128 replies »

1. > That, of course, assumes that they are as efficiently
   > run and have a similar cost structure which they
   > probably aren’t and don’t.
   This has been part of my point: some hospitals have operating margins of 15%, but on average it is closer to 5%. Around 1/4 of hospitals have operating margins of zero or less. Some of this may be due to poor accounting for charity care, but there’s also the efficiency question. I think if we get anywhere near universal coverage, the rationale for not-for-profit status at the very least narrow drastically, and I expect many (most?) hospitals wouldn’t have a defensible not-for-profit mission anymore. If NFP status goes away, the weaker institutions would be forced to change, for the better I think.
   t

2. Your #3 is close to what I’m thinking, but I don’t see a reason to earmark these corporate taxes vis a vis any other corporate tax.
   I really don’t either. I just threw that out as a possible way to win political support for the concept against entrenched hospital interests that will fight like hell to hang onto their tax exemption.
   Conceptually, if the average for profit hospital earns a pretax margin of 15%, for example, (before bad debt writeoffs at contract rates, not chargemaster) than non-profits should have to prove that they provided services (again, at contract rates) to the community and/or low and moderate income people, equivalent to the for profit hospital’s average pretax margin. That, of course, assumes that they are as efficiently run and have a similar cost structure which they probably aren’t and don’t.

3. Well, Barry, what you’ve said is certainly better than silence. With respect to #1, I don’t see why that should be tax exempt activity. With respect to #2, maybe it’d be ok to allow a tax deduction for whatever they can prove along these lines. Your #3 is close to what I’m thinking, but I don’t see a reason to earmark these corporate taxes vis a vis any other corporate tax.
   t

4. As a 60-something FP, I would be happy to earn less caring for patients as long as everyone else in the United States earning more than $80,000 a year will
   take exactly the same percentage cut in their take-home earnings.

5. Sure, “paying taxes on their profits” gets added to their product price and it filters back down to the public.

6. “If 100% of the people are ‘covered’ what is the mission of tax-exempt healthcare organizations that might justify that status?”
   Darn good question, Tom. I suggest the following possibilities:
   1. Help low income people cover the cost of at least some worthwhile services that are not included in the basic benefits package.
   2. If the basic package were high deductible catastrophic coverage, with a separate policy to cover expenses of between, say, $1 and $5,000 per person offered on a sliding scale, means tested basis, non-profits could write off at least some of the expenses that low and moderate income people might otherwise be financially responsible for.
   3. We could also, of course, withdraw the tax exemption, let those institutions pay taxes on their profits, and treat any proceeds from those taxes as an offset to the cost of taxpayer funded healthcare, akin to premiums paid by Medicare beneficiaries for Part B and Part D benefits.

7. > it still does not cover 100% of the people
   So here’s a question I have asked, and have been deafened by the silence I get in response:
   “If 100% of the people are ‘covered’ what is the mission of tax-exempt healthcare organizations that might justify that status?”
   Ideas?
   t

8. I haven’t digested it all yet, Barry, but it looks like a workable alternative. Though it still does not cover 100% of the people.

9. And here’s the paper on vouchers….
   http://www.robert-h-frank.com/PDFs/Emanuel-Fuchs.NEJM.3-24-05.pdf
   Jack – Thanks for this link. This is the best discussion I’ve seen on health reform. I especially like the following: (1) preservation of choice which is consistent with our culture, (2) creating a highly visible linkage (value added tax) between the cost of health insurance and the cost of healthcare, (3) it recognizes the need to keep long term care a means tested benefit, and (4) it establishes a mechanism (modeled after the Federal Reserve) to assess costs vs benefits of new treatments, promulgate information about best practices and challenge unwarranted geographical practice variation.
   While I personally would not have a problem with a value added tax (up to a point), I’m afraid that the rate that would be required to raise the revenue necessary to get the job done would be at least 15% and could be as high as 20%. This is because we will almost certainly exempt food and other necessities that consume most of the income available to the poor. The broadest based value added taxes in Europe, I believe, apply to only about 40% of GDP at most which is why their rates are generally so high also. I think we might be better served by a health insurance payroll tax of, perhaps, 10% applied to wages up to, maybe $150-$175K (which I think could raise revenue equal to 5.0%-5.5% of GDP and a dedicated value added tax of about 5% (6% at most) that could raise another 2.0%-2.5% of GDP. We also might have to leave Medicare in place indefinitely but do a better job with respect to cost-benefit analysis of new treatments, push for universal living wills, and try to move to health courts to settle malpractice disputes.
   In any proposed reform, I think it is always instructive to ask who are the losers? The losers among the taxpaying population will likely be: (1) young healthy people who don’t think they need health insurance and either would rather not buy it at all or buy it in the underwritten market where it can be relatively cheap, (2) high income people who would pay more in taxes under vouchers than they (through their employer) currently pay for health insurance, and (3) union workers (and many retirees) who currently have gold plated coverage that is probably superior than what the basic benefit package would include under a voucher system.
   There will also be the challenge of keeping the tax based revenue stream growing sufficiently to cover the increasing cost of healthcare unless we can find ways to bring the cost growth into closer alignment with growth in nominal dollar GDP.
   Assuming we can make the financing work, my bottom line reaction to vouchers as proposed in the article is, even though I’m probably one of those who will pay more in taxes, sign me up!

