POLICY/POLITICS: Bush’s Health Plan

I’m up over at Spot-on discussing the basics of Bush’s Health Plan. Go read and return to comment.

I was awakened during my slumber through the State of the Union by a
mention from President George Bush of a health care proposal that I
almost agreed with.

No, I haven’t come around on health savings accounts, and association health plans.
Nor did I join the Republicans in their standing ovation for
malpractice reform. The Bush proposal that woke me up was the creating
a tax deduction for health insurance that would apply to everyone.
Potentially this really matters, and inside it is the germ of the right
idea. But I guarantee you that most Americans won’t have a clue where
this came from, and why it made it into the president’s speech.

Let me explain a little. Health insurance for the vast majority
of Americans (60%+) comes from their employers. 99.9% of Americans
think that this is a natural relationship that costs them nothing and
they, in general, have no idea what it costs their employer. This is
though a historical accident, with its roots in a wage freeze policy
during WWII when employers added benefits to attract workers because
they couldn’t raise pay rates. The idea became fixed after the Supreme
Court ruled that health benefits didn’t count as taxable income.

So, today, you’re better off getting insurance paid for by your
employer than taking the cash, getting taxed and buying the same
insurance yourself. Lately self-employed people have also been able to
deduct their health insurance costs so the only saps left paying for
health insurance with post-tax dollars are those who are not
self-employed, don’t get it from their insurers and actually buy it

You may think that’s not very fair, and you’d be right. Which is why Bush’s proposal is interesting.Go on, Continue …

105 replies »

  1. Looking for some passionate people with web cams,
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    The Federal Government should provide free health care for all Americans.
    Do you agree? yes or no,
    Tell us why, make a video. Use a web-cam or camcorder be funny be creative use animation, clay-mation, wear a mask, make a sock puppet or just stand in front of a blank wall and make your point. Post the link in the comment section on:
    Health care | VideoDebater.com

  2. It’s unfortunate that we have to see such blatant examples of ignorance. The fact is most people don’t even know what a tax deduction is or how to take advantage of it. The only ones that will benefit from this particular measure would be the upper middle class…the ones who can afford a significant health care which would actually be a pricey enough type of health care plan that a deduction of the premium might actually be a significant savings.

  3. Everyone should have the same health care coverage that Bush and members of Congress have. No exceptions!! Why should low income people be paying taxes for health care for these people when they cannot afford health care for themselves?

  4. 1998 –U.S.Attorney General & Office of Inspector General – Health Care Fraud and Abuse Control [ T18CFR371Crime ] would be established as an expenditure account within the Federal Hospital Insurance (HI) Trust Fund.
    OPM FEHBP [CITE: 5CFR185.104] PROGRAM FRAUD Sec. 185.104 Investigation. (d) Nothing in this section modifies any Responsibility of an Investigating Official ( OIG ) to Report Violations of Criminal Law [ DHHS Anti-dumping & Anti-Kickback Violations T42CFR417 Against Retired ‘Entitled’ Federal Beneficiaries CITE: 5CFR890.105 for criminal HCFA Medicaid kickback conversions T18CFR286 ] to the U.S.Attorney General.
    Office of Inspector General – Misprison of a felony T42sec417 Hospital Insurance Fraud
    Office of Personnel Management – CITE: 5CFR890.105 criminal Denial of Covered Claims
    Dated: 14 May 2003
    Joseph Frech Investigator – T18CFR371 illegal agreement to defraud Entitled Individuals and Federal Health Care Programs with respect to claims
    C 03-206 Quote:
    ” Your only recorse is to file suite against the Office of Personnel Management in Federal Court. ”
    The Region V HCFA [ Michigan ] office had a record high 940 new MSP cases filed in 1998. Contributing to this were PARTNERSHIP Arrangements with [ Federal HMO T42CFR417 Hospital Dumping ] Contractors and U.S. Attorneys [ T18CFR1518 – T18CFR286 – T18CFR371 ] in Michigan and Ohio ……….
    OPM TITLE 5 > PART III > Subpart G > CHAPTER 89 > Sec. 8912. Prev | Next Sec. 8912. – Jurisdiction of courts – The District Courts of the United States have Original Jurisdiction, concurrent with the United States Court of Federal Claims, of a civil action or claim against the United States founded on this chapter.
    Read the October 2006 Health and Human Services (HHS) Office of Inspector General report on Medicaid Payments [ MI OFIS/HCFA T42CFR417 anti-dumping violation/kickback ] for deased [ Federal ] beneficiaries – for more insite into the ongoing Criminal Abuse [ Federal Hospital Insurance Fraud T42CFR417 ] Against Elderly American Citizens with Federal HMO Policies.
    1998 — HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM [ subject to prosecution ], under the Joint Direction [ T18CFR371-illegal agreement to induce forfiture of Hospital Insurance Benefits DHHS T42CFR417 Anti-dumping violation ] of the ATTORNEY GENERAL and the Secretary of [ DHHS ] the Department of Health and Human Services (HHS)(1), acting through the Department’s [ OIG ] Inspector General (HHS/OIG), Designed [ HMO Grievance Procedure T42CFR417 criminal denial of covered Hospital Insurance claims/Volentary Disclousure/SELF-Audit Program ] to coordinate Federal, State and Local Law Enforcement activities [ misprison of a felony / defrauding federal health insurance programs OPM FEHBP CITE: 5CFR890.105 ] With Respect to ( Claims ) Health Care Fraud and Abuse.
    CITE- 18 USC Sec. 1518 01/02/01-EXPCITE- TITLE 18 – CRIMES AND CRIMINAL PROCEDURE PART I – CRIMES CHAPTER 73 – OBSTRUCTION OF JUSTICE-HEAD- Sec. 1518. Obstruction of criminal investigations of health care offenses -STATUTE
    1998 Health Care Fraud and Abuse Control Program –INDUCED FORFITURE — Hospital Insurance Fraud – enacted by Hospital DHHS Employees ‘ discharge procedures/anti-dumping violation/felony fraud/intent to harm- TITLE 42-[ DHHS ]-PUBLIC HEALTH HUMAN SERVICES PART 417-[ Federal HMO ]-HEALTH MAINTENANCE ORGANIZATIONS, [ Special Services / misprison of a felony ] Subpart B-( HMO )- Qualified Health Maintenance Organizations: ” Services ” (g) Grievance procedures: DENIAL OF Existing OPM FEHBP HMO Hospital Insurance Services [ DHHS Anti-dumping violation for criminal HCFA Medicaid kickback conversions ]. (h) ” Special ” rules : Enrollees ( Covered Individuals ) under the Federal Employee Health Benefits Program ( FEHBP ). An HMO that accepts enrollees under the ( OPM ) FEHBP (Chapter 89 of title 5 of the U.S.C.) may obtain and retain Federal qualification if….[ 1998 OIG Volentary Disclousure Program/illegal agreement to Induce Forfiture DHHS enactment T42CFR417-criminal denial of OPM FEHBP Hospital Extended Care Benefits w/OPM FEHBP CITE: 5CFR890.105 criminal denial of covered claims – approx Value $288,000 each defrauded individual / ‘ General Public ‘ – to force criminal HCFA Medicaid kickback applications/conversions -T42CFR417 DHHS employee and Federal HMO employee Hospital Dumping ]
    DHHS OIG News Release 21 October 1998
    Volentary Disclousure of Health Care Fraud <~ T18CFR371 illegal aggreement ( SELF-Audit )
    For Immediate Release Contact: ……………Judy Holtz (202) 619-0893
    Wednesday, October 21,1998 ……………….Ben St.John (202) 619-1028
    The ( DHHS OIG ) Department of Health and Human Services’s Office of Inspector General ( OIG ) today unveiled an expanded and simplified Program For [ Federal HMO Hospital Insurance Contract ] Health Care Providers to 'volentarily report' [ misprison of a felony / T42CFR417 ] Fraudulent Conduct ( Hospital Insurance Fraud DHHS T42sec417 CRIME ) Affecting Medicare, Medicaid and other [ OPM FEHBP et al ] Federal health care programs.
    Unlike the piolet program,which was only available to ‘certain’ ( Federal ) health care providers in a few STATES and had strict eligibility requirements, the New Program is OPEN TO ALL ( Federal ) providers NATIONWIDE under signaficantly Relaxed Requirements ( misprison of felony/T42CFR417 ) for ( Health Care fraud ) participation.
    NOW ALL ( Federal ) health care Providers Doing Business with Medicare, Medicaid,or Other Federal health care programs [ OPM FEHBP / TRICARE / CHAMPVA / etal ] that ” Want to ” disclose Violations of Law [ Title18CFR24Crime ] are eligible for acceptance into The [ National – Health Care Fraud & Abuse -illegal agreement to induce forfiture T42CFR417 Control ] Program. The [ Federal ( OPM FEHBP ) HMO Contractor ] Provider will have the option of doing 'SELF-audit' [ DHHS T42CFR417 Anti-dumping violation ] in conformance 'with OIG' [ defrauding federal health insurance programs with respect to claims: OPM FEHBP 5CFR890.105: criminal denial of COVERED Claims T18CFR371 to FORCE illegal HCFA State Medicaid kickback conversions ]
    The Health Care Financing Administration ( HCFA ) administers the Medicaid
    program. Authorized under Title XIX of the Social Security Act.
    The Anti-Dumping Statute [ Hospital Insurance Fraud DHHS T42CFR417 anti-dumping violation for illegal HCFA Medicaid kickback conversions ] is Enforced Jointly by the Health Care Financing Administration [ HCFA ] and the Office of Inspector General [ OIG ] of the [ DHHS ] U.S. Department of Health and Human Services (HHS).
    DATED: November 24, 1998
    June Gibbs Brown
    [ DHHS ] Inspector General
    DATED: November 24, 1998
    Nancy-Ann Min DeParle
    [ HCFA ] Administrator, Health Care Financing Administration
    1. Separate and apart from the anti-dumping statute, in accordance with sections 1857(g), 1876(i)(6), 1903(m)(5) and 1932(e) of the Social Security Act, the OIG (acting on behalf of the Secretary) has the authority to impose intermediate sanctions against Medicare and Medicaid contracting managed care plans that fail to provide [ DHHS & Federal HMO T42CFR417 criminal denial of covered Hospital Insurance Benefits/Services ] medically necessary services, including emergency services, to enrollees where the failure adversely affects (or has a substantial likelihood of adversely affecting) the enrollee. Medicare and Medicaid managed care plans that fail to comply with the above provision are subject to civil money penalties of up to $25,000 for each denial of medically necessary services.
    According to the Detroit News, Between 1999 & 2001 Michigan's Medicaid clientele ballooned [ DHHS T42sec417 induced forfiture of existing federal hospital insurance benefits for illegal Mediciad kickback conversions ] to 1.25 million from 1 million, at a cost of approximately $6,000 on each Medicaid Reciepent.
    The Detroit News stated according to Paul Rienhart " a Medicaid Expert " in
    The State Budget Office of Michigan, says
    [ OFIS/HCFA ] Medicaid consumed 8% of Michigan's General Funds in 1998.
    [ OFIS/HCFA ] Medicaid will consume 32 % of the General Fund budget by 2004.
    400.603 Application for, or Determining Rights to, medicaid benefits; false statement or false representation of material facts; concealing or failing to disclose certain events; felony; penalty. [M.S.A. 16.614(3) ] …………. DHHS T42CFR417 Hospital Insurance Fraud by Fright /Anti-dumping violation and OPM T5CFR890.105 Criminal DENIAL of COVERED Hospital Insurance Claims to Force illegal HCFA Medicaid Kickback Conversions – misprison of a felony 'grievance procedures' DHHS & Federal HMO Hospital Dumping.
    Retired OPM FEHBP Health Insurance Preiums are taken out of Retiree Checks Befor they recieve thier checks. These ' Federal Beneficiaries ' are paying for 'Hospital Extended Care Benefits'/Services, that has not been available to them since the 1998 DHHS OIG Volentary Disclousure Program was created to defraud them of that benefit – DHHS T42CFR417 automatic denial of Hospital Insurance Benefts, to force illegal HCFA State Medicaid kickback conversion – eligibility / Poor.
    The OIG is an independent entity within -[ white collar criminals ]- the Department of Justice, that reports to both the Attorney General and Congress on issues that affect the Department's personnel or operations.
    U.S.Attorney…………Gonzales aide said that she had considered politics in screening applicants. The expanded inquiry, conducted by — the department's [ OIG ] Inspector General and ITS Office of Professional Responsibility —, comes after testimony Wednesday by former Gonzales aide Monica M. Goodling.
    ABOVE the LAW — T18CFR371Crime — U.S.Attorney General & Office of Inspector General — 1998 — The Health Care Fraud and Abuse Control [ DHHS T42CFR417 anti-dumping violation ] Account would be established as an expenditure account [ MI OFIS / HCFA Kickback ] within the Federal Hospital Insurance (HI) Trust Fund.
    The OIG has jurisdiction over all [ criminal ] complaints of misconduct against Department of Justice Employees [ T18CFR371 Misprison of a felony federal health care offences against american citizens & federal health care programs ] including the Federal Bureau of Investigation; Drug Enforcement Administration; Federal Bureau of Prisons; U.S. Marshals Service; Bureau of Alcohol, Tobacco, Firearms, and Explosives; United States Attorneys Offices; and employees who work in other Divisions or Offices in the Department of Justice. ( The one exception is that allegations of misconduct involving Department ATTORNEYS a that arise from their AUTHORITY TO INVESTIGATE, litigate, or provide legal advice are the responsibility of the Department's Office of Professional Responsibility.)
    All Entitled Federal Employee Health Beneficiaries being criminally denied [ DHHS T42CFR417 ] Existing Federal Health Insurance Coverage Title18CFR1001Crime.

  5. To solve the health care situation in the U.S., the two main issues that need to be addressed are the lack of a requirement for coverage and individual accountability. This proposal attempts to solve both problems.
    For any type of insurance to work, the risk needs to be spread out as widely as possible. Since everyone will at some point need some type of coverage, possibly extensive, it only makes sense that everyone should pay an equal portion to health care for the span of his or her life. This is the only sure way to keep rates for everyone as low as possible.
    This sort of coverage, henceforth called Necessary Coverage, will cover anything necessary to survive. This means that without the medication or treatment, the person would be unable to carry on day to day activities. Any treatment that doesn’t satisfy this requirement would be Supplemental Coverage and would not be required. An analogy to this would be the liability and full coverage systems in auto insurance. If a person has no Supplemental Coverage, everything not covered by Necessary Coverage would need to be paid for in full out of pocket.
    What is proposed is to add a new payroll tax for every American to cover per capita costs for Necessary Coverage. No business would provide insurance. Instead, the money that is currently being spent to provide coverage for the employee would be added to the amount that he or she is paid. The important difference of this system from many advocated socialized programs, however, is that people would then use this taxed money to choose a provider. Any funds not used to provide Necessary Coverage would be refunded, and any additional funds required would be added as a tax. Doctors and pharmacists would then bill the insurance company as they now do, and the insurance company would bill the government for the cost of a person’s insurance. The government would then disburse the tax money collected to the insurance company and the IRS would then tax or refund accordingly. Although this system would add a bit of logistical work to the current one, it should still be workable.
    By keeping competition in the marketplace, much of the extra wasted money with the current system could be avoided, and everyone working would have no choice in whether or not at least basic coverage is obtained. However, the quality of health care that we enjoy in this country should still be maintained, since insurance companies will try and cut costs and improve service to keep their customers. Currently, people with business coverage have no accountability. Many pay nothing, so they waste dollars unnecessarily with unneeded tests and prescriptions. More importantly, drug companies are being given a “blank check.” They can charge as much as they want, and since the individual consumer isn’t paying, there is no personal incentive to reduce cost or choose a cheaper alternative.
    If a person is unable to pay for insurance because they do not work or make too little money, the tax burden for their costs should then be assumed by the rest of the taxpayers.
    An in depth numerical study is necessary to determine what the cost per person for a program like this would be and if it is a feasible solution, and I have neither the time nor resources to complete this. I am hoping that someone reading this document will.

