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Myths & Facts About Health Care Reform, Part 4

MYTH #1: Because government payments to hospitals are so low, hospitals will continue to shift costs to private insurers, pushing premiums higher.

FACT: This is a canard that insurance lobbyists like to perpetuate because it helps justify climbing premiums. The non-partisan Medicare Payment Advisory Commission (MedPAC) has taken on exaggerated accounts of “cost-shifting” by showing that a hospital’s relative market strength determines what a hospital is paid by private payers.

MedPac points out that from 1994 through 2000, during the heyday of “managed care,” insurers had more power than hospitals in most markets: “managed care restrained private-payer payment rates.” But “by 2000, hospitals had regained the upper hand in price negotiations due to hospital consolidations and consumer backlash against managed care.”

Private insurers no longer tried to “manage care.” Huge hospitals had the clout to perform as many tests and treatments as they wished, without having to prove that the patient needed the procedure, and newly-consolidated hospitals could charge insurers as much as they pleased. They knew that the insurers’ customers wanted those large medical centers in their networks. Insurers “in turn passed along these costs through higher premiums to enrollees and employers,” MedPAC reports. “While insurers appear to be unable or unwilling to ‘push back’ and restrain payments to providers, they have been able to pass costs on to the purchasers of insurance and maintain their profit margins.”

Large hospitals with marquee names now have enormous power. Earlier this year, Massachusetts’ Attorney General reported that elite medical centers have been charging insurers twice as much as other hospitals charge for the same procedures. Insurers comply with their demands because they want “brand name” institutions in their networks.  A 2008 Boston Globe investigation broke the story, revealing that hospitals such as Massachusetts General Hospital and Brigham and Women’s Hospital typically are paid 15 percent to 60 percent more for the same basic services that other hospitals provide, even though, when it comes to basic services, quality is not superior.

More recently, over at Managed Care Matters, Joe Paduda has highlighted a Health Affairs report which shows how “hospitals in California now occupy the high ground.”  As the state’s hospitals consolidated they have forced insurers that need coverage in key areas to accept ever-higher rates: “In current health reform discussions and proposed legislation, providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned,” the authors write. . . . “A recent study has shown that in California, after a downward trend in hospital prices for private-pay patients in the 1990s, a rapid upward trend began about 1999 that produced average annual increases of 10.6 percent over the period 1999-2005. The study’s authors concluded that the source of the near-doubling of California hospital prices remains “something of a mystery.” Analysis of Medicare Cost Report data by the Medicare Payment Advisory Commission (MedPAC) . . . shows that how much it cost hospitals to treat patients  increased only 5.5 percent per year during that period.”

“The net is this,” Paduda observes: “hospitals’ market power enabled them to raise prices by 10.6% while their costs only went up about half that fast.” The authors of the Health Affairs report conclude: “California is leading a trend that will be felt in many other states, and soon.”

But under reform, perhaps the trend can be stopped. As I noted in Part 1 of this post, reform regulation will put private insurers under financial pressure. If hospitals over-charge, it will be harder for insurers to simply pass the cost along to customers. Under the new legislation, insurance companies will have to submit justification for requested premium increases. Already, some state regulators are getting tougher.

As a result, insurers will be more likely to stand up to hospitals. Meanwhile, states like Massachusetts and California will be taking a closer look at variations in hospital prices. And perhaps the media will continue to expose hospitals that are gouging insurers. It’s a good story. On the other hand, both newspapers and cable television reap revenues from hospital advertising. The Boston Globe deserves credit for digging into the facts. I hope that other members of the mainstream media follow suit.

MYTH #2: When 32 million formerly uninsured Americans begin flooding our hospitals and emergency rooms, we’ll all find ourselves standing on long lines.

FACT: The final legislation increases funding for community health centers to $11 billion over five years (2011 to 2015). Today, community clinics care for 20 million people—many of them among the 32 million uninsured.  With the new funding, clinics will be able to absorb an additional 20 million of the 32 million newly-insured patients who will be seeking care in 2014.

This provision takes effect this year; it’s likely that Washington will begin to hand out funding in December. Of course some of the formerly uninsured will need hospital care; clinics won’t be able to accommodate all of their needs. But many patients who now receive most of their medical care at an ER will find “medical homes” in new and expanded clinics that are open evenings and week-ends. And if they receive ongoing care at a clinic, they will be far less likely to need hospitalization in the future.

Who will staff the community clinics? The legislation adds $1.5 billion to a medical school loan forgiveness program designed to encourage 15,000 primary care physicians to work in community clinics. Nurses and nurse practitioners also will play a vital role. To increase the nursing workforce, the law includes a loan repayment program that repays 60 percent of nursing student loans in return for at least two years of practice in a facility that has a critical shortage of nurses. The law also provides grants to nursing schools and academic health centers to enhance education and practice for nurses in master’s and post-master’s programs. These programs prepare nurse practitioners, clinical nurse specialists, nurse midwives, nurse anesthetists, nurse educators, nurse administrators, and public health nurses.

As I explained here, the nursing shortage has been caused, in part, by the fact that we don’t have enough nursing school teachers. As a result, nursing schools are forced to reject qualified applicants. The legislation establishes additional loan programs within schools of nursing to support students pursuing masters’ and doctoral degrees. Upon graduation, loan recipients are required to teach at a school of nursing in exchange for cancellation of up to 85 percent of their educational loans, plus interest, over four years.

This law also provides for “nurse-managed health clinics,” creating a new $50 million grant program to support innovative safety net providers. These clinics are designed to serve as crucial health care access points in rural areas such as Tyrell Count, North Carolina, where there are no doctors. As the Kentucky Herald Leader explains: “There’s only Irene Cavall, a licensed nurse practitioner and the sole source of primary care for 4,000 residents spread out over 600 square miles. It’s been that way since the county’s lone doctor moved away two and a half years ago.”

Nurse-Family Home Visit Partnerships also will help take up the slack. The new law’s “maternal, infant and early childhood home visitation provision” adds $1.5 billion over five years that can help programs that send specially trained registered nurses into homes to visit first-time, low-income mothers for a period of 2 1/2 years, coaching them on healthy pregnancies and helping them cope with the realities of caring for small children. It’s much less likely that these mothers will turn up in ERs, seeking medical help for their babies.

MYTH #3: New rules restricting doctor-owned hospitals will leave us short of hospital beds.

Fact: It is true that after December 31, 2010, physicians will no longer be able to invest in hospitals to which they refer patients, and existing doctor-owned hospitals will not be able to expand. (There is a limited exception to the restriction on growth: if the doctor-owned hospital treats a higher percentage of Medicaid patients than any other hospital in the county–and is not the only hospital in the county–it can add beds.)

Why interfere with a physician’s right to invest in a hospital? Lawyers can own hospitals, why not doctors? According to the American Hospital Association (AHA) when physicians refer patients to facilities they own, they are tempted to “cherry-pick” relatively healthy well-insured patients, while sending difficult cases and uninsured patients to the local community hospital. In effect, they skim the most lucrative business, focusing on money-making procedures such as heart surgery, while leaving it to the community hospital to provide money-losing services such as burn units, ERs and trauma centers.

Research suggests that the AHA has a point. In 2006, Business Week reported on a study of heart hospitals in Arizona which found that about 21% of patients admitted to physician-owned hospitals undergo routine surgeries such as a heart bypass, but are otherwise relatively healthy. At facilities that were not doctor-owned, only 10% of patients fit that profile; “the vast majority of cases at these hospitals were more complicated and expensive to treat because patients suffered from multiple problems, such as diabetes and other chronic conditions.”  Another study by the Texas Hospital Assn. (THA) found that the year after a physician-owned heart-imaging facility opened in one town, the cardiac care center at the nearby community hospital slid from a $524,646 net profit to a $20,786 net loss. “We’re all for competition,” THA spokesman Gregg Knaupe told Business Week. “Problem is, this isn’t fair competition.”

That community hospital in Texas began losing money because it was treating many uninsured and Medicaid patients while the doctor-owned center welcomed well-insured patients. On average, Medicaid pays 70% less than Medicare, and Medicare often pays less than private insurers. Little wonder, then, that doctors don’t usually refer Medicaid patients to facilities they own. A study by MedPAC, confirming earlier work by the Government Accounting Office (GAO), reveals that physician–owned heart hospitals treat 75 percent fewer Medicaid patients and that orthopedic hospitals owned by doctors take in 94 percent fewer Medicaid patients.

Physician owners deny the charges, and claim that their focused surgical centers offer better care. But if facilities owned by doctors tend to treat easier cases it becomes hard to compare quality of care. As a study published in Health Affairs in 2006 observes: “Peer-reviewed research finds that lower unadjusted mortality rates in cardiac specialty hospitals [owned by physicians] are largely attributable to the fact that these facilities admit healthier patients. After adjusting for procedural volume and patient characteristics, mortality rates and outcomes were similar” to outcome at large non-profit community hospitals.

Moreover, even though the patients are healthier, MedPAC reports that care at specialty hospitals owned by doctors tends to be more expensive.

Finally, there is evidence that when physicians own hospitals, they are more likely to over-treat. A study published in Health Affairs, comparing “practice patterns of physician owners before and after they became owners” confirms that rates of use of [magnetic resonance imaging], physical therapy treatments . . . increased significantly” when physicians have a financial interested in the hospital. Business Week highlights a separate survey by the Center for Studying Health System Change which suggests that specialty hospitals owned by doctors may also drive up aggregate health-care costs by spurring demand for pricey elective surgeries.

The bottom line then, is that, too often, physician-owned facilities help drive health care spending higher, while providing care that is no better. Meanwhile, they undermine the community hospitals that we all need by siphoning away health care dollars that could support essential but low-margin service.

Nevertheless, reforms’ critics charge that by restricting the growth of doctor-owned hospitals, the legislation will leave us with too few hospitals beds. This is yet another myth. The truth is that we have more inpatient beds than we need in most parts of the nation—and excess capacity leads to over-treatment. As Dr. Donald Berwick pointed out in a 2008 speech at Famlies USA’s annual health care conference, after adjusting for differences in local prices and the underlying health of the population as well as the age and race of the patients–Medicare spends $3,000 more per beneficiary per year, in some parts of the country–for no apparent reason.

Berwick, who President Obama has tapped to head the Centers for Medicare and Medicaid, asked what high spending regions in parts of Louisiana, Texas, Florida, New York, New Jersey, and Southern California have in common. The answer: “32 percent more hospital beds, per capita, and 65 percent more medical specialists. . . . Supply drives demand.  When more technology, more beds and more specialists are available, the extra resources are automatically used, without anyone thinking too much about it.” Outcomes are no better, sometimes they are worse.

I have often wondered why research shows that  Medicare spends more in Louisiana than in other states—even after researchers correct for the low incomes and relatively poor health of the population. Then I discovered that Louisiana ranks second only to Texas in the number of doctor-owned specialty hospitals in the state. This helps explain both the number of beds, and the higher Medicare bills.

MYTH #4: Hospitals cut a sweetheart deal with Washington. Reform will do little to rein in hospital bills that have been climbing by over 7% a year.

FACT: As I noted in Part 3 of this post, when you consider who won and who lost under reform legislation, hospitals emerge as winners—for the short term. When it came to negotiating with reformers, they “got into the tent early,” and the reductions in Medicare increases that they accepted will be offset by an influx of paying patients.

It’s also true that our hospital bills have been spiraling– up more than 7% a year, from 2005 through 2007. In 2008, higher fee-for-service hospital spending once again spurred inflation; by year-end, hospital care accounted for fully 31% of the nation’s health care bill.

But as Moody’s, a bond rating agency that rates  hospital debt, points out, over time “as governmental auditing and oversight of revenue is tightened, hospitals will be pressured to operate more efficiently, forcing spending cuts and mergers among smaller hospitals.”  “After 2014,” Moody’s observes,  “many key provisions will be implemented.”

For example, beginning in 2014, the U.S. Health and Human Services Department will report every hospital’s record for medical errors and infections involving Medicare patients on its hospital web site, notes Consumers Union, publisher of the highly-regarded Consumer Reports. “It’s definitely a step forward,” says Lisa McGiffert who leads Consumer Union’s Safe Patient Project.  “It’s not everything we wanted,” McGiffert adds. “But it will create a lot more attention on hospital acquired infections.”

In 2014, Medicare will trim payments by one percent for hospitals with the highest rates of medical harm as measured by “hospital-acquired conditions.” Consumers Union explains what the term means: “These include certain preventable infections and medical errors, such as serious bedsores, catheter-associated urinary tract infections and certain types of falls and trauma.”

Moody’s expects “additional Medicare cuts for high-cost, less efficient hospitals in high-cost markets.” As Moody’s analyst Mark Pascaris explains: “The key longer-term challenge for not-for-profit hospitals is reform’s reliance on extracting long-term cost efficiencies from hospitals, probably resulting in diminished hospital revenues.” This is, of course, good news for patients. “More efficient” hospitals mean fewer errors and higher quality care as well as lower costs. Medicare also will be experimenting with ways to pay hospitals for value, not volume. Those that have relied on overtreatment and over-testing to stay in the black will be in trouble. And Moody’s notes, “We also expect hospitals will face more difficult negotiations with commercial and managed care insurers who themselves face increased scrutiny and fees and are most affected by sweeping changes in the legislation.”

Finally, reform legislation calls for closer scrutiny of the federal income tax exemption that non-profit hospitals now enjoy. The bills requires that non-profits conduct a community health needs analysis at least once every three years, soliciting input from the communities that they serve. In addition, if they want to hold onto their tax-exempt status, they will be expected to be a little more forthcoming when it comes to helping the poor. They must notify patients of financial assistance policies through “reasonable efforts,” before initiating various collection actions or reporting accounts to a credit rating agency. Even after reform, some families will remain uninsured. But under the legislation, hospitals will no longer be allowed to charge uninsured, indigent patients more than they generally charge insured patients.

