OP-ED

Your Money or Your Wife

Talk about perfect timing.  Just as the last “death panel” falsettos fade into the droning no-government-  takeover chorus, along come those “faceless government bureaucrats” from the U.S. Preventative Services Task Force to stop the music in the nation’s busy and profitable mammography suites.

No more breast self-exams or mammograms for low-risk women under 50; mammograms only every other year after the age of 50; nothing for any woman over 74.  That was the thunderclap pronouncement from the acrobatically acronymic USPSTF, the dreaded “they” from the gub’mint that has the folks at Fox in full fulmination.

While the House and Senate grind their way through a few thousand pages of legislation and one more battle in the perennial abortion rights Holy War, this abrupt about-face in cancer screening is all people want to talk about, when we’re talking about health reform, in corporate strategy meetings.  And the mix of incredulousness and anxiety in their voices speak volumes: this startling news from the health care technocracy does not affect their business; rather, it seems profoundly and directly to affect them personally, men and women alike.

Why so sudden and radical a reversal, they all want to know, in the war against cancer we have been winning for decades?  And so I, swallowing hard, explain that the very smart people on HHS’ AHRQ’s USPSTF have discovered that all the effort and money dedicated to breast cancer screening for women under 50 actually saves only one life for every 1,904 women screened – while generating too many false positives, hundreds of unnecessary biopsies, and excessive anxiety.

It’s a big waste of money, “they” now tell us, and that certainly works for me, I say, swallowing hard again.  I’m a male medical economist, after all, a hard-headed advocate of hard numbers, data-driven medicine, solid evidence, and efficiency, and I despise waste almost as much as I despise cancer itself.

Unless, of course, that one case in 1,904 happens to be my wife.  Or my sister.  Or my daughter.  Would I, looking at that same study data from across her fresh grave, countenance the inconvenience and cost for those other 1,903 women?  You’re damn right I would.

Not unlike the health insurance executives infamous for denying experimental treatment for everyone in their plans except their own family members, I know what I know is best for the group, for the public health, and for society – and to hell with that.  What is best for the group has nothing to do with what is best for my best friend, even though she is low-risk and 46 years old.  She should be screened, every year; and if her commercial health plan now has government-sanctioned cover fire not to pay for it, I will.  Early detection is the single most important and durable factor in individual cancer survival, the epidemiology and economics of the group be damned.

You Are a Study Population of One

As for the incredulous and anxious colleagues who keep asking me to interpret the new guidelines, this is not an academic discussion for me.  I have lost two friends, so far, to breast cancer, one on the eve of her 40th birthday.  I have “raced for the cure.”  And I have wept and prayed alongside nine other friends who, so far, have managed to survive the disease, and the horrific brutality of its treatment.  (If the epidemiology of my social circle seems jinxed for a 47-year-old, know that its epicenter is a synagogue; when it comes to breast cancer, Jews really are the chosen people.)  Truth to tell, I of course despise cancer more than I despise waste, to the point where I cannot think about the subject rationally, and I don’t think I’m an anomaly among even the most educated health policy wonks.

No, this is not a reasonable nor responsible position to take on this incendiary subject.  But I suspect it is the position that most otherwise reasonable and responsible Americans would take.  For proof, we need look no further than the nearest NICU waiting room.  Our cultural belief in the sacrosanct, unlimited dollar-value of an individual life – oddly American and manifest no more plainly than in our bloated, screeching tort system – explains much about why U.S. health care costs what it does.

It also provides a picture-window into how most Americans confront the health care system today, and will continue to confront it tomorrow, nudged along either by piecemeal health services research or kicked down the road by concerted reform, with their employer’s money or with their own.  If those faceless government bureaucrats say “no” – not unlike the faceless bureaucrats behind the managed care curtain have been trying to do for 20 years – then we’ll just buy what we want with our own money.  This triangulated market dynamic is precisely how we ended up with “flexible spending accounts” and multi-tier drug formularies.

Of course, American women may not swallow the breast cancer screening revisionism as easily as we have all swallowed the bitter pills of aggressive pharmacy benefit management.   The “women’s health amendment” rammed through the Senate right after the USPSTF announcement is Exhibit A of the intense fear that breast cancer strikes in the body politic.  But that amendment, like mostly symbolic abortion coverage and the dreaded public option, is one more trading card in the most critical Congressional negotiation since the 1960s, so it is best not to count on it mitigating the effects of the new guidelines.

More likely, we should consider the new guidelines as one more big step down the path to a bifurcated health care system of medically necessary versus psychologically soothing, of what gets covered versus what gets turned into a cash business.  Time, legislation and benefit design will tell.

Retail Radiology

In the meanwhile, the radiologists of America can relax: the new guidelines will not be followed by most women and most doctors.  If the technocracy wins out over the politicians, mammograms for low-risk women under 50 will simply migrate into the “self-pay” category.

For proof, we need look no further than the success of the pharmaceutical industry at selling drugs that have been booted off formularies and out of benefit plans altogether.  Mammograms for women in their 40s will join Botox, massage therapy, executive physicals, faith healing, herbal remedies, and all the other medical confections gobbled up by a neurotic, narcissistic, superstitious society addicted to medical care.  As Voltaire once noted, “medicine’s role is to entertain us while nature takes it course.”

