Will We Need a Bailout of the Health Care System, Too?

A huge bailout is being planned in Washington to avert a calamity that was brought about, in large measure, by the financial system operating the way financial operators told us it was supposed to function.  The money is needed, we are told, to bail out the financiers who assured us — up until just a couple of weeks ago — that the system they operated was sound and would need no rescue.

What is the likely spill over to health care from the misbehavior of the financial system’s owners, operators, and managers?   I’m going to suggest there are likely to be both direct and indirect effects.  One of the indirect effects is that we may lose faith in doctors, nurses, and hospitals, or at least come to suspect that the practice of their craft and trade is not aligned with their espoused principles of "doing no harm" and acting in our best interests. 

Financially what we have discovered is that the assets of the system
are so rotten in so many places, and in so many institutions, that none
of the leaders in these institutions trust one another any more.  So
now they refuse the risk of doing business with each other without the
federal government — you and me, taxpayers — serving as a backstop
and guarantee.

The entire country, excepting perhaps the perpetrators of this massive
but preventable mess, is rightly suspicious about the most basic
issue:  the motives of those in whom we have put our trust to manage
finance, the banking system, and the credit markets — in short, our
money.   They have steadfastly told us that they were working in our
best interests by rationally investing our savings, our 401Ks, and our
mortgages, in a financial system that efficiently allocates risk with
reward, balancing both in a manner that maximizes the growth and
stability of our nation’s economy, and therefore our money invested in
that economy.

Well, they lied. They weren’t protecting us. They weren’t helping us invest wisely.  They were taking advantage of us, enriching themselves through a myriad of complex premiums, mortgage rate schemes, and derivatives. They told us that markets work best when government interference is the least. But this was self-serving manipulation of our trust. What they were really doing was diverting money ginned up by their schemes into their own pockets.

Any sentient observer of this trickery on such a massive and systematic scale will start to ask questions about who else among our highest paid and most trusted professionals might be lying to us about the well being we place in their hands.   Who else, they will ask, is making money off our trust in them? Who else, they will ask, is skimming money off the top of an inflated and ultimately doomed — because unsustainable — market for complex services? Where is the next bubble that privatizes profits but socializes risk? 

And I think the answer is pretty easy to imagine, and the sector easy to identify.  It’s the health care system, composed of health plan administrators, doctors, nurses, hospitals, pharmacies, device manufacturers, and so on, pledged to protect us and act in a non-profit (or at least financially fair) manner, to do us no harm, help us prevent illness, and treat us with skill and compassion when we are sick. But it’s not happening exactly that way, is it? We trust them to protect and help us, but are they instead using our trust to enrich themselves?

My son, Ian, recently underwent an appendectomy. All went well, and I am grateful to the hospital staff, doctors and nurses who helped him get better quickly. But the bill was over $20,000 even though he spent less than a day in the hospital! He received an expensive MRI although the symptoms and basic tests were absolutely classic, as confirmatory of an appendicitis as I’ve ever witnessed, and his doctors admitted that the MRI was "probably not necessary." After the fact, he received a bewildering set of bills and explanations that took the good will of several experts in the Health 2.0 community to sort out (I want to thank, especially, Christopher Parks of Change:Healthcare for assisting Ian to make sense of this confusion).

This is perhaps not a very dramatic example of what I am suggesting is a profession and industry losing its moorings and escalating prices to serve the pecuniary interests of its own ranks. However, in a very personal way it has caused me to lose trust in the owners and operators of our health care system that they are acting fairly and that they are matching resources with a realistic appraisal of risk. And I know that there are other Americans who feel the same way and share my worries, perhaps millions of them. 

I know that some readers will think that I’m over reaching with my analogy, stretching the fabric of comparison beyond what it can carry. But I would argue that when confidence in a fundamental American institution becomes as shaky as it now is with banks and mortgage lenders, and with the government officials who set fiscal policy and  regulations to prevent the kind of meltdown we are now experiencing, it seems reasonable that people will become suspicious and cautious about others. 

I’m very worried that there is as much excess and greed in health care as there has been exposed in banking and on Wall Street, and that a collapse and bailout is eventually likely, but that we have not reached the crisis point quite yet. But aren’t we getting there? Fifty million people are without health insurance, and at least that many are under insured, while revenues going into the industry continue to increase at double digit rates of increase year after year. Medicare Part A, the portion of the fund that pays for hospital expenses for Medicare beneficiaries, went broke this year. 

The net yearly shrinkage in employees receiving health care benefits from their employers is between 2 and 3 per cent, and disposable personal income spent for health care has now, for the first time, exceeded the costs of housing, groceries, and clothing for the average American. How can this go on much longer?