Going forward, the Internal Revenue Service will review the exempt status of hospitals every three years. In addition, the legislation requires the U.S. Department of the Treasury, in consultation with the U.S. Department of Health and Human Services (HHS), to prepare an annual report for the U.S. Congress on charity care, bad debt expenses, certain unreimbursed costs and costs incurred for community benefit activities.

Recently, an Illinois Supreme Court made headlines by denying property tax exemption to a nonprofit hospital. It’s likely that in the years ahead, these new standards will lead to debate as to whether and to what extent nonprofit hospitals are distinguishable from for-profit hospitals. Do they all deserve their tax breaks?

For related articles:

Myths & Facts about Health Care Reform, Part 1

Myths & Facts about Health Care Reform, Part 2

Myths & Facts about Health Care Reform, Part 3

Maggie Mahar is an award winning journalist and author. A frequent contributor to THCB, her work has appeared in the New York Times, Barron’s and Institutional Investor. She is the author of “Money-Driven Medicine: The Real Reason Why Healthcare Costs So Much,” an examination of the economic forces driving the health care system. A fellow at the Century Foundation, Maggie is also the author the increasingly influential HealthBeat blog, one of our favorite health care reads, where this piece first appeared.

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101 replies »

  1. Your position is a false one. Instead improving capacity of health care industry to treat disease we should provide more effort to prevent disease and give people the tools to imprve their health care.
    Once again, the top down mentality rears its ugly head where so called health care experts dictate to the public what health care is. Its time for a revolution in health care and put the public in charge of the heallth care system- failing that the tragic anti-patterns in health care will continue.

  2. I hope you people above are right in exposing there is some questionable reliability about this author. I am a realist though, the harsher the criticism and the focus on political ideology as extremist in opposition to the author makes me leery of the intent.
    I just want to see people out to profit on the health care profession be exposed and revealed to be the frauds this legislation is really about.
    It would not surprise me if key Republicans in Congress are equally making out in the end, they are just as covert as their Democrat counterparts. Invested readers in the truth and need for transparency, beware, no politician right now can be trusted. Our system is truly broken, and there are many defenders, apologists, and propagandists who will lose, hopefully, when the full truth is revealed.
    And I hope the public outrage is just!

  3. Maggie, it is ridiculous to use that one MedPac report as your evidence that cost-shifting is a “myth”. Like Actuary said above, I too have seen it, witnessed it, had to price a product higher because of it. The academic literature shows that cost-shifting is real, not a one to one shift of all dollars, but anywhere from 15-40%. Those are significant costs being passed on to private insurers.
    I’ve read that same MedPac report (see page 25 of this PDF for those who are interested http://medpac.gov/chapters/Mar09_Ch02A.pdf), and you mention how they said that “efficient” hospitals make a profit or break-even. Based on their own criteria of “efficient” those hospitals earned a 0.5% margin on Medicare. Those hospitals only represent 12% of the total. So even carving out the best 1/8 of the hospitals, they still are just barely able to break even. Do you think we can magically make the other 88% of hospitals just as efficient as the best 12%? And do you think hospitals can survive on 0.5% margins in the long-run?
    You’re being blinded by your own ideology here, trying to use one report that is in conflict with a great deal of other peer-reviewed academic literature, and is in conflict with the real-world experience of those who actually do the day-to-day work of negotiating hospital reimbursement rates and analyzing public/private insurer cost data.

  4. FACTS
    Madam, you blithely inferred that you had interviewed insurance CEOs at Barron’s. Until I posted your Barron’s records from ABI — ending 1997 — 13 years ago. Then this was posted —
    ” .. I was at Barron’s from the late 1980s to the late 1990s ..”
    Facts are facts, madam. Try using them — they will help.
    Matthew — want to check my facts? Access ABI or Lexis-Nexis.

  5. Maggie —
    1) There is cost shifting, I have seen it, lived it, been party to it, responded to it, etc.
    If hospitals say they are not getting enough $$$ from Medicare/Medicaid and that is why they need to raise their reimbursement levels from the commercial payors, what do you call that?!?!
    2) There are negotiations, usually private, many times antagonistic, and even sometimes public. The hospitals always portray the fight for more $$$ as “the big bad pencil pushers” vs. “the miracle workers”. The fact is that BIG Insurance Companies are trying to keep reimbursement down to satisfy their ASO accounts and to keep their premiums down.
    Unfortunately, even if prices only went up slightly, increased utilization is a real cost driver (or revenue maker, depending on which side of the MRI one is on).

  6. damages have never been the problem in malpratice, it’s defending yourself from the bogus cases that never should have seen the light of day.

  7. Maggie – I think a distinction needs to be made between tests that are ordered to diagnose the patient’s problem and the course of action recommended once the problem is identified. Maybe some of the docs can weigh in on this, but I’ve heard them comment time and time again that if imaging or blood tests are not ordered because the doctor doesn’t think they’re necessary, patients often perceive the doctor as not thorough in his approach. An unhappy patient either may find another doctor or will be more likely to sue if there is an adverse outcome. Doctors who own their own equipment do indeed order more tests.
    Once a diagnosis is determined, doctors determine what needs to be done including referral to an appropriate specialist or hospital. So, at least with respect to diagnostic care, a treatment decision may be part money driven, part defensive medicine, and part trying to ensure that the patient is satisfied. Even the doctor himself often cannot tell you precisely what drove his decision to order tests that he thinks were probably unnecessary.
    Regarding tort reform, I don’t consider what Texas did to be tort reform. Damage caps are not tort reform. As I’ve said many times, tort reform means specialized health courts and not juries deciding malpractice cases and it means robust safe harbor protection from lawsuits for doctors who follow evidence based guidelines where they exist. No state has enacted tort reform as I define it. Even when they do, it will take some time for doctors to perceive tort reform as “for real” before they start to reduce the defensive medicine that pervades the medical culture in the U.S.

  8. Maryland has saved medicare and medicaid money. Yeah, on the backs of Maryland taxpayers. Umm, did you forget, ma’am, that states have to pay their share of what these programs alleged provided for those enrolled in them? Are you in medicare or medicaid as a patient? If you are, are you going to tell readers that you are absolutely satisfied with the level of care your insurance allows you to access?
    Well, I doubt you are in either plan, I doubt you have have ever had to deal with formularies or hold ups in accessing services for insurance review, and I sincerely and truly doubt you are an objective, unbiased reporter of these alleged facts you continue to spew at this site.
    Since you seem to like to write equally long rebuttals at this thread, care to include a disclaimer you are not on any democrat or profit beneficiary of this legislation so we can have it for prosperity, and in the end, call you on your hypocrisy when the truth comes out if you say you are neutral now?
    And you have yet another posting today. You are truly an amazing person. Your eyes have to be as brown as what you are serving up! But, pontificate away further, why say it simply so people can just see the truth in a few words?! Stagger them with thousands of words, endless links, and statistics cherry picked to allegedly prove you right.
    Like a politician. You are judged by the company you keep. Care to drop some names from your DC support group!?

  9. “Finally, all of the medical reserach done by int’l teams shows that care in Western Europe is, by and large, as good or better than care in the U.S. Better outcomes. Higher patient satisfaction–and lower costs.”
    Questionable research done by people with a political agenda. Break down any of these “studies” and you will quickly see they aren’t worth the paper they are written on.
    For starters your comparing what is usually a fairly homogenous system, NHS, against the aggregate results of 1000s of US systems. Those aggregate results are dragged down by a few very expensive plans, MA, NJ, etc and a few very poor plans, Medicaid. The 50% or so of the public with private employer paid insurance have far better coverage then any european nation. We have better doctors, better facilities, better everything. That is why they feel they have better coverage. People in UT and other midwestern states also don’t have the price disparity so your cost argument is also BS.
    “Kaiser’s use of Health IT improves patient outcomes.”
    So know your back to argueing it lowers cost, you have been on every side of this claim 5 times just in the one post. Either their premium is higher becuase their investment in IT didn’t pan out or it should be lower because it doesn’t work. You can’t claim both….well actually you can your a journalist.
    For a laugh please explain to all of us non fellows how you measure satisfaction scientifically between to distinct populations with no overlap. What exactly is your baseline or control? No one with middle school science would give an ounce of credit to any such study.

  10. Gary O, Margalit, Barry, Nate
    Gary O. Thank you for the info and very good analysis on Kaiser. And yes, Halverson is an unusual and honest CEO. His book is well worth reading.
    Margalit– Kaiser is a hybrid, part for-profit, part non-profit: “The Health Plan and Hospitals operate under state and federal non-profit tax status, while the Medical Groups operate as for-profit partnerships or professional corporations in their respective regions.”
    Spending on Health IT is not like lavish spending on new constuctrion. Kaiser’s use of Health IT improves patient outcomes. Meanwhile many of Kaiser’s hospitals are extremely Spartan-they are not over-spending on – amentities.
    Finally, all of the medical reserach done by int’l teams shows that care in Western Europe is, by and large, as good or better than care in the U.S. Better outcomes. Higher patient satisfaction–and lower costs.
    The only thing that we do better is what Don Berwick describes as “rescue care”– very rare, unusual high-tech interventions. Europe is better at managing chronic diseases.
    But you’re right, many Americans don’t believe this because they have been brainwashed by the propaganda coming from the for-profit health care industry –not to mention the AMA.
    Barry–
    Do you have good reserach from peer-reviewed journals showing that overtreatment in the U.S. is consumer-driven? (Virtually all health care economists, going back to Kenneth Arrow, the father of health care eocnomics, say it’s supply-driven. More than two decades of the Dartmouth Reserach, Atul Gawande’s work, etc. etc. confirm Arrow.
    Secondly, do you have reserach from peer-reviewed medical journals showing that that fear of litigation drives over-treatment in the U.S.? If so, why is over-treatment rampant in Texas, where they have had tort reform?
    Karl– As you know, I don’t usually respond to your comments–too abusive, not well-evidenced.
    But this is not the first time you have commented on my background, suggesting that I am an imposter, or in some way lying. So here’s the resume:
    I was at Barron’s from the late 1980s to the late 1990s–mainly writing cover stories on a wide variety of subjects. Then I left Barron’s and began writing a column for Bloomberg focusing on international markets and economics. During that time (end of the 1990s) I was predicting what would become the crash of 2000, pointing out that insiders were selling while small investors were getting in, and drawing the parallels between what was happening to what had happpened in past bull and bear market cycles. I also pointed out that the financial press in other countries was far more skeptical about the boom than American jouranlists. In this country, too many financial jouranlists had become cheerleaders. I also wrote about China, Russia, oil, Latin America etc.
    Some of my columns were re-printed in the Washington Post, the Financial Times the LA Times . . .
    I also began writing for Bloomberg’s magazines, and, in 2000 began writing Bull: A History of the Boom: 1982-2003 (Harper/Collins, 2003.) Warren Buffet recommended the book in Berkshire Hathaway’s annual report. At the end of Bull! I quoted sources recommending that people buy gold and other commodities. Turned out to be good advice.
    After that, I began writing Money-Driven Medicine (Harper/Collins, 2006), and then became the health care fellow at The Century Foudation.
    So I’ve been keeping busy, learning a great deal as I go along.

  11. FACT
    ” .. Having come from Barron’s I wouldn’t think I would have to be giving you economic lessons Maggie but apparently so.”
    FACT: ABI reports this as last article —
    “Maggie Mahar. (1997, October). The new Florida. Barron’s, 77(42), T19-T20.”
    Been a long time? You decide.

  12. Having come from Barron’s I wouldn’t think I would have to be giving you economic lessons Maggie but apparently so.
    “I’m not sure why some people on this thread believe that “it can’t be done”–(reducing costs, improving quality, while covering everyone) when every other developed country in the world has managed to do it.
    Of course, other countries also wrestle with health care inflation, but we’re the only country that endures runaway increases in prices while still not being able to cover everyone.”
    …EU president Van Rompuy warned that the bloc risks irrelevance and the end of its expensive welfare programs if it can’t speed up economic growth, forecast to expand by just 1 percent this year.
    “With 1 percent growth we can’t finance our social model any more. With 1 percent structural growth we can’t play a role in the world,” he told the World Economic Forum in Brussels. “We need to double the economic growth potential that we now have.”
    We have “run away” inflation because we can. The American economy had excess capital that it chose to spend inefficiently on healthcare. We could have bought more Chinese electronics, eaten out more, or wasted it on any number of other things but instead chose to overmedicate and treat ourselves.
    While it is always nice to reflect on what we could have done with the money we wasted, as a country we were much further ahead spending it on healthcare then more foreign oil or Chinese toys. Elasticity of money is a concept that should be taught to every liberal.
    In regards to the quote from the EU president, these other, supposedly successful, developed countries you claim have it figured out have no answers of the sort. They don’t spend as much on healthcare as us, not because they don’t want to, but they can’t. The money isn’t there. What they spend on bloated pensions and high unemployment is what we spend on healthcare.
    Neither their social spending nor our healthcare spending is sustainable. The answers to either’s problems are not found across the ocean. Our Social spending is blowing up as is their healthcare spending.
    Far from your claims, there has been no replicable success.