And that’s the junk, not a serious procedure that, until a few weeks ago, was a cornerstone of breast cancer prevention for women all the way down into their 30s.  Ample conference speaking experience has taught me that if you want to turn a roomful of noisy, fidgeting, Blackberrying people stone cold quiet, just say “breast cancer.”

This may have more to do with our complex collective angst about breasts, sex, and motherhood, than with our baseline angst about cancer, disability and death.  As most heterosexual males discover, often abruptly at a certain point in early adolescence, there is something quite remarkable about the female breast. With the possible exception of the heart, the breast is more freighted with mystery and meaning than any other feature of human anatomy.  Associated unconsciously with our earliest and most nurturing (and paralyzing) memories of sustenance versus starvation – and associated consciously with our desirability (or desire), gender identification, and self-worth (or pride in our mate’s projected worth) – the female breast is electrified with pre-verbal psychological energy.  If this were not true, plastic surgery would be a radically smaller and less lucrative business, and we would not recognize the visual landscape of the typical retail newsstand, where today breasts dominate not only shrink-wrapped porn, and not only music, entertainment, and men’s lifestyle magazines, but many of the women’s lifestyle magazines as well.  This is the wellspring of the fury over the findings, the next-day “women’s health amendment,” and the outsized shock and curiosity by so many of my otherwise level-headed health care business colleagues.

If the women’s health amendment is traded away for a few more votes in the House, the new guidelines will stand; and consistent with what the crackpots fear most about “death panels,” the findings of the USPSTF will drive what is and isn’t covered by a standardized, subsidized, reform-hatched health plan – whether administered by an “exchange,” a private plan, a non-profit co-op, the OPM’s FEHBP, or Halliburton.

As mentioned earlier, those findings will also quickly find their way into commercial health insurance plans.  “Consumer-driven health care” – roughly translated as “consumers pay more for health care” – has been highly effective at shifting demonstrably “wasteful” medical spending (e.g., the high marginal costs for only marginally better medications) from the employer/health insurer risk pool to the individual’s wallet, HRA, FSA, or HSA.  And if it were not for the tax-advantaged status of all that spending, we could easily write it off as no-harm/no-foul to the macro-economy.

But radiology businesses learned years ago to direct-bill patients for procedures they did not need, with the introduction of “full body scans” marketed to otherwise healthy people, or what I like to refer to as “recreational MRIs.”  The business strategies for marketing newly “unnecessary” mammograms will surely be no different.

Is This Any Way to Run a
Government Conspiracy?

Beyond the inevitable market durability of a now discredited procedure for women under 50, there is something quite odd about the timing of the new breast cancer screening guidelines, given the fury the news was certain to unleash.  If nothing else, choosing to open this Pandora’s box of empiricism versus emotion just as Congress is preparing its final push on health reform is proof positive that there is certainly no orchestrated conspiracy inside the Beltway to lull us into accepting a government takeover of health care.  It would seem designed, actually, to have just the opposite effect, stirring up even the most ardent supporters of reform over what those “faceless government bureaucrats” want to take away from us first.

Better still, if you were a left-wing conspiracy theorist, you could make a good case that this whole thing is the work of somebody on the far right: they set up the USPSTF to announce these guidelines now, just in time to enrage the country at the health care technocracy and foil the Democrats’ grand designs.  Get the federal government to un-do a generation’s vaguely comforting beliefs about breast cancer prevention at the precise moment that half of Congress is trying to convince the other half that health care is long overdue for some central planning, and see what happens.

Back in the real world, the announcement is also perfectly timed for open enrollment season for employee benefits and its sundry financial planning tasks.  The smart money would bet that smart women in their 40s are Googling the cost of a mammogram and putting about that much extra into their health care spending accounts.

J.D. Kleinke is a medical economist, author, and health information industry pioneer.  He has been instrumental in the creation of four health care information organizations; served on several public and privately-held health care information company boards; and written about health care business policy for The Wall Street Journal. His work has also appeared in JAMA, Barron’s, the British Medical Journal, Modern Healthcare, and numerous other publications.  His books includeBleeding Edge: The Business of Health Care in the New Century (1998), Oxymorons: The Myth of a U.S. Health Care System (2001), and Catching Babies, a novel about the training of OB/GYNs, which will be published next year.

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33 replies »

  1. As a UK resident, I find the US health system shocking. I was watching the “Sick” by MIchael Moore, that reveals how the US health system is based around money and insurance companies’ interest. As someone who enjoys free health care (sorry not trying to boast here) it is quite surprising that the worlds richest nation would put it’s people at such risks for money only.