  6. I am an insurance broker who talks to people in need of insurance coverage. I also talk to medicaid people (Under 150% income level) who use government run health care. It is clear to me that government can not provide health care directly to the people. Government can not issue pass ports in a timely manner and would not be able to issue health cares in a timely manner. Look to New Zealand for what national health care does. In New Zealand people buy health insurance supplement plans becasue if they don’t have a supplement plan they can not see a doctor. I like the European medication model where they have no prescriptions and you can get medication easily and cheaply. People buy health food things that are more dangerous than medications being take today. Nationalize the drug companies because it is making and distributing a tangable product but medical services are not something our government can manage effectively or efficiently.

  7. Jack,
    Your entire argument is based on administrative expenses and you’re using old data. Administrative cost ratios are down to the 14% to 16% range, which is a significant savings for the entire system. Is it still too high, certainly, but they will never be eliminated and you fail to recognize that fact as well. Medicare and most state Medicaid systems use the private sector to administrate claims; therefore the notion of a single payer system is truly a farce.
    Furthermore, you have failed to address the real causes of raising healthcare costs in this country…our aging population and the demand for more services. Basic and simple facts you can’t ignore. Where are your facts that to address increased cost of medical technology, drugs, physician fees, medical malpractice, private for-profit specialty hospitals, hospitals sitting on $100’s of millions of dollars and spending billions on expansion projects, etc.? Your single payer system solution is simplistic and narrow-minded and will solve nothing without addressing “ALL” aspects of the healthcare crisis. And no single system payer system in a major industrialized state has been able to resolve the issues either.
    As far as looking to our friends up north as a model, you must be kidding? Their program is under funded and demands constant infusions of cash from the provincial governments and has annually reduced benefits to their citizens. For example, we enjoyed two visits to the dentist per years in this country, in Canada; it’s one visit every two years. There is a cost benefit differential you are failing to recognize when making you comparison. Germany’s single payer system is having the same problems and their worker nationally went in strike a few short years ago because the government had to cut benefits. If a single payer system is so great, why are we seeing an expansion of private insurance in all of the countries?
    The fact is there are multiple problems with multiple solutions available to us today. To fail to look at all causes and all solutions is wrong and will only result in putting a band-aid on a hemorrhage.
    I would agree with you that the Medicaid system is the fist place to look. I would propose expanding enrollment into Medicaid in a similar manner as current Medicare Supplements are sold. A defined number of benefit programs to choose from that meets your personal needs, with modest premiums based on you ability to pay using brackets of percentage of the poverty level. Currently Medicaid is only available to people who fall at the 150% level and below. If we simply expand this program up to the $50,000 income level we will resolve nearly 2/3 of the uninsured problems in the country.

  8. W’s HEALTH PLAN = two new Ws’ (Germs?): WINDFALL(W1) and/or WHEREWITHALL(W2)
    At least that is my conclusion re the following excerpt from THCB dated January 25, 2007 POLICY/POLITICS: Bush’s Health Plan:
    “The Bush proposal that woke me up was the creating a tax deduction for health insurance that would apply to everyone. Potentially this really matters, and inside it is the germ of the right idea. But I guarantee you that most Americans won’t have a clue where this came from, and why it made it into the president’s speech.”
    Initially, Kudos’ to you and THCB for being a terrific resource for those involved or interested in health care issues. I believe THCB will prove indispensable for tracking and discussing health care developments in the future.
    I agree with you a) that the Bush plan contains a germ of the right idea and b) that most Americans don’t have a clue as to where (the Bush plan) came from or why it was included in the state of the union address. Further, I suspect we might agree that the mere fact that President Bush proposed the plan is likely to generate most of the resistance to it. I think we might also agree that at this point most Americans don’t (at least yet) understand, care or appreciate the impact of the plan. Do these issues really matter? I don’t think they do. My experience suggests a good idea will prevail, and often will take on a life of its own, regardless of who suggested it. With the internet and blogs like THCB, ideas, good, bad or even ugly are not easily suppressed.
    So, does the Bush tax deduction proposal have merit?
    I think the Bush plan has a great deal of merit, more merit and the potential for implementation of sound health care policy than any proposal I’ve observed in some forty years of dealing with insurance and health care issues as an attorney in private practice and in both state and municipal government, as a health care lobbyist, and one shot as political candidate (unsuccessful). Currently, I’m a 67 year old seasoned citizen in a state of job lock (for the pay and benefits) and fearful of retirement. This personal stuff is not to elicit sympathy but is offered to afford some background on those experiences which might affect my views. Now, as to the merits, or at least my personal view based on the rather limited information currently Clearly new information, congressional modification, amendments etc. might change my views on any of these points from a plus to a minus.
    Plus Side:
    1. The plan places primary responsibility for health care spending decisions on the individual or family subject to state and local government regulation. The federal government role is more limited but is still significant and of course is always subject to change via Congressional action. I View this as a positive but I realize that many may might disagree.
    2. States would appear to have broad discretion on how best to deliver, regulate or provide healthcare. ERISA issues aside, insurance regulation would continue at the state level.
    For example, it seems that a federally based one size fits all single payment system would not be possible. On the other hand a state based or regional or even local based single payor systems would be possible if permissible under state law. Multi-state or regional plans involving more than one state appear problematic without additional Congressional action.
    Again, I would anticipate that some will consider this attribute as a negative and agree that in some instances such views might be well founded given the power and resources of the insurance industry.
    3. The Bush plan is simple and easy to compute.
    I think most would agree that this aspect should appear as a plus. We will soon find out since every taxpayer should know by April 16 or be able to calculate a ballpark figure of how the proposed changes will affect them.
    4. At the Federal level, the Bush plan would tax the rich – the rich being those whose healthcare expenses exceeded the proposed (generous) exemptions – $7500 for single taxpayers, $15000 for joint taxpayers.
    Everybody but the rich is likely to agree that this is a positive.
    5. At the State/Local Level the “Germs” dubbed WINDFALL(W1) and/or WHEREWITHALL(W2) kick in and taxpayers will be impacted in accordance with their state & local tax structure.
    a. The WINDFALL(W1) germ impacts those (relatively few) states with no state or local income taxes. In these states, as I understand it, the working poor will receive tax relief from payroll taxes including social security for health care expenses. With no state/local taxes, this new “income” spending on health care should have a positive impact. I dub the W1 germ WINDFALL because state and local economies would benefit from this additional spending power upon the effective date of the plan with no legislative action on their part. It appears that withholding amounts would simply be adjusted downward and fatter paychecks would follow. It is not clear how it would be assured that such amounts are spent on health care. I suspect significant penalty and interest charges would be applied.
    b. The WHEREWITHALL(W2) germ would impact the substantial majority of states, those that have state and/or local income taxes . Unlike W1 states, the W2 impacted states would need to take prompt state legislative action to offset the highly regressive impact of their income taxes on the new non cash but taxable income – the value of a taxpayers health care benefits or expenses. Even after adjusting the for the regressive effect (presumably by exemptions or credits), there should still be plenty of money left for states to design and implement more efficient health care plans to meet the needs of their citizens and perhaps other needs as well. Dubbing the W2 germ WEREWITHALL seems appropriate since it addresses the most serious and most frequently omitted issue in most health care proposals – how are we going to pay for it.
    Though the answer to who or how do we pay for it is always we all do, the Bush plan has a quite novel wrinkle. This because Congressional action taxing and exempting health care benefits or taxing the rich actually generates substantial increases in state and local taxes in the W2 states. The state legislatures then have to correct the regressive effects, carve out sufficient amounts for their health care reforms and stave deal with all other interests who might wish to share in any unallocated balance of the WHEREWITHALL.
    Just imagine how many blogs will be generated during this process. Is THCB ready for this?
    To sum up, my take is that both W1 and W2 are good “germs” and there appears no urgent need to find or administer a vaccine. All states and local governments and more importantly the people could benefit from this plan. The plan clearly places the ball in the states court with what appears to me to be an adequate and appropriate financing mechanism, which in itself is a remarkable feat. I believe President Bush has presented a serious and well thought out plan for health care reform.
    Surely the Presidents plan is worthy of further discussion and debate. I certainly hope we can agree on this last point and further that you and THCB make it possible. Imagine THCB reporting on the progress of the 50 little crucibles of democracy hard at work fashioning health care reforms appropriate to their citizens.
    Thanks for taking the time to read this post. I urge and will be pleased to reply to any comments or criticisms email Email: jnewco@earthlink.net
    Jim Newcomer

  9. his site has a hybrid proposal for the uninsured:
    Creates 50 new state workforces of Universal Health Care Workers, at lower labor rates to provide direct health care to the uninsured vs. insuring them with health care policies. This would separate them from the current system which must raise rates to cover the 42 million who are uninsured.
    This policy does not or using Canadian style health care for everyone. Utilizes non for profit retired, college and foreign workers. The new UHC workers would not need medical policies themselves.
    It also issue a New Universal State (Part B Policies) so Current Medical Polices can be reduced from $5millon to $50,0000 or by 99%. You current $5,000,000 medical policy would no longer need to be larger than $50,000.
    This combined with the Workers will drive premiums down.
    Check out this sit http://www.mypaysaver.com.

  10. his site has a hybrid proposal for the uninsured:
    Creates 50 new state workforces of Universal Health Care Workers, at lower labor rates to provide direct health care to the uninsured vs. insuring them with health care policies. This would separate them from the current system which must raise rates to cover the 42 million who are uninsured.
    This policy does not or using Canadian style health care for everyone. Utilizes non for profit retired, college and foreign workers. The new UHC workers would not need medical policies themselves.
    It also issue a New Universal State (Part B Policies) so Current Medical Polices can be reduced from $5millon to $50,0000 or by 99%. You current $5,000,000 medical policy would no longer need to be larger than $50,000.
    This combined with the Workers will drive premiums down.
    Check out this sit http://www.mypaysaver.com.

  11. Whoa there Mr. Leith, your fallacious premise is showing.
    You are assuming the that the average medical school matriculate would earn the average income in some other field. They would not. They would excell. They are talented, driven individuals who would earn many times the average in their chosen fields of endevour.
    An average achiever in our general population could not survive much less much less excell in the medical school curriculum. It takes uncommon ability to adequately grasp the concepts required to safely apply current medical knowlege. The “economic rent plus” you describe is the price society pays for the opportunity costs incurred by the human being who decides to commit himself to this rigourous training program of 9-15 years in legnth. If you want a good system, you need to have good providers. You are going to have to pay for them.
    I have always tried not to have a big head, but medical school was damn hard, getting in was damn hard. Residency was damn hard and the most I ever made in one year was $17,000. If you don’t make the profession renumerative, even the perfect system will fall to the mediocre level of its providers, as this economy has too many opportunities for the skilled. If I was presented with your scenerio at the front end, I wouldn’t go through the training. If it changed now, I would strongly counsel every potential physician against the profession unless society recognized their value. Life is too short.
    Fortunately, you can do compensate phsyicians adequately without the apparently distasteful option of actually paying them based on their value. Removing barriers, like universal free medical education, liability reform and advantageous tax treatment of capital investment in systems which have been demonstrated to improve outcomes, such as a colposcope, will go a long way.
    All this talk of reform is pointless unless you are planning to allow physicians to control costs as you control their payments. Make the reimbursement too tight without such control and watch the practioners flee the system. Ir the upcomming 10% Medicare cut illustrates how society values me, at the end of the year, I will not be taking any new Medicare patients. If future cuts are not addressed in a year or two, I will opt out. Those offended by paying my rates up front can take their care elsewhere.
    I say once again we get the system we deserve.
    by the way, if the AMA is the cartel you describe, it has got to be the worse one in the history of the planet. It hasn’t even won me the right to collectively bargain like the lowest paid service sector employee does, my Medicare reimbursement has gone up 1% year for each of the past five years and I am due to take a 40% pay cut from them over the next ten. I wish folks would stop referring to them as some sort of monolith. They are mostly a running joke among my colleagues, especially since the Sunbeam fiasco, and are seen as being in the pocket of corporations. I haven’t been a member for years.

  12. I am a firm believer in paying good docs well ($200-500K in wages), just not on the basis of how many tests they order or don’t order. That also falls in the “top 10%” in case we are being picky. The bad docs should be used in lesser responsible positions until they work themselves up the ladder. Of course we have no way of judging that today, but over time we should develop a national database that tracks practice patterns, practice variations, successes and failures, and etc. I would guess with this info the clinics can compete for the better docs. With a single-payer system and a CMS-like reimbursement system the wages will be held in line.
    The public “should forgive the loans” of the top 10% of physicians. Provide an incentive and the public will benefit. The government could reimburse the medical colleges for those docs with high grades in needed specialties. (And incidentally, I have no horse in this race. I’m retired and not a physician.)

  13. Jack Lohman writes:
    > Good docs should indeed earn in the top 10% wages
    Well, that means a “good doc” would earn around $75K per year. $100K puts him in the top 5%. So by your lights this problem is entirely solved already.
    A very gross analysis could look something like this: median income in the US is about $40K. People ought to expect a return on their investments. If a doc invests $1M in his own training (tuition, foregone income) let’s say he ought to realize 5% on that each year, or about $50K. ~$40K + ~$50K ~= $90K, so it seems to me docs are due in justice about $90K in “personal income” each year from a reasonable amount of “medical labor”. Anything docs generally earn above this amounts to economic rent on medical licensure, which is entirely at the pleasure of the government. This of course explains lobbying by the AMA: they have to protect those economic rents. There are about 1M docs in the USA and their fees are about 25% of $1.6T. On a per capita basis, they each get $400K in gross income. Practice expenses are about 50%, leaving them with $200K in “personal income”. Apparently the economic rent on a medical license runs in the neighborhood of $100K per year. I realize this is not uniformly distributed, but that’s a problem for The Guild to solve. Its all very rough but I think I have the outline right and even the figures should be close. The Healthcare Economist may wish to weigh in on this.
    If a doc also has his own business (private or group practice, whatever) he is due also the returns on his ownership stake in that. Of course, the return on that investment will depend on his management skill, and if he’s distracted from doing “medical labor” in order to manage the business, the “medical labor” component of his income will fall.
    > their medical training should be totally forgiven if
    > they ranked high in the graduating class.
    How will you determine which is a “good doc”? And who pray tell should “forgive” their training? The medical schools (i.e. the docs who did the training)? The bank that holds their student loans? Who?
    But no matter. As we have seen, the “problem” of educational debt is already handled by their income levels: they’re getting a return on their investment PLUS economic rent on their medical licenses.

  14. sunkyu park, who the hell really knows? As with all Bush proposals, follow the money. It is he who gives the most money to Republicans that will gain the most benefit. And with Bush you know that it will never be the taxpayers or patients. The Dems are only a little bit better because they get much of their money from unions. And unfortunately, from trial attorneys that will block tort reform. It is unfortunate. Without political money driving the system we’d see a fix to the health care system and malpractice fiasco virtually overnight.

  15. Barry, I think that’s what we can expect from all Democrats, with the trial lawyers giving some 80% to their campaigns. That’s why I’d prefer seeing tort reform moving forward without tying it to health care. We can’t wait for the latter.