10. And here’s the paper on vouchers….
    http://www.robert-h-frank.com/PDFs/Emanuel-Fuchs.NEJM.3-24-05.pdf

11. You are absolutely correct Joe, it is called “Follow the Money.” Above I provided the link to http://www.ThrowTheRascalsOut.org/NYT_Health_Care_Racket.htm.
    Here is another:
    
    A Health Care Plan So Simple, Even Stephen Colbert Couldn’t Simplify It
    In his State of the Union address, President Bush proposed tax cuts to make health insurance more affordable for the uninsured. The next day, Stephen Colbert had this to say on his show on Comedy Central: “It’s so simple. Most people who can’t afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don’t owe, they can use the money they’re not getting back from what they haven’t given to buy the health care they can’t afford.”
    See the complete article at http://www.ThrowTheRascalsOut.org/NYT_A_Health_Care_Plan_So_Simple.htm

12. I think you guys vastly overestimate the lobbying power of docs in the USA. AMA hasnt had any real power since the early 60s. Hell they fought tooth and nail against Medicare but in reality their power was already so diminished by that time they had no chance.
    Less than 30% of docs are members of the AMA. They are largely symbolic these days.
    The real power in lobbying that will stop any attempt at single payer is the insurance industry. Insurance lobbyists outnumber AMA lobbyists by factor of at least 20 to 1. The lobbying budget for the insurance industry is at least 50 times larger than the lobbying budget for the AMA and any doctors groups.
    The real power in DC is insurance, not doctors. Doctors lost their lobbying ability long ago.
    Bear in mind that its absolutely illegal for doctors to unionize.
    BTW, the SEIU 1199 union that is fighting spitzer’s healthcare reforms in New York is NOT a doctors union. Look at their membership list, you wont see a single doc listed. Its all nurses, lab techs, and other ancillary hospital personnel.

13. John, you win again. Everything you say is absolutely correct. No spin. No excuses. Just plain fact!
    I surrender.

14. “With all due respect, no matter how you choose to spin it, the data does not demonstrate that the US compared with the rest of the world today, a “success and competence of the U.S. health care system regarding life expectancy and infant mortality.””
    Jack, in your continued zeal to “first try to disagree” with me, you fail again to think about what I write.
    My earlier comment nowhere compares the U.S. performance to other countries except to note that there are important differences in data gathering with respect to infant mortality.
    Ironic that you immediately spin the OECD data to suit your agenda.
    Example?
    “From the same OECD data cited above, comparing 1963 and 2003; Infant mortality is higher in the US than any other industrialized nation in the world, twice that of Sweden”.
    Jack, in 1963, Sweden’s rate was 15.4 per 1,000 live births, US was 25.2 – a difference of 9.8. In 2003, Sweden’s rate improved to 3.1 while US improved to 6.9 – a difference of 3.8, thus the difference was reduced by 61%. This shows neither failure nor poor performance.
    Another example?
    “probably due to a portion of mothers in the 45 million uninsured that are going without prenatal care”
    That’s not in the OECD data Jack.
    Another example?
    “18,000 people who die prematurely because they have no health insurance.”
    Because they have no health insurance? Is that on the death certificate? Anyway, that’s not in the OECD data either Jack.
    But this is boring. It is an abuse of data, not to mentions words, to suggest that the US health care system has failed to perform well because it does not perform better than any other country on these two measures.
    It’s clear that, increasingly, poor behavior has adversely affected Americans’ health over the past 40 years. You seem to agree. It follows that the impact of these behaviors is reflected in our public health data. Those data do not accuse our health care system; they are obstacles that we ask our health care system to overcome. And our system has shown remarkable improvement in the face of this added headwind.
    I understand exactly why you and some others cling to the notion that comparative nations’ statistics on two measures – infant mortality and life expectancy – somehow demonstrate that the US health system is “failing”. Fortunately that’s false. Our system is not meeting expectations and is in need of reform, but it is not failing.