  2. Thanks, Ross – you’re making a better and more eloquent case than I did on this controversial topic, but a case for society, not for individuals. But I do appreciate your own wife’s story, and the important lessons it brings.
    I agree completely that the best and wisest use of our resources should be spent on prevention and wellness, not flogging diseases – many of which can be avoided through better living without chemistry – but I don’t think this is an either/or choice. I believe we can and should have both, and I also believe we can afford both. The biggest (and most reasonably reducible) waste factor in health care is not unnecessary testing that the worried well will always demand (and pay for out of pocket); the real waste is produced by the Tower of Babel that is the administration of our health care “system.” Unnecessary process, endless redundant paper-based forms and approvls, the claims adjudication circus, and on, and on, …thanks to hundreds of state-by-state regulated health plans, which exist in a parallel universe alongside thousands of willy-nilly ERISA plans, combine to burn 20-25 percent of our premiums; and providers are forced – to cope with that 20-25 percent of premium health plan waste machine – to burn their own 40 percent managing “back.”
    THAT’S waste, and if we could use reform to flush some of it from the system, we would be forced into these false choices of prevention vs. treatment.

  3. As usual, JD, an eloquent and fearless commentary on a hot-button issue. My counterpoint, filled with the same passion but leading to a different conclusion, is best illustrated by recounting a conversation with my wife from a few years ago.
    Kym is a 26-year Hodgkin’s Lymphoma survivor and pursues health with the zeal of someone who will never go down without a fight. She reads everything she can get her hands on about fitness and nutrition – focusing on holistic approaches but also checking every box she can to ensure that anything penetrating this primary line of defense is caught early and treated aggressively.
    Kym started wearing a Live Strong type band supporting Hodgkin’s research and asked that I do the same. I wore it for a while, but stopped, but didn’t share my reasons. One night, she confronted me about it – she saw my reluctance to wear it as a lack of support for her personal quest for health. This was when the floodwaters broke through as I choked out my defense: I can’t focus on this one disease because I CANNOT KNOW what will get you!
    As a Hodgkin’s survivor and someone whose treatment included a splenectomy and aggressive radiation therapy (back before the notion of targeted or conformal therapy had been added to the radiologist’s lexicon), Kym is at risk for melanoma, breast cancer, heart disease… with a Hodgkin’s recurrence far down the list.
    Yes, it is brutally hard to look at the scientific evidence and not want to NIMBY-ly cry out, “Not in my benefit coverage!” Our most common reflex as Americans is to want to ACT – intervene even when it could kill us and when watchful waiting is the safer and more therapeutically sound approach. But we are talking here about population-based decisions and this IS the level at which we need to make general policy recommendations – always with the caveat that individual factors be considered.
    One of our greatest sins in medicine is that we go for the quick-fix intervention by focusing on the organ, on the single pathogen, on the most obvious manifestation of a problem. Instead, we should be employing what industries have been leveraging more and more – LEAN and Six Sigma process improvement approaches that analyze root causes and address those.
    If we’re going to fight these recommendations, let’s look at the science and critique that if warranted. Since we absolutely ration healthcare today, let’s at least move to a more rational rationing. As you said, people will still spend the money going after “recreational” or fear-assuaging screenings, evidence be damned. That’s fine, but don’t force it as a national coverage policy. We need to spend our limited resources on the places that will bring us the greatest benefit. Focusing all our defenses on the front gates just leaves us vulnerable to a thousand other fronts.
    Instead of buying mammograms for your friends, think about using the money to them gift certificates to Whole Foods and nutrition classes – you’ll likely do more to protect them from breast cancer and many other threats besides. The question is, can you look past the less exciting, less action-packed nature of this intervention and see that it is filled with even greater passion than the nuclear option because it looks past the emotional, gut response and, with steely resolve, focuses on the deeper need.
    This, to me, is love in action.

  4. Not sure about the NY insurer #s since I didn’t read the article, but if the terminology being used is accruate this 18.7% is the villified, misunderstood medical loss ratio, or the revenue that is left over after paying medical and pharmacy claims. These net revenues pay people’s salaries, pay for the cost of processing claims, capital investmants, and all that SG&A accounting stuff. The low single digit profits (probably around 4% for the industry) is what’s left over after all that.
    The fact that it (this 18.7%, the inverse of the loss ratio) went up 25% is probably due to the recession. The underwriters look retroactively at utiliztion and medial service/prodedure pricing to predict the future. But if people postpone services/checkups because they’re trying to save their money and/or just lost their job, then the actual utilization/cost is lower than predicted. The good news for consumers is that excess dollars should be used to build up reserves. After all, this temporary low utilization due to the economy is just that – temporary – and an underwriter would reasonably expect those deferred services to be incurred (possibly everyone at once) in the future. An insurer might have a higher profit margin in this environment, but it is usually not intentional. Most insurers have a profit margin that they try to acheive (and they differ based on non-profit or Wallstreet status), and a deviation from that is usually due to the imprecise nature of risk/utilization forecasting.

  5. Breast cancer is the most common type of cancer in women around the globe. It comes as no surprise, that, everybody seems to know at least one woman who has breast cancer or has been challenged by it in the past. It has been estimated about 1 out of every 7 women in North America will be affected by this deadly disease in a 90-year life span. Have it ever occurred to you that for simply being a woman and getting older, you too, can be affected by the disease during your lifetime? However, it is possible to reduce the chances of developing breast cancer by knowing about what puts you at breast cancer risk. For this reason, it is important to know what factors can increase or decrease breast cancer risk and how much those factors change your risk.

