’re just trapped in a bad system based upon flawed economic ideas. They are calculating a “Update Adjustment Factor” contrived to hold Medicare within a Sustainable Growth Rate. Physicians lobbied Congress to prevent the cuts and prevailed. If you think that Physicians should be in the business of pleading with Congress for their money…rock on. “Medicare for all” would just make a bigger mess of it, and I think it’s the height of absurdity.
    We should be lobbying Congress on behalf of our patients. To expand research funding and guide public health policy. That the AMA gets a substantial portion of its revenue publishing the CPT code book and spends a large portion of the rest of its time lobbying for increased Medicare spending (relying on the CPT codes) is appalling.

    Ask them how much they charge for a simple ECG or color flow echocardiogram and I think you’ll get an answer.

    I invite you to try. Do a little survey of the hospitals and physicians in your area. The free market does not exist. Your assertion that something like one exists because “physicians and hospitals are free to do as they damn well please to maximize profits” is absurd.
    First of all, profit is not a dirty word. It is absolutely essential and the key to future provision of services, growth, continued investment, and maintenance of capability. Without profit, enterprise dies.
    Second, they are free to do “whatever they damn well please” within a set of considerable constraints. They are highly regulated. Their labor costs are quite high. Incentives are totally backwards with inefficient/dangerous process being financially rewarded if they produce rework and additional utilization. They are increasingly relied upon to provide uncompensated care for the uninsured. They cannot set their prices with any meaningful flexibility. In fact, they pretty much get told what they’re gonna be paid. I’m sure I’ve left out a bunch, but other than that…sure, they’re free to do what they want.

    Every time I get into this discussion I become more convinced that a simple salaried system like that in the VA makes the most sense (wait a minute, I think I said that before.)

    And every time I hear that it makes me want to vomit. Literally. There is nothing “simple” about any government bureaucracy managing 15% of the economy. The mere thought of it is absurd.
    How would your fantasy system cap demand? How would it manage supply? How can it hope to scale from about 8,000 physicians with 18 million mostly older male patients to over 300,000 physicians and 300,000,000 patients of all ages and sex. This is not a simple linear growth in complexity.

  6. >>> “Individuals cannot make the right decisions for themselves? I reject that wholeheartedly. One of the foundational ideas of western society is that individual liberty should be maximized. Why should health care be an exception to that?”

    First, Pid, one should never say never and I broke that rule. The 20% of patients that drain 80% of the costs (or whatever the exact percentages are) are not usually in a position to make the decisions for themselves and it is usually made by the physician, as Brian Klepper pointed out elsewhere.
    Brian: “In truth, patients’ diagnostic and treatment choices represent a tiny portion of larger healthcare cost. The real money is associated with chronic disease and catastrophes. In those cases, healthcare professionals, not patients, guide the purchasing decisions. That’s exactly as it should be.”
    Thanks to Brian and Barry and others I am moving closer to believing that transparency could help improve the delivery of care. But I don’t see that useful until we have a national IT system and I’d want to also see referral patterns. Is this Doc trusted enough among his peers to receive a lot/little of referrals?

    >>> “You say we have “free market” health care.”

    I mean that physicians and hospitals are free to do as they damn well please to maximize profits. And they do it, as I describe above. I have not called a hospital or clinic and said “I am a cash client and I want to know what it is going to cost me for this or that x-ray,” but my guess is that they will say they need to see the physician’s order before they can give you an accurate price. Ask them how much they charge for a simple ECG or color flow echocardiogram and I think you’ll get an answer.
    And yes, I recognize that Medicare is trying to cut costs, though the last time they threatened my industry with a 5% cut we got a 2% increase. But Medicare would do better to cut physician over-ordering and waste, which accounts for 30% of costs. Of course, they’d do better by educating physicians that it is not nice to over-order, but I’ve never seen that work either.
    Every time I get into this discussion I become more convinced that a simple salaried system like that in the VA makes the most sense (wait a minute, I think I said that before.)