  13. MAGGIE’S SCREW-UP (2)
    ” .. It seems to me that this thread reached an extreme of absurdity when Karl wrote: “Most people — if they do NOT smoke, over-eat, dope, booze heavily, or live quietly — will not have major medical problems.”
    Right, Maggie.
    Over-eating is not a problem.
    ////////////////
    “More police, fire recruits flunk fitness test”
    http://bit.ly/cXIWWp
    “JACKSON, Miss. — When the Jackson Police Department tried to recruit new officers this spring, more than a third of the applicants were not able to pass the initial physical fitness test.
    “The city’s police academy’s initial fitness exam includes push-ups, a 1½ mile run, an obstacle course and a flexibility test, Deputy Police Chief Gerald Jones said.”
    OWE-bama and his political-puppets expect TAXPAYERS to fund this kind of fiscal STUPIDITY. Paying for the STUPIDITY of fatties, smokers, dopers, boozers and “extreme living.”
    Nov. 2, he’s getting a wake-up call. That’s a FACT.

  14. GOOD ENOUGH
    ” .. You apparetnly dont know the difference between first hand experience and reading someone else’s work ..”
    Good enough for OWE-bama and Maggie — the BANKRUPTCY court will understand. Not.
    Oh, and of course, Medicare and Medicaid are financially solvent. And PhDs in English and JDs are really MDs.
    And non-profit?
    “Non-profit hospitals’ top salaries may be due for a check-up”
    http://www.usatoday.com/money/industries/health/2004-09-29-nonprofit-salaries_x.htm

  15. “I suspect that its cost growth-rate is lower than competitors, but has no incentive to pass this along as lower premiums.”
    Gary, I suspected as much as well. I’m sure it’s all legal and above the board, but as a non profit organization, I’m not sure Kaiser should have that choice. It’s not much different in nature than the large non profit hospitals going on construction binges.
    Barry, may I suggest another reason why people don’t think it can be done, or rather don’t want to see it being done.
    I think most folks with decent insurance strongly believe that, for them and their family, health care in the US is much better than what Europe has to offer. Since resources are indeed limited, an attempt to distribute resources more equitably, like in Europe, will increase what the poor get at the expense of what the well insured already have. So while average quality will increase, their personal quality will decrease to European levels.
    That’s why there is so much talk about how we can’t afford the same level of care for everybody.

  16. “This is based on what? I ask this rhetorically, because Nate never provides sources, because he is a self-proclaimed “expert.””
    Well Gary O if I work in the market and see the kaiser quotes and see the groups not buy kaiser what better source would you like me to cite? You apparetnly dont know the difference between first hand experience and reading someone else’s work.
    “In any case, it sounds like Kaiser is confident it is outperforming other providers on the basis of both quality and cost effectiveness.”
    Anthem is confident it is as well as United, Aetna, and just about every other carrier. Can’t say I remember the last time a carrier said they weren’t confident in their quality and cost effectiveness. Instead of believing a CEO who’s job it is to pimp his bottom line I like to see what people are actually buying, and it aint kaiser.

  17. FATAL FLAWS
    ” .. it sounds like Kaiser is confident it is outperforming other providers ..”
    You presume (1) the California health care market is rational and (2) the current administration is competent.
    As for (1), you must be joking.
    As for (2) — the current administration has, once again, had its truthfulness seriously questioned in public.
    http://dyn.politico.com/printstory.cfm?uuid=83A7F13A-18FE-70B2-A8B371C7087ACB10
    http://bit.ly/byty7I
    “Facts” — so difficult to (D).

  18. “I’m not sure why some people on this thread believe that “it can’t be done”–(reducing costs, improving quality, while covering everyone) when every other developed country in the world has managed to do it.”
    I’ll offer three reasons why it’s so difficult to do this in the U.S.
    1. Prices per procedure, test, consultation, drug, etc. are significantly higher in the U.S. even based on Medicare rates (Medicaid rates for drugs).
    2. Defensive medicine is pervasive throughout the medical culture because of our litigation system. In Europe, most doctors perceive, correctly, that they will never be sued and therefore don’t engage in defensive medicine, at least to any significant degree. Medical dispute resolution is one area where I would love to see us move toward the approach used in other countries. My own preference is to get these cases out of the hands of juries and into specialized health courts where decisions can be more objective and consistent across the country and over time. Presiding judges would have the power to hire neutral experts to sort through conflicting scientific claims.
    3. Patient expectations are much more demanding, and, I think, unreasonable in the U.S., especially around end of life care, which, in combination with defensive medicine motivated by our unpredictable legal system results in lots of overtreatment and futile treatment. Even for routine issues, many patients equate lots of tests, especially expensive imaging, with thoroughness as long as the tests are non-invasive and relatively painless to undergo.
    So, instead of casting blame on insurers, and money driven doctors, hospitals, and drug companies, we patients need to look in the mirror. When our expectations become more reasonable and real tort reform allows us to start to change the culture of defensive medicine, I think the cost curve will start to bend. Robust price and quality transparency tools, along with higher co-pays to use doctors and hospitals that charge more for care of comparable quality to their lower cost competitors would also be helpful. Price controls are unlikely work and will probably cause more problems than they solve, in my opinion.

  19. Margalit: “What I want to understand is why aren’t Kaiser premiums lower. ”
    I suspect that its cost growth-rate is lower than competitors, but has no incentive to pass this along as lower premiums. It does not need more enrollees. In Northern California it already has a 44 percent share of the market. See p. 4, http://www.commonwealthfund.org/~/media/Files/Publications/Case%20Study/2009/Jun/1278_McCarthy_Kaiser_case_study_624_update.pdf And, in other markets it could only grow so fast while maintaining quality.
    Furthermore, in the last several years it has increased premiums “somewhat more to fund infrastructure improvements that are expected to deliver increasing value over time. The health plan has made a capital investment of $4 billion for KP HealthConnect and spends about 3 percent of annual revenue on its information technology budget. The medical groups also invest in training physicians, which entailed some temporary loss in productivity during EHR adoption.” (Id. at p. 20.) Lastly, there has been little economic pressure on fee-for-service providers to become more efficient:
    “But in our current health care system, there is no virtuous cycle of innovation, success and expansion. When Intermountain standardized lung care for premature babies, it not only cut the number who went on a ventilator by more than 75 percent; it also reduced costs by hundreds of thousands of dollars a year. Perversely, Intermountain’s revenues were reduced by even more. Altogether, Intermountain lost $329,000. Thanks to the fee-for-service system, the hospital had been making money off substandard care. And by improving care — by reducing the number of babies on ventilators — it lost money. As James tartly said, ‘We got screwed pretty badly on that.’ The story is not all that unusual at Intermountain, either. That is why a hospital cannot do as Toyota did and squeeze its rivals by offering better, less-expensive care.” http://www.nytimes.com/2009/11/08/magazine/08Healthcare-t.html?pagewanted=7&_r=2
    Kaiser Permanente CEO George Halvorson echoed this when he responded to a question about why Kaiser and Mayo, which are considered to be the “best and most cost-efficient,” did not use their competitive advantages to take over their respective markets. His response: “When you look at the Mayos of the world, they’re doing well. They have a good business model that’s working for them. But everyone else has a good business model that’s working for them, too. There are $2.5 trillion in this market. There’s no reason, if you have a comfortable cash flow, why would you do hard things and heavy lifting to get to a different model?” http://voices.washingtonpost.com/ezra-klein/2009/11/an_interview_with_kaiser_perma_1.html
    Perhaps Halvorson believes that competition cannot take place until consumers have sufficient information to make informed choices about their providers, not just the premium price:
    “If I could add one thing to the [health care reform] bill, I would make the exchanges more robust and require them to provide consumer focused data about care team choices and performance. It can be done if it is designed into the exchange requirements. When your chance of dying within five years from late stage prostate cancer ranges from thirty percent to almost seventy percent depending on the care team you select, and when your chance of dying from major heart surgery varies by a multiple of twelve — also depending on your care team — we clearly need consumers to be able to make much better informed choices about care and the teams who deliver care.” http://voices.washingtonpost.com/ezra-klein/2009/12/letters_to_health-care_santa_c.html
    Nate: “…it [Kaiser Permanente] hasn’t proven to be any more effective or cost efficient then [sic] anything else being done.”
    This is based on what? I ask this rhetorically, because Nate never provides sources, because he is a self-proclaimed “expert.” In any case, it sounds like Kaiser is confident it is outperforming other providers on the basis of both quality and cost effectiveness. I don’t hear for calls of such transparency from too many other CEOs.

  20. SHE IS BLIND
    ” .. I’m not sure why some people on this thread believe that “it can’t be done”
    A Harvard Law grad who has NEVER held an HONEST job in his life — sure, OWE-bama has the required experience. And Biden didn’t cheat in law school.
    Oh — and the USSR isn’t around anymore. Didn’t you get the memo?
    Matthew, thank you for so much comedy. That’s a FACT.

  21. Jeff Goldsmith, Peter, Barry–
    Jeff– Yes, Berenson knows as much or more about Medicare than anyone. I have learned a great deal from him. And thanks for weighing in as a voice of reason on a thread that had been hi-jacked by a few voices.
    I don’t mind responding to readers who disagree with me (Barry–often, Margalit- sometimes) as long as they are talking about the issue at hand–not me, or Obama, or Nazis. . . Tcoyote almost always disagrees with me, but as long as he’s talking about healthcare, not me, he raises issues that deserve discussion.
    Peter–Yes, price controls do work in other countries that offer care that, on average, is at least as good–for 50% less.
    I’m not sure why some people on this thread believe that “it can’t be done”–(reducing costs, improving quality, while covering everyone) when every other developed country in the world has managed to do it.
    Of course, other countries also wrestle with health care inflation, but we’re the only country that endures runaway increases in prices while still not being able to cover everyone.
    Suggestions that I am, at best, a starry-eyed idealist (we won’t go into what I am “at worst”), ignore the Reality in the rest of the developed world. Quite simply, they are doing a better job (by covering everyone and providing good care) at a much lower cost.
    Barry–
    Actually the Maryland solution has saved Medicare and Medicaid money. If you go back and read my post, you’ll find that Medicare and Medicaid agreed to pay the same rates as private insures only as long as Medicare Payments to Hospitals In Maryland Grew More Slowly Than
    Average Growth in Medicare Payments to Hospitals Nationwide.
    Since the 1970s, Maryland has managed to meet this standard–even though the state’s demographics, its location (in the Boston – DC corridor), and the presence of an excellent but realtively expensive teaching hospital (Hopkins) would lead one to expect higher-than average health care inflation in Maryland.
    (Though Hopkins gets extra payment for being a teaching hospital, and probably receives extra payment for treating many poor patients, the Dartmouth reserach shows that it is much less wasteful than many academic medical centers. Hopkins uses fewer resources while getting good outcomes. This confirms what MedPAC has seen: when hopsitals are under financial pressure (and Maryland’s regulation of rates creates financial pressure) they CAN become more efficient.
    As for Kaiser — it has successfully expanded to many other areas– Colorado, D.C., Hawaii . . . other places I can’t remember at the moment.
    Under reform, for-profit insurers will be regulated and will have to play by patient-centered rules (spend 85% of premiums on healthcare, cover sick patients as well as the healthy, etc.) In this environment, I predict that Kaiser will flourish.
    Just today, a friend was asking me if there is a Kaiser– or Kaiser-like model– in NYC.
    I would guess that the medical culture in Manhattan would be one of the last places to accept Kaiser–but who knows? There are many savvy and intelligent people in N.Y.

  22. MAGGIE’S SCREW-UP
    ” .. It seems to me that this thread reached an extreme of absurdity when Karl wrote: “Most people — if they do NOT smoke, over-eat, dope, booze heavily, or live quietly — will not have major medical problems.”
    Right, Maggie.
    Smoking is not a problem.
    Over-eating is not a problem.
    Dope (D) is not a problem.
    Alcoholism has been cured.
    And you know what “facts” are.
    This is the STEAL-O-CRATS at their best DENIAL mode.
    Nov. 2, they are getting a wake-up call.
    Death and TAXES — STEAL-O-CRATS love both. Estate taxes at death — OWE-bama while alive.
    Maggie, you’d get more respect if just admitted that Obama sets your agenda. Well, dream on, lady.

  23. “all of them are on the same downword slope to insolvancy”
    Yea, we’re living large and fiscally responsible. I wonder who’s going to run out of healthcare dollars first. How “solvent” would they be if they were paying what we pay. I guess the more you pay the more solvent you get.

  24. “its model cannot be replicated elsewhere beyond where it is already well established because of the need for a critical mass of both patients and providers from day one.”
    Even with critical mass it can’t be replicated. Look at their attempt to grow into Cleveland, originally in conjunction with one of the Unions, I forget which. People outside the West and NW just don’t take to their model of care, and it hasn’t proven to be any more effective or cost efficient then anything else being done.

  25. The Massachusetts AG’s investigation of healthcare costs in that state found that sometimes care paid for via capitation turned out to be even more expensive than it would have been under fee for service. So, while the incentives are better aligned under capitation in theory, it’s not necessarily the answer to controlling healthcare costs.
    Regarding Kaiser, better and more thorough preventive care, especially for patients who were insured by Kaiser for many years, should result in fewer hospital inpatient bed days per thousand members on an age adjusted basis. If you divide members into age groups of 21-49 and 50-64, I wonder how Kaiser’s inpatient bed days per thousand stacks up vs. their competitors. Moreover, since Kaiser owns the hospitals and their doctors are salaried, for patients who need hospitalization, not as much should happen to them while they’re there. The bottom line is that their costs and their premiums should be lower.
    For Kaiser’s Medicare Advantage members, the same factors apply. In addition, every insurer gets a payment based on each member’s individual risk score. Either Kaiser’s MA members are no older and sicker than those enrolled by Pacificare, CA BS, Anthem, Health Net, etc. or they are paid more if the members are older and sicker in which case, lower costs should translate to higher profit margins. On the other hand, they could be, in effect, wasting money on excessive preventive care and/or paying their doctors considerably more than necessary to attract and hold qualified people.
    As I’ve said before, even if independent analysts conclude that Kaiser does provide better care for the premium dollar, its model cannot be replicated elsewhere beyond where it is already well established because of the need for a critical mass of both patients and providers from day one.
    With respect to the Maryland all payer rate setting system, it would lend itself best to inpatient care. Many outpatient services, especially imaging and standard procedures like colonoscopies can be done elsewhere for considerably less money. However, Medicaid would certainly have to pay far more than it does now and Medicare would probably have to as well especially for outpatient services while private insurers would pay less. Given the fiscal imbalance at both the federal level and in most states, it just wouldn’t be affordable to do that anytime soon even if we wanted to. That said, there should be a legislated limit to what a hospital can charge for care delivered under emergency conditions.