  6. Margalit – I would have to defer to someone who knows more about health insurance company subsidiary level accounting than I do, but I think there are two issues that need to be better understood. First, did reserves have to be built in prior years because claims were higher than budgeted? Second, how large are the expenses at the parent level? It could be that subsidiary level gross profits are comparable to the contribution to profit from a single successful store in a large chain like Wal-Mart or Walgreen. At the store level, gross profit might be 25% of sales. Occupancy costs plus in store labor might be another 10% or so leaving a store level profit margin of 15% before taxes. The corporation might only earn a net after tax profit of 3%. This is because the retailer also incurs significant expenses for its distribution centers, buying and merchandising organizations, advertising, liability insurance, interest on its debt and a host of other expenses. I suspect, but don’t know for sure, that the same general concepts and issues are at work in trying to reconcile the supposed profits of Wellpoint’s Empire Blue Cross subsidiary and the net after tax profits after ALL expenses including taxes as a percentage of premiums earned by all of Wellpoint.

  7. Barry,
    I find it fascinating that these NY insurers have a 25% larger excess from premiums collected in 2008 than they had in 2007, and that for one of the payers it constitutes 18.7% of the total premiums collected. I’m not sure how this sits with the much advertised single digits of net profit.
    How much are these people really paying for medical care if they have 18.7% of collections left over after all medical claims are paid and all SG&A is taken care of?

  8. Margalit – The question implicit in your first link is a bit away from my expertise but I’ll try to answer it as best I can anyway.
    Insurers are regulated at the state level. Among the factors that regulators control are the amount of reserves each insurer that operates in the state must maintain and the coverage benefits they must offer. The large national health insurers have numerous subsidiaries. Wellpoint, for example, owns 14 of the 39 Blues plans. Capital requirements vary by state and are intended to ensure that claims will be paid as they are incurred. Most insurers try to maintain an additional margin of safety beyond minimum capital requirements set by regulators. When insurers have a bad year and underestimate medical claims costs, they must often inject additional capital into their subsidiaries. When profits return and accumulate beyond the state capital requirement plus an adequate margin of safety, the excess is transferred to the parent corporation as a dividend. Those cash flows are used to finance capital investments which are in the $1 billion range per year for the largest insurers like United and Wellpoint. They are also used to develop new products, pay dividends to shareholders, make acquisitions and buy back stock.
    The article you linked to did not give any information regarding how long it took to build the surplus that was transferred to the parent. It may well have been built over more than one year. It also did not indicate how much premium revenue was associated with the capital that was transferred. The premiums these companies charge in New York or anywhere else they operate must be competitive to win business. That includes competition with non-profit insurers. As an aside, New York and New Jersey are two of five states that use community rating. The downside of community rating is that young, healthy people pay 3 to 5 times more for insurance than it would cost in nearby states like Pennsylvania that use medical underwriting.
    Regarding the link to the story about the low income women who can no longer access mammography, it sounds like they make too much to qualify for Medicaid and are otherwise uninsured. Like most states, New York’s budget is under severe pressure. However, it wastes incredible amounts of money in lots of ways. Its Medicaid program, for example, provides a wide array of optional benefits beyond those required by statute. A three part series done by the New York Times done in 2005 documented massive fraud in the program. New York’s Medicaid program costs over $50 billion per year, including the federal share, which is about 14% of all Medicaid spending nationally even though NY accounts for only about 6% of the country’s population. State and local workers, including teachers and police, are given ultra generous medical and pension benefits that are far beyond what most private sector workers in the state get including those who work for large companies. If the state legislature had the guts to stand up to the unions and weren’t so quick to give taxpayers’ money away to a host of special interest pleaders, it wouldn’t have to cut spending for worthwhile causes like community health centers. As always, there are two sides to every story.

  9. “Somehow it seems to me, for example, that whether a woman of any age should or should not have a mammogram at a particular time, is a decision that needs to be made by the woman and her doctor in light of all the available guide lines. Physicians do not usually profit from ordering mammograms and women do not enjoy having them (understatement). So what exactly is the point of creating more rules and regulations and adding to billing complexity and bureaucracy which will eventually cost as much as staying out of the doctor’s exam room?”
    Margalit, I am sorry, but that sounds entirely unrealistic. A woman may ponder the question whether to undergo a mammogram or not as long as she wants to … but a physician is not a personal counsellor for endless discussions about a potential, statistically quite small benefit. Do we have pool funde transport consultants who advise someone individually whether to do a 200 mile trip by car, bus or plane, based on the newest available evidence and weather conditions?
    That said, the “bureaucratic rules”, in a reasonable world, have their purpose in telling the patient and the physician when screening exams do make sense. And in a reasonable world, only exams that make sense should be covered by a risk pool, be it a tax payer risk pool (medicare/-aid) or a private one (commercial insurance). Of course one could build plans that cover more (or even everything imaginable), and these would be obviously more costly to every contributor to the pool. In the US, it is usually too much that is covered and used/consumed, and that’s exactly why care is now unaffordable for many.