  16. You wrote: So, today, you’re better off getting insurance paid for by your employer than taking the cash, getting taxed and buying the same insurance yourself
    I’m confused by your comment on the last paragraph.
    Didn’t Bush “propose” the tax cut for whoever purchases his own insurance?
    My understanding was that “for an individual”, Bush’s proposal wouldn’t reduce or increase health care spending because if he would opt out of the employer provided health insurance, the wage will go up and with that extra money, he could buy the health insurance.
    I thought Bush’s new proposal would alleviate the industry’s burden of providing health insurance to employees.
    Am I getting this right?

  17. Dr. Thom,
    Thanks for the great comments. It’s very helpful to hear from someone like yourself who has to deal with this every day.
    I notice that the recent seven page description of the health reform plan offered by presidential candidate John “Trial Lawyer” Edwards had exactly zero to say about malpractice reform or health courts. I suspect that the trial lawyer puppets among his former Senate colleagues are of the same mindset. Perhaps we can get some of the states to adopt health courts. I think the constitutional issue relates to guaranteeing a jury trial which is what would have to be changed, probably by constitutional amendment, for this category of disputes.

  18. Thanks for getting back to us DrThom. A weekend of call is certainly good reason for tardiness. Having spent 25 years owning my own cardiac lab and sleeping more on the couch in my office than at home, I certainly understand.
    Most of us on this thread agree with your suggestions on liability reform. I don’t think a constitutional amendment would be needed but it may indeed be claimed by the trial attorneys. We wouldn’t suggest changing the criminal justice system that requires a twelve man jury, only the civil court system as it relates to medical lawsuits. The “peers” a doctor should have to convince should be qualified peers that understand medical decisions; other doctors. I would not oppose making it a part of the Medicare-for-all deal, but these things are usually easier to get passed if they are not laden with other issues. I’d like to see them move forward on parallel tracks, but that’s not a deal breaker for me.
    Your Medicare fraud sensitivity is a legitimate issue, but you can thank the docs in the lower segment of your profession for that. And not just docs; the nursing home environment is probably more rife with fraud than doctor’s offices. I can imagine even your clerks doing the upcoding without the doc’s knowledge, and then benefiting as a whistle blower. I don’t know if having a 2-3 person internal committee would help mitigate any charges, but voluntarily increasing your own oversight may be of some help. Certainly requesting a letter from the Medicare carrier on questionable codes would be advisable.
    In my old business CMS is attempting to cut the per-test reimbursements on cardiac monitoring, when instead they should be effecting cost reductions by cutting the over utilization. Far more Holters are done in the doctor’s office because they are easy and profitable, and less often because they are a legitimate diagnostic tool. Sometimes the results are meaningful, but not enough physicians really know how to deal with a thousand PVCs on an asymptomatic patient. That’s why I’d like to see a national database that compares practice patters.
    I don’t have a big problem with private insurers providing Medicare Advantage plans, even at 12.5% higher than Medicare itself. I’d insist that they be non-profit and self-contained (no exorbitant consulting fees to replace overpaid CEOs), and their books are open. I’m concerned with their cutting care to increase profit spread and hiding those profits to look like good guys.
    The real thing doctors have to worry about is the direction of the system if we don’t fix it now. Rather than belaboring that here I’d refer you to http://www.throwtherascalsout.org/How_doctors_are_yielding.htm. It’s not going to be a pretty sight. If you think Medicare is tough wait until industry takes over.

  19. Well, I’ve learned I can’t post before a three day call weekend. It sounds like, even though your blog is obviously widely read by folks smarter than me, you guys don’t get many regular docs chime in very often. I am flattered by the interest in my opinions, I will do my best to be as honest and direct as I can.
    Health courts as described are the standard by which all other solutions are measured. The reaction to their implementation as far as patient management is concerned would be toward known quality indices as opposed to the shotgun approach to try to cover all the bases. The increased quality of care and increased efficiency of care would result in positive multiplicative effect. In short, it would be a good thing.
    What is unclear to me is, considering how the courts are treating judgment caps, how they could ever be implemented short of a constitutional amendment. I don’t see how they can be. Without some sort of tort reform any healthcare reform is doomed to be fatally incomplete. The price will be paid by either a decrease in the quality of the practioners in the system (and a concomitant decrease in the quality and efficiency of the system itself)and/or increasing utilization out of survival instinct. I have seen this issue discussed many times but never toward the issue of how to convince the trial lawyers to give up their stake in the system. I would be very interested to hear your opinions on how to make such as system a reality.
    Finally, and this might change your opinion of me, but I will have a singular lack of interest in any real work on universal coverage that does not deal with the liability issue front and center. Any idea that does not effectively moderate liability costs will eventually be unaffordable and from most physician’s point of view, a non starter.
    With regard to using Medicare as a single payor, as a small, ok medium businessman, I would take a single payor Medicare system in a heartbeat as long as it addressed the weakness of the current Medicare system. In its current form, I would still need about the same number of billing staff for reasons I will outline below. I don’t think any of the changes I need are deal breakers from Medicare’s standpoint but they absolutely are by mine.
    The punitive nature of the program must change. Honestly not a week goes by that I am not reminded of the consequences of Medicare fraud. Medicare fraud, I am told by our attorney, is the only felony crime on the federal books where you do not have to form intent in order to be convicted. In other words, if I overcode, or demonstrate a pattern of overcoding I could be held criminally liable even if I did it unintentionally. I am not saying this is likely, but it is explicitly the current law. It is also what Medicare constantly, and I mean constantly, reminds me of whenever they send out their bulletins. The harping in Washington on “waste, fraud, and abuse”, while politically cheap, has resulted in an environment where I a presumed to be a criminal. Not the way to encourage provider participation in such a system. I don’t want to sound maudlin, but it is a significant stressor and the more of it there is, the shorter my professional life will be.
    What is more, the poor office worker who presses the buttons on the computer is equally liable. Even more, if she recognizes the pattern and tells CMS before she tells me, she gets to keep a sizeable percentage of the take. Keep in mind that the rules for coding, like IRS regulations, are kept deliberately vague so as to keep me a little uneasy when I determine a level of care. I know that lots of unethical people cheat Medicare, but I would prefer extremely clear rules and extremely harsh criminal penalties to the current system. If we were to try to cover everyone in Medicare and not change this presumption, I would not accept a single new Medicare patient. If I was compelled to accept them in such a system, I honestly believe I would quit.
    Current covered services in Medicare also reflect this bias that I am a crook. Diagnosis based restrictions on testing significantly hamper my ability to care for patients. Documentation requirements are equally onerous and even more nonsensical. Medicare wants me to improve my foot care in diabetics, but in order to meet the requirement to get paid twenty four bucks for trimming toenails, I have to provide one printed page worth of information. I should only have to dictate “toenails trimmed without complication”.
    Wellness care is also woeful. Medicare should at least pay for screening tests at intervals that the government’s own joint task force on preventative services recommends. Indeed, it is its lack of coverage of theses services that enables private insurance plans to push their Medicare Advantage plans. Also, the new Medicare D plans may be holding down costs to the consumer, but their use of prior authorization for drugs is onerous (sp?) and a significant barrier to care. PAs must go if you want me to be efficient enough to care for my share of all these newly insured. Hell, at least 80% of the value of a drug is found in the generic version of most classes of meds. Just make sure I have unfettered access to at least one drug in each class. And now that I don’t need their samples to treat my indigent patients, keep that pretty drug rep with the low cut blouse out of my office too (leave the Viagra, though).
    Even with recent changes, current payments from Medicare do not recognize the importance of high quality primary care physicians who drive the costs in the system. Payment levels are unstable from year to year, making planning difficult in the extreme and, at current levels, they are not enough to meet the income thresholds I described in my previous posts. Although Medicare pays relatively quickly, buffing these claims takes considerable time and expertise as does all the compliance I have to do in this overly punitive environment so I can feel I have a reasonable chance of staying out of prison. Therefore don’t expect my overhead to change much with a Medicare based single payor system, I’ll need all my commercial staff to help with the increased Medicare claims.
    That said, I think that all these issues are fixable relatively cheaply as long as there is some way to compel the proceduralists to participate in the program enough to keep services available while at the same time allowing them to make enough money on a private FFS basis to make their training worthwhile.
    Reading back, this sound awful whiny. Look, I practice medicine because I love my patients, I get a good income even considering the time I put in up front, I get some societal respect (except, of course, from out government which seems to think I don’t pay my fair share of taxes on income they assume I stole from them in the first place) and a personal sense of accomplishment. If it takes a single payer to cover everyone I’m in. The costs of my providing care can be easily covered by reducing the barriers in place rather than printing more money.
    Of all physicians, primary care docs are the ones who need to buy in, after all someone has to provide quality care for the millions of newly insured. It seems to me it is just as important to keep us practicing as long as possible as it is to get new ones in the pipeline. Reform the tort system, forbid physicians from receiving the technical component of testing and compel every physician to participate in a single payor to some level (but not too much). In return, you must completely get out of my face as to what interventions I order, give me clear billing guidelines and trust me to do the right thing. Do that and see how long I stay in practice. There would be no reason to retire, ever.
    We just bought a comprehensive nextgen emr/practice management system (1.5 million with absolutely no help and much hindrance from our government). I hope it will do everything as advertised. However, if it merely halves my efficiency and triple my work, it will exceed my expectations. More on that later

  20. Jack,
    Maybe we should develop a global budget for the number of questions we ask Dr. Thom before we ask him any more!

  21. Let me add three more:
    3) Does Medicare interfere with your treatment decisions?
    4) What are the major weaknesses of Medicare?
    5) Is your office aleady using electronic records, and what would you like to see them do to help your practce?
    (Aren’t you glad you asked?)

  22. And I’d two more questions:
    1) If we had a Medicare-only system, how many people could you reduce your billing staff from/to?
    2) Does Medicare most often under-pay, over-pay, or is their fee schedule fairly on target?

  23. Dr. Thom,
    Very interesting comments. I have two questions regardings #1 and #3 which are:
    1. Could you make a satsifactory (to you) income if you collected Medicare rates from all of your patients?
    2. If we had a sensible malpractice system (like health courts) that you and other docs perceived would resolve disputes fairly and objectively based on sound science and accepted medical practice, how would your practice pattern change, and how much of the healthcare costs that you and other docs currently “drive” could be safely eliminated?

  24. Thanks DrThom, you’re my kind of doctor. I agree with you 100% on your list of seven. Good docs should indeed earn in the top 10% wages and their medical training should be totally forgiven if they ranked high in the graduating class. What we need most is to get the non-health care services out of the health care delivery system. Insurance company marketing, commissions for the 50,000 brokers, salaries for the 100,000 underwriters, excessive salaries for the executives, and profits for the sharehoders add absolutely nothing to patient care.
    The knee surgery went well, thank you. I went to a doc who believes that if only half of the knee is bad, replace only that half. Two days out I discarded the crutches and two weeks out I’m walking fine though with some pain, but mostly during therapy.

  25. love the discussion
    As a family physician who is an owner of a multispecialty clinic and the driver of all health care costs, let me tell you what a system should look like.
    I would be happy if
    1. it paid me enough to pay off the 200k worth of debt I piled up getting here and not feel like a sucker for giving up the first 9 years of my professional life. Idon’t have to get rich, but I had better be in the top quintile of income if want to have enough talented motivated providers to keep the system going. There are too many other opportunities in this economy and I can satisfy my desire for service in other ways that won’t shorten my life expectancy
    2. There is no insurance company droid getting between me and the intervention my patient needs. Want to improve my efficiencey? don’t make me waste time trying to communicate the justification for my judgement. Limit my choices if you must, but don’t make me jump through any hoops for any of them. Any system that doesn’t essentially trust me won’t work.
    3. It removes any profit incentive for me to do one test over another or any test at all for that matter. although I do pretty well myself, it is a distraction
    4. It removes the worry that some malpractice attorney will make my life hell for 6 years, using the system to stress me until I settle or have a heart attack. This is a deal breaker. I have never been named but I have seen that scenerio up close and personal over a dozen times. It honestly is a and sometimes the primary consideration in absolutely every decision I make. If your think any system that does not address this will work, you all are living in a dream. Looks to me like health courts will require a constitutional amendment before the liability attorneys will give up on the current litigation model.
    5. It gets the marketers out of my face, another distraction
    6. It didn’t put any more costs on me than any other business man faces esp taxes on me because I am a physician
    7. It gives me the option to work for myself. it will take 5 employed physicians to provide the service of two self employed ones. If you don’t understand this, you will have one unsatisfied patient base
    I hope your knee is getting better.

  26. Bev, regarding paying “list price” for health care… no… you are not. You get the same discount as anyone eles with the same carrier as you. That is one of two things.. the ONLY two things… you should look for when buying insurance. Network ( for the discounted rates ) and a stop less you can live with, that’s IT.

  27. Barry, I’d say the one thing these numbers do tell us is that the waste — which is estimated at over 30% of the total — is well hidden and not easily determined when looking at overall costs….
    Jack – Maybe it’s all defensive medicine! Just kidding.

  28. Barry, I’d say the one thing these numbers do tell us is that the waste — which is estimated at over 30% of the total — is well hidden and not easily determined when looking at overall costs….

  29. What are we trying to prove here? That we really don’t have a health care problem? That the for-profits aren’t all that bad after all? That we can continue on our current course? When I had a product that didn’t work, I would go as far as scrapping the whole thing and startng redesign from scratch. Why are we trying to whittle around the edges here, and who is it we are trying to save?
    All of the areas you could possibly discuss are headed by special interests that are making money on the system and don’t want to lose position or profits. In my view, and admittedly it has become focused on what I think is the best possible system for Americans, we ought to quit trying to save the negatives and start working on the positives. We could start tomorrow if the politicians would get off their asses and get HR676 passed. See http://www.healthcare-now.org/resources/hr676.htm

  30. C’mon Barry. If hospitals represent 30% then docs represent 70%
    Jack — According to the California Healthcare Foundation, U.S. health spending broke down as follows (for 2002): Hospital Care, 31%; Physician and Clinical Services, 22%; Prescription Drugs, 10%; Dental / Other Professional, 10%; Nursing Home / Home Health Care, 9%; Administration, 7%; and Other, 10%. Total 2002 spending: $1.6 trillion.
    You can access the full report here. Note the relatively low percentage for administration, which includes all spending by insurers plus their profits and only excludes what they spend to pay claims.

  31. C’mon Barry. If hospitals represent 30% then docs represent 70%. Hospitals are not free of criticism, especially as more of them have become for-profits. But the system is driven by the physicians because they control the patient base. I think we have to quit defending our terribly fractured free-market health care system and look at the Medicare-for-all system in Canada. We can do it better, we can eliminate the wait times, but we simply have to have the balls to admit that the free-marketers have f**ked this up so badly that only a total remake of the system will fix it.
    Incidentally, I promised to get back to you on my knee surgery: Hospital charge for surgery room and three days = $23,500. How much could have been cut? Hell, I don’t know. But if they were operating under a Canadian-style system with fixed budgets would not do them any harm.
    And finally, “all of the above” are guilty of overcharging wherever and whenever they have the chance. That’s free market competition at its best.