  26. actually Peter 25% markup over cost, reimburse 125% od cost, major difference there.
    Not sure what exactly you mean by “do it” but no country has solved healthcare spending, all of them are on the same downword slope to insolvancy. Some are just closer then others.
    Jeff if your going to say I am wrong can you at least make an argument to what I said and not kill innocent straw men? My quote;
    “I’m going to go out on a limb here and guess Berenson, et. al., like Maggie, never worked a day in healthinsurance. His comments, like Maggie, show a complete lack of basic facts and knowledge.”
    And you respond he was medical director of an IPA, ok thanks for the compltly unrelated tidbit, my point still stands that he doesn’t grasp the basics of insurance.
    Regarding Kaiser;
    Point one how does spending on IT, which is suppose to lower cost supposedly, effect insurance rates? IT would be paid by reimbursements, is Maggie claiming Kaiser reimburses itself far less then what other medical centers who have not invested in IT get reimbursed. This argument has no logic and is actually counter to why everyone says they should be investing in IT, its been 10 years if they are still seeing no ROI then why are we pushing HIT?
    “Secondly, Kaiser has always had many older patients.”
    BS just a made up argument, their population is no older then any other carriers.
    Third point, “Kaiser was refusing to sell low-cost plans that for-profit insurers have been marketing to younger customers”
    Notice the was, so now that they have been selling HDHPs for a few years why have their rates not dropped and they are still not more price competitive? By Maggie’s twisted understanding of insurance the fact they joined HDHP later in the game would mean they are the ones now picking off young healthy risk at the epense of other carriers with mature blocks.
    “Third Kaiser spends a great deal of money on preventive services and managing care.”
    This is classic Maggie. First she argues their member mix is older and stays with them forever and that increases cost, then she claims all the money spend to keep that population healthy also increases cost. Kaiser either has the most ineffective care managemnt program out there or maggie is once again making crap up. They have been around like 80 years, if they are getting a return on preventive care yet, something they have supposedly done better then anyone else since day one, why are they in business?
    For years the knock on preventive care was the member didn’t stay with the employer or plan long enough to relaize a gain from it. Here Maggie argues those people are in fact staying with the plan to long and the investment didn’t work, yet she still pushes for more? Maggie has managed to argue for every side pro and con of wellness, and in one post. Thanks for the well rounded analysis.
    Here finally doesn’t make any sense at all either. Margalit’s question is why they aren’t lower, I would assume she meant relative to other carriers as what else would you compare them to? Other insurers have far less ability to manage the use of expensive drugs and technology so that should in fact help Kaiser be lower, but for some reason it is once again a disadvantage.

  27. “Price controls are never effective and usually have consiquences far worse then the original inflated price.”
    Nate, from a past post of yours you think 125% hospital markup over cost is the “right price”. I’d be happy with at least a cap on markups. In those countries doing it for about 1/2, price controls, either direct or through negotiation, are a large part of why they’re able to do it.

  28. Nate is wrong about Bob Berenson. He worked for thirteen years as a practicing internist (on Capitol Hill of all place), and was also the medical director of an IPA. He’s been on both sides: healthcare provision and regulation. He knows more about how Medicare works than just about anyone in Washington and would have been a superb choice to run CMS.

  29. Margalit–
    First, Kaiser has spent a huge sum up front on health IT. They are far ahead of most medical centers in having EMRS and IT.
    Secondly, Kaiser has always had many older patients. Patients stay with Kaiser long-term. And, as California Senior Congress explained in 2002: “Kaiser and its 11,000 doctors are being confronted by the rising costs of treating its aging membership, while more bare-bones health plans are drawing away the coveted young and healthy consumers.”
    Kaiser was refusing to sell low-cost plans that for-profit insurers have been marketing to younger customers–policies with names like the “Daredevil” plan. These insurance plans are filled with holes, and marketed to young people who believe that nothing really terrible will ever happen to them.
    Third Kaiser spends a great deal of money on preventive services and managing care. Long term, this keep their patients’ heathier (and may save money) but short term, this is labor-intensive and thus very expensive.
    Fourth:, they pay their docs well. (Top 20th percentile nationwide.)
    Finally, Kaiser, like all insurers, has had to face spiralling prices for drugs, devices and hospital equipment. And, in an extremely competitive market where they are vying with for-profit insurers in states like California they have to spend on marketing and advertising.

  30. What I want to understand is why aren’t Kaiser premiums lower. They do control the entire system of delivery, all the docs are on salary and everything is according to what we think will solve the problem, but it doesn’t seem to. Why?

  31. Maggie I know your such a big fan of internet fact checking so I wanted to give you a jump, maybe you can study for three hours then tell us why these carriers didn’t have lower prices and higher profit margins.
    “WellPoint, Inc. (NYSE: WLP) today announced the completion of its acquisition of QualChoice Select, Inc. the Medicaid plan from QualChoice Health Plan, Inc. (QualChoice), an Ohio- based managed care organization that was part of the University Hospitals Health System (UHHS). The transaction was announced April 26, 2006.”
    They closed their commercial and individual plans down.
    Here is another one Maggie that according to you should be thriving….um didn’t quit work out that way;
    “On August 18, 2009, The Physicians Assurance Corporation (“TPAC”) was placed in liquidation by the Franklin County, Ohio, Court of Common Pleas. Mary Jo Hudson, Superintendent of Insurance, was appointed as Liquidator. The Liquidation Order was agreed and consented to by the Board of Directors of TPAC, and was prompted by the financially hazardous condition of TPAC.”
    There is also St. Mary’s in Reno that loses money most years.
    You can also look into the financial success of Hometown Health in Reno
    Here’s another one for you Maggie
    “Summit Insurance Co., a health plan owned by Upper Valley Medical Center, said Wednesday it is selling its business to Medical Mutual of Ohio.
    Read more: Medical Mutual buys local health plan – Dayton Business Journal:”
    Well this one had an interesting little gem at the end;
    “The decision to sell Summit’s assets comes during a increasingly expensive and highly volatile insurance environment, Musilli said.
    Insurance became much more price-driven, making it harder for a smaller company like Summit to compete, he said.”
    But Maggie you said they didn’t compete on price, why is this article saying different?

  32. “I went back and checked the comments. One doctor who works in Maryland said the results were mixed (that was Legacy Flyer who, like you, is politically opposed to govt. regulation.)”
    Any one else was proably deleted by Maggie for disagreeing with her. She is a huge fan of censorship, her right to do on her blog but you can’t trust her for what was said or not said as it changes as she needs it to.
    I’m going to go out on a limb here and guess Berenson, et. al., like Maggie, never worked a day in healthinsurance. His comments, like Maggie, show a complete lack of basic facts and knowledge.
    “So instead of offering plan options that feature competing, mutually exclusive provider networks—a central tenet of managed competition theory—employers have focused on offering an HMO and a preferred provider organization (PPO), often from the same carrier and with similar networks.”
    Wow, what ignorance. very few employers offer dual option, outside of CA and some East Coast States HMOs are rare, so rare in fact most groups don’t offer them at all let alone as a dual option. My educated guess, as a real expert that actually knows what they are talking about, maybe at most 5-10% of employers offer a dual option.
    The rest of it is just as far off base and inaccurate.
    Maggie apparently decided to bury her head and not read the 5-6 examples of her being wrong. If she had should would have noticed that the government often sided with the hospitals and put pressure on the insurers to include all the hospitals. States even threatened insurer licenses for trying to cut hospitals out. But hey Maggie don’t let facts get in the way of a great narritive.
    “If insurers wanted to compete on price and quality, they could have told some hospitals and doctors’ groups: the price is too high. We won’t include you in our network. They would wind up with a smaller network, but could offer lower premiums–and, with some luck enjoy a higher profit margin.”
    THis one is even funnier. Maggie you really need to learn what you are talkign about. Let me take Ohio for example. Off the top of my head I can think of three hospitals that had their own insurance company that featured their slim network, the same concept you claim should have lead to lower prices and increased profit and yet in reality it didn’t happen. Why is it Maggie so much of what you write doesn’t actually pan out in the real world? While I am thinking about it, Nevada had two slim network hospital owned insurers and neither of them worked out either.
    Do you lie cause you don’t know better or lie becuase you have an agenda? Either way your not very good at it.

  33. Karl, Tcoyote, Barry,
    Karl–
    It seems to me that this thread reached an extreme of absurdity when Karl wrote: “Most people — if they do NOT smoke, over-eat, dope, booze heavily, or live quietly — will not have major medical problems.”
    No, Karl. Everyone will die. A few will pass quietly in their sleep. A few will be killed instantly in an airplace crash or other accident. The vast majority will experience major medical problems before they die:
    Alzheimer’s, other forms of senile dementia; various forms of cancer that afflict people who never smoked, are not obese and are not drinkers; MS, blindness (AMD); complete loss of hearing; kidney failure, osteoperosis . . . I could go on.
    Tcoyote —
    Of course insurers gave up on managing care (and trying to control costs) for political reasons. I watched this happening and wrote about it in the 1990s when I was at Barron’s.
    But they soon discovered that if they stopped trying to contain spiralling costs and just passed them along in the form of higher premiums, employers would pay more. In the health care market, it is amazing what the market will bear. Most employers felt they had to provide insurance–even relatively small businesses. (96% of employers with 50 to 100 employees offer insurance).
    An aside: Just as insurers learned they could pass on 8% annual increases, so in recent years, drug-makers have discovered that there seems to be no limit to what they can charge for cancer drugs. So why try to learn how to make drugs less expensively? There were many ways drug-makers could cut costs; a few years ago I talked to a group of institutional investors in London about this. But only recently have drug manufacturers begun to trim down.)
    Back to insurance: Over the past decade, employers have asked employees to pick up a greater share of the cost. Some employers have dropped out, and with rising unemployment many employees are no longer covered.
    So insurers are losing customers. And their profit margins are slim. But they continue to pay large hospitals the fees they demand because they feel they must have broad networks. As Berenson, et. al., point out in a 2004 Health Affairs article titled: “Are Marekts Strong Enough To Deliver Efficient Health Care Systems? Confidence is Waning”:
    “The strong preference for broad networks by large, heterogeneous workforces has also meant that offerings by different carriers have become more similar. So instead of offering plan options that feature competing, mutually exclusive provider networks—a central tenet of managed competition theory—employers have focused on offering an HMO and a preferred provider organization (PPO), often from the same carrier and with similar networks.”
    If insurers wanted to compete on price and quality, they could have told some hospitals and doctors’ groups: the price is too high. We won’t include you in our network. They would wind up with a smaller network, but could offer lower premiums–and, with some luck enjoy a higher profit margin. But it was simpler, and less risky, to offer the same broad network every one else offered, and pass the cost along.
    Similarly, they all cover the same drugs–including Vioxx, even when there was published research on the risks. Kaiser, the VA and Mayo paid attention and withdrew Vioxx from their formularies. But the for-profit insuers didn’t want to lose market share, so they continued to cover this over-priced and dangerous drugs.
    Even small insurers don’t try to compete on price: . As the Urban Institute’s Linda Blumberg points out: “small insurers do not aggressively compete over price. Rather, rising premiums and increased profitability of nondominant firms provide indirect evidence of shadow pricing by smaller insurers; that is, smaller insurers do not seem to compete on premiums to gain market share but rather seem to follow the pricing of the dominant insurer. Competition in insurance markets is often about getting the lowest risk enrollees as opposed to competing on price and the efficient delivery of care.
    http://www.urban.org/UploadedPDF/411762_public_insurance.pdf
    If private insurers made offering the best possible product at the lowest possible price a top priority, they would have tried forming smaller networks of high quality but not necessarily brand name hospitals and doctors’ groups. But that was not their top priority.
    Meanwhile, as you note, at this time, “there was also a surge in hospital capital expansion, which fresh costs were passed on. Private insurers were basically passing through huge rate increases and utilization increases (from imaging in particular).”
    The building boom was complete unnecessary. We didn’t need more inpatient beds. We didn’t need the hotel-like amenities, the medical arms race etc. etc. Presumably low interest rates plus the belief, on the part of hospital CEO’s, that their job was to “grow revenues” led to overbuilding. (As Don Berwick points out, hospitals need to learn to think of themselves as cost centers, not revenue centers.)
    I realize that Certificate of Need programs had led to fraud in the past, but we need some sort of regulation–and more oversight.
    Yes, Medicare was also trying to rein in spending, but by and large, private hospitals were Not forced to shift costs because Medicare paid too little. (Medicaid, on the other hand, was paying far too little, but this had more impact on public hospitals and safety-net hospitals, and much less impact on the brand-name large, newly-consolidated hospitals that we are talking about.)
    I’m glad you read MedPAC. And I greatly admire Glen Hackbarth who I have interviewed a couple of times. I also have read his testimony before Congress. But I think others on the MedPAC panel who I know, have read or talked to also are very good. And the majority agree with Hackbarth on the major issues.
    I don’t think that concerns about our overuse of new medical technologies is in any way “fighting the last war.” One major difference between the U.S. and other countries –countries that often achieve as good or better care for less– is our overuse, and over-treatment.
    I’m wondering–what do you think is driving healthcare inflation?
    Finally, under Berwick, I believe that Medicare will begin to move away from fee-for-service. This will not happen overnight. But 10 years from now, I think we may see major structural changes in the system.
    It is already beginning: younger doctors are much more enthusiastic about working for large multi-specialty centers, on salary. They want regular hours. They don’t want the hassle of running a small business. They don’t want to work 60 hours a week. They didn’t go into medicine expecting to become extraordinarily rich. (By 1994, it was obvious that there were many easier ways for an intelligent college graduate to make a large amount money. ) Women doctors also tend to be content on salary. 1/3 of docs are now women. 1/2 of med students are now women. The demographic trends are baked into the cake.
    And there is no question, but that fee-for-service creates perverse incentives to “do more.”
    Barry–
    Please read my response to tcoyote– In particular, read Berenson, et. al., a 2004 Health Affairs article titled: “Are Marekts Strong Enough To Deliver Efficient Health Care Systems? Confidence is Waning”
    This report was based on interviews with health care leaders in a great many markets. In 2004, amany had begun to say: government must intervene. What’s interesting is how many of the possible fixes that the authors consider at the end of the piece are part of the reform plan.
    Barry, you wrote: “As for Maryland’s all payer system, a couple of doctors who live and work there commented on your blog that the record is mixed at best.”
    This simply isn’t true. I went back and checked the comments. One doctor who works in Maryland said the results were mixed (that was Legacy Flyer who, like you, is politically opposed to govt. regulation.)
    I’m sure that this is how you remembered the comments, but I think you mis-remembered because you simply didn’t want to admit that the Maryland solution is working.
    I’m not suggesting that it would work nationwide. Not now. But I would think it could work in some/many states.
    You suggest letting wealthy people pay more for routine care at marquee hospitals if that’s what they want to do.
    Barry–We don’t want to divide the population into people with money who go to the brand-name teaching hospitals for routine care and middle-class and low-income people going to community hospitals for routine care.
    That would a) reinforce the perception that the brand name hospital provides better routine care and
    b) people would never learn that in healthcare, a higher price does not mean better quality.
    Meanwhile, many teaching hospitals would continue to be extravagant–and sloppy.
    If you read the MedPAC report you find that hospitals that are under no financial pressure are extremely wasteful, and ultimately, that leads to more medical errors as well as unnecessary surgeries that expose patients to unnecessary risks.
    Too often, at these hospitals, the priority isn’t patient safety; instead the hospital administration focuses on attracting well-heeled patients with decor, parking, better food, spa-like amenities.
    This is a waste of health care dollars that could be used to improve health. We need to encourage hospitals to re-think their priorities.
    This why we need to regulate hospital prices as they have done in Maryland where all insurers (Medicare as well as private insurers) pay the same price for hte same service–with adjustments made for hopsitals that treat more difficult patients and adjustments for hospitals that have extra costs because they are teaching hospitals.
    They have contained costs– and the state’s hospitals are solvent. Good bond ratings. And high quality in a state wtih tough demographics (many very poor/sick people in the most densely populated area of the state.)