    >>> “Yeah, docs can opt out…but few have.”

    If few have, then the overall payments must represent a financial gain.

    >>> “Now, tell me, could you have continued to “do well” with Medicare patients if they decreased your compensation by ~20% over 3-4 years? How about just decreasing 14% over 2 years? Would you have stayed in then? If it were the “single payer” what would you do? Unionize? Strike? Complain vigorously?”

    If Medicare were the only coverage you can bet your bottom dollar they would reimburse fairly, or they’d have hospitals closing and physicians becoming plumbers.

    >>> “You mean that giving people stuff for less cost increases demand/consumption?!! I’m shocked. SHOCKED!”

    Yes, and the unintended consequences were that costs went up, not down. So HSAs and other methods of deterring patients are going to see some very negative consequences.

  7. In the real world that simply won’t happen. Patients (in general) will rarely make the right decisions if cost is a factor. Decisions yes; right ones rarely. I’ve said this elsewhere, but patients simply are not going to seek out the lowest bidder when it comes to their health or that of a loved one.

    Individuals cannot make the right decisions for themselves? I reject that wholeheartedly. One of the foundational ideas of western society is that individual liberty should be maximized. Why should health care be an exception to that?
    Individuals sometimes make poor decisions. Sometimes they just do. Sometimes it’s because they have inadequate information or mis-aligned incentives. Under certain circumstances, there exist compelling reasons for society to provide disincentives for costly or dangerous behavior (e.g. prison for criminal activity, tobacco taxes, helmet laws, etc).
    But it’s not just about choosing the lowest bidder and it’s not about maximizing the number of people on statins. It’s about the patient choosing a provider THEY FEEL is most likely to maximize their value.
    You say we have “free market” health care. But last time I called a provider, here’s how the conversation went: “X-ray for possible broken arm…how much will it cost? Uh, I’m not sure we have that information.” There is no “market” for health care. There really isn’t a market for health insurance either. At least not one maximizing patient value.
    Individuals can’t be trusted to make the “right” decision when cost is involved. It’s true. I clearly made the wrong decision in automobile. I got a Toyota Camry. I would have done much better for myself (from a safety perspective) in a Hummer or Suburban. Of course, I would have done much better for myself from an money perspective to get that model with the lowest price and lowest total cost of ownership. Of course, I could also have done much better for society if I’d just bought that Prius. Wait, whose decision is it and whose value am I maximizing here?

    Then who brought us “free market” Medicine? As a Medicare patient I love it; as a Part B provider I did okay with it; as a provider you can opt out of it if you wish.

    We do not have “free market” medicine, but I’m glad you like Medicare. Of course, I’ve never argued that patient’s dislike it. Quite the contrary, they seem to want MORE for free (prescription drug coverage isn’t enough…close the donut hole!!!). Again…I’m shocked.
    Yeah, docs can opt out…but few have. Of course, the calculated “update adjustment factor” for Medicare Part B has been somewhere in the -20% range for about the last 4 years or so. It’s limited to -7% by statute, but that’s a 7% decrease in Medicare Part B physician compensation. Given the originally calculated necessary decrease, that decrease was likely to continue year over year for at least 3 years. Now, tell me, could you have continued to “do well” with Medicare patients if they decreased your compensation by ~20% over 3-4 years? How about just decreasing 14% over 2 years? Would you have stayed in then? If it were the “single payer” what would you do? Unionize? Strike? Complain vigorously?

    We already involve patients in the financial choices through deductibles. To quite TomH: “A recent Rand study, for example, found that patients paying a $10 copay for cholesterol-lowering drugs were 6-10% more likely to comply with doctors’ orders to take the drugs than patients paying a $20 copay. They concluded that reducing copays would “avert nearly 80,000 hospitalizations and more than 31,000 emergency room visits each year.”
    http://www.rand.org/news/press.06/01.11.html”

    You mean that giving people stuff for less cost increases demand/consumption?!! I’m shocked. SHOCKED!
    Increased use of statins could have the public health effects claimed by RAND. But increased utilization does not always improve health and our goal should not be to maximize utilization.