  32. Look at all of the clinic consolidations over the last 10 years, and the resulting bigger clinics purchasing record numbers of diagnostic testing devices for their in-house use, and then claim (with a straight face) that this has had noting to do with skyrocketing health care costs. Guys, if that’s not where it is coming from, pray tell, what is causing it?
    Jack – Perhaps others have better information on this than I do, but my understanding is that prescription drugs account for about 10% of healthcare costs, and imaging is another 5%. I think the bright light should be shined on hospital charges – both inpatient and outpatient. By charges, I mean what they actually collect from insurers (including Medicare and Medicaid), not their list prices. Hospital charges account for at least 30% of healthcare costs, and that does not include bills from doctors, anesthesiologists, radiologists, etc. for services performed in a hospital setting that are billed separately. Despite the secular decline in hospital inpatient days that has been ongoing for more than 25 years because of less invasive surgical techniques, new drug therapies, etc., hospital charges are outrageous and continue to soar. Yet, most of them claim that they make little or no profit margin.
    Just one example from personal experience. In 2005, I went in for angiography. The test began around 2:00 PM. A blockage was found and a Cypher drug eluting stent (DES) was inserted. After a short stay in a recovery holding area, I was transported to a room in their “short stay” unit and was sent home at noon the next day. The bill: $31,000 of which insurance actually paid about $20,000. And that excluded the interventional cardiologist’s charges. Imagine what they must charge for more complex procedures that include a significantly longer hospital stay. Do they really need to bill their operating room time at $4,000 per HOUR? I don’t know how much of this is cost shifting, but I think all the debate about imaging and prescription drugs is small potatoes by comparison.
    For what it’s worth, guess which category of expense had the LOWEST increase in cost trend in 2006 for United HealthGroup: (a) hospital inpatient costs, (b) hospital outpatient costs, (3) physician charges, or (d) prescription drug costs. Answer: D and by several percentage points primarily because of all the new generics coming to market as more of the branded drugs lose patent protection.

  33. I’d just add one more thing: Look at all of the clinic consolidations over the last 10 years, and the resulting bigger clinics purchasing record numbers of diagnostic testing devices for their in-house use, and then claim (with a straight face) that this has had noting to do with skyrocketing health care costs. Guys, if that’s not where it is coming from, pray tell, what is causing it?

  34. I can hear it now: “Yes, Mr. Patient, I realize that my stats show more MRIs than the rest of the doctors, but that’s because I leave no stone unturned and I really care about my patients. You can turn down those tests if you want to, but then I must get you to sign this waiver.”
    Guys, until you’ve had direct experience with the overordering, as I have had, you’ll simply not be convinced. So be it. But these are practices that were once considered fraudulent that suddenly became okay.

  35. Pete,
    I agree with you. Doctors need a sensible litigation system (like special health courts) to be at least reasonably assured that any dispute they are involved in will be decided fairly and objectively based on sound science and appropriate and accepted medical practice, not jurors’ emotions and sympathies for the plaintiff AND the patient needs to have some skin in the game. There also needs to be good pricing transparency readily available to both patients and doctors. Then, perhaps we could reduce the over testing and direct the commodity like work (MRI, blood tests, etc.) to the most cost-effective providers.

  36. Jack,
    I see it as a matter of emphasis.
    I know doctors order more tests when the profit motive is involved. Incentives matter.
    My sense is, however, that defensive medicine is a larger contributor to overtesting than physician profit motive. The majority of physicians practice defensive medicine (it’s ingrained in training), but only a minority are profiting from their CT and MRI scans, with only a minority of those doctors ordering scans inappropriately.
    (I think you said something similar in the thread above regarding ethical vs. unethical docs.)

  37. Pete, I fully recognize that it is not the malpractice costs that bite, but the costs of defensive medicine.
    Isn’t it strange, though, that while malpractice costs have remained steady over the last six years the ordering of procedeures by physicians who are moving the cash-cow tests (MRI, CT, Echo) into their clinics, and no longer referring patients to the hospitals and their testing, has increased substantially. Did all of a suddent the presence of this device in their own lab increase their sensitivity to the malractice threat that has not been increasing? I don’t think so.
    Physicians should not be allowed to refer patients to internal labs in which their clinic has an ownership. They can refer them to the hospital that has no conflicted ownership.

  38. De-lurking for a couple comments re: Barry and Jack.
    Re: “skin in the game”
    >If I were a doctor, I wouldn’t feel threatened and >would certainly understand if a patient said: gee doc, >that MRI is going to cost me $300 out of pocket (out >of, say, $1,500). You’re the expert and I’ll certainly >go along with your judgment, but are you sure I really >need it? Under the current system, both the litigation >aspect and the patient’s insulation from the cost of >the procedure make it nearly impossible to control >costs.
    What’s going to happen when the patient doesn’t get the MRI (decision influenced by cost and doctor’s judgment) and ends up having a serious diagnosis delayed, with serious consequences. Won’t the lawyer say that the doctor didn’t appropriately emphasize the importance of getting the scan in ruling out disease? Won’t the argument be “of course my client would have paid for the MRI if you had emphasized its importance.” It’s possible (likely?) that unless the doctor insists on the test in these situations, there will still be legal risk for the physician. Is a doc going to stick his neck out, expose herself to risk, and give you judgment? Not unless the legal culture changes.
    that leads into my next comment:
    >The litigation arena is not the monster you make it >out to be. Malpractice costs have remained at less >than one-half of one percent for over five years now, >all while health care costs have skyrocketed. I >nonetheless, as you do, support special medical courts.
    To be sort of rude ;), how many times does it have to be pointed out that defensive medicine is the real issue here, not calculated (premiums, payouts, etc.) malpractice costs?
    As mentioned above, if doctors could feel relatively confident in using judgment for patients instead of feeling the need to “rule everything out” to prevent a lawsuit, billions of dollars would be saved.
    You talk about the 20% of docs who order tests to make money. The other 80% order tests so they don’t get sued. Which is a bigger problem?
    Now that I got that off my chest, I agree that special malpractice courts are probably essential in changing this culture of defensive medicine. Which is what you advocate. So we agree.

  39. Barry, you keep using the word “insurers,” like whatever we come up with they have to be a part of it.
    Yes, they propably do have IT systems; about 400 of them. Everybody is doing their own thing, and I believe that if we are to really get serious about a national IT system we should start with a system already in the public domain rather than build on a proprietary software package. That system already exists in the VA’s VisTa system, and it is available for free for anyone that wants to expand on it. It is open source, like Linux, and I would like to see a bidding system that would let qualifying companies bid on expanding it to meet the needs of a standardized national database. If one or more of the current insurers want to bid on it, fine.
    But the software must remain open source and owned by the taxpayers.
    You had some excellent ideas on what this IT system should do, and if you ever get that list formalized I’d sure like to get a copy of it.
    As well, even if an insurer decides to participate as a contracted programming source, they should still be removed with the rest of the “free market” providers. If they want to bid on the administrative contracts for Medicare, for which there is already one per state (WPS here in Wisconsin, Blue Cross and others in other states), they could jump into that market. So could Halliburton if they wanted to.

  40. I don’t like Medicare’s fee-for-service payment system, but I think increasing oversight on the over utilization problem coupled with a national IT system would stem these abuses.
    Jack – We’re in basic agreement on this one. I’m certainly not an expert on IT, but I strongly believe that this is one area where insurers can really add value. This is because of their sophisticated IT capability, the data they possess from a huge volume of claims history, etc. Even Medicare uses the private insurers (mainly the Blues) to process and pay its claims. I was amazed to learn just yesterday, for example, that United HealthGroup has five year prescription drug history on 240 million people! I was told that such information gives a pretty good idea about what diseases and conditions people have. United also has a good health risk scoring capability (developed as a result of underwriting) which their Ingenix division sells to others.
    Last year, United also announced that it will stop paying for Nexium producing a savings of $150 million per year for its customers. It says that Prilosec and its generic equivalent are just as effective.
    Presumably, it would not be insurmountable to track medical spending by referring doctor as well as by the actual provider. At the same time, I think insurers need to give up on their historical demand for confidentiality in provider contracting which prevents disclosure of what hospitals, doctors, imaging centers, labs, etc. are actually paid by insurers (as opposed to list prices). If we had better transparency, both patients and doctors could make more cost-effective decisions, especially with respect to the commodity like services such as imaging, blood work, and even drugs.

  41. I think there is another dynamic here. Even I would have to admit that the VA does not attract the top physcians because the “salary” doesn’t permit them to get rich, so the VA gets an overall lower level of capability. That of course would be mitigated if we folded the entire US healthcare system into the VA’s. But I’d prefer for the moment folding all VA patients into the public-private Medicare system. I don’t like Medicare’s fee-for-service payment system, but I think increasing oversight on the over utilization problem coupled with a national IT system would stem these abuses. Barry is better equipped to address that.

  42. Disappointing news, Bev. The VA seems like a good model but underfunded. I think there is still the misperception that heart attack is a white male disease. But it is nice to see that they even measure themselves.
    And Barry, the main reason for-profit insurers get a bad rap from me and others is because they are taking a piece of the funding for services that are not providing health care at all (marketing, commissions, profits) while 45 million Americans remain uninsured and 18,000 Americans die prematurely each year because they are uninsured, all so the insurance industry can have a seat at the table. Sorry if you think I’m being unfair, but they are dispensable.
    That 170-180 million Americans get their insurance through their employers is unmoving. We should not be saddling employers with health care in the first place. It is driving jobs out of the country and seriously affecting our economy and security.
    The litigation arena is not the monster you make it out to be. Malpractice costs have remained at less than one-half of one percent for over five years now, all while health care costs have skyrocketed. I nonetheless, as you do, support special medical courts.

  43. Bev,
    Thanks for the research and the links. It sounds like the VA, while trying hard I’m sure, is not providing as uniformly wonderful care as some would have us believe.
    I also think the for profit insurers are getting a bad rap, especially from single payer advocates. There are between 170-180 million Americans who get their health insurance through other than Medicare and Medicaid. Of these, roughly 50-55 million work for large employers (defined as 5,000 employees and above), and virtually all of those self-insure. They contract with insurers to provide administrative services like claims processing, network access, etc. but pay all healthcare claims out of their own funds. The Federal Employee Health Benefits Plan, I believe, is a cost-plus contract which is comparable to self-insurance. The non-profit insurers have a very large market share. Indeed, in Minnesota (where United HealthGroup is headquartered), non-profits have a 100% market share by law. In Pennsylvania, its about a 70% share. Many of the Blues remain non-profit. The non-profits don’t have to pay taxes, their medical cost ratios are somewhat higher than the for profit companies, and their profit margins are lower. Even the for profits average only about 5% after tax net income margin.
    I’ve commented before that doctors drive virtually all healthcare spending through hospital admissions, referrals to specialists, ordering tests, prescribing drugs, counseling patients and doing procedures themselves. Patients may contribute to cost growth by asking for non-invasive but expensive tests like MRI’s “just to be sure” or to rule out cancer or whatever. It is often not easy to determine before the fact whether a test is necessary or not, but the litigation environment that doctors have to practice in creates a bias toward over treatment. I know, some of them make money doing the tests too. However, I’ll bet that if the litigation environment were more sensible AND patients had some skin in the game and an incentive to care about costs, it would make a positive difference. If I were a doctor, I wouldn’t feel threatened and would certainly understand if a patient said: gee doc, that MRI is going to cost me $300 out of pocket (out of, say, $1,500). You’re the expert and I’ll certainly go along with your judgment, but are you sure I really need it? Under the current system, both the litigation aspect and the patient’s insulation from the cost of the procedure make it nearly impossible to control costs.

  44. And Bev, I say go for it, if that works for you. But 70% of the public prefers a universal government-run health care system, and they are paying the bill so they should get it. Unfortunately, the health care industry is contributing $100 million per year to campaigns to keep the system broken, so it is an uphill battle. We have a bought and paid for congress.

  45. OK, I tried to research Barry’s question regarding how many cardiac procedures are ordered by VA docs vs. private docs. This was in an attempt to answer whether private docs are over-ordering procedures for personal profit.
    Unfortunately, there is no clear answer, at least in journals that one can access for free. (BTW, this is another pet peeve of mine; just because I’m not a cardiologist and won’t pay for a subscription to Circulation, or the American Heart Journal, or whatever,
    I can’t benefit from reading the research – even though
    my tax $$ may have helped fund it…..)
    There is a report from 2003 , and I quote, “VA patients underwent significantly fewer procedures than their matched (for severity of disease, age, etc.) Medicare counterparts. For patients 65 yrs or older, utilization rates for catheterization, CABG, angioplasty and revascularization were significantly lower for veterans compared to Medicare patients treated in private sector hospitals”. BUT – the mean length of stay for veterans was 11.1 days vs. 8.8 days for Medicare, AND the VA patients had higher short and long term mortality than private sector patients. So in other words, they got less treatment but more of them died!! So I don’t think that answers our question.
    In fact, the last link cited refers to a program by the VA aimed at improving what is deemed inferior cardiac care for veterans compared to non-veterans (…..strategic goal 3pdf)
    I did learn, of interest, that there is a clearcut bias among both VA docs and private docs to order fewer of these procedures in both blacks and women.
    So back to arguing over HSA’s, gentlemen. I have one.
    Sure, I’m saving the $$ but paying directly out of pocket at list price for my medical procedures. Since retired docs have no employer-sponsored health insurance (I buy mine thru the College of American Pathologists and it’s $2000/quarter at $4500 deductible), that’s the only way to go for me, Jack!!

  46. Terrence, having the payors at the table is understandable as long as we recognize that the payors are the taxpayers. If we are to discuss how to eliminate all of the waste, I see no value in having the waste at the table. Unless its a departure dinner. This should be solved by a nonpartisan committee.
    Sorry Tim, you described yourself as an agent and I assumed that to mean an insurance agent — and they could also argue for themselves being a patient advocate. And I don’t even have a problem with that, given where we have been and where we are going in the furure. But insurance companies and agents are dispensible. They add cost and no value.
    I don’t consider Barry’s home/health insurance comparison relevant. One is for an expensive piece of wood that has no organs functioning daily and the other is for life and quality of life for ourselves or our loved ones. We will never agree on the value of HSAs, Tim, so I say leave them as an option to those who want them. But for those concerned with health security we need a Medicare-for-all system.
    To see more on my wild arguments go to:
    http://www.ThrowTheRascalsOut.org/health_care.htm or

  47. Jack, HSA’s are not my livelihood. Helping people to not be ripped of by their carriers, however, is a different story.
    The only reason I even talk about HSA’s is in comparison to the traditional way of buying insurance. The traditional way of buying insurance has the carrier paying for just about everything, even all the small things, and they aren’t going to lose that game. You will pay for it, and then some. Take on the little things yourself, and let the carriers worry about the big stuff. I think Barry hit on it a little bit regarding car and home insurance. Most people don’t hit a $500 deductible. So why have everyone buy a ridiculous;ly loaded plan with all kinds of “benefits” they will never use? That is my main argument for HSA’s. Take on the first dollar coverage yourself, just like you do for car and homeowners insurance. And if you thing I’m paying 4 to 5k a year for insurance with an HSA you’re WAY off the mark. It’s $75 a month for an HSA plan. If I were to buy a fully loaded plan with all kinds of “copays” in it and coninsurance, I would probably be up around where you are talking, at 300 – 400 a month. But why do that? I can take on first dollar coverage at a cost of about 900 a year, and my worst case is I spend an additional 2500 if I get into a mess of some sort.
    The HSA plan isn’t just for setting up a tax shelter, it’s about taking on the little things yourself, rather than pay the carrier to do it for you, in which case, you will lose every time.
    Going back to the car insurance parallel, when you bought car insurance did you buy oil change insurance? For your homeowners policy did you get lawn mowing insurance? No and no. These are routine things that you can pay for youself more cost effectively, rather than give the carriers money to do it for you. Office visits, ER visits, etc… it’s a losing game if you buy that from the insurance company. These things aren’t insurance, they are built in prepaid claims that you get to pay for every month in premium, whether or not you even utilize them.
    THIS is my argument as to why HSA plans are a better way to go. The tax benefits just add icing to the cake if you can get it.