  34. “Cost reduction with non profits raking in $ billions?”
    How many “non-profit” CEOs are making $1,000,000.00+ a year?
    “Non-profit,” indeed.
    MGA, you need to think. And read.
    Gimme a frickin’s break. Obama is a dumb as rocks. And the public knows it. Nov. 2, the reckoning.

  35. Cost reduction with non profits raking in $ billions? Maggy, the spiral will not be controlled with policy and laws which do not reconstruct the foundation of medical care. Academic medical centers are conflicted and are useless. Medcal Center leaders like Levy at BIDMC are ethically and morally bankrupt and should resign. These “academic” leaders are in to excessive unnecessay medical care to the max.

  36. First Nate, then MD as Hell, and now me:
    a significant reduction in costs will be having to say a painful but firm NO to those who are going to die, and often it is intrusive, unrealistic, and guilt ridden consciences of family/sig others who can’t/won’t let go who push the full court press that has no other outcome than end of life.
    And those who argue the most intensely this is a bad attitude just don’t get it! I am not advocating for euthanasia, I am advocating for reality and boundaries.
    Won’t see politicians accept those terms, true!?

  37. “people will die of preventable causes, this isn’t malpratice or cruel, or racist or anything else but life, we can’t spend every penny necessary to prolong every life every second possible, as long as we deny that we will have these same problems.
    Posted by: Nate | May 9, 2010 7:41:07 AM”
    Nate has hit is out of the park.
    This is the heart of the matter: Live while you are healthy, for no matter how much or how little is spent on healthcare is will not change the health of humanity, but will change the fate of countries, economies, and cultures.
    No government or health rationing board or insurance company will ever care if an individual lives or dies. Keep your own money so you can spend it for what you want. Don’t give it to any government. Don’t buy “coverage” you don’t need or want.

  38. “but should we practically ignore collusion and regulate consumer choices to avoid offending businesses? Why not regulate the businesses instead?”
    Margalit it all depends if you want to actually accomplish something or just appear to be trying to do something. Price controls are never effective and usually have consiquences far worse then the original inflated price. The economies of any communist or socialist banana republic will show exactly how well they work.
    Inflated prices are a direct result of poor buying decisions, no law or rule that doesn’t directly change those poor buying decisions will ever succed. There is no magic regualtion that will relieve people of having to make tough decisions and live with the fact we all can’t have world class healthcare at an affordable price.
    I’m certain NASA could build the saftest car in the world, they could probably eliminate all traffic fatalities. And it would only cost us a few million per car. Healthcare is the same way, people will die of preventable causes, this isn’t malpratice or cruel, or racist or anything else but life, we can’t spend every penny necessary to prolong every life every second possible, as long as we deny that we will have these same problems.

  39. Most people in America drive a car. If they own the care, they own the one they can afford. Most of them are not new. Most of them are not had made. Most of them have a market value for resale.
    For a given complaint, like abdomenal pain , possible appendicitis, the medical care is brand new, hand made, custom built andhas nothing to resell.
    The care you drive is not the one you are entitled to drive. It is the one you chose to drive based on your own financial priorities.
    If your employer or the governemnt had to buy you a subscription for car service at the same price as everyone else’s subscription, you would take the Ferrari when you wanted a car and not the Yugo. But you would never buy your own Ferrari with your own money because you value your money more than the Ferrari, and the Yugo will get you where you want to go.
    When people have to value their healthcare purchases against their own means, there will be healthcare reform and not a moment before.

  40. Margalit – It’s interesting that you mentioned labor and delivery and NICU’s as this is something I’ve learned quite a bit about in the last year because of the experience of a woman who lives near here. Here’s the story:
    Her baby was determined to have a catastrophic condition called skeletal dysplasia early in the pregnancy. This condition is usually fatal within a short time after birth. For personal reasons, she would not consider an abortion. The original intention was for her to go to a hospital in Philadelphia to give birth because of its more sophisticated NICU. As I’ve since learned, there are at least four levels of NICU’s. In the end, there wasn’t time to travel the 80 or so miles to Philadelphia so she was taken to our most sophisticated local hospital about 20 miles from here. After less than a week after birth, she was told that there was nothing more that could be done for the baby at that facility. However, there was a hospital in Wilmington, DE that had a specialized unit to treat this condition. The baby was taken there by ambulance. At the Wilmington hospital, they were told that there was an experimental drug intended to build bone density. There were six compassionate use slots with one still available. Her baby got the 6th slot. Numerous surgeries and about seven months later, the baby, unfortunately, died never able to breathe on his own. Total cost of his care was probably well into seven figures. Even in this case, it wasn’t necessary to be in the most sophisticated possible hospital at the outset to ensure that the baby ultimately got the best care available.
    I think trying to control medical prices by regulation would operate with too heavy a hand and result in unintended consequences. That said, I do think we need regulatory limits on what hospitals can charge for care delivered under emergency conditions. For other care, disclosure of contract reimbursement rates and having that information available, along with relevant quality information, should allow referring doctors to steer their patients toward the most cost-effective but still high quality providers. Patients need to feel cost differences for comparable care via higher co-pays to use the high cost facilities. Competition should ultimately force the facilities that charge the highest prices to lower their prices closer to what their competitors charge or lose business for the bread and butter routine care that just about every facility can do well. For complex rescue care, the large hospitals will have more pricing power because there will be much less competition, at least locally. Even here, however, medical tourism, at least within the U.S., might often be a viable option.
    Healthcare in the U.S. has never been allowed to function as a normal market because of the absence of good price and quality information available to both patients and referring doctors. Let’s make that information available once and for all and see what happens. If it doesn’t work, we can look at other options including price controls and rationing. I’m optimistic that the market can work with adequate price and quality information except for care delivered under emergency conditions. We should give it a try.

  41. INDECENT — GOVERNMENT
    ” .. Nate and Barry, could we possibly think of another way to reign in what really amounts to indecent behavior of large medical corporations ..”
    .. well, if indecent is a concern, what about all the THEFT, GRAFT and STEALING in the state of Illinois (Obama-land)?
    Which, along with California and NYState, are approaching BANKRUPTCY? Former L.A. Mayor Richard Riordan wrote last week that unless are costs are controlled IMMEDIATELY, L.A. faces BANKRUPTCY within months.
    You want to go after INDECENCY — start in D.C., Chicago, L.A. and NYC. Otherwise — it is just B.S.

  42. Nate and Barry, could we possibly think of another way to reign in what really amounts to indecent behavior of large medical corporations, other than require patients to accept lower quality of care? I understand that in many cases the differences between a top academic hospital and a smaller rural hospital are not consequential, but you never know going in what will happen to you in a hospital. Labor & delivery is a good example. Most likely everything will be uneventful, but what if something goes wrong and there is no NICU on premise?
    I know you both think that the market can regulate prices, but should we practically ignore collusion and regulate consumer choices to avoid offending businesses? Why not regulate the businesses instead?

  43. REAL FACTS
    Most people — if they do NOT smoke, over-eat, dope, booze heavily, or live quietly — will not have major medical problems.
    Why the F do the innocent have to pay for the STUPIDITY of smokers, piggies, dopers, boozers, and “extreme lifestyles?” Which consumes more than $1,000,000,000,000.00/year? Which would pay for TEN “reforms?”
    When OWE-bama gets his political legs cut off on Nov. 2 — it is HIS INEXPERIENCE, BUMBLING and love of CENSORSHIP that imitates Stalin. Not a race card.
    Go ahead, Maggie. Play the sexism-card. Re-read Fabian Socialism and how Stalin cut off his critics. Instead of actually working in the system.
    /////////////////////////////////
    Unless people are personally willing to pay for a policy that provides unlimited resources there has to be some safe harbor for providers and insurers that deliver reasonable care.

  44. The way we consume healthcare is equivelent to going to a 5 star restraunt for buttered toast or the car dealer to clean your floor mats. Just becuase you can and they are happy to have you doesn’t mean you should.
    Under the current cost structure I doubt many of the big names could survive without all the routine work they do, that isn’t an excuse to keep having it done there though.

  45. “Would half as good outcomes for half the price be considered cost effective?
    I bet it would by the insurer.”
    I seriously doubt it, Margalit.
    The Massachusetts AG cited at least one case where the very same interventional cardiologist performs the exact same procedures (angiography, stent insertion, etc.) at two different hospitals and achieves identical outcomes. One of the hospitals is owned by Partners and one isn’t. The Partners facility is paid substantially more than the other hospital even though it is the SAME DOCTOR doing the same work and achieving similar results.
    I don’t know what procedures you have in mind when you talk about these quality differences. Highly complex rescue care is one thing, and I said before that contracts could be written to allow patients to go to the famous facilities for such care. Routine labor and delivery, colonoscopies, and many comparatively routine same day surgeries can be done perfectly well at just about any community hospital by a reasonably experienced doctor. You don’t need to go to the brand name teaching hospital for most of this stuff and if you insist on going, you should pay a significantly higher co-pay for the privilege.
    You can’t expect to completely insulate patients from feeling these very real differences in cost for, most of the time, little or no difference in outcome and then wonder why healthcare costs continue to increase faster than both general inflation and wages. As I’ve said numerous times before, both patients and referring doctors need to start to care about costs even when insurance is paying the bill. Incentives matter and we need good price and quality transparency tools to help referring doctors do their jobs better and more cost-effectively.

  46. What bothers me about the lawsuit frenzy Margalit is people buy cheaper policies that clearly limit their choices then they sue when they actually encounter a sitution where that choice was limited. If you look at most of the lawsuits over denial of care it was all clearly laid out in the policy, people didn’t want to be bothered to actually read the policy, bought what was cheap, then after the fact want the advantages of a better policy.
    We can’t afford for everyone to have the best outcomes. Some people will suffer outcomes, even death, that could have been prevented if they had unlimited resources. Unless people are personally willing to pay for a policy that provides unlimited resources there has to be some safe harbor for providers and insurers that deliver reasonable care.

  47. This is also a classic example of why people are unable to trust insurers. They will of course pick the cheapest possible hospital, which is accredited, as you said, but cost effectiveness is subjective. Would half as good outcomes for half the price be considered cost effective?
    I bet it would by the insurer. Not so much by the patient.
    In the world of generics, it’s half the price for the exact same thing. There will never be the exact same thing when it comes to hospitals, so the question of how much quality you are willing to sacrifice for cost, and who makes that decision is loaded with ambiguity.
    As Nate is correctly projecting, there will be a flurry of law suits and Obamacare headlines.