    Maximum value? Not with administration costs 15% higher than in Canada and 30% over utilization waste. That’s not value, that’s unnecessary profit and waste.

    They say it themselves:
    “Demand for care may exceed current supply, such that current utilization can’t be considered to be fully reflective of demand.”
    http://www.gov.pe.ca/photos/original/health_costs.pdf
    In other words, people want services in Canada that they just can’t get. That’s hardly a problem here. Perhaps that’s why they come here to get things they can’t get there?
    The fact that administration costs are only 15% higher is remarkable when you consider the number of administrative requirements imposed by CMS, the State, and the insurance industry for even simple preventive care. I’m sure your experience with Medicare was that it reliably reduced your administrative costs. There isn’t any paperwork involved or anything. I’m sure you’d also do it joyfully while they cut back payments by 7% per year for a while.

  8. Health care can either be a social service or a market commodity, Tom, and I prefer the former. Otherwise, why don’t we also turn police and fire services over to the private sector and let them charge on the basis of how many tickets they write or fires they put out?
    Because some things are best pooled and run by the government. Health care is one of them.
    Accepting the free-market concept in medicine is to invite the profit-seekers into a very personal process in which vulnerable patients are subjected to excessive testing and unnecessary surgeries because they are profitable. I’ve heard some propose “patient advocates,” which of course adds to the already bludgeoning costs. Giving physicians and for-profit CEOs free reign is not my choice. Having spent 35 years in the health care industry, I’ve been too close to the system to trust it.
    I’d trust a Medicare-for-all system (with fair reimbursements), but my preference is a system like the VA where all physicians are salaried. Oh, you want it privatized? Have Halliburton own it.

  9. Jack E. Lohman writes:
    > How high does it have to go to satisfy
    > you and the free-market proponents?
    But Jack! A “free market proponent” finds this question nonsensical. He is satisfied so to speak at whatever level the free market settles at. That’s what “freedom” means.
    What many (most?) free market proponents fail to recognize is that “free markets” aren’t necessarily “competitive markets” that optimally allocate resources, and that the necessary conditions for healthcare approximating an ideally competitive market just don’t exist, largely (but not entirely) due to power and information asymmetries. Even under Enthoven-esque competition among health plans facing a monopsonist, the plans will extract rents because of this. But its probably the best we can do.
    t

  10. Pid, we “slid” towards the free market as the politicians and Medicare gutted the Stark rules and those that prohibited hospitals from employing their own physicians, and physicians being able to refer patients to hospitals they had an investment in, and referring patients to labs they owned or had an investment in, and the elimination of the certificate of need rules, and on and on and on. I do agree with you, however, that it is outrageous that hospitals get rewarded for making mistakes (by getting paid to correct them).
    >>> “the people consuming services have no idea and/or no power in the transaction. If patients are empowered to make value choices for themselves and bear a larger part of the financial cost, we automatically rearrange the entire incentive structure of health care. Physicians re-engage the patients and can compete on price and quality. They automatically have incentives to upgrade their medical records, analyze their processes to decrease wait times and improve service, improve outcomes, and minimize waste.”

    In the real world that simply won’t happen. Patients (in general) will rarely make the right decisions if cost is a factor. Decisions yes; right ones rarely. I’ve said this elsewhere, but patients simply are not going to seek out the lowest bidder when it comes to their health or that of a loved one.

    >>> “Johnson and his “Great Society” brought us the monstrosity that became Medicare.”

    Then who brought us “free market” Medicine? As a Medicare patient I love it; as a Part B provider I did okay with it; as a provider you can opt out of it if you wish.