  48. I would say Matt has it about right including his comments at the end about Hillarycare, which is a far far better thing than straight single payer. It appears that a bipartisan solution at the federal and/or state level may be achievable in my lifetime, a rather pleasant surprise, if and only if reformers learn from the mistakes of the past and give providers and payors seats at the table.

  49. Peter,
    Thanks for the very interesting information about healthcare spending in Canada. In looking at the numbers from the CBO study that I linked to earlier, it appears that the gap between what Canada and the U.S. spend on the elderly is much smaller than the spending gap for care that covers the rest of the population. The CBO study, however, only includes spending for Medicare covered services though it includes out of pocket spending and benefits paid by private supplemental insurance policies. It does not include, I believe, spending for long term care whether paid by Medicaid, private individuals or insurers who sold long term care policies.
    Since I have consistently advocated for using the states as laboratories, I nominate Massachusetts to pilot a Medicare for All approach since it’s a liberal state and its senior Senator, Ted Kennedy, is a long time advocate for single payer health insurance. Massachusetts is neither small nor large in population, it has a large city (Boston) as well as suburban and rural areas. It has a number of large academic medical centers and many small community hospitals. In short, it sounds like a good candidate to me. I would not like to see NJ be the pioneer, however.
    Jack and Tim,
    When listening to the debate about HSA’s, I’m reminded of the concept economists call: “the importance of being unimportant.” In this context, it means that people don’t mind reasonably high deductibles for auto and homeowners insurance. In fact, if they never have a claim in their entire lives because they weren’t in a car accident and their home never suffered much damage from a fire or storm, they’re happy. Why? Because the annual premium is fairly small (probably under $1,000 in each case). For health insurance, by contrast, asking a young, healthy person to pay $4,000 or $5,000 per year for single coverage that he will most likely not need or use is perceived as, at best, a bad value. It probably represents over 10% of income for, in his mind, nothing. While I think he’s wrong, and I think everyone should have coverage, especially for catastrophic events, I at least understand where he’s coming from. I say again that I think HSA’s are fine for the upper half of the income distribution. I think having some “skin in the game” is a good thing, but I think the amount of it should be scaled to income and not be some arbitrary flat dollar figure.

  50. Tim, I’m with Jack on HSA’s. Just another way for rich people to reduce their tax share. It works for people with extra savings to sock away but does nothing for the people who need healthcare support. This will not solve spiraling healthcare costs. This is just another Republican tax scheme for contributors.

  51. Tim, let me make clear one thing: Jack reeeeeaaaly does hate HSAs! And he makes no bones about it.
    HSAs are an accident waiting to happen. They were conceived by an insurance company (Golden Rule) not to treat patients, but to make lots of money! They will benefit Wall Street and those who market the plans more than they will benefit the patients. They will draw the young and healthy out of the pool we need to get our shared costs to a minimum. That is, until the young and healthy are no longer young and healthy, then they’ll want to opt into the Medicare pool.
    All you have to do is look at whose and how many hands are in the pie to realize that the money is not being sent efficiently on health care. How many young mothers are going to skip their blood pressure medicine because it means dipping into savings? How many HSA patients are going to make some really stupid decisions and die as a result of wanting to build their account?
    Yea, it’s your money and you do with it what you want. But let the saner among us opt for a system that puts health ahead of money.
    I can certainly understand your enthusiasm for HSAs. They are your livelihood, just as motorcycles are the livelihood of motorcycle salesmen. But that doesn’t make them safer and it doesn’t add to the long term health of the country. You’re probably young and indestructible. I’m 69 and have dealt with patients and their lack of medical skills for 25 years. I think the HSA market takes advantage of their ignorance.

  52. I have come to the conclusion that Jack reeeeeeally hates HSA’s. 8^)
    Interesting point that Jack made though, about HSA’s being available for those that want them. Ironically, those that are on the state plans and HIPAA plans can NOT have HSA’s. Odd. Just because you are deemed “unhealthy” you can’t have an HSA account? Seems kind of odd since being unhealthy has nothing to do with how much money you have or whether or not you can take advantage of a tax law.
    How is an HSA gambling with your future assets? You set money aside, and you use it if you have to. Once you’ve spent up to the deductible, you are covered 100% for darn near anything that comes along the rest of the year. IF you don’t use it, it stays where it is for future possible use, and you can use it for other things after you retire like LTC insurance.
    How is setting aside my own money gambling? It’s mine. I own it. I am fully covered and have access to a network of doctors.

  53. >>>”As for the effectiveness of other systems to provide healthcare at lower costs, I would like to see the data that John Fembup asked for several months back. That is: per capita healthcare spending for the 65 and over population only, not the total population.”
    Barry, Here are numbers from CIHI by population. You can send this to John and see if this help him. I did it this way rather than the link as it was fairly short and the link may present problems.
    “December 5, 2006—Health care spending in Canada is expected to reach $148 billion in 2006, an increase of $8 billion over last year, according to figures released today by the Canadian Institute for Health Information (CIHI) in its annual report on health care spending. National Health Expenditure Trends, 1975–2006 projects that total health care spending in Canada will increase by 5.8% in 2006 over the previous year. This increase is slightly lower than the estimated annual growth rate of 6.4% in 2005, and lower than the average yearly rate of increase (7.8%) from 2000 to 2004. After adjustment is made for inflation, health expenditures in 2006 are expected to grow by 3.7% or reach $120 billion in constant 1997 dollars.
    “For the tenth consecutive year, health care spending continues to outpace inflation and population growth,” says Graham W. S. Scott, C.M., Q.C., Chairman of CIHI’s Board of Directors. “This sustained period of growth may be due in part to new public money flowing into health care delivery from federal/provincial accords. However, while health care spending continues to grow, it now appears to be growing at a slightly slower rate.”
    CIHI’s estimates also reveal that while health care spending as a share of Canada’s gross domestic product (GDP) is expected to stay relatively stable this year, it remains at its highest level in 31 years. Health care spending as a share of GDP is expected to reach 10.3% this year, compared to an estimated 10.2% in 2005 and in 2004. Health care spending as a proportion of GDP was at its lowest (6.8%) in 1979, climbing to a 10.0% peak in 1992, before dipping and rising again to its current high level.
    Spending higher per person for younger and older Canadians
    Total health care spending per capita is expected to reach $4,548 in 2006, a 4.9% increase over last year. In 2004, the latest available year for data broken down by age group, health care spending by provincial and territorial governments was highest for infants and seniors, costing an estimated $7,565 per person for Canadians under the age of 1, and $8,969 for those aged 65 and over.”
    “The beginning and final years of life are the times when people use health care the most,” says CIHI President and CEO Glenda Yeates. “This is a trend that has been consistent over time, and continues to be an important factor in health care spending. But the proportion we spend on seniors has remained relatively stable in the last few years.”
    “CIHI’s figures show that Canadians aged 65 and over accounted for an estimated 44% of total provincial and territorial government health care spending in 2004, a proportion that has not changed significantly since 1998, when national data broken down by age group first became available. Infants (under 1 year of age) account for about 3%.”
    Then this comparison by CIHI:
    “Canada still among top five health spenders in 2004
    Canada continues to rank among the world’s top five health spenders when compared to other countries in the Organisation for Economic Co-operation and Development (OECD), and remains behind the United States in terms of health care spending per person. Among 21 countries with similar accounting systems, the U.S. maintained its rank as the highest per capita spender on health care (US$6,102) in 2004, the latest year for which data are available. Canada ranked fifth in per capita spending (US$3,165), after Luxembourg (US$5,089), Switzerland (US$4,077) and Norway (US$3,966). The OECD countries that spent the least per person on health care in 2004 were Turkey (US$580) followed by Mexico (US$662).”
    I’m not sure why you want to break it down but anyway you cut it Canada is doing it for less, far less, by age, by sex, by skin color, by sexual preference. As long as Americans continue to want the power of health spending controlled by providers through the power of bribed politicians they can expect to see no end to spiraling costs.

  54. Tim, HSAs are a crap shoot. Ten years from now you are going to be able to tell of some great success stories and I’m going to be able to show you some great failures and bankrupcies. With a Medicare-for-all system you are not gambling with your future assets. Everybody wins and are properly cared for. As well, nobody denied themselves or a family member needed care because they didn’t want to dip into their savings. Care, incidentally, that gets more expensive down the line the longer you delay it. HSAs are best suited for the young and healthy and the very rich as a tax shelter, but I believe they should be allowed for those who want to opt our of the Medicare-for-all system. But then, they should be treated for what they are; tax shelters.

  55. Jack,
    I see your point, but that can happen to people regarless of whether or not they have an HSA plan. Many hospitals and UC centers will gladly set up a payment arrangemet with you if you don’t have the cash.
    Not everyone is going right to $5000 and $10000 deductibles on the HSA plans. You start out where you are comfortable, and you raise it up year after year as your HSA account (hopefully) grows.
    If you have the money set aside, it’s no problem. Besides, in most cases I’ve worked with, where the family is paying $1000 a month or more for a low or NO deductible plan, they go to about $300 a month or so for a $5000 HSA plan. That’s a savings of $700 a month!
    Chuck part of that away in the HSA, and only spend it IF you have to.. don’t give it to the insurance company for nothing.

  56. I didn’t live in Redding but believe that case was an aberration. I operated a mobile echo service and cardiac monitoring lab for 25 years before retiring in 2004. Two other books support my view:
    Money-Driven Medicine: The Real Reason Health Care Costs So Much (Hardcover) by Maggie Mahar
    Critical Condition: How Health Care in America Became Big Business – and Bad Medicine … by Donald L. Barlett, James B. Steele (ISBN: 0385504543)
    I’ve also covered much of this in my own book at http://www.moneyedpoliticians.com. I’m not selling it to folks on this link; a free copy can be obtained by sending your mailing address to jlohman@execpc.com.

  57. Barry raises a very interesting question. There is definitely data showing that health care utilization patterns for various conditions vary widely in different geographic areas. I will try to research this VA question to see if there is any such data and report back.
    Jack – by chance did you live in Redding, California? If so no wonder you have a biased view of cardiologists!!
    Have you read Stephen Klaidman’s book “Coronary: A true story of medicine gone awry”? That book does support your views although I believe it was an isolated case (and abetted by a for-profit hospital system, which is another whole discussion in itself).
    In your echo lab I assume you are talking about professional fees vs technical fees? (e.g. you charged to perform the echo but the doc read it?) If so, here’s another example – our hospital (in Md., where rates are controlled) charged about $200 in technical fees for preparing a microscopic slide of a breast or prostate biopsy, while I was allowed to charge $187.50 for reading the slide to diagnose whether or not the patient had cancer. Sometimes things work both ways.
    I’ll report back with any data I find on VA vs. FFS.

  58. Tim, the credit card companies get involved in the first $5000 deductible. Unless the patient has cash to spare, they will either have to charge the medical services or charge something else so their cash can go to the doctor. At interest rates pushing 30% and reaching 60% in some exhorbitant cases, the credit card companies will love the HSA. If the $5000 has been subsidized by someone else (say, an employer) it is not as big of a problem. But of course, those with employers are always better off than those without.

  59. >>> “In our litigious environment and in the interest of trying to be thorough, they might still order the tests.”
    Yes, but only at a fraction for defensive medicine and not profit purposes. Unnecessary ordering will go down significantly. Your situation sounds appropriate because it ended in a CABG.
    In my community the FBI was called in (by other cardiologists) because one cardiologist was doing a cath n virtually everybody that walked in the door. Our fee-for-service system stinks, and the VA’s salaried system is better. But as long as physicians end up part owners of their clinic it would negate the effect. The guy bringing in the most revenues would get the highest salary.
    But I too would like to see the stats.

  60. Jack,
    Explain to me why HSA’s are a credit card company’s dream? It costs me nothing to use mine, and I don’t even have to fund it if I don’t want to do so. I think you are confusing something else with “credit”. Where is the credit in an HSA?

  61. But their are a lot of tests that can be chalked up to defensive medicine, about 100% of them. Did it also rule out a cath? Yes. If there were not a profit motive (and reason) I’d be less concerned
    Jack — In your preferred world of salaried docs, while they would not have a financial incentive for ordering extra tests, they wouldn’t be penalized for doing so either. In our litigious environment and in the interest of trying to be thorough, they might still order the tests.
    I mentioned before that I’m a cardiac patient myself. The normal pattern, I suspect, is that the patient presents with an issue – chest discomfort, rapid heart rate, etc. The cardiologist does a regular EKG, checks blood pressure and orders a standard stress test, at least to get a baseline measure. If the regular stress test is inconclusive or abnormal, the doc may order either a thalium stress or a stress echo or, if it’s a rapid heart rate issue, a 24 hour monitor / recorder. If the next level of testing is either inconclusive or shows a problem, the gold standard test is angiography. I’ve been through angiography twice with one resulting in a CABG and one in a DES. If there is a bias to over treat, it’s probably because the consequences of under treating could be severe (patient has a heart attack or stroke that might have been prevented with testing) and the tests are not painful or invasive (except for angiography which is somewhat invasive). Charging $1800 when $500 might have been more appropriate is a different matter, but even the salaried doc might be inclined to order the tests if there is the slightest inclination that there might be a problem. Bev could probably speak to this with much more authority than I can, and I would be interested in her views.
    I wonder if there are any stats comparing, say, testing patterns by VA cardiologists with private FFS cardiologists treating patients of similar age with similar risk factors.

  62. Don’t get me wrong Bev (and welcome to the Blog), but I don’t classify all doctors as greedy charlatans. I believe a lot in the 80-20 rule and 80% of them are damned good people who try their best to treat the patient appropriately. Even some inept ones fall into this category, though they try with less success. But then comes the shades of grey that eventually meld into black who cause the problems, and the medical profession does a poor job of weeding them out (much because of the legal issues we both know about). I’d probably reverse the 80-20 rule for attorneys, but it still applies. I don’t have many friends in the arena.
    But for 25 years I owned an echo lab and frequently heard my technicians asking each other “Why in the hell did the doctor order an echo on this guy or that gal?” If they charged only $500 for it I would not be critical; an $1800 echo is a bit much. Ruling out the need for the cath ended when the tech removed the transducer from the patient’s chest. What happens after that is called anything from fair to gouging, when the doc sends the bill, and some of the best physicians in the area got caught up in the ease of charging $1800. We charged only $300, did 95% of the work and made 10% profit. He did 5% and received $1200-$1500 profit (except for Medicare, which only reimbursed an appropriate $400).
    Did the $400 echo provide as much legal protection as the $1800 one? Of course. But their are a lot of tests that can be chalked up to defensive medicine, about 100% of them. Did it also rule out a cath? Yes. If there were not a profit motive (and reason) I’d be less concerned.
    And I agree with your assessment; reform will benefit our kids, not us.