  10. Dr. Kirsch, it would be foolish to completely disregard cost of care, of course. However, cost of care is a continuum and so is quality of outcomes, which makes it very hard to decide on the optimal equation. I just happen to think that the decision should be left to patients and doctors as long as there is no irrefutable evidence that the particular treatment is harmful or exactly equivalent to a much lower cost option (i.e generics).
    Somehow it seems to me, for example, that whether a woman of any age should or should not have a mammogram at a particular time, is a decision that needs to be made by the woman and her doctor in light of all the available guide lines. Physicians do not usually profit from ordering mammograms and women do not enjoy having them (understatement). So what exactly is the point of creating more rules and regulations and adding to billing complexity and bureaucracy which will eventually cost as much as staying out of the doctor’s exam room?
    Barry, since you seem to know NY rates and policies really well, here are two news items from today that I am having enormous trouble reconciling:
    http://www.timesunion.com/AspStories/story.asp?storyID=877165&category=ALBANY&BCCode=&newsdate=12/12/2009
    http://news.yahoo.com/s/ap/20091213/ap_on_he_me/us_cancer_screening

  11. Margalit, when I am advising an individual patient in my office, I am not considering the costs of the recommenddation, although the patient may do so, particulary if it is not a covered benefit. From a global perspective, cost must be included in the process. See this link to see what happens when cost of care is ignored. Ilearned about the fiasco of this drug last week. Absurd! http://bit.ly/5XxRWK

  12. “forecably cutting them off”
    Expand that accusation Nate. My experience in Canada shows this is NOT how the single-pay system works and you would be astounded how well the elderly are cared for there. The healthcare of my aging mother there was nothing but patient/doctor/relative contolled. She was never “cut off”, and I, as her legal guardian, had the choice at her end of life to control how SHE wanted her medical issues handled through her living will.
    “Eliminating lifetime maximums and capping annual out of pocket”
    Your preferred method of, “cutting them off” even when not at end of life and regardless of scientific Qualy/Metrics – a decision made by insurance bureaucrats on profits, not doctors/patients on medical need/justifcation. Your “rationing” is to ration through price and deny care to anyone not able to meet the system’s inability to control it’s prices/costs, no matter their medical situation.

  13. rbar raises an interesting fact. Our problem is the 20% of the population that consume 80% of the care. In every other country they control this by rationing the care those individuals recieve, forecably cutting them off. What do the liberals in America propose….
    Eliminating lifetime maximums and capping annual out of pocket.
    Yes American liberals are that stupid. The one small price control we have left and they want to outlaw it. I would argue with anyone the reason we spend twice as much of GDP as anyone else is 100% becuase our liberals are twice the morons as the rest of the world. They can’t grasp the simple concept that to have rationed level prices you have to have the rationing. They think they can legislate outcomes and it will all just work out.

  14. Most breast cancer patients have mutated genes which aggravates the situation and which have been found to be a contributing factor in people with cancer.
    But breast cancer can be prevented. A healthy lifestyle like not smoking or not drinking, regular exercies and having the right weight can contribute to lowering the risks of having breast cancer.
    Studies show that women who breastfeed for several months get the benefit of reducing their breast cancer risk. The body has natural ways of healing, if only we choose a healthy lifestyle.

  15. Margalit – I think it’s extremely difficult if not impossible to make “apples to apples” comparisons with respect to utilization of hospitals and physician services in the U.S. vs. other developed countries.
    You may find, for example, that there may actually be more inpatient hospital bed days per thousand of population in other countries than in the U.S. though I don’t know for sure. What I do know is that hospitalized patients in the U.S. have much more done to them from testing to drugs to surgeries to use of intensive care beds. Care that may be provided in a rehab center here might be provided in a hospital setting abroad. As I said previously, prices per procedure are also far higher in U.S. hospitals than those elsewhere yet 85% of all hospital beds are controlled by non-profit institutions and most say that Medicare and Medicaid do not pay them enough to cover their costs.
    The mix of doctors in the U.S. is 70% specialists and 30% primary care. It’s roughly the exact opposite in most other countries. It’s the specialists here that earn roughly twice as much and sometimes much more than their counterparts overseas. To earn those high incomes, they charge much more per procedure than doctors elsewhere. So, if gross physician visits per thousand people per year were comparable among countries, it would tell us nothing about utilization if many more of the U.S. visits are to high charging specialists and if U.S. primary care doctors are ordering more tests, prescribing more drugs and referring more patients to specialists.
    At the same time, patient expectations, our litigious culture and the fee for service payment model drives plenty of unnecessary and cost ineffective utilization. None of this has anything to do with insurance companies or their profits.
    Prices are also considerably higher here in the U.S. for brand name drugs though generics are actually cheaper here. Roughly two-thirds of all prescriptions are now for generics, but brand name drugs account for about 80% of the dollars spent on drugs. We could lower drug prices to European and Canadian levels via price controls, but, as I said previously, we would do so at the risk of slowing the pace of innovation in the future.
    While combined spending for hospital charges (inpatient plus outpatient), physician and clinical fees, and prescription drugs account for about 65% of total healthcare spending, they account for virtually all of the medical claims paid by commercial insurers and self-funded employer plans. These insurers and employer plans will generally tell you that 40% of their medical claims are for hospital charges, 40% are for physician and clinical fees, and 20% are for drugs. For Medicare, hospital charges are about 45% of costs, drugs are around 10% and the rest is physician and clinical fees (including rehab), home health care, durable medical equipment, etc.
    Separately, rationing by ability to pay means that people are denied access to necessary and cost-effective care because they can’t pay. If they can’t afford unnecessary or cost-ineffective care but people who can choose to waste their own money on it, that’s not rationing by ability to pay. It’s sensible allocation of taxpayer and insurer resources.