15. In another blow to the free-marketers, at least in my mind, is an excellent article in the NYT (not my favorite paper) called “The Health Care Racket.” Here are excerpts:
    
    “Like denial management, however, marketing and underwriting cost a lot of money. McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems.”
    and
    “And this is just part of the story. McKinsey’s estimate of excess administrative costs counts only the costs of insurers. It doesn’t, as the report concedes, include other “important consequences of the multipayor system,” like the extra costs imposed on providers. The sums doctors pay to denial management specialists are just one example.”
    
    See complete article at: http://www.ThrowTheRascalsOut.org/NYT_Health_Care_Racket.htm

16. I don’t reject the motion that they could be wrong, Barry, they probably are! But they could be wrong in the opposite direction as well. In any event, I do reject the notion that if the system does not function exactly as promised from the start, that it can’t be tweaked to improve it. We are tweaking the current system on a daily basis; why would tweaking be verboten with a single payer system?
    As to the elimination of co-pays and deductibles, I don’t believe that will pass in the beginning. But they do have very good reasons for their belief, including that they delay needed care and in the long run add to the costs of medicine.
    And I’m glad to hear that about Medicare D. Instead of a $780 billion giveaway it is only a $500 billion boondoggle. Reassuring. But I still contend that letting patients simply buy their drugs at the drug store and having them bill Medicare (minus a co-pay) as they did in the past would be cheaper and better than establishing a new industry to add to health care costs.
    Indeed other options could work, but vouchers add another level of administration. I think “simple” is key, and Medicare-for-all is the simplest and less costly. Yeah, opt out of it if you choose, but don’t keep it from the rest of the public. And again; please start your experiments in Wisconsin.

17. Jack,
    I know you are a staunch single payer advocate and have cited PNHP numerous times to illustrate how such a system might work. I want to reiterate just three concerns (there are others as well) with their analysis.
    1. Their estimate of potentially administrative cost is wildly overstated which has already been discussed in detail on this thread.
    2. Their proposal to completely insulate people from out-of-pocket costs by eliminating deductibles and co-pays could drastically increase utilization from already excessive levels.
    3. Their proposed financing mechanism of a 7% payroll tax (presumably on all wages with no cap) and a 2% income tax (which I interpret as a two percentage point increase in all tax brackets) would likely raise, at most, 4.5% of GDP (possibly as much as 5%) which is nowhere near enough to do the job they are proposing. Your home state of Wisconsin has a proposal that includes a 12% payroll tax to replace employer provided healthcare, and critics believe that is inadequate as employer costs currently average 15% of payroll.
    Since nobody can know for sure how any reformed system would actually work in the U.S. with our culture, our expectations, our litigation system, and our provider compensation levels, it is quite possible and even likely that the PNHP authors just might possibly be WRONG on one or more of their key assumptions. In your zeal and conviction for single payer, you seem to flat out reject the notion of that being within the realm of possibility.
    Separately, I note that the Medicare Part D drug benefit, which was much maligned as a giveaway to Big Pharma and insurers wound up costing about 30% less (in both monthly premiums and total program cost) than the so-called experts initially forecast. Yet liberals still contend that government could have provided the benefit even more cheaply with a one size fits all plan. The VA’s highly restrictive formulary is not a valid model and would not be accepted by Medicare beneficiaries.
    I think you should keep an open mind and entertain the possibility that other options (like premium support or vouchers might work better) or, at least, support experimentation at the state level to get some real world experience with what actually works and what doesn’t.