  63. Arguing in blogs is fun to this newbie! Jack, don’t confuse cost and medical necessity in your zeal to prove all docs are greedy charlatans. One can argue endlessly over what something should cost (I don’t think $1000/hr lawyers or 900K artwork done by a pseudo-four yr old are worth it either) – but, was that $1300 echocardiogram necessary or not? Did it replace a $10,000 cardiac catheterization and thus save $$? (And BTW, the doc would make more $$ on the catheterization). And I am a patient, too, with a high-deductible policy, so don’t think I’m not freaked out by paying for my yearly endoscopies (yes, they are necessary in my case)
    Look at both sides of this issue, not just knee-jerk reactions.
    Regarding defensive medicine, pathologists also run the clinical laboratory, from which neither the clinician nor the pathologist profits. (any more). We were constantly having to question over-ordering of common or esoteric tests in the name of “rule out _____” (some rare disease that the doc was scared of missing.)
    Finally, re who’s driving overuse, don’t forget the patient who runs to the Dr. for every cold, which will get better in 14 days without treatment or 2 weeks with treatment. This is a serious problem when the patient has no “skin in the game”, as Washington Post columnist Steven Pearlstein likes to observe.
    One thing for sure, there is no magic bullet and health care reform will be messy and prolonged. But I believe it will happen, over time – for our kids’ generation!
    bev, M.D.

  64. Thanks Barry. I haven’t seen this before, but just the introduction discloses a major flaw in how we report Medicare “expenditures.” These are not expenditures as you and I would properly identify them; they are “charges” that resulted from and were commanded by the physicians who ordered the tests.
    The cost of the Medicare system is being driven by the physicians who are profiting from it. The patients are not ordering these procedures themselves. I would lay the responsibility of the Medicare overuse 90% on physicians themselves, and the lifting of the Stark rules by Republicans provided the key to the gate.
    For physicians claiming that Medicare does not reimburse enough, they seem okay with making it up in volume. 🙂
    That said, not all overuse is due to physician involvement. Nursing homes that place patients in front of a TV set and then bill Medicare for a “therapy session” ought to be hung out to dry. But the feds must rely on whistle-blowers, and few employees recognize their duty to do so.
    We can thank Bush and the deficit for cutting resources to monitor these programs. (I’m not real happy with my own party for the handling of this).

  65. >>> “So far, Medicare hasn’t been able to control its cost growth any better than private insurers (and self-insurers) have.”
    I’ll give you at least part of that. The Medicare system experiences less fraudulent billing because the federal penalties involve jail time. But the politicians lifted many of the (Rep. Pete) Stark regulations that were designed to (and did) eliminate physician self-referrals to labs in which they had a financial interest. Now doctors can even be partial owners in the hospitals they refer patients to, so you now see them referring their profitable patients to their own hospital and their unprofitable patients to the hospital down the street.
    >>> “Medicare can get away with its dictated prices because hospitals and other providers can still make up any shortfall by cost shifting to private insurers. If everyone had to accept Medicare rates, quality of care will likely suffer ….”
    Barry, that simply is not true. If all we had was Medicare the system would survive quite reasonably and no rationing would be necessary (except for breast implants, holistic medicine and alternative medicines, which few support paying for).
    With Medicare-for-all there would be no bad debt, cost shifting or bankruptcies. I would support a 5-10% increase over Medicare’s current reimbursements, but it is not the scrooge some people make it out to be. Do they block exorbitant billing? You betcha, and good for them.
    I’d like to put my fingers on that data too. I once had it and I believe it came from Health Affairs and was developed by docs at Johns Hopkins. But there is no doubt that us old geezers cost more than those under 65. I’ve heard that 5% of the population consumes 70% of the care, and most goes to the over-65 crowd.
    >>> “I don’t know the answer, but I darn sure think we should know before we turn 16% of our economy upside down and inside out.”
    Sort of sounds like you want a study committee to determine whether we need a study committee! How many more studies do you want? I remember Philip Morris wanting more than the 20,000 we had done before they’d admit that smoking is bad, but give me a break.
    Yeah, all of those answers would be interesting but would not alter what we already know: we have the most expensive health care system in the world, we cover only 85% of our people, and our care lags terribly behind all other countries that have universal health care. We have the best single-payer system in the world (Medicare), but we refuse to extend it to everybody because it will harm the profitability of the insurance industry.
    Okay, so let’s take it a step at a time. Let businesses buy into the Medicare system and get a tax break for the premiums (like they do for private insrance). Or let’s eliminate the middleman and have the taxpayers fund it from the start. If Medicare remains as good as it is today, it will win out. If it is starved (as they are attempting to do in Canada), we’ll see the wealthy opt for boutique physician practices and the rest of us suffer wait times. If we were ever fortunate enough to get the money out of our political system, that won’t happen and we’ll all be pretty happy with the final results.

  66. I’m sure you remember Vioxx, which was killing people because the parent company had their way with the FDA and pushed the product through because time cost them money.
    Jack, I’m sure you remember the Thalidomide disaster in the early 1960’s (horrible birth defects, etc.). After that, the FDA’s drug approval process became super cautious because no regulator wanted to be the one who approved the next Thalidomide. Obviously, no drug is risk free, and we can’t do 10 or 20 year clinical trials before we pronounce a new drug sufficiently safe to warrant approval. A balance has to be struck. We do the best we can.
    I repeat my support for Medicare competing on a level playing field against private insurers to provide insurance to the non-Medicare eligible population. I define level playing field to mean that Medicare would have to cover its costs solely with premium revenue. The industry opposes this because it doesn’t trust politicians to guarantee that Medicare will have to compete on this basis and not be subsidized with general tax revenue if its premium income proves insufficient to cover medical costs. So far, Medicare hasn’t been able to control its cost growth any better than private insurers (and self-insurers) have.
    Medicare can get away with its dictated prices because hospitals and other providers can still make up any shortfall by cost shifting to private insurers. If everyone had to accept Medicare rates, quality of care will likely suffer, and/or care would have to be implicitly rationed either by artificial constraints on supply or global budgets.
    As for the effectiveness of other systems to provide healthcare at lower costs, I would like to see the data that John Fembup asked for several months back. That is: per capita healthcare spending for the 65 and over population only, not the total population. For the U.S., that means most of Medicare spending, Medicaid spending for long term care for the elderly, spending by private insurers who sell Medicare supplemental policies to the elderly, and out of pocket spending for services not covered by insurance including long term care costs for the elderly not yet eligible for Medicaid. Let’s then compare that to the per capita numbers spent by the OECD countries on their 65 and over population. Then we could go through the same analysis for the 0-64 population. Let’s see if the gaps are significantly different and to what extent they are attributable to differences in care at the end of life (and the very beginning of life in the case of premature babies), defensive medicine, and differences in compensation paid to providers. It may well turn out that our higher costs may have a lot more to do with our values, our provider compensation, and our litigation system impacting the delivery of healthcare while our insurance financing mechanism may be relatively unimportant. I don’t know the answer, but I darn sure think we should know before we turn 16% of our economy upside down and inside out.

  67. Where I disagree with Barry is that I prefer a Medicare-for-all system and he prefers a free-for-all system (though we aren’t far apart on other issues).
    Having been in the device manufacturing arena for ten years prior to my independent lab service (for 25 years), let me assure you that R&D would not walk under a single-payer system. That we would then be serving 45 million more people, we’d actually increase the need for product and I think they’d be quite happy with that.
    But that said, I’m sure you remember Vioxx, which was killing people because the parent company had their way with the FDA and pushed the product through because time cost them money. Getting it to market early was more profitable than getting it there safely. And having watched my old company just get FDA approval on a new device, I will attest to the bureaucracy, but mostly it was for the safety of the patient. I wouldn’t want it any other way.
    The NIH currently funds 35% of all Pharma R&D, and I would trust them to fund it all and own the resulting patents and then license manufacturers to produce. If it went from NIH to FDA to manufacturer I think we’d see great improvement. Let’s also allow private industry to compete in the process, but without taxpayer subsidies.
    Barry, you supported a Medicare-for-all system as long as the right to opt out permitted people to buy on the outside. That would add good competition and I wholeheartedly support the idea. Along that line, I support the government getting into the energy market as a competitor to Big Oil. It can buy an existing exploration company and go after the Gulf in competition with everybody else. If they end up being the cheapest kid on the block we will have proved that the government can do it, and at the very least it will drive down the current mega-profits. If it doesn’t work we can auction it off. There will be many potential buyers.
    You suggest keeping the current for-profit system and worry about the consequences of being wrong. But we’ve already been proven wrong and it’s time to change. With costs twice those of every other country for lesser outcomes, I think we’ve already seen the consequences; we just refuse to accept the answer and make the necessary changes.
    That’s because we have what the other countries are not saddled with: a moneyed political system that prevents fixing the problem. (And yes, I’ll give you that they have under-the-table bribery; I’m talking about the $100 million per year in legal campaign contributions.)

  68. I’ve been thinking lately about the connection between improvement in our health over time, productivity, innovation, risk and profit.
    The main thing doctors have to sell is their time and their expertise. They can never squeeze more than 24 hours into a day, but they can build their knowledge base. When a patient presents with a problem, the doc has to try to diagnose it and recommend a course of action. Assuming testing of some sort is called for, advances from sophisticated analysis of blood and urine to detailed pictures from MRI’s give doctors diagnostic tools that either did not exist or were far more primitive a generation ago. New drugs can cure or at least manage disease that might have been a death sentence a generation ago. Devices like stents, pacemakers and defibrillators both significantly extend life and improve its quality as compared to a generation ago. Less invasive laproscopic surgical techniques shorten hospital stays and speed recovery times for patients undergoing a wide array of surgical procedures as compared to a generation ago. These drugs, devices, lab tools, MRI, etc. were developed and commercialized largely by for profit industry. If a heavy handed, monolithic, single payer system squeezed most or all of the profit out of the healthcare sector, there could be a significant adverse effect on innovation.
    I note that in the energy sector, for example, the government auctions the right to explore in, say, the Gulf of Mexico. It doesn’t try explore for, produce and refine oil and gas itself. Why? Because it knows it can’t do it as well as the private sector can. For the same reason, the Defense Department doesn’t try to build new combat aircraft. Instead, it contracts with Boeing or Lockheed-Martin, etc. because it knows industry can do it cheaper, better and faster. If the NIH, academic medical centers, and other non-profit entities want to partner with Big Pharma or the biotech companies to develop new drugs and share the profits, that’s fine by me. As a taxpayer, however, I have zero confidence in NIH’s ability to commercialize anything or to have the discipline to pull the plug on research projects that are non panning out. Since there are many R&D failures, industry has to do this routinely.
    In the investment business, to properly assess risk, it is critical to understand the consequences of being wrong. Jack and other single payer advocates seem to be 1,000% confident that we can cover everyone for the same or less cost with no rationing and no adverse effect on innovation. If they’re wrong, the adverse consequences, especially with respect to innovation, will be significant. Those consequences can be avoided by building on the for profit system we have. Even if it costs somewhat more in the end, it would be worth it to protect our innovators.

  69. As a pathologist, Bev, I’m sure you didn’t see the level of overuse that exists elsewhere. If these tests ordered by physicians who owned their own labs were not also profitable as hell, I’d perhaps agree with you. But 30 minute echocardiograms that reap a $1500 gross profit is pretty hard to write off as defensive medicine.

  70. “…..employers have no more business in the process than do the insurance companies”… I’m NOT kidding, right!
    First, employers simply add their costs to the price of the product and we consumers pay them back at the cash register. As a part of that very stupid part of our history, we force them to compete with foreign companies that do not have to add health care to the price of their product. Why in the world do you think the Big Three automakers are now making more cars in Ontario than they are in Detroit? Because Canada charges them $800 per employee per year and their costs in the US are $6500! Duh!!!!
    We are the only country in the world that does not have a universal health care system. Wake up and smell the coffee.
    I can certainly understand your ire if you are a broker and this is the way you make your living. But Tim, we don’t need people in your job to do it right. I spent 25 years in the health care industry before retiring in 2004, and I’m now on he best single-payer system ever: Medicare. And I didn’t need to go through an employer or agent to get there.
    And HSAs? A credit card company’s dream, and right behind them the bankrutcy attornies. They love you for it!

  71. Wow, quite an interesting discussion for a new reader. As a retired MD and a economic non-sophisticate, I can only offer a few insights:
    1. Defensive medicine DOES definitely exist, never mind statistical studies “proving” otherwise (it’s almost impossible to measure accurately) and not because of the profit motive. I practiced it myself sometimes as a pathologist (although probably less so than others in my group) – it’s fear driven and due to the fact that medicine has many gray areas, which lawyers love to convert to black and white areas.
    2. The issues of a screwed up health insurance system and a screwed up healthcare delivery system are inextricably intertwined, and both must really be fixed together, not separately. This is a massive task, however.
    3. Medicine is inherently a “needle in the haystack” profession; 99% of patients with a certain symptom complex have no or insignificant disease. How do you cost effectively, but reliably, find the 1% with the SAME symptoms but serious disease, and save them? What if that 1% includes YOU? This problem underlies all the issues in points #1 and 2.
    bev, M.D.

  72. Health INSURANCE is not expensive if you buy it right.
    The statement made above by Jack that “employers have no more business in the process than do the insurance companies”… you’re kidding, right?
    First off, 99% of America is employed by someone else. In the very least it’s fair to say that there are VASTLY more employees than employers. If you have always been an employee who was offered group health through your employer, and you were lucky enough that the employer covered the majority of the premium for you, you would have NO IDEA what insurance actually costs as they are buying it. You would only have an idea of the true cost of that plan once you were let go and received a COBRA statement.
    Out of THAT pile of ignorant masses, I’d be willing to bet that 99% of those people who get a COBRA statement don’t even realize what COBRA is… just a law that allows them to stay in “the group” for a short time, but now they get to pay the full amount themselves.
    If people really had an idea what the difference between BENEFITS and INSURANCE really are, they’d just buy INSURANCE. But that’s not the case for the vast majority of employers who provide benefits and insurance to their employees.
    People need to be educated as to what they are really getting, and what they really need. As it is right now, everyone is brainwashed into thinking “group insurance” is the King, because it’s so inexpensive and office visits only cost $20! Yay!!
    Then they get a COBRA statement and get the truth.
    I wonder how many single males at GM realize they have maternity coverage? I wonder how many people at GM with no allergies realize they can get allergy shots for $5? I wonder how many females on GM’s plan know they are covered for a PSA test? I could go on and on, but you get my point.
    Secondly, the rising costs of healthCARE having nothing to do with health INSURANCE directly. But it’s the carriers networks whose price negotiations limit how much they can charge ( see NETWORK DISCOUNT on any EOB ). If you don’t have any insurance, that office visit may cost you $100. but if the office is IN NETWORK, the charge may be limited to $50 or $60. If you have a copay built in for less, the carrier just picks up the difference “for you”. Yeah.. you’ve already given them the money to pay it and then some. Good idea with that plan… for them, not for you. Did you think the doctors make money and live on $30 office visits? Hardly. The carriers beat them down, then they raise your premiums more than enough to cover the expense if you use it. It’s like gambling at the $5 table in Vegas for $7. Even if you win, you lose.
    The health carriers protect their wealth, with any means they see fit, legal or not. If they can scare you into thinking insurance needs to be expensive so you will buy into the hype and not question it, so be it. I and other agents have lost our appointments with one of the biggest carriers in the US for showing people how to save money by using an HSA plan instead of a fully blown ridiculous plan with all kinds of built in garbage. Who is the problem again? Did you know Anthem in California is now publicly cancelling any agent who shows anyone how to use a high deductible plan and self insure underneath the deductible? Did you know there federal law says you CAN do that? Their contract may say “cancel without reason”, but I think they just upped the ante and gave a big reason. If you show people how to save money, you will be cancelled.
    I’d call that pretty obvious about what the problem is with health insurance, and who is to blame, and how it can be fixed.