    >>> “If we re-connect consumers with their costs in a meaningful way, we will realign the incentives within health care and substantially change the system for the better. Of course, most importantly, empowering patients within a market increases the chances that they will be served in a way that maximizes their value.”

    We already involve patients in the financial choices through deductibles. To quite TomH: “A recent Rand study, for example, found that patients paying a $10 copay for cholesterol-lowering drugs were 6-10% more likely to comply with doctors’ orders to take the drugs than patients paying a $20 copay. They concluded that reducing copays would “avert nearly 80,000 hospitalizations and more than 31,000 emergency room visits each year.”
    http://www.rand.org/news/press.06/01.11.html”
    Add a big co-pay and it will get worse. God forbid those with HSAs.

    >>> “The key thing to recognize is that a market-based system can provide the maximum value for our investment much more reliably than can a single-payer governmental system.”

    Maximum value? Not with administration costs 15% higher than in Canada and 30% over utilization waste. That’s not value, that’s unnecessary profit and waste.

    Pid, I’ll ask you what I asked Erik, though he hasn’t answered yet: Healeth care is currently gobbling up 15% of GDP. How high does it have to go to satisfy you and the free-market proponents?

  11. Jack,
    In what way have we “slid” towards the free market over the past decade? In what way has it compensated for the market damage done by Medicare?
    It’s astonishing and wrong that providers get paid for their rework. You think that’s because a market exists? When was the last time you paid double for breakfast because, gee, the waitress couldn’t find the first one they made? Physicians and hospitals get paid for that rework because insurers make money on the turn of every dollar, government doesn’t “care” (i.e. it’s too bureaucratic and unwieldy to really address the problem), and the people consuming services have no idea and/or no power in the transaction.
    If patients are empowered to make value choices for themselves and bear a larger part of the financial cost, we automatically rearrange the entire incentive structure of health care. Physicians re-engage the patients and can compete on price and quality. They automatically have incentives to upgrade their medical records, analyze their processes to decrease wait times and improve service, improve outcomes, and minimize waste.
    It is precisely because of the GOVERNMENT wage freeze during WWII that we had the development of large scale employer-sponsored health insurance. Within 20 years, Johnson and his “Great Society” brought us the monstrosity that became Medicare. Insurance’s response to employer complaints about the cost of coverage was the HMO. “Oh, it’s these docs…they’re doing too many tests…tell you what, we’ll MANAGE them.” Fact was, HMOs couldn’t sqeeze enough blood from that turnip and went out of business (enrolled people at low cost anticipating savings they couldn’t produce). Government’s response to untapped demand? “Prospective payment” mechanisms. Of course, the problem really wasn’t (and still isn’t) that docs are inefficient because they’re slovenly or greedy. Nor was it the lack of a prospective payment system. No, that waste exists because incentives are misaligned. What fundamentally mis-aligned the incentives? Precisely the separation of the consumers from their costs. If we re-connect consumers with their costs in a meaningful way, we will realign the incentives within health care and substantially change the system for the better. Of course, most importantly, empowering patients within a market increases the chances that they will be served in a way that maximizes their value.
    None of this means that there isn’t a large and proper role for government in all of this. No one wants a system where people go without needed basic care. But Government’s role within the system should be salutory to the market. It should assist people with obtaining necessary services within the market and regulate the market. The key thing to recognize is that a market-based system can provide the maximum value for our investment much more reliably than can a single-payer governmental system. Just think of the growing abundance of cheap food in this country. We all need food. We depend on it for survival. Who among us rationally believes that the best way to provide it for everyone is to have a single-payer for our groceries???
    Those convinced that the VA is the model are abstracting a model that works for a older and predominantly male subsegment of our population. Many of whom carry private co-insurance (which they use to obtain non-VA subsidized services). This population is one to whom this country owes a great deal of discretion and generosity. Scaling that model to cover the population at large would not add linear complexity…it would add exponential complexity. And I’m not convinced that it would remain a viable model.
    Pid

  12. Until you got to the last paragraph, Pid, I thought you were going to offer a solution. But frankly, it is the slide toward the free market over the past decade that got us into this mess. I, too, don’t think more of the same is the solution, and that goes for the free-market as well.
    Every time I look at how the VA system costs about $4000 per patient per year, for patients that are typically sicker than the norm, I become more convinced that a salaried system ought to be our goal. Entrusting physicians who are paid on the basis of how many tests they order and surgeries they perform has surely not worked out.