  48. “By only paying a set amount, which happens to cover the hospital I want them to go to, I am protected from that lawsuit, I didn’t tell them to go anywhere I just paid what the plan allowed and they chose said facility.
    There would be many more simple and effective solutions if not for trial lawyers”
    Nate – This is a classic example of the widespread pernicious effects of our legal system, especially as it relates to healthcare. Doctors are licensed once they pass certain standards. Specialists can be Board certified. Colleges are accredited. So are hospitals. Just as doctors should enjoy robust safe harbor protection from lawsuits if they follow evidence based guidelines where they exist, both insurers and referring doctors should be protected if they steer patients toward cost effective providers as long as those providers meet independently established standards and have earned the appropriate license, certification or accreditation. It’s a shame that people have to be afraid of being sued every time they make a move and need to cover their butt every which way to Sunday whether its docs ordering unnecessary tests or insurers and TPA firms afraid to offer tiered products.
    The problem with just paying a certain amount is that the excess charged by the more expensive hospitals would be well beyond the means of all but the wealthiest segment of society, at least for anything major like a significant surgery, organ transplant or course of cancer treatment. Separately, there is also the issue of care delivered under emergency conditions.

  49. Maggie’s constant pimping of MedPAC reminds me of Ezra and his labeling Lewin Group as “The Gold Standard” in healthinsurance analysis even though they are really nobodys, just a paid political research firm. For a price they would publish a report saying the earth was flat.
    The left loves to build up these supposed experts that support their cuase but have no real world experience. Then again if your a built up Journalist with no real world experience I guess you all got to stick together. Sure paid off well for Ezra, Maggie probably has part two of her tome ready to drop any day now.

  50. “And unlike generics, cost effectiveness here implies a certain compromise on quality in favor of cost, because as you probably know, the most expensive is often the best. Not always, but often enough.”
    I would disagree with the Margalit, there are hospitals in the midwest every bit as good and better then your big name expensive metro hospitals that charge a fraction of the price. Quality and cost have very little to do with each other in healthcare. Gepgraphy and cost now seem pretty darn entertwined.
    As an alternative to co-pays and steering someone to one hospital or another what if you just allowed the charges of the preferred hospital? If someone went to a big name plate facility they would be responsibile for the difference.
    The thing I don’t like about tiered co-pays based on quality measures is liability. I could see someone haveing a bad outcome at the cheapest tier facility then sueing the healthplan for “forcing” them to use that facility that their attorney will paint as third world and only on this list becuase it was cheap.
    By only paying a set amount, which happens to cover the hospital I want them to go to, I am protected from that lawsuit, I didn’t tell them to go anywhere I just paid what the plan allowed and they chose said facility.
    There would would be many more simple and effective solutions if not for trial lawyers

  51. OMG!
    ” .. The main MedPac agenda right now: ending fee for service payment at all costs. Lot of luck, guys.”
    OMG! What about all of OWE-bama’s ambulance-chasing lawyer buddies like John “Lover-boy” Edwards (D)? What about them? Will the NEW Congress of Nov. 2, 2010 fix that?
    Oh. OWE-bama didn’t do zip about medical-malpractice? He’s a TOOL of the trial lawyers?
    Never mind.
    Now, please — some more “facts” (a.k.a., LIES).

  52. It wasn’t that insurers “stopped negotiating rates with providers after 2000”, but that they stopped a lot of their politically controversial prior authorization programs to reduce the political heat they were taking from the “managed care backlash”. They backed off for political reasons, not because they lost interest in cost containment.
    AND they did so at the worst possible time, because beginning in 1999, there was a huge wave of hospital cost shifting from Medicare’s BBA payment restrictions, which peaked in 2003 with private insurer cost trends in the 13% range. There was also a surge in hospital capital expansion, which fresh costs were passed on. Private insurers were basically passing through huge rate increases and utilization increases (from imaging in particular).
    Personally, I read every MedPac report from cover to cover (no fooling). I borrow aggressively from their research findings in my own work. However, as several of the readers have commented, they are not free from bias. They draw from a health services research community that is consistently five years late to the party, and has an agenda stemming from “the last war”- the fight over restricting access to technology, defending Medicare’s accessibility (e.g. no problem with physician participation, happy customers, nasty health plans, etc.), and wallowing in “price control” details like area wage indices.
    They have a top flight staff, but, with the exception of Glenn Hackbarth, who used to work in a respected private health plan, they are still largely academics, speculating on what’s really driving health costs. The main MedPac agenda right now: ending fee for service payment at all costs. Lot of luck, guys.

  53. Margalit – You are quite right that assessing quality differences among hospitals and physician groups is a more complex, and, to some extent, subjective undertaking as compared to generic drugs vs. brands. However, I think it’s quite possible and likely that experts could reach a consensus that they are comfortable with in most cases. The experts might range from people at Dartmouth Atlas to MedPAC to insurer employed clinicians. If they can certify that hospitals A, B, and C are just as good as X, Y and Z for most procedures and are 20%-50% less expensive and they would be perfectly comfortable receiving care there for themselves and encourage family members and friends to do the same, that would be good enough for me. If there are complex procedures that the most expensive hospitals do better than anyone else, they could be viewed as regional centers of excellence for those procedures and patients could be allowed to go there and pay the preferred tier (lowest) co-pay for those procedures if a contract along those lines could be negotiated. The bottom line is that I don’t think we need absolute objectivity and certainty regarding outcomes across all procedures to make these tier related judgments. I would certainly be willing to live under these rules myself. As Warren Buffett might say in a different context, I’m willing to eat my own cooking.

  54. You do not understand, Maggy. “For example, beginning in 2014, the U.S. Health and Human Services Department will report every hospital’s record for medical errors and infections involving Medicare patients on its hospital web site” Big Deal. The hospitals hide the errors and punish those who talk. HIT increases never events, such as falls. One recently got caught without consent forms and for not reporting complications.How many continue to deceive? Read HIStalk about the cover up in Pittsburgh.

  55. Barry, I am not opposed in principle to the tiered co-pay idea. It’s just that it seems pretty complex to execute. Generics are almost exact copies of the brand name drug and the decision is binary.
    With hospitals, you have many factors to asses, not all of them objective, and not all of them readily available (like long term survival).
    Also cost-effectiveness will not be the same for all patients and will definitely not be the same for all procedures, maybe not even all calendar dates.
    And unlike generics, cost effectiveness here implies a certain compromise on quality in favor of cost, because as you probably know, the most expensive is often the best. Not always, but often enough.

  56. Hi Maggie, hope your having a lovely evening, could you please be so kind to reconsile the following;
    “Insurers stopped negotiating with brand-name hospitals and brand-name doctors groups back in 2000.”
    http://www.daytondailynews.com/business/medical-mutual-to-drop-premier-from-network-395431.html
    For the third time in five years, a private health-care insurer is dropping Premier Health Partners from its network.
    “We could not accept (Premier’s) rates, which would have made them the highest-cost health system in the state for us,” said Ed Byers, Medical Mutual’s manager of media relations.
    http://illumen.orchidsuites.net/sites/rockport-fultonvotes.com/index.php?ht=display/ContentDetails/i/1611691
    Health insurers are starting to sell policies that largely bar consumers from receiving medical care at popular but expensive hospitals such as Massachusetts General and Brigham and Women’s
    http://www.bizjournals.com/dallas/stories/2000/10/23/daily16.html
    Baylor Health Care System and PacifiCare of Texas Inc. ended negotiations without a new contract today and confirmed that seven Baylor health care facilities will drop out of the health insurer’s network effective Jan. 1, 2001.
    Jim Cassity, president and CEO of the Texas subsidiary of Santa Ana, Calif.-based PacifCare Health Systems Inc. (Nasdaq: PHSY), said Baylor sent a termination notice with a proposed new provider contract, which included “substantial rate increases” and other changes. Cassity said the new contract would have made it difficult to compete for North Texas business
    http://www.northjersey.com/news/Hospital_insurer_at_impasse.html
    Aetna has warned 55,000 households in North Jersey that St. Joseph’s Regional Medical Center in Paterson and its sister hospital in Wayne will no longer be part of the insurer’s network in April.
    But both sides say they are still negotiating and hope to reach an agreement before the four-month grace period expires on April 6.
    “We were far apart in costs,” said an Aetna spokesman in Chicago, Scott Roskelley. “We’re still negotiating in good faith. St. Joseph’s is certainly an important part of our network there. We hope we’ll come to an agreement.”
    The negotiating brinksmanship is not uncommon in New Jersey as disputes over contract terms spill into the public arena because of strict disclosure requirements designed to protect the public.
    Earlier this year, Governor Corzine intervened in negotiations between Capital Health, a two-hospital system in Trenton, and Horizon Blue Cross Blue Shield of New Jersey, which signed an agreement after a four-month standoff.
    https://www.chicagobusiness.com/cgi-bin/news.pl?id=26018
    Blue Cross & Blue Shield of Illinois is again threatening to drop Rush University Medical Center from its provider network, less than one year after the two sides struck a deal that was supposed to have made peace through 2010.
    In a letter to customers dated August 2007 and obtained by Crain’s, Blue Cross says it intends to drop the Near West Side hospital from its provider network for all its health plans on Dec. 31, unless the two can reach “contract terms that have been mutually agreed upon.”
    curious Maggie, exactly how many of these would you need to see before you finally admit you are wrong? Or is there no amount of proof under which you would ever admit that?

  57. Nate – I wouldn’t have any problem with using hospital cost reports instead of Medicare reimbursement rates as the basis for negotiating hospital rates. However, just looking at care delivered under emergency conditions, how would you determine appropriate compensation for independent surgeons and anesthesiologists who, presumably, don’t file cost reports? We do have Medicare reimbursement rates, however. If hospitals accept Medicare rates, even if unwillingly, for 30% of their revenue and Medicaid rates for another 8%-10% of revenue, it seems that those rates can and should be used as a basis for negotiation. While I’m not familiar with the court rulings you refer to, maybe they could be overturned by either legislation or regulation.
    Regarding OOP maximums, my experience with insurance that I and my colleagues had over the years is that the difference between out-of-network charges (list price) and the insurer’s allowance (what it determines to be usual and customary in the market) does not count toward the member’s OOP. In the case of surgeries in particular, that difference can be a quite substantial number. I do think there is a lot more that insurers can do on members’ behalf in these situations including providing members with the Medicare payment rates for the services in question and helping the member to work something out with the provider as opposed to just telling the member you’re on your own and fend for yourself. I helped a colleague deal with this situation a couple of years ago. The case was ultimately resolved satisfactorily (via appeal), but it was an aggravating experience and our insurer was not at all helpful.
    Maggie – Insurers were tough on providers during the HMO heyday in the 1990’s but there was a consumer backlash for a variety of reasons. Also, during the 2000’s, the non-profit insurers, including the Blues not owned by Wellpoint, weren’t any tougher on the hospitals than the investor owned companies were. Even though they don’t have shareholder demanding steady growth in earnings and dividends, they were not any more successful at restraining rates. In Massachusetts, all of the major insurers are non-profits and healthcare costs there are among the highest anywhere.
    As for Maryland’s all payer system, a couple of doctors who live and work there commented on your blog that the record is mixed at best. I admit to a strong free market bias, as you well know. Tiered co-pays have worked and are working quite well in the prescription drug space with generics now accounting for almost 70% of all prescriptions (15%-20% of total drug spending). I would like to see the concept given a fair trial as part of an effort to encourage referring doctors to steer their patients toward the most cost-effective hospitals, specialists, imaging centers and labs. The PCP’s and specialists will need robust, user friendly price and quality transparency information to do that. If it doesn’t work, I would be open to an alternative approach.

  58. WRONG
    “Clearly, our model is not working.”
    Tell that to the Saudis who fly to the USA for cardio and cancer treatment. And the Canadians. And Euros.
    Tell that to my working-class uncle with stomach-cancer who is being treated by the MD who treated your buddy Teddy Kennedy. (Why didn’t Teddy go to Europe for better treatment — he had $3,000,000,000.00 on hand.)
    Madam, you and OWE-bama are WRONG, and the public will fight you, to the end. Get used to it.
    //////////////////
    OH, REALLY?
    ” .. I’ve written cover stories about the insurance industry for Barron’s (quite different from Huffington–Barron’s had fact-checkers), interviewed the CEO of Aetna, etc.”
    Really? What year? ABI reports this as your last Barron’s article —
    Maggie Mahar. (1997, October). The new Florida. Barron’s, 77(42), T19-T20.
    Yup, you’ve never worked insurance. In this century.
    Say hello to your political master, Mr. OWE-bama. The one you worship.

  59. I just toured the Holocaust Museum. They have a new exhibit on Nazi propaganda. This entire admin is starting to sound a lot like the exhibit. The common enemies this time are capitalism and bankers. They are working on the final solution, but first they have to make everyone angry with the common enemy so no one will defend them when they are eliminated.
    The coming economic collapse heralded by Greece will make all of this irrelevant. Spening money borrowed from a future that will never exist has run its course. Bubble is popping.