18. Dr. Thom will like Matthew’s posting today about China’s rural HMO project. It seems that Chinese farmers can do a passable job of UR (Utilization Review) when the see the connection between their premiums and what’s done for/to them. Read it quick before the WSJ puts it behind their firewall…
    t

19. Let’s see if I have this straight. From the same OECD data cited above, comparing 1963 and 2003;
    1) Infant mortality is higher in the US than any other industrialized nation in the world, twice that of Sweden, probably due to a portion of mothers in the 45 million uninsured that are going without prenatal care because their incomes are too high to qualify for Medicaid and too low to afford insurance; and
    2) Life expectancy is worse than in any other industrialized nation, probably influenced in part by the 18,000 people who die prematurely because they have no health insurance.
    But not to worry. Because since 1963 we and the rest of the world have improved our technology and numbers.
    With all due respect, no matter how you choose to spin it, the data does not demonstrate that the US compared with the rest of the world today, a “success and competence of the U.S. health care system regarding life expectancy and infant mortality.”
    I’d say that as we all have aged, the US has not aged as well.
    See the PowerPoint presentation at http://www.ThrowTheRascalsOut.org/PNHPNovember2003.ppt, slides 81 and 83

20. > folks have a fairly sensitive BS meter
    > and word gets around.
    The work of Dr. John Wennberg, his colleagues and others on practice variation says that the BS meters fail in some important (even spectacular) ways. Here’s a readable summary.
    > In order for any system to be cost efficient,
    > [Dr Donohue] must be killed. I’ll do it for free!
    Patient walks in and says “On Donohue I saw…” Doc, interrupting, says “Turn off your TV and call me in the morning.” “But, but Doctor! It was on Teeee Veeee! Have YOU ever been on Teeee Veeee?”
    Back in the late 19th century, doctors decided together as a profession that the only medicines they would ever reccommend would be those:
    1) whose ingredients are disclosed, and
    2) marketed only to physicians
    Such medicines were called “ethical medicines”. I think I should like to see this concept resurrected and even expanded-upon. Ethical Talk-Show Hosts. Hmmmmmm. Then there’s the doctors who hawk various supplements (and worse). Donohue should be referred to one of these guys for a colonic purge at every opportunity. They all deserve each other.
    > Our concern is that the documentation requirements
    > to prove I P’ed enough to get P’ed will be so onerus
    > (intentionally or unintentionally) that it will be
    > inefficient and seen as a backdoor way to cut my pay
    > further.
    Well, I note that medical practice has avoided “rigorous” documentation requirements longer than most public-service type industries having a health and safety risk. Ask the leadership of any airline, for example. My wife works at a cheese distributing company and they have one FTE dedicated to tracking lot numbers from plant to retail store. Others implement the GMP (Good Manufacturing Practices) programs, which are documentation-heavy. Her company is just a packer — the actual manufacturers have greater requirements. Then there are electric utilities, auto manufacturing, the list goes on. And it isn’t all bad, is it?
    Documentation is a key feature of accountability, and accountability is a key virtue in the Church of Democratic Proceduralism. All I can say is “Use the Templates” you’re paying so dearly for, and stay engaged in the profession to make the documentation actually useful.
    > The incentive better be there (Medicare better P me
    > alot more than it does now if I am to jump throught
    > the additional hoops)or the good providers will opt
    > out.
    Realistically I don’t think either will happen. The good docs will figure out how to keep on being good and keep the doors open (as you evidently are), and Medicare will probably keep paying about what its paying.
    Healthcare has bumped into the demand curve now. This means there will not be new money flowing in, and the internecine rivalry will become more apparent. Oh, things may get re-jiggered by Medicare on the margins, but there’ll be nothing dramatic unless the panel that controls the RBRVU schedule suddenly decides that every minute of physician time has the same value. I shall watch to see whether the American College of Physicians manages to convince the American College of Surgeons and the Radiological Society of North America of this. Should be more fun to watch than Hulk Hogan vs. Andre the Giant…
    t

21. Tom
    Even with complex decision making processes like those required for oncology and radiology, patients can sense when a physician is not keeping their interests paramount. I think this is mostly because a physician with this pattern of behavior rarely does it once. The physician who doesn’t give you a pneumovax probably won’t also send you for a test or do some of the other things that the patient’s friends or family has had done. In the 15 or so years of practice, one of the few consistant trends I have seen is that progressively more patients come to me with dissatisfaction over their providers for just this kind of thing. I don’t know, maybe its the primary care perspective, but at the entry level of the system, folks have a fairly sensitive BS meter and word gets around.
    I am however in total agreement with you as far as using groupings of Medicare HMO type of plans in a managed competition model. They are by far the best third party arrangements I participate in, limited only by the congenital distrust, no, not distrust, that has too many negative connotations; let’s just say the proclivity of insurance companies to completely ignore physician input. E.G. we split drug costs in one of our contracts, but the insurer still has not given up any real-time access to information regarding our utilization. “Doctors have never asked it of us before” A leaden bureaucracy of fools.
    Medicare HMO’s give me the most freedom to outcompete my fellows on delivery efficient of quality care.
    I should have been more specifice regarding P4P. Our concern is that the documentation requirements to prove I P’ed enough to get P’ed will be so onerus (intentionally or unintentionally) that it will be inefficient and seen as a backdoor way to cut my pay further. It takes two sides of a sheet of paper to get paid to trim toenails, the certification requirement for ACQA diabetes management are rediculously complex and emphasize the documentation not the actual good the care does. These are examples that cause concern. The incentive better be there (Medicare better P me alot more than it does now if I am to jump throught the additional hoops)or the good providers will opt out.
    By the way, this discussion has never addressed one of the true drivers of overutilization in our system: Dr Donohue. In order for any system to be cost efficient, he must be killed. I’ll do it for free!