  13. I know that Impossible is Nothing . Nevertheless, providing health care is an enormous endeavor. It is dizzyingly complex and fraught with moral dilemmas, and the government has proven in the last 40 years via Medicare that the law of unintended consequences is ignored at our peril.
    Whenever I think about “expanding Medicare” (whatever part you choose) to control costs, I think about what has happened to health care spending since the introduction of Medicare in the 60’s. Then I think about the bureaucracy…do people generally have any idea how fundamentally screwed up the Medicare system is? Forget simple issues of solvency. Let’s address what it’s done to the marketplace and the “system” in general.
    How about the Part B RBRVS system? It is based upon an objective theory of value (the value of a good/service is directly related to it’s cost of production). If that were true, why does paper money have value? Why can I sell a diamond I find on the ground for the same price as someone with investment in all the crews, bulldozers, and machines to sift through tons of dirt? Why won’t some patients gladly take the “valuable” chemotherapy for “free.”
    Don’t even get me started about the “update adjustment factor” (that really isn’t) and sub-sub-parts of the calculations to determine payment for any certain service. Or the incestuous relationship between the AMA, codebook publishing, RBRVS Relative Value Update Committee, and CMS.
    My question is: does anyone really think we’re going to have less of this nonsense with MORE of the same government in health care? Most of the bullshit going on right now is a direct result of the fact that Government brought itself into the game most unwisely. It is wholly stupid to believe that MORE of the same government is the solution to problems primarily created by government.
    Government first uncapped demand by stepping in with its pockets wide open in the 60’s. Then (SHOCK!) it got expensive and government tried to “fix things” by introducing “prospective payments.” RBRVS is the perfect example of a prospective payment system gone wrong. Given the same information about the time, stress, and resources involved in providing certain services/procedures to patients, markets could have accounted for that change in the information asymmetry (physicians and hospitals would have lost some of their pricing discretion). Instead, government altered the dynamics of the market brutally and imposed upon their relative value scale a conversion factor to convert these “relative values” into payments. Doing so they essentially created a monopsony. It is a decidedly hamfisted attempt at pricing medical services. Regional adjustments, adjustments for malpractice costs, value of the work, blah blah blah. DOESN’T ANYONE UNDERSTAND THAT THIS IS CRAZY?!! Could it be this has something to do with how messed up health care costs are in this country?!
    Pricing doesn’t work that way. Value doesn’t work that way. Managed economies almost universally fail. We need a model that takes into account that human meta-systems (e.g. the “economy”) mimic life systems in general. What we need are homeostatic mechanisms that accomplish specific tasks. The main policy task facing government, in my opinion, is not how to create a bigger government insurance program. Rather, it is how to create a mechanism by which to spread risk and expand access. This mechanism should AUGMENT the health care market rather than destroy it (noting that the market has been seriously injured by the preceding governmental initiatives and that single payer care would destroy whatever “market” exists).
    As a brainstorm, how about the creation of a government sponsored enterprise like the First National Mortgage Association to buy and sell securities based upon the risk of insuring someone.
    I don’t claim to have the solution here and now. I just think that the evidence clearly indicates that markets are much better at solving problems relating to the allocation of scarce resources. And health care must be viewed as a scarce resource like food (essential but scarce) rather than a right.
    My humble off the cuff 2c,
    Pid