  60. Barry– Insurers stopped negotiating with brand-name hospitals and brand-name doctors groups back in 2000. And they passed the cost on. This is when premiums began to soar.
    You are right that this has begun to hurt insurers in terms of losing customers– but not for all 10 years. As you point out, the biggest losses have occured “in the past few years.”
    At this point, I’m not blaming insurers for passing on the cost. They don’t have much choice; their profit margins are too low to do anything else.
    But if they had been tougher earlier in the decade–and if they had complained publicly about brand-name hopsitals over-charging–they could have made it much more difficult for hospitals to drive health care inflation ever higher.
    To do that, insurance company executives would have had to look past the short-term, and looked past what’s good for their shareholders to also consider what is in the public interest. Companies that take the long view, and consider the public good (selling a better product at a more affordable price) are the companies that, in the long run, do best by their shareholders–as Warren Buffet has told us.
    In Northern California, Kaiser is the most popular insurer. And for good reason: overall, outcomes are better for patients treated at Kaiser’s hospitals.
    Regarding your suggestions: I particularly like #1 & #3.
    But ultimately, I would like to see the Maryland solution rolled out nationwide. (See my post on Maryland here: http://www.healthbeatblog.com/2010/02/massachusetts-problem-and-marylands-solution-we-dont-have-to-wait-for-washington-part-2-.html It has worked very, very well in controlling costs and maintaining quality in a state where the demographics combined with a couple of very, very large marquee hopsitals would lead one to expect to much higher hopsital spending.
    In terms of Medicare payments, what’s going on at BIDMC in Boston really doesn’t tell us much. It’s one hospital. MedPAC’s survey of the nation’s hospitals tells us a lot. If you read it, I think you would find it very interesting.
    Finally: within the world of healthcare, efficiency and quality are highly correlated. In hospitals where doctors take much longer to diagnose (and many more doctors are involved in trying to diagnose) quality is lower and costs are higher. In hospitals where patients fall victim to more mistakes, efficiency is lower and quality is lower.
    We’re not talking about how many laundry workers a hospital uses. That’s not where the money is spent. The money is spent on multi-million dollar pieces of medical equipment that is then over-used (to pay for it) on unnecesary tests that, in turn, lead to unnecessary procedures.
    Yes, we have too many hospital beds. And we want to close hospitals that are providing truly sub-par care. But these are usually public hospitals and safety-net hospitals in poor areas that are hugely underfunded. In NYC most of the care at one such hospital is provided by unsupervised residents working more than 80 hours a week, and working shifts that are so long that they are illegal.
    We’re not going to close UCLA Medical Center—it provides good care (though not top quality care) at an exorbitant price. We need to try to bring down the cost of that care without bankrupting UCLA Medical Center. This will not be easy.
    We need to change how we pay for care at UCLA. We need to install management that understands that hospitals should Not try to grow revenues. Within the context of our health care system, they should see themselves as cost centers, not revenue centers. This is why paying them for empty beds is a good idea.
    Barry, ultimately, I think you’re still hoping that “the market” will control costs. But “the market” favors growth–that’s what American-style capitalism is all about. That can work in some industries, but not in healthcare.
    We are the only developed country that has turned healthcare into a largely unregulated for-profit industry. Every other country in the developed world pays far less for heatlhcare (on average 50% less) and outcomes are as good or better. Clearly, our model is not working.
    We don’t want our health care industry to grow. We don’t want its revenues to grow. We can’t afford it–and inevitably, in our medical culture, higher revenues means more overtreatment, and more patients harmed by medical care.

  61. Maggie,
    Not to split hairs, but US docs also have a lot more paperwork than those in other OECD countries. So some, if not all, of those extra working hours could very well be going to administrative work. Also since there are less doctors per capita, they would have to work longer hours to satisfy the same exact demand.
    As to payments, yes, Switzerland pays less in GDP ratio, but the UK and, I believe, the Netherlands pay more.
    The difference between the 21% going to doctors services here as opposed to 15% elsewhere could also be due to having more procedures done outside the traditional Hospital in the US.
    And I do think we need more doctors. If right now US doctors need to work so many more hours, just imagine what would happen when the boomers start hitting Medicare next year and the currently uninsured start seeking proper care. I am talking specifically about primary care.

  62. OH, REALLY?
    ” .. I’ve written cover stories about the insurance industry for Barron’s (quite different from Huffington–Barron’s had fact-checkers), interviewed the CEO of Aetna, etc.”
    Really? What year? ABI reports this as your last Barron’s article —
    Maggie Mahar. (1997, October). The new Florida. Barron’s, 77(42), T19-T20.
    Yup, you’ve never worked insurance. In this century.
    Say hello to your political master, Mr. OWE-bama. The one you worship.

  63. I know Matt reads everything I post cause every couple weeks he reminds me how wrong I am. He wouldn’t know that unless he read nd he wouldn’t read unless he cared:) Hi Matt!

  64. “Many of the uninsured may suffer a “pre-existing condtion” that would make insurance expensive.”
    Maggie you don’t seem to understand how insurance premiums are derived, The connection is not pre-existing condition to cost. They are seperate and not related. Most carriers rate on predicitive expectation of cost. A C section is pre existing but it has no future cost value related to it. An old knee surgery would be an example, if the surgery is already done it has minimial impact on future cost and thus rates, it would still have pre-existing limitations placed on it for individual policies though and in rare cases group.
    Now let me give you a lesson in insurance, there is an old rule called 80/20. 20% of your population will account for 80% of your expenses. So you pointed out 61% of the population who will not have high claims. Congrats, I’ll spot you that 61% and give you another 19% and you still managed to miss 80% of the cost. This is why people that don’t know insurance shouldn’t regualte or try to fix it. 80/20 is basic insurance common sense. I have said for years there are only 4-5 million people in America uninsured that can’t afford insurance. That is why liberal solutions that screw up insurance for the 180 million that have it are so stupid. The problem is those 5 million we are talking about have really high claims, oh like 80% of all claims expected from the uninsured.
    Those 5 million are going to RUN to the exchange, they will probably camp out to be the first ones signed up. The other 40 million or so, they found a way to avoid paying insurance premium before and they will most likly find a way now. All these young healthy people you point out aren’t going to join, they are going to pay then penalty and continue to game the system like they always have, you just made it easier for them. Now Federal law says we have to sell them comprehensive insurance when they need it not just ER care. Brillant!
    Your entire cost comparison between individual coverage and group left out one huge factor, common for people that don’t know what they are talking about, those buying individual policies have higher take home pay becuase their employer isn’t providing them insurance. Your 20% premium contribution is BS, employees pay 100% ofthe cost of their insurance, 20% with co-premium, 80% reduced compensation. See how that blows your entire argument out of the water?
    Consultants are a prime example, for example NV Power use to hire hundreds of consultants, often ex-employees. They would pay them considerably more then they paid active employees becuase A) they weren’t providing benefits, B) could be fired at the end of the contract. These were all highly paid people so most would buy individual coverage, and it was cheaper then their group unless they were the rare unhealthy person.
    “much as those with employer-based insurance get subsidies from their employer.”
    No such thing exist, pick a pocket and that is where the employee pays 100% of the cost.
    “In the Exchanges, insurance will be cheaper for both middle-class and low-income people because they will receive government subsidies”
    Why didn’t that work with any of the exchanges that have been tried and failed to date? What is different about this exchange then the others before it?
    “I haven’t worked in the insurance industry. I’ve written cover stories about the insurance industry for Barron’s”
    I have and do work in insurance, I have and do work with exchanges, I have and do work with hundreds of employers and you have and continue to be 100% wrong. But I can see how a couple cover stories and an interview by far make you more athoritive on the subject matter. You and Ezra Klien are so similar it is scary, couldn’t get a fact right to save your life but spun the hell out of the narritive. Just becuase I never get tired of telling it, did you hear about the time Ezra called HSAs sexist against women becuase women need more preventive care and he didn’t know most HSAs cover those expenses at 100%? Like you he never could admit he was wrong. Thought since you also like throwing the sexist argument around you might get a kick out of that. I’m sorry, want to be accurate here, you labeled me Misogynist not sexist.
    “It’s pretty well known that “Private insurers rarely negotiate with dominant hospital systems and typically pass on the higher costs to beneficiaries in the form of higher premiums.”
    Excuse me, by whom is this well known? Not to beat a dead horse but you have no basis at all to make that claim. I can name you people that 8 hours a day do exactly that, it is their freaking job title. Boy you must miss those Barron fact checkers, where you this bad when you wrote for them.
    Remember your challenge to check your facts against mine, I’ll put up the names and companies of people whos job it is to negotiate with hospitals, you put up the source of your claim and lets see who honest and whos spinning BS.
    “To those who write abusive comments”
    Would you be including yourself in this Maggie? Nothing I have heard on here is close to as bad as you calling people Misogynist becuase they keep catching you in lies.

  65. “In the Exchanges, insurance will be cheaper for both middle-class and low-income people because they will receive government subsidies (much as those with employer-based insurance get subsidies from their employer.)”
    Because the cost is paid out of more than one pocket does not make it cheaper. LD

  66. Margalit, Nate, Barry — and To those who write abusive reponses
    Margalit– Yes, you’re right. Someone distorted what Orszag said.
    And you are also right that we do having fewer doctors than many countries–including Switzerland. But our doctors work longer hours. And we pay them far more per hour. And they do more.
    In the U.S. male physicains work an average of 53 hours per week while female physicians–who make up 1/3 of the work force– work 47 hours per week. By contrast, in Switzerland, many doctors work less than 40 hours a week. And in general, European take more vacation time than we do. (The numbers on physicians’ hours in the U.S. are from Business Week: http://www.businessweek.com/magazine/content/08_17/b4081104183847.htm
    U.S. doctors work longer hours in part because most are paid fee-per-service: the more they do, the more they are paid. This helps explain why Americans undergo so many more tests, procedures and surgeries than patients in other countries. (American doctors also are trained to be more aggressive, and to use more medical technology.) Americans don’t spend more time in hospitals, but as Elliot Fisher points out: “more happens to us while we’re there.” We see many more specialists while in the hosptial, and undergo many more treatments.
    Our doctors work harder, do more, and we pay them more per hour. As a result, in 2004, a general practioner in the U.S. earned an average of $161,000; in Switzerland, a GP earned $116,00 –and Switzerland spends more on healhtcare than any other country in the world, except the U.s. In France in 2004, a GP averaged $92,000. The gap between U.S. specialists and specailists in other countries is even greater: In 2004, U.S. specialists averaged $230,000 a year, vs. $130,000 in Switzerland and $149,000 in France.
    To get an idea of what this means in terms of purchasing power and standards of living, economists compare income to per capita GDP.
    In the U.S. the ratio for specialists is 5.7 in Switzerland it’s 3.8..
    Another way to look at it: our total national spending on physicians as a percentage of GDP is double the OECD median–roughly 3% of GDP in the U.S. compared with 1.3% of GDP in the average OECD country.
    If you look at total health care spending in the U.S. physician’s services account for 21% of our national health care bill–compared to 15% in the average OECD countries. So the fact that we pay physicians more does go a long way in explaining why we spend so much more on health care– though it certainly is not the only factor.
    The gap between physician pay and the average workers’ pay is much greater in the U.S. than elsewhere: ratio of the average income of U.S. physicians to average employee compensation for the United States as a whole about 5.5. Germany’s is the next highest, at only 3.4; Canada, 3.2; Australia, 2.2; Switzerland, 2.1; France, 1.9; Sweden, 1.5; and the United Kingdom, 1.4.
    Of course most U.S. physicians have to pay for their own med school education; in other countries it is subsidized. But if a physician is paid 5.5 times what the average worker earns over the course of a 30 or 35 year career, I wonder, what point is he re-paid for the money he spent on his education (plus lost pay while spending more years in school)– in ten years? eight years? twelve years?
    Moreover, other U.S. workers also have to pay for their college and post-graduate education while in other countires, education is more heavily subsidized.
    Botton line: We over-pay many specialist, but the big problem is that they do to much–they over-treat. More surgeries, etc, and yet on average outcomes are no better here. We would be better off if they worked fewer hours, and did less. (AS you say, that may happen with a younger generation of docs working in large medical centers on salary.) We need more primary care providers (both PCPs and NPs) working more efficiently (with electronic medical records, etc). In some places, we have too many specialists. Overall, we don’t need more doctors; we need less over-treatment.
    Nate–
    You keep insisting that the people in the Exchanges will be sick.
    You ignore some facts:
    First 20% of the uninsured are children.http://covertheuninsured.org/content/children
    Most are healthy; as you know, it doesn’t cost very much to insure children because the vast majority don’t need major medical care.
    21% of the uninsured live in households earnign more than $50,000 (i.e. more than median income). They are not poor. Another 20% of the uninsured live in households earning $25,000 to $49,000–they are middle class and lower-middle class. Again, not poor.
    Many of the uninsured may suffer a “pre-existing condtion” that would make insurance expensive. But keep in mind that for a woman, having had a C-section or an abortion counts as a pre-exisitng condition. Insurers lable the smallest risk a “pre-existing conditino”– even if its an illness that has been cured.
    In addition, when you say that insurance that an healthy individual purhcasess on his own is “always” much cheaper than employer-based insurance. You are assuming that insurers are allowed to underwrite (charge more based on pre-existing conditions and age) in all states.
    That of coures is not true. As a result, rates in the individual market vary greatly. In New York, a family policy in the individual market costs an average of about $13,000 (whatever your age or pre-existing condtion. ) In Iowa, by contrast, a family plan in the individual marekt will cost $6,000.
    Nationwide, the average premium cost for private sector job-related health insurance is $4386 for singles and $12,298 for family coverage in 2008. Employees paid 20% ($882 single) to 28% ($3394 family) of the premium on average.
    If a person didn’t have job-related insurance, and had to buy it in the individual market, in 2005 the average health insurance premium for someone who bought their own policy was $3664 for individual coverage– compared to out-of-pocket premium of $1655 for an employer-sponsored policy. (Since the employer pays part of the premium.)
    And if the individual is between the ages of 55 to 64 purchasing his own coverage in the indivdual market, insurance costs $4288 for individual coverage–about as much as teh total cost of employer-based insurance (including what the employer as well as employee pay.) t
    In the Exchanges, insurance will be cheaper for both middle-class and low-income people because they will receive government subsidies (much as those with employer-based insurance get subsidies from their employer.)
    Insurance in the Exchange will be cheaper for people who work for relatively small companies because teh administrative costs are higher when an insurance company sells to a small company. In addition, if the small company has many older employees, that will make insurance more expensive. In the exchanges, employees from small companies will be pooled so they will get the lower rates that large companies get.
    .I haven’t worked in the insurance industry. I’ve written cover stories about the insurance industry for Barron’s (quite different from Huffington–Barron’s had fact-checkers), interviewed the CEO of Aetna, etc.
    Barry–
    It’s pretty well known that “Private insurers rarely negotiate with dominant hospital systems and typically pass on the higher costs to beneficiaries in the form of higher premiums.” This is true even when one insurer has a near monopoly in a metropolitican area.
    ” A public plan could, in an environment of head-to-head competition, push private insurance companies to negotiate more aggressively with providers and dramatically lower health care spending.” [Urban Institute, 10/03/2008; LA Times, 4/09/2009]–For links, see http://wonkroom.thinkprogress.org/2009/06/11/rove-public-plan/
    Barry– I’ll repond to the rest of your comments later
    To those who write abusive comments: you should know that you’re wasting your time. I don’t read abusive comments (one can spot them at a glance.) From what I can tell, most of your fellow-readers don’t read them either. Have you noticed how rarely they respond? Have you noticed that there are only a few of you saying the same things over and over again? And I’m pretty sure Matthew is too busy to read them. So you’re talking to yourselves.