There is enormous anger at Wall Street among our countrymen and countrywomen, in all walks of life. If a bailout of health care is required, I think we’ll see the same anger towards doctors, hospitals, and health plans. It may well be deserved if we don’t get a grip on things medical.

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26 replies »

  1. It seems long overdue that doctors like us lead the way in looking at all the inefficiencies and greed square in the eye, as well as the disparities, in order to clean it up. We are much closer to a health care “crash” than we may want to believe and it’s going to take all of us working together to avert it. Friends, let’s not wait long.

  2. I would like to know when the presidential candidates are going to address the people who cannot get health insurance because of preexisting conditions. Because 12 years ago I was treated and “cured” of leukemia, no health insurance company will give me an insurance plan. McCain says he’ll give a $5000 credit. I already get $300 monthly from my employer. It does me no good however since I cannot get a plan. When are they going to address this??

  3. Dear Jane: I think the health care system is closer to “crashing and burning” than most of us realize. Read my next blog entry, and let me know what you think. DCK

  4. Here’s my story: I have been repeatedly billed for a $1,300 path lab item. When I got the original bill, I contacted the health insurance company and was told that under their contract the provider could not bill me for that item. That was about three years (and, given that most companies change their health insurance companies regularly, about four healthcare systems) ago. Since then, I have been repeatedly assured that the file had been closed, only to receive another bill six months along. So from what I can see, the provider is simply never closing out the amount, but leaving it on the records as unpaid in the hopes that, somewhere along the line, I will pay it. I mentioned this to a doctor who told me that providers often send out unwarranted bills because the majority of people will eventually pay up.
    How can any industry justify this kind of tactic? And billing so complicated that you need expert knowledge to decipher it? You’re right, David, one of these days the whole system will crash and burn. I lived in Belgium for 16 years and never once had an issue with healthcare there. The system in America is WRONG.

  5. Dear Peter: Yes, debtor’s prison seems the next logical step to collusion between hospitals and state taxing authority: it certainly relieves any pressure the health system has to be sensitive to consumers’ concerns about price gouging and predatory collection practices. It also would seem to give them a cushion to increase their charges.
    I have wondered what prevents people working in these institutions from raising their voices, when they know their neighbors are at risk of suffering financially from these practices. Thanks for your comments. DCK

  6. rbar, no I’m not a doc but I do take medical decisions very seriously. Even when in Canada with no direct bills I tried to justify the treatment and only used the system when absolutly necessary.
    Mr. Kibbe, I see that your experience in NC was most likely with UNC hospital. I have had my fill of UNCH and will not go there again. Your experience with the AG’s office was like my wife’s when she was disputing a charge. She got a very threatening form letter from the AG – pay or else. I think if NC had debtors prison they would use that as well. UNCH had some bad press a while ago about their charges to the unisured, seems gouging helpless patients was not above a state financed hospital with a user friendly mission statement. To get the press off their back they now give uninsured patients a 25% discount on some services, I think though this is 25% off charges that are already 4-5 times above what they would be satisfied with from BCBS of NC or other insurers. I found out their lab charges were at least 5-6 times what I could have gotten from an out of hosptial doc. In any other hospital you would be able to negotiate the charges, but with the state lawyers as their collection agency they can do what they want. About your only option is a payment plan that at least does not charge interest, but that too is very strict and not very negotable.

  7. My wife just got bill for $2,600 dollars for a piece of medical equipment from almost 2 years ago. The company involved INSISTS they sent numerous prior invoices. They didn’t.
    This was a case where they agreed at the time to waive any charges above what her insurer would cover. Now, two years later, they want to demand the balance.
    My wife spent last night rummaging around old files to locate the card for the product rep so he could get it straightened out. She was told this “happens all the time.”
    Nor is this billing screw-up an isolated case. My wife has successfully disputed many thousands in charges over the years. Anyone else would likely have just paid them or gone bankrupt when they couldn’t do so.
    I also know my uninsured adult daughter got billed for an expensive scan twice in an ER – because they screened up the first one by doing the scan before the dye was properly distributed. They discussed it when I was in the room with her. Yet, THEIR error still showed up on HER bill.
    Only in medicine is the customer expected to pay for clear mistakes.
    Name ANY OTHER INDUSTRY that would try something like this with a customer? Seriously, when I buy real estate or a vehicle, I know what it costs at the time of the closing. I will never see an auto dealership send me a bill years later for something they think they forgot about at the time (or go back on an agreement they made and hope the customer can’t document it).
    Nor will they try to charge me for a job they obviously botched.
    We recently had a story in our local paper about an uninured lady getting charged something like $141 for a pain pill at a hospital ER. The more the hospital person tried to justify it, the more silly they seemed.
    At some point, the seemingly unreal charges for these services are going to have to be examined. They are unsupportable and nobody: not patients, not insurance companies, not the taxpayers, NOBODY has the loot to just pay these ever-increasing charges.