  14. But CT, it doesn’t have to be that way. In my view Medicare doesn’t mind sticking it to providers in some cases because they know full well that the provider will make it up in other cases. If it were an overall loss they would have providers dropping out of the system right and left. Volume doesn’t matter when the average payment is a loss.
    And incidentally, the only difference between Medicare payments in California and those in Wisconsin is the regional cost-of-living adjustment, so they net out to be essentially the same.
    What we need is a change in culture. If Medicare were the primary insurer (in a Medicare-for-all system) the reimbursements would have to be fairly set. Of course there should remain an opt-out for those boutique physicians who serve the rich folks who don’t want to follow the same rules.
    But we need a universal health care system for many reasons.

  15. I don’t understand how antecedal evidence from one region of the country negates the claim that in many, if not most incidences, Medicare is a losing reimbursement system for providers.
    So it might turn out that in Southern California Medicare reimbursement trumps that of some private options. As pdbMD points out “The HMOs in Cali have had a stranglehold on the market since the early 1990s and physician reimbursement is relatively low compared to other parts of the country.”
    But that is one situation? Who in the world is making a universal claim that in EVERY situation Medicare is a losing proposition for providers?
    Medicare is still a terrible system in terms of keeping physicians and hospitals above water in many, many situations and parts of this country.

  16. Having been a Medicare B provider for about 15 years, I understand the difference between A & B. Both should be spread to everyone, just as they are in Canada. There the hospitals receive a set amount of dollars for operating expenses and another budget for technology. But as the Doc in Orange County says, Medicare part A ain’t so bad here in the US.
    It simply doesn’t matter how you cut it, Eric, the public is going to pay the costs no matter what. I am pushing to eliminate the bulk of the administrative costs and the profits the corporations pull from the system.
    But let me ask you about another of your posts where you seemed to object to any regulation at all. Health care is taking 15% of the national pie now, how much higher would it need to be to make you happy?

  17. Jack– quick reminder… ‘medicare is not one program’. Hospital payments (medicare part A) have a totally different fee schedule and funding mechanism than medicare part B (the outpatient, physician service side).
    The failure of the pro-single payer advocates to understand and appreciate the significance of this is disturbing and astounding.
    Medicare Part A — this is funded through payroll taxes. Like social security, medicare part A taxes do not go for ‘your’ future costs, but rather to pay today’s beneficiaries. The fee schedule, although the relative work values and fixed payments can be changed by CMS, is adjusted yearly by using the very obscure, but somewhat understandable MEI– medical economic index. The MEI is close to the CPI, which is close to the inflation rate.
    Thus, part A, hospital payments, by statute go UP every year.
    Thus, it is a stable source of revenue for hospitals, for whom medicare is often the largest payer.
    (As an aside, it is this stable revenue flow that is, in part, the main reason that hospital corp’s can get bonds so easily for expansion— the willingness of banks and institutional investors to put up money in exchange for an income stream…)
    I have belabored medicare part B so many times elsewhere on the blog, but just put it in the comments and I will explain the funding stream and sources for medicare part B, Part C, and Part D.
    Jack- hope that clears up the air somewhat… you’ve got to understand that medicare is not medicare, but rather medicareS (meaning it is really several programs in one).
    PS- which one do you want to spread to everyone?

  18. They must be. In fact, it looks like, Medicare is the best payer there. Most places Medicare is a good payer today. In Westchester, NY insurance usually pays 20% above Medicare. In OC, Cali, who knows what insurance is paying. My guess, 30% below Medicare.

  19. The HMOs in Cali have had a stranglehold on the market since the early 1990s and physician reimbursement is relatively low compared to other parts of the country. In Cali Medicare is king. If it wasn’t for the sun and beaches physician recruitment would be dead there.

  20. Wait a minute! This guy is advertising specifically to attract Medicare patients because they pay a steady rate? Eric and others are not going to like this a bit, because they say providers lose money on Medicare! Which is it?

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