  16. Margalit,
    Whether americans go to the doctor twice more often than individuals of other nationality is an interesting one.
    From my own experience working in Europe and now in the US for a decade, there is certainly an important minority of folks overusing medical care, of course with the assistance of the fee for service docs.
    It would be great to review the few pieces of comparative evidence – for instance, I read somewhere that prostate cancer is more often diagnosed in the US, including milder forms, thereby skewing outcome numbers of treated prostate ca in the US.
    “Dr. Kirsch, it’s one thing to disseminate medical evidence to physicians and patients so they can make informed decisions, and quite another matter when the financial administration of health plans undertakes to make those decisions for both patients and doctors” – patients wishing overly aggressive screening, diagnosis and treatment and their fee for service docs may proceed however they please on their pwn budget, but the equation changes as soon as a pool/3rd party payor is picking up the tab.
    That is why I can reasonably expect for policemen to patrol in my neighborhood or to show up upon calling 911 on tax payer expense, but it would be unreasonable to expect to have a private guard always on my side, financed by taxes.

  17. Barry, are we really using health care services twice as much as other countries, or are the services just twice as costly in the US?
    Do Americans go to the doctor more than, say, people in Japan? Are we spending more time in hospitals than they do in France or Germany? Are we taking more medications?
    If the answer to these questions is no, then why would the solution be to lower utilization instead of lowering the obviously inflated costs of services? Is it the path of least resistance?
    Dr. Kirsch, it’s one thing to disseminate medical evidence to physicians and patients so they can make informed decisions, and quite another matter when the financial administration of health plans undertakes to make those decisions for both patients and doctors. The former is better care and the latter is rationing based on ability to pay.

  18. The USPSTF Mammogate fiasco shows that health reform has a vertical climb. This was outrageous. An apolitical task force, appointed by the federal government, issues findings which are then rebuked by the federal government. Does medical evidence even matter? Apparently not. See http://bit.ly/8R0wAx

  19. Margalit – I would like to address the issue of healthcare and health insurance costs in the U.S. vs. elsewhere as it relates to insurers, drug companies, doctors and hospitals.
    Insurers – The vast bulk of insurers’ costs are for medical claims. They negotiate these as best they can though some providers, including the big brand name hospitals, very large medical practices that dominate a region and rural hospitals and physician groups have considerable market power and are able to negotiate prices that are well above dictated rates imposed by Medicare and Medicaid.
    As for insurers’ overhead costs, most of these are for salaries and benefits. With the exception of CEO’s and other senior executive management for which the competition for talent is national in scope, virtually all other employees are paid based on local market conditions. We’re talking about people like computer programmers, secretaries, call center operators, actuaries, nurses and other clinicians, etc. The main administrative costs incurred by insurers that are not incurred by CMS (Medicare) are for broker commissions and medical underwriting as well as profit. While these are a meaningful chunk of administrative expense, they are probably only about high single digit percentage of the premium dollar for their fully insured, so-called risk business. Large self-funded employer plans do not incur the cost of medical underwriting or broker commissions which accounts for why their administrative costs are only 5%-11% of healthcare related spending according to the Congressional Research Service.
    Drugs – Brand name drugs are considerably more expensive in the U.S. because other countries impose price controls. In effect, they are free riding knowing that both U.S. and foreign based drug companies can charge what the market will bear in the U.S. thereby largely financing the R&D for much of the world drug industry. If the U.S. imposed price controls as well, the risk is that innovation would suffer materially. Moreover, a rapidly growing piece of drug spending is for specialty drugs to treat cancer and a few other diseases. These lend themselves especially well to coverage decisions based on QALY metrics. How much is that extra month or two of low quality life really worth and who should pay for it, in anyone?
    Doctors – Specialists earn twice as much or more as their counterparts in other countries. Their decisions to order tests, prescribe drugs, admit patients to the hospital, consult with patients and perform procedures themselves drive virtually all healthcare spending. Under the fee for service payment model, the more they order and do, the more money they can make. Patient expectations and the litigation environment also contribute significantly to high utilization, in my opinion.
    Hospitals – Hospitals are capital intensive businesses with very high fixed costs. To operate efficiently, they need high occupancy rates. Roundly five million people work in hospitals in the U.S. to staff about one million beds. For community hospitals, there are 4 employees or a bit more per bed on average. For teaching hospitals that also do lots of research, there are probably twice that though I’m not sure precisely. In big cities like NYC, there are more hospitals than we need though some have closed in recent years. It is extremely difficult to close a hospital because of the power of unions and other special interest groups that have influence in state legislatures and city councils. At the same time, hospital prices for both inpatient and outpatient services are astronomical on any measure including in comparison to hospital charges in other countries. Yet, 85% of all hospital beds in the U.S. are controlled by non-profit institutions.
    In the end, we have to reduce utilization. For that to happen we have to move away from the fee for service payment model toward bundling and capitation where appropriate and tiered co-pays. We need to reform the litigation environment by replacing juries with specialized health courts. We need to stop paying for cost ineffective care including futile end of life care and wildly expensive specialty drugs. To do this, CMS (Medicare) needs to explicitly take cost into account in determining what it will cover and pay for. In short, patients need to add the word, NO, to their vocabulary and lose the expectation that they can have any medical service, test or procedure that has the slightest chance of benefiting them while expecting someone else to cover the cost.