  73. With all of your justification for rising insurance industry profits, jd, why must health care be a commodity marketed on the New York Stock Exchange? Or anywhere else? And if you support reasonable profits, why not also support unreasonably high profits? And what’s wrong with gouging? When does reasonable profits end and gouging begin?
    Why aren’t we providing health care as we are other community services like police and fire protection? Why are we allowing the shareholders who control it to make their millions on the backs of the sick? Some of my own stocks are in the healthcare market, but I’d give up those profits in a heartbeat for the good of the country. Most of us would.
    If I hear you right, we have record profits for the investors, which is a direct result of a record number of diagnostic tests performed by physicians. So the investors really become cheerleaders for overutilization and misuse of the system. Callous, perhaps, but on target.
    >>> “do you mean profit is not OK in any area of healthcare: pharma, physicians, hospitals, device makers?”
    Profits usually lead to the controlling of healthcare by the shareholders. Profits are not the same as “higher-than-normal salaries” which attract the best people and I support. But if the government worked correctly for the people it would make the necessary investments in the health care infrastructure and run it as a service to the public, much like it does the National Guard and armed forces. Or should we turn all of these, plus health care, over to Halliburton?
    No, if they are publicly run they are accountable to the voters. Medicare is for us old geezers; why do we have a cutoff at 65?
    >>> “I stand by my statement that insurance profits are a very small part of the problem, and almost no part of the skyrocketing costs we have faced in the last 50 years.”
    You are confusing profits with burden. I trust that profits have remained at 5%, but the high costs of executive salaries and marketing and broker commissions, all of which has been rising, is offloaded to the patient and ultimately to the public. While we need payment administrators, like Medicare, we do not need insurance companies and all of their baggage.
    Not to be forgotten are Pharma profits. Rather than having we taxpayers fund 35% of medicine’s R&D, as we do today, I’d like to see us fund 100% and end up owning the patents we paid for. Then the taxpayers could license the manufacturing to multiple companies and let them truly compete in the marketplace.
    But that’s a story for another day. I’ve covered it in my book in great depth, and to avoid marketing it here, anybody on this thread is welcome to a free copy (up to 10). Just send your mailing address to jlohman@execpc.com and I’ll see that you get a copy. You can see its description at http://www.moneyedpoliticians.com,

  74. Barry,
    I tend to agree with you about the deductible being reasonable, so long as cost-sharing is dramatically reduced after it is reached. It’s the 20% co-insurance that kills those who have high expenses, unless there is a modest annual or lifetime maximum out of pocket cost.
    Also, I think it got lost in the debate that you had proposed subsidies to lower income individuals so that they did not pay the full deductible. And someone at 100% FPL or less really can’t pay much of anything out of pocket. Even a token copay would do more harm than good at that point.

  75. By the way, Jack, I wholeheartedly endorse this statement:
    “I reccommend a salary system much like they have in the VA and armed forces services, but that is hard to implement when physicians become partners in ownership of clinics.”
    Not only would we be able to remove many perverse incentives, but we would make insurance much simpler to administer.
    The only thing I will say in favor of FFS is that it provides an incentive to do record keeping of exactly what was done. One thing health plans in New York have experienced is that under a capitated or salary system, providers are not motivated to keep as careful records of what they did and did not do. We have actually gone more towards the FFS model in NY partly in order to satisfy the Dept. of Health’s demands for utilization and expense data. It’s disappointing, but Spitzer’s team is aware of the issue and I’m hopeful they will find a way to incentivize reporting in non-FFS models.

  76. Scott and Jack,
    Yes, there are record profits in the health insurance industry. But just think for a second: there are record expenses on healthcare; therefore there are record premiums charged to cover those expenses; therefore there are record revenues for health insurance companies; therefore there are record profits assuming that margins don’t decline.
    In the last 5 years or so the underwriting cycle has been on an upswing, so margins have increased a little above the 5% historical average. From data coming out now, it looks like the underwriting cycle has peaked and there is a good chance that medical costs will increase faster than premiums in the next 5-7 years.
    So, yes, record profits. But the overwhelming reason for this is record medical costs. If you understand insurance, you know that this must be so (again, ignoring the underwriting cycle, or the possibility of deficit spending in the case of a publicly-funded insurance system).
    By the way, not one of the examples Scott gave contradicted what I said about health insurance having modest margins. None of those examples gave profit margins at all, which is what I was talking about. You’ll make your best case by looking at United, but they are the exception not the rule.
    Jack, do you mean profit is not OK in any area of healthcare: pharma, physicians, hospitals, device makers? If not, why not? And why is profit OK for car insurance, life insurance, health food vendors, farmers, etc., etc., but not for health insurance? By “profit” I just mean earning more than you pay out in expenses. Non-profits make “profit” too in this sense. I completely understand the aversion to large profits, but why is a profit of, say, 3% per year so egregious? And don’t forget that for a non-profit, that almost all of the money goes back into the system as investments in the company or reductions in premium increases.
    Let’s say you made a rule that insurance companies (or the public system into which one pays) could not make a profit, but had to return any additional money into next years’ premiums/taxes. What would that change? Do you think it would make health insurers stop issuing denials? Do you think they’d stop doing utilization review to try to weed out fraud or poor performers? They wouldn’t, and shouldn’t.
    Yes, insurers make providers jump through hoops and sometimes delay payment using legal procedures. But the absolutely primary reason for this is to lower medical costs in order to keep medical costs in line with projections and to keep premiums competitive.
    Think of it this way: if the insurance industry is throwing up so many barriers to providers out of greed, why has it had an average net margin of around 5% for the last 20 years? Why hasn’t it been going up all the time? Why isn’t it up there with pharma, banking, big oil, etc.?
    I stand by my statement that insurance profits are a very small part of the problem, and almost no part of the skyrocketing costs we have faced in the last 50 years.

  77. Peter!!! You are not saying that a scandal erupted when physicians started sending patients to labs in which they had a financial interest are you? Both Ekic and pgbMD would be very upset at this claim. I can’t believe that it would be a cost factor in Canada as well…… 🙂
    Unfortunately, it’s a daily occurence here. These are money machines. Once they buy them they must use them (or maybe they only use them for defensive medicine).

  78. >>>”United Healthcare is currently testing a real time claims adjudication system that it hopes to be ready to roll out nationally later this year.”
    Barry, You are advocating a national health identity card? Issued by – each insurance company or the government? Would this card then have access to IRS data so that those who get subsidized care would have that information on the card?
    >>>”if employers start to do a better job of communicating just how much they are paying on the employee’s behalf for health insurance and the employee sees the high current cost, projected growth, and relates it to why raises have been low or non-existent, there will likely be more interest in controlling the cost of healthcare services.”
    It appears that the cost of healthcare is out of the hands of employees and employers. I think if it were that easy employers would already be doing this and it would show up in the cost of the system. The system is not being controlled by payers, it is being controlled by providers. We have to change that.
    >>>”If they are identified as high utilizers vs their peers and cannot improve within a reasonable time, they could face removal from the insurers’ networks.”
    Boy I’d like to hear Eric Novack’s opinion on that. Wait – I have to plug my ears first. Talk about managed care and insurance intervention in healthcare decisions. I’m not sure that will fly Barry. In Canada physicians negotiate fees and there is a set reimbursement rate for procedures. This helps control costs and does not interfer with medical decisions. Many years ago docs in Ontario could own their own private labs. This became a scandal as docs sent a lot tests to their own labs that no one could say were legit. I think if you take the profit incentive out of docs/hospitals decisions then the rest becomes health delivery issues and cost will be controlled.
    >>>”As for quality, if the information were available, the patient could check surgeon outcomes data, hospital infection rates and complication rates, etc.”
    I’m married to a nurse and am fairly/somewhat/maybe not so smart on these issues. I also have access to advice from medical people my works with as well as a friend who spent years in the private lab business and It’s still a struggle trying to figure out who to see and if what they say makes sense. I don’t think the average joe will be able to, or have the dedication to, try to figure this all out. People can’t even figure out which mechanic to pick. Would you know how to pick your mechanic or is there a lot of blind trust going on?

  79. Thanks Scott, and I’d add that “profits” are calculated after deducting for exorbitant executive salaries and the other waste that I claim we should elimnate.

  80. “In contrast to these true robber barons, managed care has historically made net margins of around 5%.
    So “mega” profits of insurers have never been a big problem, though I agree with you that there is no compelling reason why there should be for-profit health insurance.” – jd
    I have a problem with this. Historically 5% maybe, but in today’s world insurance companies are reporting RECORD profits, while at the same time lowering reimbursement to medical providers. So mega profits do exist and it is a problem. The compelling reason for for-profit health insurance is the record profits.
    2006 Q3
    10/26/06: Third-quarter net income was $476 million, a 37 percent increase over the prior- year quarter. The increase in operating earnings reflects an 11 percent increase in revenue primarily from year-over-year membership growth and premium and fee rate increases.
    2006 Q3
    11/1/06: Net income was $268 million, a 38% increase over third quarter 2005.
    2006 Q3
    10/27/06: Revenues up 14.0% over the prior year quarter. “We are right on track with another quarter of record earnings,” said Dale B. Wolf, chief executive officer of Coventry.
    April 2006: Coventry rated the worst payor in a survey of Kansas City physicians commissioned by Mid America Medical Affiliates.
    2006 Q2
    10/30/06: Consolidated revenues up 48 percent to $5.65 billion. Michael B. McCallister, Humana’s president and chief executive officer stated,”With year-to-date revenues up nearly 50 percent, 2006 is playing out as planned and positioning us for another year of robust earnings and revenue growth in 2007.”
    UnitedHealth Group
    2006 Q3
    10/19/06: Third Quarter Revenues Rose 55% to $18 Billion and net income rose 38%. UnitedHealth Group now expects full-year earnings per share growth of at least 25 percent in 2006. Stephen J. Hemsley, president and chief operating officer, stated, “The broad and evolving health care markets are increasingly engaging the capabilities which we have cultivated, even as our business execution steadily continues to improve.
    WellPoint Health Networks / Anthem
    2006 Q3
    10/26/06: Third quarter 2006 net income was $810.8 million, an increase of 26.5 percent.

  81. Barry, you are obviously not part of the real world. People keeping up necessities like homes are cars will always take priority over medicines and health care. So will feeding their children. But what you are proposing is a penalty on health care and I disagree with that. It is not humaine, nor is it necessary.
    And horray for United Health care. I much prefer a system where coverage is not the issue, but care is. I would expect this type of operation in a managed care system.
    >>> “if employers start to do a better job of communicating just how much they are paying on the employee’s behalf for health insurance and the employee sees the high current cost, projected growth, and relates it to why raises have been low or non-existent, there will likely be more interest in controlling the cost of healthcare services.”
    First, employers have no more business in the process than do insurance companies. They are both problems, not solutions. You keep adding cooks in the kitchen, and we need only one.
    >>> “Standard services like MRI’s are pretty much the same everywhere and should be treated like the commodity that they are – done at the facilities that offer the best price.”
    I agree that MRIs are a commodity, and a very profitable one at that. So are you going to go to the facility that is the cheapest? Perhaps using old technology to remain the cheapest? MRIs should only be done in hospitals on behalf of the ordering physician. Physicians and clinics should not own MRIs because they become cash cows.
    And Barry, “defensive medicine” is often the excuse physicians use to justify ordering too many highly profitable tests. Take the profit out of those tests and you will see volumes fall.

  82. Peter and Jack,
    First, regarding the issue of people not getting needed services because of a comparatively high deductible, I think I just apparently have more faith in people’s ability and willingness to act responsibly and in their own best interest than you do. They seem to be able to maintain their homes and cars without the benefit of third party insurers paying the bills for them, and I think they can pay for the routine care needed to maintain their bodies out of their own pocket as well.
    Peter, on determining whether or not the deductible has been met, technology is about to solve this. United Healthcare is currently testing a real time claims adjudication system that it hopes to be ready to roll out nationally later this year. Upon presenting the card, the system would be able to determine, within a matter of seconds (a) does the patient have insurance with us, (2) is this a covered service, (3) what is the contract rate, (4) does the patient have any remaining out of pocket responsibility, and (5) if so, how much. I think it is similar in concept to how bank ATM technology works.
    With respect to the issue of price and quality transparency, I’ll make two points. First, assuming we maintain the employer based system for the time being, if employers start to do a better job of communicating just how much they are paying on the employee’s behalf for health insurance and the employee sees the high current cost, projected growth, and relates it to why raises have been low or non-existent, there will likely be more interest in controlling the cost of healthcare services. Doctors, for their part, would know or should know that the cost of healthcare services that they drive (not just provide themselves) is being tracked. If they are identified as high utilizers vs their peers and cannot improve within a reasonable time, they could face removal from the insurers’ networks. That should focus their attention. As for quality, if the information were available, the patient could check surgeon outcomes data, hospital infection rates and complication rates, etc. Standard services like MRI’s are pretty much the same everywhere and should be treated like the commodity that they are – done at the facilities that offer the best price.
    On living wills, I don’t have data on this, but I think most elderly people who execute these choose no heroics if the prognosis is dismal. It is usually middle aged children who have not yet come to grips with their own mortality that want the doctors and hospital to “do everything.” As a last resort, we could charge a higher premium for people who want everything done, but I wouldn’t advocate that, at least at first.
    Finally, I think most docs will tell you that defensive medicine is a significant contributor to healthcare costs. It is not correct to just look at malpractice premiums or court awards and say it’s only 1% of healthcare costs or less which makes it a non-factor in the overall cost picture. I’ve seen estimates that suggest that defensive medicine could account for as much as 10% of healthcare costs.

  83. Barry, the problem I see with #1 (reasonable approach based on ability to pay) is where in the system is this going to be administered. How will the doc/hospital determine who gets billed for deductible/co-pay and who doesn’t and for how much? What you advocate is effectively and efficiently done in Canada through the tax system. At present in Ontario there is an $800 per year healthcare surcharge per family (not sure about individuals) collected at tax time – very efficient and clean, with NO deductibles or co-pays. As well if you set a system based on this it does not determine who actually has the $1000 lying around. Given Americans ability to be, up-to-the-eyeballs in debt, I don’t know who would get caught in this and how we would collect it. Getting it at tax time or as at payroll deduction is the most cost effective and fair way to do it.
    #2 won’t work because docs don’t care about cost and performance. They may care about performance (for patients sake) but they have no stake in cost control as is shown in both singel pay and the U.S. system.
    #3 The use of best practice can be used in every system. I guess I wonder who will force best practice on the docs. In a single pay system where budgets and costs are the driving force it is in the hospital’s best interest to force best practice.
    #4 Can/is be/being implemented in Canada through investments in IT. There at least, with a more central system, this can be coordinated and standardized – who’s going the do that here?
    #5 I guess you could do that, but there is no limit to how many people will say – spend the bank when giving me medical care. It depends on the approach I guess. Would people get cheaper insurance if they opted for a living will? What if they said spend the wad – would you limit that?
    #6 We have talked about this ad nauseam and have shown this is more an issue for docs and insurance companies not significant in driving health costs. Canada has less law suits but higher awards – partly because of law, partly because of attitude, partly because cost of living there is higher. And again I stress, if healthcare cost (universal, tax supported system) were not on the table in these law suits there would be no need for such high awards.

