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POLICY: We need health cost containment before fixing the payment method , by Jack Lohman

Das Kapital

Jack Lohman is a retired business owner from Wisconsin and founder of Throw the Rascals Out. He’s become a frequent commenter on THCB, oddly enough as a Republican voter who is in favor of single payer, and I thought that his opinions on health care were interesting enough to merit an opinion piece no the main page. Jack can be reached at jlohman@execpc.com.

MikeGUEST POST

Let’s take a time out.

As the nation struggles with how to pay for health care costs that are spiraling at an annual rate of 17%, five times the rate of inflation, we are virtually ignoring the reasons behind the escalating costs in the first place. We are engrossed in payment methods rather than cost containment, all while the industry seeks innovative ways of taking home a bigger piece of the national pie. Some see the “free-market” as our savior, when in fact, the slow conversion to a free market system that began a decade ago is the reason we are in trouble today. And it will get worse.

Years ago it was considered fraudulent for hospitals to hire their own physicians, for physicians to own an interest in a hospital to which they referred patients, and for physicians to refer patients to an outside laboratory in which they had a financial interest. We also had a certificate of need program that prohibited hospitals from leap-frogging the hospital down the street, thus churning expensive high-tech imaging systems. 

morThanks to $100 million in annual campaign contributions from the
health care industry to politicians, all of these cost-containment
rules that protected the system from excesses have been eliminated, and
the ensuing free-for-all began and thrives today. But this maneuvering
also promises to backfire and become the undoing of a once-proud
medical profession. 

The only competition that resulted is between hospitals and clinics
as physicians move expensive and profitable testing into their clinics.
Hospitals that once used time-shared mobile MRI services — and then
bought their own in-house system because volumes justified it — are
now finding their local clinics adding the mobile MRI service and
leaving them without patient volumes to pay for their system. In the
meantime patient testing volumes are increasing in the clinic because
of the added profit incentives. 

Is anybody watching the growth of these cash cows? Are we totally
blinded by the conflicts of interest that a free-market system demands?

Don’t get me wrong. Physicians should be paid extremely well, just
not on the basis of how many tests they order or surgeries they
perform. Doctors should have the freedom to refer their patients to any
hospital or independent lab for expensive tests, as long as they or
their clinic do not have a financial interest in the service. Hospitals
should be prohibited from employing their own physicians and physicians
should be prohibited from referring patients to a hospital in which
they have a financial interest. What’s not to understand about these
no-brainers?

There is one rule that has held for centuries: “He who has the gold,
rules.” Currently that gold is held by the business leaders who provide
employee health care and who are losing sales to products that are made
in countries that have universal health care systems. Their competitors
do not have to add health costs to their product price, thus some
American companies are moving jobs offshore while others are preparing
to take over the health care system.

Physicians should look at how the dominoes will eventually fall. The
current system is unsustainable and will eventually be taken over by
the MBAs and CEOs and shareholders. If left alone the current system
will transition to corporately-controlled HMOs and independent
physicians will be a thing of the past. 

We have two sustainable options: A Medicare-for-all system, like
that in Canada, or a socialized system, like that in Britain and our
own VA and armed services systems. The latter uses salaried physicians
while the former still leaves room for fraud and overuse. In the end,
health care can be either a social service or a market commodity, but
not both.

But make no mistake about it. Regardless of the system we choose,
the public will bear the final costs. The important question is: How
long will it take us to fix it the right way? We can fiddle with costly
workarounds and ultimately settle on one of the above. Or we can fix it
without delay and move on to other national policies that are critical
to our nation.

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Barry CarolScottpidgasTimJack E. Lohman Recent comment authors
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Jack E. Lohman
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“I previously quoted the CEO of BIDMC in Boston claiming his (non-profit) academic medical center could not sustain its current level of care if it had to accept Medicare rates from all patients even assuming uncompensated care were eliminated.” Barry, I don’t think he’s a liar either, but he’s assuming no change at all under a Medicare-for-all system. Medicare would indeed have to get more realistic and make reimbursements fairer, or all hospitals would have to close. Or it could go to a Canadian-style system that pays a fixed yearly budget and a second variable budget for technology purchases. “I… Read more »

Peter
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Peter

Barry, I think BIDMC’s robust accounting system reflects the entire inefficient blotted system we have now, not what we could have with a more efficient single pay system with cost containment. I agree that this is a complicated system, as is the Canadian model. I am close friends with a regional hospital CEO in Canada. She spends long days and hard work keeping the system going and trying to bring together all sides to improve the system and the delivery of healthcare. But you know, if politicians would work with ideas and solutions and not bribes, we could have a… Read more »

Barry Carol
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Barry Carol

Jack, I suspect that if Medicare for all were implemented, the system would run afoul of what economists call the fallacy of composition. For example, I previously quoted the CEO of BIDMC in Boston claiming his (non-profit) academic medical center could not sustain its current level of care if it had to accept Medicare rates from all patients even assuming uncompensated care were eliminated. I don’t think he’s a liar, and I don’t think he’s full of crap. He says BIDMC has a very robust accounting system and knows its costs in great detail. The ability to cost shift by… Read more »

Jack E. Lohman
Guest

Barry, IF the special interest money were not flowing to politicians — which it is for the sole purpose of deferring a political correction of a very profitable system — these bastards (sorry about the French) would find the solution overnight. The first thing that would go is the 1500 insurance companies that are consuming the 30% in administration costs. If I were calling the shots I’d then give corporations the right to buy into the Medicare system at what it is currently costing per patient (adjusted for age, of course, because currently Medicare has the sickliest patients). Then I’d… Read more »