22. Just turning off the italics I started. Mea Culpa.
    t

23. There is so much noise about life expectancy and infant mortality in the U.S., a few facts will be helpful. These data are from OECD.
    In 1963, U.S. life expectancy at birth was 70 years. In 2003, it was 77.5 years. That’s an improvement of 7.5 years or 11%. In 1963, infant mortality in the U.S. was 25.2 per 1,000 live births; in 2003 it was 6.9 per 1,000 live births. That’s an improvement of 18.3 or 73%. In the U.S. about half of babies born under 16 ounces are saved. This is also a death rate of 50%. But in the U.S. all such babies are counted as live births – not true in other countries. So there is a difference in the way statistics are kept and which introduces a bias that does not favor the U.S.
    These results were achieved over the past 40 years in which Americans increasingly embraced poor health habits – bad diets, inadequate exercise, inadequate sleep, alcohol & drug abuse, domestic violence, poor maternal health, problems of excessive weight – with all the associated pathologies such as diabetes, joint problems, hypertension, etc, – and any number of other behavioral pathologies that are harmful to health.
    So do life expectancy and infant mortality data show that our health care system a failure? No. They show it’s a resounding success. That the health care system is not meeting our expectations perhaps results because (1) it has been so successful and (2) its high cost.
    Nevertheless, the record clearly demonstrates the success and competence of the U.S. health care system regarding life expectancy and infant mortality.

24. Sorry Pete, my last response was to your question instead of Tom’s. But remember that I said I was an old geezer. The second thing to go in life is memory.

25. Tom, you are correct in your surmising. I believe overutilization is a major cost waste, but I believe that most of that overutilization is due to physicians owning their own diagnostic testing devices that are are profitable to USE. So they do it more often than they should. They are cash cows. I don’t have the exact numbers either, but if you looked at all testing outside of THAT arena I believe that 90% is justified and perhaps 10% is defensive. Shoot me if I’m wrong, but after 35 years in the health care industry (10 with a medical device manufacturer and 25 as a cardiac laboratory owner), I have seen far too many abuses to cut any slack here.
    And yes, with every other industrialized country in the world with single-payer of one sort or another, and the their better outcomes and fewer dead bodies on the street, I am indeed a true believer in that system. And that comes from an old geezer on Medicare.

26. > What I and my partners fear is that P4P actually
    > means non-payment for non-proveable performance.
    This is probably what it will mean for the forseeable future: a documentation-heavy emphasis on process. But this stems from a very common attitude in the sciences and in medicine. I worked for a long while in a radiology research lab at a major university here in St. Louis. My lab director, Dr. G. James Blaine (that’s DSc, not MD), taught me “If you didn’t write it down, you didn’t do it, and if you didn’t measure it, you don’t know it.” What’s changed now is that there’s a way to enforce good documentation practices, and that’ll take some getting-used to.
    We should indeed pay for outcomes rather than process — but outcomes should be normed to the risk-adjusted expected rates in your panel, yada, yada, yada. My personal hope is we get there sooner rather than later. Note that this accepts review by payer/administrators as good. My guess is that the process documentation will still be required even when the emphasis shifts to outcomes. From a research perspective, this makes perfect sense. But as you say, we can’t do it yet. What I say is “That’s no excuse to do nothing.”
    > Even the least discriminating, least educated has
    > been saturated enough in our consumer driven culture
    > enough to sense when services are being withheld or
    > driven for reasons other than their own benefit.
    Very respectfully, you are no doubt correct about this for a good many things — the sorts of things a patient can evaluate, and which tend not to occurr in extremis. This does not include many big expensive and risky things: I’m thinking specifically of situations in Oncology, and I’m positive you can think of more. And what about your geriatric patient example of pnuemovax? Many docs have evidently “withheld” vaccination, but the patients have not known enough to ask for it, or go find a doc who reccommends it. Consider also that patients will shop around for a doc who will give them what they want, especially drugs, PT, time off work, labs, etc. And then there’s the “Do everything you can for Mom!” thing at the end of life. You might be glad if the feeling-guilty children did shop for another doc at this point, but then there is your actual patient lying there.
    What do you think?
    t
    