  20. Barry, I believe our disagreement is anchored in the definition of the finite resources at our disposal. I am not willing to accept that the resources to be fairly divided amongst us are nothing more than the leftovers from the predatory elements that seem to have an entitlement to skim the top.
    In this country, we pay more than others for every single element that comprises health care. We are also being subjected to more unwanted and totally futile “care” before we die, some of it aimed at something other than extending life or increasing comfort.
    I do understand that it is easier, in the name of finite resources, to withhold mammograms from largely poor women than to tackle the financial books of private insurers or “non-profit” hospitals or the price structure of pharmaceutical companies.
    Unless we fix those problems first and reclaim all our resources, we will be choosing to let some folks die in order to maintain the lifestyle of the powerful few.
    Triage in time of scarcity, like war, is aimed at saving as many people as possible, bringing to bear all resources available at that time. There are no set asides for playing golf and skiing at Vail. If there are such set asides, it’s not really triage, it’s negligent manslaughter ant it’s actionable.

  21. Amusing little psychodrama. All the emotional twists and turns have been part of every insurance redo since health insurance was created. There has always been strain over what is covered and what is not covered. That is why coverage has always expanded, being sold to willing consumers for just a little more premium, frog is the pot style.
    Now that the gub’mint has bankrupted it’s own political creations we now must participate is this shell game called reform so they can survive the storm when the excrement hits the rotating oscillator?
    There is really no debate if we clarify just whose money we are talking about. This little missive presumes that there somehow is a difference among private money and employer’s money and goverment money. In this little incorrect presumption lies all the difficulty. Afterall, healthcare as presently construed is an argument over who determines how the money is spent, for whose benefit and to whose credit.
    Well, lets me be clear…
    None of it is employer money and none of it is government money.
    There, feel better? Now you know you are not entitled to spend it, because it is not yours, collectively. Quit stealing from people.
    You are fighting over how to distribute something that is not yours. When enough owners wake up in 2010, there will be new clarity.
    People need to live with their own choices. That way when they are at the grave side for someone, they are not plotting a coup because someone died due to bureaucratic callousness of government. People die. They should die free and with dignity.
    Maybe that is the quality missing from this entire debate. There is no dignity.

  22. Margalit – Personally, I would be comfortable with an organization like the UK’s NICE making coverage decisions based on cost per quality adjusted life year (QALY). I think something in the range of $100K-$150K per QALY with adjustment for regional differences in medical input costs would be about right. Based on life expectancy in the U.S. of a bit less than 80 years, this implicitly values a life at $8-$12 million. Others may come up with a different number, but I totally reject the notion that we can’t put a price on life or that its value is infinite when we know absolutely for sure that resources are finite.

  23. Somehow based on stories we have been hearing about under 50 women being helped by mammogram it seems like 1 in 1904 stats is not correct.
    I am of Indian origin and one thing about our culture became evident living in US that we abhor being medicated and being opened up or radiated by doctors. I do notice this self restraining aspect in limited population in US and certainly HSA population is back to days of home remedies. The only difference being medical knowledge is inherited in Indian family culture and the knowledge is being transmitted across generations and there is rich trove of experience and references to count upon. The days of calculated risks are in. The days of insurance and absolute and maximum safety probably intervened in transmission of generational knowledge. I bet all health care pros on THB have had maximum health coverage apart from availing full gamut of preventive services.

  24. Barry and Dr. Motew,
    It’s all fair and simple when things are clean cut and the treatment is obviously harmful or 100% ineffective. The problems come up when it’s almost ineffective and sometimes harmful.
    So 1 life saved per 1904 screenings is too little. How about 2 lives? Or 5? Would 10 be enough? 100? According to whom?
    I guess if you have enough money it doesn’t really matter….

  25. So….which of the upcoming comparative research studies will we follow..those that show good science and cogent approaches to care with balanced outcome data…or….those that fit our personal ideals regardless of the science??
    If we collectively are being asked to pay, then decisions must follow the collective not the individual. That being said, if anyone wants to pay for potentially harmful medicine with their own money, then go right ahead, that’s your right in the Land of the Free.

  26. In the real world of finite resources, there is a huge difference between self-paying for cost ineffective care and expecting taxpayers or even insurers to pay for it. If it’s your own money, go for it if you want. If it’s taxpayers’ or insurers’ dollars, forget it.