Barry Carol
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Barry Carol

Jack and Peter, I never got around to asking this, but I will now. Suppose we got all the lobbying money out of politics and all candidates either accepted taxpayer funding only or self-financed their campaigns. Then, those that are elected, presumably owe nothing to special interests. Now all these Congressmen and Senators who got elected without help from special interests decide it’s time to reform the healthcare system. How are they supposed to do that without tapping into the expertise of doctors, hospital executives, drug company scientists and executives, regulators, insurers, etc.? All of these people have a perspective,… Read more »

Peter
Guest
Peter

Pidgas, “He won those trials using junk science.” Get yourself a better lawyer. When Louisiana Senator Trent Lott could not collect from his home insurer after Katrina he hired, guess who, the same lawyer who won the big tobacco lawsuit. Trent Lott, who riled against greedy trial lawyers, until he needed one. One mans junk science is another man’s malpractice. My wife is a Neonatal/obstetrics Nurse, done so for about 30 years, she can tell you a lot of “never-been-prosecuted malpractice stories and docs protecting docs. As well as the good docs doing the right thing. “Of course, patients paying… Read more »

Jack E. Lohman
Guest

My assertion is that government bureaucrats cannot “control” economies in any meaningful sense. Their actions have unintended consequences because economies are complex phenomena. C’mon, Pidgas. If what you are really saying is that governments cannot control doctor ordering patterns because they do not shadow them on a regular basis, then I’d agree with you. I used to have to watch over my kids so they wouldn’t get into trouble. I would hope that physicians are beyond that. I agree that lobbyists won’t “just go away” as long as bribery and payola in our political system is not only legal but… Read more »

Tim
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Tim

Peter, yes, the carriers for the most part are scum. But the problem does not simply stop with them. The problem is their distribution model, and it’s severely flawed. The other problem is political, as most state DOI’s are heavily lobbied by the large group carriers, and the large group carriers tell THEM what to do. The DOI’s make the rules, after being told what rules to make. Ironically, many of the state DOI’s are in violation of federal law, and don’t even realize it. Most consumers tend to think the DOI’s are the law, and in reality the DOI… Read more »

pidgas
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pidgas

Your link to a John Edwards court settlement overtly separates two unrelated issues and exposes your Republican bias. A chief RNC smear during the Kerry/Edwards campaign was that Edwards was one of those “greedy trial lawyers”. Actually it exposes my bias as a physician. Particularly one who cares for newborns. He won those trials using junk science. Electronic fetal monitoring does not help prevent cerebral palsy. So far it has just increased the rate of C-Section. Of course, C-Section isn’t as good as vaginal delivery and is fraught with it’s own complications. Oh, and Jonathan Edwards IS a greedy trial… Read more »

Peter
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Peter

Tim and Scott, I also agree that insurance carriers are scum and that citizens do not see the behind the scenes reality until they need the system. That’s why I’m unisured now, healthy and sleep well. Not because of inability to pay, but because of an ability of choice that I was not going to play their game any longer. This occured after I used the, “system” for the first time and a small part of the premiums I had paid for 6 years. Past posts have outlined my story. I have used both the Canadian system and the U.S.… Read more »

Peter
Guest
Peter

Pidgas, Your link to a John Edwards court settlement overtly separates two unrelated issues and exposes your Republican bias. A chief RNC smear during the Kerry/Edwards campaign was that Edwards was one of those “greedy trial lawyers”. Look at figures on Canadian and U.S. malpractice and you will see that neither drive healthcare costs. My reference to the Canadian Supreme court ruling was a reference to how, in Canada, they can have the politicians put on notice by the courts, through an action by one citizen, certainly not the healthcare industry, which here controls congress through bribery not through voters… Read more »

Jack E. Lohman
Guest

Sorry, that link to “Eleven facts about our health care crisis” is http://www.wisopinion.com/index.iml?mdl=article.mdl&article=5539

Jack E. Lohman
Guest

Pid, you surprise me. I had you pictured as one of those MBAs that was in the process of taking over the health care system and didn’t want any outside interference. I’ve written about those at Eleven facts about our health care crisis and would recommend it to all physicians who think their profession is secure. They will be rudely awakened when in 10 years they are working for an MBA. Get used to it. As for your medical expenses, I feel that every student in the top 10% should have his full college expenses paid for by the taxpayers… Read more »

pidgas
Guest
pidgas

I would also point out how much fairer the Canadian system is when the Supreme Court can rule in favor of PATIENTS over the “system” in some provinces. We can only dream about such a solution here where years of arguing and overpaying will produce nothing for patients, but through political bribery, will produce everthing for providers.
NO WAY!!! The court can rule in favor of patients in SOME provinces! We really must dream for that. Courts in this country NEVER rule in favor of patients.

pidgas
Guest
pidgas

>>> “Providers reacted by shifting their costs to other patients.” Wow, is that a stretch. And they did this because Medicare was the bad guy and not because they could? I suppose if Medicare had not been a big bad bully they would not have gouged the private payers? Give me a break. It’s not a stretch, it’s fact. Seriously, read the article I referenced. Hell, read any objective article on the subject. Obviously you are making too much money on the current system to be detracted, but others of us do care. I could be offended, but really I’m… Read more »