27. Jack,
    I feel like I’m taking crazy pills. (for you Zoolander fans 😉 )
    You didn’t list med-mal in your 4 because it’s not a “major” cost issue. Then you don’t answer the one question I asked, so I’ll post it again, word for word:
    Do you think the minority of physicians who are ordering tests for profit costs the system more money than the defensive medicine practiced (and taught) by virtually every physician currently in practice?
    Since you won’t give a straightfoward answer to the question, I will be left to surmise. You must feel that defensive medicine costs (not major?), are less than “profit influenced testing” costs (major?) for our health care system as a whole. I don’t have numbers or studies, but I would be very, very suprised if that’s true. I would also be very suprised if you think it’s true. Do you think it’s true?
    Additionally, I find your faith in a single payer system spending 15% of GDP, covering everyone, and
    sustaining itself (without having to ration care through canadian style budget starving) as incredible. A true believer you are.
    Pete

28. 1. The U.S. spends considerably more on healthcare than would be predicted by our wealth as measured by per capita GDP vs other developed countries.
    >>> I’ll withhold on that one.
    2. In general, our population is not sicker than that of other countries.
    >>> We just die earlier and have a poorer infant mortality rate. The 45 million without insurance just don’t get as sick as often (??).
    3. The excess spending relates mainly to doing more procedures and paying considerably more for services.
    >>> Others would disagree. Even http://www.pnhp.org, a clearly staunch single-payer proponent puts the highest waste on the bureaucracy created by the 1500 health insurers. Overutilization is also on their list.
    4. Doctors (both PCP’s and specialists) earn considerably more here than elsewhere, with income expressed as a multiple of per capita GDP.
    >>> Canada has a salary cap of $400K, though I would agree that physician income is higher here than elsewhere. But that often has to do with how many tests they order and profit by. But more Canadian physicians are now heading north than south. The trend has reversed.
    5. While nurses salaries are comparable (relative to per capita GDP) nurse staffing ratios are higher here than elsewhere.
    >>> I’ve heard the opposite, especially with the nursing shortage, but I won’t argue the point.
    6. We pay considerably more for brand name prescription drugs, though our generics range from 10% more expensive to 50% cheaper than in other countries.
    >>> The drug industry is another story. If there was ever a need for socialized anything, this is it. Taxpayers pay for 1/3 the R&D and then pay through the nose for the resulting drugs.
    7. Administrative costs are higher here with underwriting, sales and marketing costs singled out. However, I suspect that much of that infrastructure would remain to market supplemental policies if we ever went to taxpayer financing for primary coverage.
    >>> I would agree that “some” would remain, but at drastically lowered levels.
    8. Doctors who own an equity interest in an imaging center or ASC are much more likely to refer patients to use those facilities than docs who don’t. However, this profit seeking only accounts for $8 billion of the excess spending, according to McKinsey.
    >>> Well, $8 billion here and $8 billion there and, well, you know the rest. But I think it is far more than that.
    9. We actually underspend on long term care (despite all the questionable practices that go on in nursing homes) vs what our wealth would predict we would spend. I think this probably relates to a lack of insurance coverage except for the very poor and Medicare under very limited circumstances. Some $68 billion of LTC costs are paid out of pocket. While the study did not speak to the issue specifically, I think it is quite likely that a significant amount of our excess utilization relates to defensive medicine and more heroic services at the end of life and the very beginning of life.
    >>> I agree with the end-of-life costs being high, and as we have discussed before, I would support a mandatory no-code after the age of 90 unless the family is willing and able to bear the costs going forward. I won’t comment again on the defensive medicine issue.