  8. Good comments, all. I want to relate a conversation I had with a colleague last week, a family doctor who like many sold his practice to a hospital system and who is now part of a very large group practice. His position is fairly typical, I believe.
    A good doctor, with lots of clinical experience, and a leader in his area in terms of use of EMRs, he is judged on his “productivity” in terms of referrals to subspecialists, image centers, procedures that he orders, and hospital admissions. He has been told that he is a part of a “cost center” for the hospital system, because the primary care “product area” loses money every year. Essentially, he is being told that his only value to the health system of which he is a member is his ability to refer to “profit centers” like cardiology, orthopedics, and radiology/imaging.
    You might imagine that he’s looking for alternatives!
    I tell you this story simply to point out that many people, including many good physicians, are trapped in a very bad and dysfunctional system of care delivery.
    But I still think that he, and many colleagues like him, do have the opportunity to reject participation in that system, and help build a better one.
    Regards, DCK

  9. Deron, I am one of the very few here who think that you do have a point … although it doesn’t really pertain to this discussion, as more visits and more scans should make each individual service cheaper and bring astronomical bills down (I have argued before that healthcare cannot be streamlined since it is too complex and individualized; certain components, such as MRIs, certainly can).
    Peter, I think you are a physician, too. Have you made the same experience as I did, namely when you mention cost aspects of any treatment or test I recommend (or don’t): some people appreciate it, others express “cost doesn’t matter, how can you even think about that”, many are just befuddled.
    The few physicians I have met who really know exact Dollar reimbursement for their services were, well, very, very interested in Dollars.
    It would be quite easy to steer the system, even in today’s mess (medicare being the fee leader): reimburse the procedures that are overused by reimbursing them at a fair rate (or just slighly below).

  10. “However, I find it unrealistic to expect from doctors that they personally review all their bills for accuracy,”
    I find this to be the case with most health professionals – not knowing what their services cost and not really wanting to be involved in day-to-day financial information. Ask your dentist what the charge will be and he will refer you to his office manager, ask your pet’s Vet what the charge will be and they will refer you to their office manager. In a way I understand this as docs want to concentrate on the care of the patient and their medical practice, not on the dollars – but to NOT be informed about the dollars puts the patient at medical risk when dollars are a big part of the decisions. This attitude of, “the dollars don’t matter, just the care plan” is a driver of high medical costs because docs are the gatekeepers for not only care, but care costs. That’s why government run systems do a better job at controlling costs in part because they impose healh budgets that force day-to-day focus on costs, not just care.

  11. Dr. Kibbe – It is refreshing to hear that you think individual physicians need to own up to their share of the healthcare morass too. Until everyone in the healthcare food chain is willing to give a little (and this includes rank-and-file docs too), no meaningful and lasting healthcare reform is going to be possible.

  12. Peter and rbar – I just want someone to acknowledge that patients are playing a role in our healthcare woes. It’s becoming cliche to blame everything on “greedy CEOs” and “greedy insurance companies” and “greedy physicians” etc. Do I think those are all problems? Absolutely! But I can promise you this: If the ultimate solution(s) to our crisis does not address the role that patients play (i.e. not going to the doctor until they’re sick, not taking of proper care themselves, etc.), I can assure you that we will not get ourselves completely out of this mess.

  13. I did not in any way condone the large, often inappropriate sums that are billed – in fact, I specifically wrote that I feel that “US doctors, esp. proceduralists, are relatively overpaid”, and I did not exclude myself (however, one also has to take other professional’s earnings into account, and the high cost of medical education).
    However, I find it unrealistic to expect from doctors that they personally review all their bills for accuracy, or to adjust every claim based on the patient’s income (although I do bill patients lower codes when I know that they have no insurance, or try to facilitate charity care within our monster MSG).
    What I think one could realistically expect from physicians is to be active in one or many ways to make sure that everyone who needs healthcare gets it (i.e. donate time and/or money to free clinics, lobby for healthcare reform e.g. with the PNHP, or less credibly, with the AMA, offer clinics in underserved areas).
    Deron S., why do you want the patients mentioned in this abstract discussion? Discuss their needs? Blaming them? Just curious …

  14. Deron, blaming patients is like blaming borrowers for the mortgage mess or Bush blaming the mess on falling home values. How about it’s the trees waving that create the wind. Patients react to the system in place -fix the system and patients will respond accordingly. Trying to rely on patients is the way conservatives don’t want anything done that will cost them money, “let the market work”. Before public health agencies came into exisitence the “public” didn’t take it on itself to stop disease transmission, at least in any scientific or organized way.