  84. >>> “1. A meaningful deductible of at least $1,000 for an individual and $2,500 for a family with 100% payment above that point.”
    The credit card companies and bankruptcy attorneys are going to love you for that suggestion, Barry. Indeed it may have delayed my operaation until I needed a full knee replacement, where I did it earlier and nly got a half knee replacement.
    >>> “2. Pricing and quality transparency so doctors, who drive virtually all healthcare spending, can know who the most cost-effective hospitals, imaging centers, and specialists”
    I agree, but be careful. People will not gravitate to the lowest bidder when the health of a loved one is at stake. It may result in just ther opposite.
    You are 100% correct on best practices, treatment variations, interoperable electronic medical records, and living wills. And I’d go a step further with automatic no-codes for people 90 and over.
    >>> “6. Eliminate the jury system in favor of special health courts to resolve medical disputes in a fairer, more objective, less capricious manner.”
    Doctors should be tried by their peers, not the patients’. A three-doctor panel would get my vote, with punitive awards going into the single-payer fund rather than the patient’s and attorney’s pockets.
    >>> “Absolutely none of these approaches is about denying patients needed care.”
    Bite your tongue on this one, because a $1000 deductible will indeed result in patients not seeking care (even with your subside).
    You are not correct on your latter statement. Canadians are saying “we know it will require higher taxes, but we prefer that to waiting times; and we surely prefer that to the American system.” It is the for-profit interests who are lobbying parliarment to cut funding so they can erode support for their system. But Peter is the Canadian among us and better equipped to answer that.

  85. Peter,
    My preferred strategies for controlling utilization include the following:
    1. A meaningful deductible of at least $1,000 for an individual and $2,500 for a family with 100% payment above that point. I think this is reasonable for the upper half of the income distribution that can well afford to pay for routine care out of pocket. For the lower half of the income spectrum, I would provide sliding scale subsidies to help them cover the deductible.
    2. Pricing and quality transparency so doctors, who drive virtually all healthcare spending, can know who the most cost-effective hospitals, imaging centers, and specialists are and what the most cost-effective drugs are. It would be nice for patients to have this information too, but it would be most important for doctors to have it in an easily useable and accessible format.
    3. Attempt to spread best practices to reduce the current wide variance between the high utilizers and the best practicers in managing many medical conditions. Also within hospitals, more widespread sharing of information about strategies to reduce infection rates.
    4. Interoperable electronic medical records. When multiple doctors are involved in a patient’s care, especially in a hospital setting, interoperable electronic records could help to sharply reduce or even eliminate duplicate testing and adverse drug interactions.
    5. Make executing a living will and advance medical directive a requirement of insurance so providers know what care the patient wants and doesn’t want in end of life situations.
    6. Eliminate the jury system in favor of special health courts to resolve medical disputes in a fairer, more objective, less capricious manner. Hopefully, this could significantly erode the culture of defensive medicine among doctors.
    Absolutely none of these approaches is about denying patients needed care. They are about allocating resources more wisely, sensibly and efficiently. The Canadian global budget approach is implicit rationing by restricting supply. Canadian citizens may well be much more tolerant of such a system than Americans would be. The reason that Canadians and other national systems use this approach is because they know there is a limit to how much they can extract from their people in taxes while demand for healthcare when it is not a financial transaction at the point of service is potentially infinite. But hey, administrative costs are low.

  86. >>>”Jack and other single payer advocates grossly overestimate the savings to be had from eliminating insurer profits, marketing costs, broker fees, etc. and never offer any ideas to control utilization.”
    Barry, I’m not sure what you mean by controlling utilization? Do you mean sick people should be restricted from seeking treatment? Do you mean sick people should have to exhaust most or all of any assets/savings before they have access to affordable care? Single pay utilization in Canada is done by setting strict hospital budgets and setting/negotiating doc fees and reimbursements. This is done under a system where NO financial transaction takes place between doc/hosptial/patient. This has led to wait times (seemingly accepatable by 80% of Canadians) and adjustments to federal cost transfers and provincial budgets to reduce wait times in specific problem areas -all with a eye on cost containment. The argument in the U.S. is an argument about cost. This country is NOT controlling costs. So far every provider player in the discussion only wants to focus on ways to bring more dollars into the system from payers so that THEY won’t be hurt. Where is the shared pain in any of these “solutions”?

  87. The problem, Barry, is not whether profits are a big part or a small part, it’s that they are a part and should not be. It is hard to be just a little bit greedy.
    And I have indeed offered controls for overutilization by proposing reinstatement of the certificate of need and the many rules that Medicare had in place to prevent self-referrals by physicians, especially when they were referring patients to their own lab for expensive echocardiograms, ultrasounds and CT scans. My clinic now has its own MRI service, and I’m sure they make handsome profits from it.
    PNHP has good reason to oppose co-pays and deductibles: they too often deter care until the patient is in dire need and when the cost of that delayed care is multiples higher than had they moved forward with it earlier. I could live with co-pays and deductibles, but because I know full well that we will eventually smarten up and eliminate them. PNHP has taken that position up front.
    I absolutely agree with you on the Medicare opt-in. And being just four days out of the hospital for a knee replacement, I’ll let you know as soon as I get their bill. But even if what you say is true, it is a damned sight better than whatever else is out there. I might also add that they did not rsh me out of there. I had to convince them that I could handle going home a day early.

  88. Still, my own view is Enthoven’s: the best model is managed competition of large integrated provider/insurers to get the right economies of scale, cohesiveness of care, use of best-practices, alignment of incentives, etc. But there is no reason that these entities have to be public. They could be private non-profits, or quasi-public organizations. Monolithic single-payer exists in only a few countries.
    I agree with this. I also note that in Massachusetts, where the health insurance market is dominated by non-profits, the initial bids for a so-called affordable policy are averaging about $380 per month for single coverage as compared to $200 that former Governor Romney spoke about and the legislature expected.
    Jack and other single payer advocates grossly overestimate the savings to be had from eliminating insurer profits, marketing costs, broker fees, etc. and never offer any ideas to control utilization. Indeed, Physicians for a National Health Plan (PHNP) does not even think healthcare should be a financial transaction at the point of service (no co-pays or deductibles).
    I say again, let Medicare offer its insurance policy to everyone who wants it in competition with for profit and not for profit insurers. Medicare should have to charge rates high enough to break even from their premium revenue alone while states could subsidize the premium for low income residents. It is also important to note that Medicare, which Jack claims to be so satisfied with, has a $900 deductible for each hospitalization and a 20% co-pay for all other services with no out of pocket maximum. This is why most seniors buy Medicare supplemental insurance policies, often at a cost of more than $200 per month, since those co-pays can add up in a hurry for people with multiple conditions.

  89. jd, I’ve heard too frequently from physicians that they had to fight with some low-level clerk to get a test approved for a patient in managed care. Perhaps that doesn’t occur in the plans you work with, but these horror stories are real. I consider the term managed competition much like compassionate conservatism; they are both oxymorons. Whenever you have a profit motive and executives like Wm McGuire, who would rather see patient money not going to patent care, the incentive is to reduce needed care.
    Managed care cannot function without placing the insurer between the doctor and patient. These companies can play a role as Medicare administrators but I would not want them calling the shots on a loved one.
    I agree with you on best-practices and alignment of incentives, as long as that alignment is toward the patient.
    >>> “1. There is also an incentive for government-as-insurer to deny care that comes from budget constraints. Rationing is not avoidable. Profit is not the motive, lower taxes are.”
    That’s why any single-payer system must be managed by an independent health care commission set up much like the Federal Reserve Board, with directors serving 14 year stagged terms. Most services will fit within a reasonable budget and other non-standard services can be dealt with via the private market, until they are proven legitimate.
    >>> “2. Physicians in a FFS system have incentives to supply too much care, and the wrong kind of care.”
    I could not agree with you more on this issue. The FFS system has some rather perverse incentives. I believe physicians should be paid very well, but not on the basis of how many tests they order or don’t order. That is one of the drawbacks of the Medicare system and why it needs more oversight. I reccommend a salary system much like they have in the VA and armed forces services, but that is hard to implement when physicians become partners in ownership of clinics.

  90. Jack,
    You’re certainly right that marketing costs would disappear. So would broker fees (a non-trivial component of admin SG&A expenses). Incidentally, these expenses would be reduced in a Massachusetts-style system in which the Health Connector provides a central clearing house for health insurance and information. Broker fees for small businesses could be eliminated on the health plan side.
    The claim that the problem with managed care is the incentive not to provide services they get paid to provide is like the claim that health insurers have vast profits: it is a significant exaggeration of the facts. Remember the fact that net margins are only around 5%? That means that health plans are pricing pretty much where they have to. Even if you think they’re too stingy on denials, etc., if they were less stingy they’d just have to raise prices in the current environment. Yes, in a better environment we could get rid of some of the admin costs, but my point is that with the market the way it is health plans are NOT as a rule being greedy, but are pricing in line with health care cost increases, and always have. The underwriting cycle provides some movement in premiums above and below the medical cost trend, but never more than a few percentage points, and never for long. The data on this are extremely clear. It’s one of the things about which I think there is no room for disagreement once you see the data on medical cost trends vs. premium trends. Sometimes I think even Matt doesn’t get this one.
    Still, my own view is Enthoven’s: the best model is managed competition of large integrated provider/insurers to get the right economies of scale, cohesiveness of care, use of best-practices, alignment of incentives, etc. But there is no reason that these entities have to be public. They could be private non-profits, or quasi-public organizations. Monolithic single-payer exists in only a few countries.
    By the way, there is are two correlaries to the statement about managed care having an incentive to deny care:
    1. There is also an incentive for government-as-insurer to deny care that comes from budget constraints. Rationing is not avoidable. Profit is not the motive, lower taxes are.
    2. Physicians in a FFS system have incentives to supply too much care, and the wrong kind of care. To put it more starkly: they have an incentive for their patients to be sick, because then there are billable events. What kind of a healthcare industry is it that rewards most those providers who are inefficient at treatment and poor at prevention? There was an article on this in the NYTimes just today.
    I know you have written extensively on the last point yourself.

  91. But JD, regardless of its net profit of 5%, managed care also has marketing costs that would disappear under a single payer system, and the problem with managed care is the incentive to not provide services they get paid to provide. If they had to abide by all rules of Medicare, I wouldn’t be as concerned. And you are absolutely correct about Parma profits, but that’s a story for a different day.

  92. Jack, you say “government protection of insurance company mega-profits should not be on the list of needed reforms.” Despite what everyone thinks they know, profit in the health insurance industry is small compared to most other industries. Big pharma has historically made net margins of around 20%. Likewise investment banking and the oil industry. In contrast to these true robber barons, managed care has historically made net margins of around 5%. And I would remind you that historically health insurance was offered primarily by the non-profit blues and even today more than half of Americans get their health insurance from a non-profit organization (the government or a non-profit insurer).
    So “mega” profits of insurers have never been a big problem, though I agree with you that there is no compelling reason why there should be for-profit health insurance. Non-profit works just fine, and there is evidence that it is associated with somewhat higher quality care.
    But in the big picture, it’s all the other screwed up incentives to over-provide, under-provide and fragment care that are the real problems.
    Either way, it is far easier to move to a universal system that uses health insurers than one that does away with them. This is universal healthcare 1.0, coming soon to a state near you. Universal healthcare 2.0 might look more like the system you want, but I think the only way we’ll get there is through 1.0, which is some version of the Massachusetts model.

  93. If I had my druthers, Susan, I’d like to see all unemployed immediately folded into the Medicare system and close up Medicaid and other state-funded services. Then I’d let businesses opt to buy into the same Medicare system at Medicare costs for the adjusted age group, which should be quite lower than what Medicare pays for us old geezers. Of course, most businesses would do that because Medicare is not saddled with the marketing costs, high executive salaries, broker cmmissions and profit requirements of current insurers. And Medicare uses the same private doctors and hospitals that everybody else uses.
    But over time, say five years, I’d like to see all business funding phased out so US companies can compete with product from countries that do not burden their manufacturers with health care costs. Costs, incidentally, which heretofor have simly been added to the product price and we consumers reimbursed the company at the cash register. But I’d like to eliminate all of the middlemen and provide healthcare that is funded by the taxpayers.

  94. If I had my druthers, Susan, I’d like to see all unemployed immediately folded into the Medicare system and close up Medicaid and other state-funded services. Then I’d let businesses opt to buy into the same Medicare system at Medicare costs for the adjusted age group, which should be quite lower than what Medicare pays for us old geezers. Of course, most businesses would do that because Medicare is not saddled with the marketing costs, high executive salaries, broker cmmissions and profit requirements of current insurers. And Medicare uses the same private doctors and hospitals that everybody else uses.
    But over time, say five years, I’d like to see all business funding phased out so US companies can compete with product from countries that do not burden their manufacturers with health care costs. Costs, incidentally, which heretofor have simly been added to the product price and we consumers reimbursed the company at the cash register. But I’d like to eliminate all of the middlemen and provide healthcare that is funded by the taxpayers.

  95. Bush’s plan does not discuss cost control. If insurance companies get to charge whatever they want for premiums, fewer and fewer individuals, employed or otherwise, will not be able to afford coverage. I would love to see what Mr. Lohman suggests come to fruition, but I don’t think insurance companies will get abolished any time soon. I do think it is high time that health insurance became regulated, and that a cap be put on premiums/out-of-pocket expenses based on a person’s income.
    I was also somewhat put off by Bush’s discussion of “basic” plans versus “gold-plated” plans, since what that seems to come down to are plans that provide the actual coverage a person needs versus the new proliferations of plans that have low premiums but could easily put you into bankruptcy over one major illness. I don’t think it’s selfish to want affordable coverage that actually protects you and your interests if you get sick.

  96. > employers are natural pools of insurance risk
    No, employer pools are unnatural pools of insurance risk. They are popular for reasons of tax treatment as you say, but an employer group is also easy to market to, and is considered unlikely to experience significant adverse selection problems: it is difficult to become employed somewhere simply in order to have a particularly favorable insurance benefit. Not that it doesn’t or can’t happen.
    > Young workers are essentially cross-subsidizing
    > their older and sicker colleagues.
    In a sense, but this is precicely what makes an employer group an unnatural insurance risk pool. In a “natural” pool of insurance risk, nobody cross-subsidizes anybody because everyone faces similar uncertaity about the future — in other words, risk.
    > the underwritten individual market (is) a market place
    > where pooling risk is a dirty word.
    “Social Insurance” and “Insurance” are not the same thing — they’re not even similar. Although the society in question is much smaller than we might like, Employer Groups are akin to “Social Insurance” because the risks faced by the members are markedly different. The the underwritten individual market represents plain-old “Insurance”.
    We need a new vocabulary. The terms as we have them cause great confusion that I must admit is effectively used by activists, but I don’t think it is ever admirable to get one’s way through confusion.

  97. Of all of our health care problems, government protection of insurance company mega-profits should not be on the list of needed reforms. But that apparently won’t stop President Bush, who is now proposing an annual $7500 single and $15,000 family tax credit for citizens who are either unemployed or whose employer has dumped their health insurance. This would enable them to purchase insurance directly from the insurance company to help them retain their profits. Bush also made another plug for health savings accounts, for which Wall Street, the credit card industry and bankruptcy attorneys will forever be in his debt.
    Tax credits are not the answer. We should be providing health care directly to the patient, not through third-party insurance companies. But don’t tell that to the politicians.
    Follow the money. These are taxpayer assets being given to the insurance industry for non healthcare services — when instead, the insurance industry shouldn’t be getting a penny of our health care dollars. Much of their services are an unnecessary part of the system and largely dispensable. They consume 20% of health care dollars yet provide absolutely zero health care benefits to the patient.
    That’s a terrible waste. We should totally eliminate these unnecessary costs that are consumed by marketing, broker commissions, huge executive salaries, and corporate profits. None of these would exist under a single-payer system like Canada’s. With a strong political will we could mimic their system and simultaneously extend health care to 100% of the public, and we’d spend the same amount of dollars we are spending to cover 85% of the people today. And we can do it without Canada’s wait times! The money saved would be spent on more doctors and more nurses to serve more patients.