29. Jack Lohman writes:
    > What type of system would be better
    > than a properly funded single-payer system?
    To reiterate: something like Alain Enthoven’s policy proposal he has called “Managed Competition” seems to me the best idea in theory. The best way I can think of to get there from where we are would look like “Medicare HMOs for All”. Whether it could survive our political process is another question.
    You are flatly wrong that “massive administrative costs foisted upon” anyone even exist. The costs are not massive, and they haven’t been foisted on anyone. And if you think a government-run system will not try to supervise through documentation the work of docs and others just as the commercial insurers do, you are wrong, wrong, wrong.
    The 1,500 insurers whine is a canard even for a solo doc. I have found it straightforward to get credentialled into any number of insurers, bill them, and even get paid. Stunning! It might be a little tough for the average non-college-bound high-school grad to pull off without any training, but then so evidently are most jobs. In any case, she can be taught to do it, and the evil insurance company’s physician relations reps will help them do it. It has been possible for many years now to bill all 1,500 insurance companys using the same billing form: from a business process perspective it hardly matters that there are 1,500. With electronic billing, it matters still less. Administration isn’t what drives costs in the system.
    What drives costs is utilization. Fraudulent utilization is a problem, yes. Massive? In the scheme of things, probably not (but this does not make individual cases any less disgusting). Plain old non-fraudulent (over)utilization driven by many forces, and great inequities in availability of services are the problems we are facing.
    t

30. Thanks for the responses. Primes are going to have to take one for the team with P4P just like any other stakeholder in the system. What I and my partners fear is that P4P actually means non-payment for non-proveable performance. Currently Medicare’s information system is so desperately poor, there is no way to accurately gather this data based on claims data. They should start with something simple and easily verifiable, like paying the docs a $10 bonus for each patient over 65 who has not had a pnuemovax. Hell, pay ’em $100, it would save Medicare millions.
    I must disagree with Tom Leith on one point, though. Patients are very, very sensitive to when a physician is not working in their best interests. Even the least discriminating, least educated has been saturated enough in our consumer driven culture enough to sense when services are being withheld or driven for reasons other than their own benefit. They may seem to comply in the short term, but they will quickly seek out another provider once they are out of earshot of their physician.
    I have a career’s worth of experience with managed care plans as a prime and I can tell you that the way to make them profitable is to provide high quality patient centered care. We routinely get “honored” by various insurance companies as being among the highest “cost effective” providers. When you look at the numbers, we are actually fairly high utilizers. What we do well is reduce the “screwing around” that pads so much of the revenue of various organizations.

31. Jack,
    You might want to check out this study by McKinsey that Ezra Klein linked to on his blog that examines why healthcare in the U.S. is so expensive. I think registration is required, but it’s free.
    The brief summary of its findings are as follows:
    1. The U.S. spends considerably more on healthcare than would be predicted by our wealth as measured by per capita GDP vs other developed countries.
    2. In general, our population is not sicker than that of other countries.
    3. The excess spending relates mainly to doing more procedures and paying considerably more for services.
    4. Doctors (both PCP’s and specialists) earn considerably more here than elsewhere, with income expressed as a multiple of per capita GDP.
    5. While nurses salaries are comparable (relative to per capita GDP) nurse staffing ratios are higher here than elsewhere.
    6. We pay considerably more for brand name prescription drugs, though our generics range from 10% more expensive to 50% cheaper than in other countries.
    7. Administrative costs are higher here with underwriting, sales and marketing costs singled out. However, I suspect that much of that infrastructure would remain to market supplemental policies if we ever went to taxpayer financing for primary coverage.
    8. Doctors who own an equity interest in an imaging center or ASC are much more likely to refer patients to use those facilities than docs who don’t. However, this profit seeking only accounts for $8 billion of the excess spending, according to McKinsey.
    9. We actually underspend on long term care (despite all the questionable practices that go on in nursing homes) vs what our wealth would predict we would spend. I think this probably relates to a lack of insurance coverage except for the very poor and Medicare under very limited circumstances. Some $68 billion of LTC costs are paid out of pocket.
    While the study did not speak to the issue specifically, I think it is quite likely that a significant amount of our excess utilization relates to defensive medicine and more heroic services at the end of life and the very beginning of life.