  15. DCK:
    I think you are absolutely correct about who the public is going to point their fingers at, right or wrong. Most of the public until very recently thought doctors were in control of their healthcare….From what I have been reading lately, this opinion appears to be shifting toward third parties, payors, and government.
    In my younger days as a physician it seemed to me physicians were in more control of their hospitals and organizations . I seem to remember MDs having the majority position on their boards, and if they wanted something done, it was done!!!
    Today hospitals and medical staffs are adversaries, and at times the medical staff needs attorneys to try to enforce their responsibilities for the public…I always tell myself when things are going to h-ll
    “look in the mirror’.
    We are all part of the problem…
    In some respects we are over-regulated, under-regulated, and regulated in the wrong areas.
    Technology is expensive, but the same technology is offered at far less expense in other countries…is industry over charging the American market?? It is apparent in Pharma….does this take place in biomed as well?
    There is a hospital building boom. In California it is due to seismic regulation deadlines.
    When the ASC boom started, it drained off a great deal of bread and butter from the hospitals…they never learned how to accomodate high volume patient volulme, such as cataract, ENT and minor orthopedic, plastic surgery, urology and other specialty procedures. In fact the hospitals welcomed this change, wanting to focus on orthopedics, cardiovascular surgery and ‘centers for excellence”
    At the time I was chairman of one of the subspecialty departments at a large non profit community hospital that had just completed a building boom. I was lectured to by a 24 year old MBA that had just returned from Europe who told us all, “this is the wave of the future”…(what she didn’t say was ‘watch out for the undertow!’)
    There is no one simple solution. This goes way beyond the capacity of politicians to decipher and vote upon….Witness the morass in Congress this week re the financial markets. At least they are not rushing into making a decision quickly.
    Medicare, in the first place fueled medical inflation…what is the answer?
    Reduce administrative cost. Slow down technological developments? Kill all the lawyers?
    Doctors who blindly hope and think their billers will do the job correctly are like those who trusted the financial market regulators to do their jobs. If they were like plumbers or normal people they would be sure their bills were correct…

  16. Dear Roy and rbar: I thank you for your comments about the roles and responsibilities of physicians for the current health care system melt down. As a doctor, and a primary care physician, you know there is a part of me that wants to say: “You’re right, it’s the fault of those damned _______ (fill in the blanks, e.g. health plan executives, hospital CEOs, subspecialists, anyone but individual doctors etc.)” But that is really a dodge. As a doctor, as a medical professional, I MUST insist that physicians accept our part of the blame, and I MUST concern myself with the leadership and position of power that leads to opportunities of my own profession to do the right thing. We (physicians) can’t turn our heads away from our obligations to be part of the solution, when we are so clearly part of the problem. We can’t say “Oh, I just fill in the blanks for charges, and it’s up to everyone else in the supply chain to determine what happens thereafter.” We can’t simply say, “Well, I just practice medicine, and the rest is up to other people.” I believe in my heart that individual physicians must, like William Carlos Williams, understand and connect with the pain of our patients, or else we sacrifice the soul of our profession to others. Kind regards, DCK

  17. I’m a little surprised at the notion expressed by Dr Kibbe that individual physicians are still at the top of the health care pyramid. I would submit that it has been a long time since this was so. Health care is dominated now not by individual physicians, or even physician groups, but by ever larger corporate entities, not-for-profit (like hospitals, academic medical centers, and a few health insurers), and for-profit (like drug, device, biotech, health information technology companies, and most insurers). These are often lead by large bureaucracies and very highly paid executives, most of whom are not physicians. Their role seems more analogous to that of the now discredited “masters of the universe” than that of the practicing physician in the trenches.

  18. Dear Dr. Kibbe,
    From what I know (practicing in a large MSG myself), doctors rarely have any precise personal expectations re. the bill – they just check the (appropriate or maybe inappropriate) codes and then have the billing department handle it (I think that even in small practices, this is usually outsourced).
    Now, self pay patients are the exeption (most patients do have coverage such as insurance, medicare etc.), although some hospitals have to deal with uninsured quite often, as we all know. The hospitals bill the full amount (the extraordinarily high self pay charge), but they know that a lot of these bills will not get paid (in that case, they can write off a good amount of charity care for a tax break). Usually, when a patient contacts the hospital and states that he/she has difficulty paying the bill, rebates can be negotiated, that, from what I heard, are usually in the 20-50% range.