  27. While we can argue that individuals will always try to find a solution to their health issues and that people will be willing to pay whatever it takes to maintain their health, ultimately there are always limits. The real difference between individuals and organizations is that governments or health insurers try to plan the limits in advance and unfortunately, based on the emotional assumption of human life as precious and of infinite value, any amount of such planning is sadly seen as evil.
    Rather than vilify these organizations for attempting to contain costs and make costs predictable, we should realize that we must empower them and also hold them accountable for providing the best bang for our dollars, all the while knowing that it is impossible to prevent and treat every problem that each of us will face.
    It is only us, as individuals, who can afford to take the risk of betting the farm in our final days in order to try to preserve our lives. It is completely unreasonable to expect this of these organizations if we want them to be sustainable. In the end, the “Death Panels” can be based on well though out regulations that have been reviewed time and again or they can be the unfortunate result of emptying the pocket book.

  28. Ok JD, increase your local taxes to increase social services community support, we might save one abused child or one beaten wife (maybe not yours though). Increase your local taxes for more police, that might save one life (maybe not yours though). Increase your property taxes to spend more on education, that might prevent one child from becoming a failure and ending up a murderer, that might save one life (maybe not yours though). Increase your state taxes to spend more on safer roads, that might save one life (maybe not yours though). Or do you fight for lower taxes cause you can see it come directly out of your pocket? Again I ask, why do we want healthcare exempt from cost controls?

  29. Geez, I’m already wishing LD would go away. These comment sections used to be a good place for civil discourse among well-informed healthcare industry people.
    I liked JD’s analysis. The point, LD, wasn’t about limiting people’s freedom to have a mammogram, so thanks for wasting my time in reading your garbage. IF you’re talking about something else, go somewhere else to get hysterical. As far as I can tell, mammograms are still legal. The point of the analysis was highlighting the tradeoff between coverage and self-pay.

  30. The recommendation not to begin mammography until age 50 has to do with medical issues, more than cost effectiveness issues. Mammography is not harmless.
    You are subjecting 1,899 women to annual doses of ionizing radiation to the breasts, with some unavoidable scatter to chest wall and lungs. We do not know how many women who are irradiated by mammography in their 40s will develop radiation-induced breast cancer (or even lung cancer) in their 60s, 70s, and 80s.
    The other problem is that women in their 40s tend to have very dense breasts, making it more difficult to get an accurate exam. These women often are called back for “additional views,” giving them even more radiation. There are more false positives, leading to breast biopsies and sometimes unnecessary lumpectomies, in cases where the biopsies are technically suboptimal.
    In contrast, in older women, their breasts are less dense, making the examination more accurate, with fewer false positives, and there are fewer years of remaining life to develop a radiation-induced malignancy.
    It’s almost like there is a sacred cow thing going on here. It may be the lack of epidemiological (or any other) data that makes it hard to say for sure what the risks are for increased radiological surveillance. What bothers me is the extent to which profit motive is subverting science and outcome data in our healthcare system.

  31. I enjoyed reading this diary entry. Many good points, several bad ones. Since this is a comment section, and most others are scared to offend (pc and all), I figured I’d give it a big swing.
    1) It is comically ironic to me that Mr. Sensitive Touchy Feely Man overlooked another somewhat mysterious and meaningful feature of human anatomy whilst focusing intently on breasts… never mind her beautiful mind (brain), just check out the cans on that bimbo. Relagating the brain to third place behind breasts and heart reminds me of a Miss America pageant,
    2) It is disturbing to me the juxtapositioning of the terms crackpots fearing “death panels” ,the synagoue being the epicenter of breast cancer, and Jews being the chosen people when it comes to a genetic disposition or weakness towards a disease. Hopefully Ahmadinejad doesn’t rss this blog,
    3) Certianly breast cancer is a deadly serious issue, but to insinuate that right wingers concoted and orchestrated the spotlighting and timing of this issue is to fall blindly into the lintany of distractions (straw men or silicon breasts)dumped on us by this legislature that is willing to say anything, bribe anyone, or throw any and everyone under the bus inorder to pass this abomination and ultimately remove everyone’s choices, and abilities, options, and freedom to seek the care they decide they want.
    I dispise people wasting time on distractions when our very freedom is on the line. Thanks for listening. LD

  32. Good question. As coverage for medical services of any degree of necessity recedes, and as deductibles and co-payments go up generally, we can expect women of lesser financial means to be forced into some very terrible tradeoffs between preventive services versus food, rent, new kids shoes, etc. The abortion debate is this syndrome in overdrive – the rich get taken care of, and the poor get children. I think this is why Kaiser makes so much sense for its predominant target market segment. I am not a big fan of autocracy in health care, but while lots of well-off people can navigate all this just fine on their own – and cover their coverage gaps with their own money – there is a broad swath of people who really do need systems and benefit plans to make the hard decisions for them. Will be interesting to see how THOSE systems integrate the breast cancer screening news into their plans…

  33. So beautifully written…..
    Love the description of the primeval and sexual foundation for the reverent fear of breast cancer. Could also be that it’s by far the most prevalent form of deadly cancer in women and most all of us know someone who has gotten struck by it. Probably a combination of both….
    Got one question though. Since you are betting that “smart women in their 40s are Googling the cost of a mammogram and putting about that much extra into their health care spending accounts”, what is your bet regarding not so “smart” women, or not so able to fund flex accounts (maybe Medicaid should also have flex spending), or are we not betting on the latter sort of women?

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