32. http://money.aol.com/news/articles/_a/doctors-insurers-butt-heads-over-billing/n20070214111209990010
    Doctors, Insurers butt heads over billing codes: AOL money and finance.
    The cost added to health care due to this nonsense could be eliminated with a single payer system. The insurance industry is rotten to the core. Their political influence is the thing standing in the way of real health care reform.
    As for some of the studies mentioned in many posts one must always consider WHO did the study. Have any of them been done by biased think tanks with misleading names?
    Here is a good example of one exposed biased study that has been used against citizens whose health was harmed due to substandard construction of their new home. This article was written by a WSJ reporter who did extensive research into the validity of the study and the conflict of interest of the contributors to the study.
    http://www.imakenews.com/pureaircontrols/e_article000741671.cfm?x=b8V9g0h,bvtvCt3
    http://www.imakenews.com/pureaircontrols/e_article000732125.cfm?x=b8PcTc0,bvtvCt3

33. You are right that defensive medicine should be on the list, Pete, but as #5. Surely med-mal is a factor, but it is not the monster driving the health care increases. Malpractice awards have remained steady at 0.05% for the last five years, and increases in rates have more to do with insurance losses in other markets than doctor mistakes. Doctors are just easy prey. I didn’t list med-mal reform because I was only listing the major costs, and I’m glad you caught it. But I have (on other threads) supported a special medical court staffed with retired physicians and nurses. I also support any punitive awards (after economic losses, reasonable pain and suffering and reasonable legal expenses are deducted) going into the health care fund rather than the patients/attorneys pockets.
    And yes, I do believe that profits are a higher motivator than med-mal when in-house equipment is purchased. But that does not apply to those physicians who do not own their own lab.
    I do not believe that 20% is inevitable if we move to single-payer. It hasn’t happened in any other country and they have better outcomes than we do. Do I believe they cut too many corners? Indeed. But keeping it at 15% and covering 100% does not translate to rationing.
    I disagree. The foundation of the problem is that our politicians are bought and paid for by the health care industry (yes, “industry!”), and the $100M in campaign dollars is going to negate anything this dedicated group of bloggers propose.

34. Jack,
    How is defensive medicine not in your top 4? I’ll ask you point blank: Do you think the minority of physicians who are ordering tests for profit costs the system more money than the defensive medicine practiced (and taught) by virtually every physician currently in practice? I’d like to hear your answer.
    Do you think DrThom’s opinions on defensive medicine and the need for med-mal reform are a diversion? If not, then why isn’t the move to specialty courts one of your top 4 priorities? (I know why it’s not a priority for congress, but I’m not sure why it doesn’t make your top 4). And why do you need to be continually remided of this?
    moving on…
    Re: overutilization. Isn’t this the real problem? If we go to single payer or canadian style or whatever you want to call it, 20% of GDP is inevitable given our current medical culture. (patient expectations included in the definition of culture) If we don’t overhaul the system, we’re going to 20% anyway. We have more health care available than we can pay for. And it will keep getting worse. New diagnoses, new drugs, new procedures, new technology, all of it is the real problem with costs. If we want state of the art to continue, and to extend it to everyone, the system will collapse. So we move to rationing. The word is loaded, but it is what it is. If we don’t ration, we go bankrupt.
    If you don’t believe that now, wait until you see what additional treatments we can offer 25 years from now. I’d love to see a statistic looking at the average number of diagnoses/procedures/prescriptions per 50 year old comapred to 25 years ago.
    To me, the discussion in this thread is important, but largely window dressing. The foundation of the problem is this: How do we decide what beneficial treatments will NOT be provided, and who will make those decisions? That’s where the money is (literally) in controlling costs. As has been stated on THCB several times, the cost of health care drives the cost of insurance. So let’s focus on the driver.
    On a pessimistic note, is it even politically possible to discuss rational rationing? Or is canadian-style “budget starving” the only way it happens?
    Pete

35. Here’s an interesting piece a friend referred me to called “Doctors, insurers butt heads over billing codes”:
    http://money.aol.com/news/articles/_a/doctors-insurers-butt-heads-over-billing/n20070214111209990010
    Or easier: http://tinyurl.com/22wfnu

36. So from all of this Tom, what do you see as the best fix to the system (other than “more of the same”)? I do not favor continued tweaking and leaving the employers and private insurers in the loop, even if you choose to call that a “public” scheme.
    I see as the biggest wastes the following:
    1) The massive administrative costs foisted upon hospitals and physicians to pay for the extra personal needed to deal with the existing 1500 private insurance companies, where the elimination of same would decrease,
    2) The higher reimbursements required to offset the costs of the heavy marketing, salesman commissions, underwriting costs, huge executive salaries, and high corporate profits,
    3)the vast numbers of diagnostic tests that are over-ordered by physicians because they have purchased expensive technology for their office, and
    4) the fraud and abuses, including the nursing home industry.
    What type of system would be better than a properly funded single-payer system?