  19. Even when only a fraction (usually, as far as I know, 505% and up) of the 20K is paid, the question where all this money goes is an interesting one: from what I have read and observed:
    1. a lot goes to fund care of uninsured and medicaid patients;
    2. US doctors, esp. proceduralists, are relatively overpaid (although I have read estimates that this explains only like a few percent);
    3. medical supplies and drugs seem overpriced also;
    4. and what about health systems, for profit or not, that seem to be in a construction boom, at least where I am writing from.
    Any other ideas?

  20. Dear NotSo: In the case of my son’s appendicitis, as in most other medical care bills that I’ve encountered in the US, the doctors, hospital, labs, radiology center, radiologists, etc. all expect to be paid the amount they charge. In the past, when I have challenged a medical bill from a hospital, I have been pursued by a collection agency, and I’ve had the state of NC add the challenged amount to my state income taxes (or deduct this amount from a refund).
    This is not the same thing as the “mark up” you refer to. Hospitals generally and often charge 2-3 times the cost of an item that is used in the course of treatment, e.g. bandages or sutures or prosthetics.
    However, people ought to challenge their health care bills more regularly, even if someone else, e.g. the health plan, pays most of the amount. DCK

  21. This is a great post, Mr. Kibbe is dead on. I hope that after the chaos settles from the current financial crisis, someone on capital hill will have the foresight that is within this post and can begin work on this problem now before the healthcare crisis is saturating the news. One would hope that legislators could make a connection, if the banks are failing and nearly led to our economic destruction, maybe we should look around at other industries that are in trouble.
    They will find that the comparisons between Wall Street and health care funding are staggering. In both scenarios there is one primary common denominator, greed.
    Corporate CEO’s receiving millions in payment and stock options and millions more in a golden parachute, unregulated pricing, a Medicare trustfund is soon to be tapped out.
    Lawmakers were forced to fix the current crisis and pass legislation in about 11 days. People have been pointing to a healthcare crisis for years. Unfortunately it appears that our legislators can only work effeciently in the midst of a crisis.

  22. Actually, it is almost certainly NOT the case that “all the entities that charged for their services expected to paid those exact amounts.” Healthcare charges are much like the “manufacturer’s suggested retail” on a new car–almost no one actually pays that price. Charges are inflated becuase most payers will reimburse the “lesser of costs or charges” and the “costs” are what they have negotiated. In other words, a provider will only match its charges to what it expects to paid if the provider hasn’t been taking care of its charge master.
    I have found it not at all uncommon for markups on individual items to be in excess of 100 percent.

  23. MRI: $900? My mother had an MRI done in a private facility in Paris a few months back. No wait time, great service and immediate results she took back to her PCC. Cost? 75 Euros!
    No one will ever be able to justify the differences between the 2 pricing schedules. Even if the French lab is subsidized at 100% or 150% we are stll very far from the $900. And every expense incurred in today American healthcare system can be subjected to similar analysis.
    Once you start looking into these details it becomes impossible to understand how so many of the 300 million Americans have been convinced to accept blindly that this is “just the best system in the world” and therefore the cost overruns are perfectly justified. Looks to me amazingly similar to a multitude of blind faith calls made by a certain administration over the last 8 years. This is an untenable system and the sooner we act decisively to produce in-depth systemic reform the better we and our children will be.

  24. Dear bev MD: I have not yet looked at the bills myself, but the MRI was over $900 and Ian said that almost half the bill was for anesthesiology and anesthesiologists’ charges. In this case, I think the surgeon’s bill was a small component of total charges, which is usually the case. And I can assure you that all of the entities that charged for their services expected to be paid those exact amounts! You are right: we need to ask these questions, and do so by the millions. DCK

  25. Great post and right on target. I read recently about a surgeon being reimbursed about $300 for an emergency appendectomy including 90 days of follow up care. So where did the balance of your son’s bill go? We should be asking these questions – all the questions we DIDN’T ask of our “hyper-helpers” (Warren Buffett’s term for middlemen, what I call parasites) in the financial system.
    A question I would ask of you is whether the $20K was what was actually reimbursed, or just charged in hopes of receiving some small percentage of that. The overcharge-to-get-something-smaller phenomenon is peculiar to the payment system of the health industry, and something that must be part of health reform.