  67. “3. For care delivered under emergency conditions limit the amount a hospital can charge for inpatient care to a maximum of 110% of Medicare.”
    Courts have ruled Medicare reimbursements rates to be arbitrary and thus not allowed as a basis for determination. Not to mention Medicare is a nightmare to reprice to. A more effective and easier method would be 1xx% of cost as reported to the government. A fair profit and easy to calculate. What is already happening on a small scale is plans dropping hospital PPOs and just saying they will be cost plus xx%, if the hospital doesn’t like it bring it on and try to justify your charges.
    To think PPOs lazily sit back and accept these rates becuase the sanquira is just to good to leave is silly, must have been written by someone that never negiotated a contract and only read about them.
    “The way to do that is with price and quality transparency coupled with tiered co-pays,”
    Wonder if this will work when OOP is limited. How they define OOP is going to have huge impact on healthcare going forward, more then people realize. If charges over UCR for example are counted as OOP then the entire concept of PPOs and discounts will be destroyed. Sure hope these staffers have a clue what they are doing. Hospital could charge 10 times cost, write off the members OOP and gourge on plans till they are dried bankrupt shells of companies.

  68. OWE-BAMA: I KNOW EVERYTHING
    “V.A. Medicine is perfect — why we need single-payer.”
    Sure — and pigs fly out your butt. Tell that to the families of these veterans.
    NPR: “VA Limits Surgeries At Some Hospitals After Deaths”
    http://n.pr/ccLCrZ
    “The Department of Veterans Affairs is implementing a new rating system for its hospitals that at some facilities will limit the types of surgeries doctors can perform.
    “The changes come after several patients died because of surgical mistakes at one Illinois VA hospital.
    “VA officials acknowledge that at least nine patients died directly because of surgical mistakes by doctors at the Marion VA Medical Center in southern Illinois in 2006 and 2007. A VA investigation found that poor care at Marion contributed to the deaths of at least 10 other patients, and to the illness and injury of several more.”
    How’s that hopey-changey thing? Still alive?
    NOV. 2 — REPEAL STUPIDITY — DUMP THE DEADWOOD!

  69. “Secondly, there are probably some things that you don’t know about communitiy clinics that lets them provide good care for less. For instance:”
    Less than what? All the items you list cost a lot more than nothing. So, if these community clinics can cover these 20 or 32 million uninsured for $11 or $17.6 billion more than nothing a year, then you should be outraged that this administration just spent $250 billion a year to do the same thing (1 trillion plus 500 billion/6 years of benefits). Then again, covering the uninsured may not be the real intention of this “reform”.
    “Secondly, Small businesses with up to 100 employees will be able to participate in the exchanges and pool
    together for coverage. They will get the much better large “group” rates that large companies get. “The exchanges will maximize small business bargaining power to negotiate better coverage, promote transparency and informed choice, and increase competition to lower rates.”
    Simply being part of a large pool, especially full of adverse selection, does not make “rates” better. The economies of scale discounts pale in comparison to the increased claims costs
    There are planty of large companies that have very high costs (e.g. Delta Airlines, General Motors, etc.).
    Maggie, are you one of the blind men attempting to discribe the elephant…
    O how they cling and wrangle, some who claim
    For preacher and monk the honored name!
    For, quarreling, each to his view they cling.
    Such folk see only one side of a thing.
    If not blind or in the dark, you are ignorant and limited. LD

  70. Maggie,
    To follow up on my last comment, about a year or two ago, I commented on one of your posts that perhaps some of the AMC’s would be better off if they tried to become a low cost high quality hospital and prosper by growing their market share at the expense of higher cost lower quality facilities. You responded by saying that a hospital like UCLA can’t just close wings and fire specialists because they need the revenue to service the debt that was taken on to build the wings in the first place. The way to respond to hospitals and large physician groups with significant market power is to create countervailing power. The way to do that is with price and quality transparency coupled with tiered co-pays, along with special rules for inpatient care delivered under emergency conditions. It can be done, I believe, without resorting to government (Medicare) dictated or administered prices. Those that can provide good value for money will thrive while those that can’t will wither and, ultimately, close.

  71. I think insurers are already negotiating as hard as they can with hospitals and large physician groups. The notion that they are happy to pass along big increases in hospital costs because it will increase the insurers’ profits might be plausible if there were no loss of customers. However, insurers have lost a significant number of commercial members during the last several years. They would much rather see medical claims costs rise 2% per year (in line with inflation) instead of the current rate of 8% plus or minus 50 basis points. Just what do you think an insurer is supposed to do if a powerful hospital group believes (correctly) that the insurer needs the group in its network and, without a contract, if an insured member lands in one of the hospital’s ER’s and is then admitted as an inpatient, the insurer will be responsible for paying full list price less, perhaps, a 10% prompt pay discount? The Health Affairs article that you referenced noted that the only constraints on the monopoly power of hospitals are that (1) insurance premiums will be driven up to the point where more and more employers will simply stop offering health insurance to their employees or force employees to accept high deductible plans because that’s all the employer can afford, or (2) in the case of CA employers, switch to Kaiser which owns its own hospitals even if employees don’t want to be limited to a narrow network HMO product.
    If regulators really want to be helpful here, they should do the following:
    1. Require public disclosure of actual insurer contract reimbursement rates.
    2. Prohibit hospitals from refusing to sign contracts that allow insurers to charge members higher co-pays if they want to go to a more expensive hospital if quality is no better than nearby competitors.
    3. For care delivered under emergency conditions limit the amount a hospital can charge for inpatient care to a maximum of 110% of Medicare.
    With respect to whether or not Medicare payments are adequate, I’ve written this before but it bears repeating. At BIDMC in Boston, a teaching hospital, Medicare’s payments are adequate for inpatient care overall but way too low for outpatient care and services. BIDMC’s Medicare case mix by revenue is 56% inpatient and 44% outpatient. For commercially insured patients under 65 years old, the revenue mix is 37% inpatient and 63% outpatient. If the hospital had to accept Medicare rates for all services, it would not be able to sustain its model even if there were no uncompensated care and even though the hospital is driving toward a goal of becoming the high quality low cost AMC in its market.
    I think you are also confusing the concepts of efficiency and quality. Since the vast majority of a hospital’s costs are for wages and benefits, efficiency relates to how many people are needed – nurses, lab technicians, pharmacists, food service and laundry workers, transporters and custodians, etc. per 100 patients or per licensed bed. The occupancy rate is also an important factor in determining unit costs. Minimizing readmissions and incidents of VAP and CLI’s are quality of care and outcomes related concepts. Performing well on those metrics will tend to drive revenue lower. If we do a better job there, we will need to close some of the excess capacity and capacity is being taken out of the system gradually with the closing of St. Vincent’s in NYC the most recent example in that market. I’m not a fan of paying for empty beds. We need to get the excess capacity out of the system. If the focus is on high and rapidly rising healthcare costs, the hospitals have a lot more to answer for than the insurers do, in my opinion.

  72. just because the original post bombed doesn’t mean the thread needs to go to waste. There are a number of business owners on here, I’m curious;
    1. if going from 25 to 26 employees cost you a tax credit would you be hesitant to hire that extra worker?
    2. if adding a 50th employee suddenly made you required to offer insurance or pay a fine would you stop growth?
    I have had clients and prospects tell me they don’t plan to grow bcause of this, and I beleive some people would actually follow through. I’m also a business owner and growth is just so damn sexy it is hard to say no to. I don’t think I would grow by 1-2 employees and pass a threashold but if I could blow bye it by 10 or 15 then it would be hard to say no.
    I’m not a CPA but have started a number of companies in my time and wonder if this wasn’t another case of real world experience deficiency biting politicians in the ass. Once you hit 20 or 40 just start another LLC or S corp and grow under that. Have to pay the CPA a little more but sure seems like an easy law to skirt. Another example of why politicians shouldn’t write laws favoring one person/entity over another, it never works out as simple as they plan.

  73. Stories are better when they are triologies. In this case, #4 is the flop that makes people doubt why they ever considered reading stories 1-3 and raises new questions the credibility and knowledge of the author more than ever before. I hope this is #4 of #4.

  74. I can’t find a transcript but you are correct those are not his exact words, but it is a dead on discription of what he said.
    video I am listening to seems edited
    :38 in “enourmous amount independent power
    :55 proposals take effect automatically unless congress and president veto
    statutory power to put forward automatic proporals huge change
    initera plays to power of independent board
    actual speech is worse then the quote if I could type
    FYI Maggie not that you would recognoise it but that is journalism, see how I admitted an error, went back to my source, and corrected it, you should read up on it some day

  75. YUP
    ” .. Of course, the reporter (or whoever that was) has a right to his opinion, but that’s all it was – an opinion.”
    Ditto the “fact-master,” M.M. Who really works for MESS-iah.
    [Cue sexism-card/racism-card]

  76. “Powerful Rationing Panel (Not Doctors) Will Control Health Care Levels”
    Nate, Mr. Orszag never said that. That was a conservative reporter’s interpretation of his simple description of the Independent Payment Advisory Board. Of course, the reporter (or whoever that was) has a right to his opinion, but that’s all it was – an opinion.

  77. “Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.”
    So if even the large groups don’t want large group pricing what makes people think the small groups are going to get gaga over them? What do these large companies know anyways, they must not be able to read 200 pages

  78. “Government run health care is not efficient nor effective, it is just solely about cost containment,”
    And if your doubt this Maggie just listen to your God Peter Orszag, cause we all know if Peter said it then it is gospel.
    “Powerful Rationing Panel (Not Doctors) Will Control Health Care Levels”
    death panels, what death panels, oh you mean powerful ratioing board that can only be over ruled by majority of congress and a veto

  79. “As alwalys, you are mistaken.”
    And this is based on what Maggie your three hours of hard study of the subject matter?
    “don’t have insurance because it so expensive unless you can get a group rate.”
    Spoken like a clueless person who has spent all of three hours studying the subject matter. If you had ever actually worked in insurance you would know the rates for a healthy person under individual insurance are FAR cheaper then group. See group has limited pre-ex, guarantee issue and all sorts of other bells and whistles that make it more expensive. A healthy person can ALWAYS buy an individual policy cheaper then a group, so healthy rich people are already insured. Those needing the exchange are the less then healthy.
    FYI thats based on actually selling policies, far more accurate and relative then you reading something on huffington post.
    “If they buy insurance outside of the Exchange, they don’t get the subsidy. So they’ll use the Exchanges. Common sense 101.”
    Great example of complete lack of common sense. If your subsidy is $1000 but the policy through the exchange cost $1500 more common sense is your forgo the subsidy and buy outside the exchange.
    Further street sense, something else you seem to lack, is why buy a policy at all when you can pay $700 fine, and save your money until your sick, you can then go to the exchange and buy a policy guaranteed. This is called adverse selection, everyone but you liberals are aware of it.
    “Most small businessmen don’t know what is actually in the legislation. It’s complicated, it’s detailed and Fox News (or people like you) keep telling them “You’ll never be able to afford it! You’ll be ruined!”
    Projection Maggie, the only one that doesn’t know what is in it is you. My clients are very aware becuase I have taken the time to educate them over the past year. I have actually sat with the staffers who will be writing the regs then reported back to my clients. I spent more time in DC learning about the intent and plans of Dems then you have studying healthcare entirly. On my worst day I forget more about reform then you will ever know.
    “many employers with fewer than 50 employees think they will be forced to buy insurance.
    They won’t.”
    If your a business owner with 49 employees and you have the chance to grow but said growth would take you to 51 employees do you do it? Great Job growth there Dems. I have already had clients tell me they wont hire more employees then what allows them to qualify for the tax credit. You would know these problems Maggie if you ever spoke to any real business owners instead of burying your nose in liberal propoganda.
    FYI MedPac is a joke, a bunch of clueless, PARTISAN, academics and politicians with no idea what they are talking about. They are as informed and qualifed as your local planning commission. And equally “non-partisan”

  80. It is interesting Ms Mahar is now taking on comments as they come in, as, letting them get traction could be dangerous, as they might, god forbid, make sense!
    For someone who has worked for organizations that are required to accept Medicare and Medicaid patients, they are not thriving, Ms Mahar. And, with this part four, you are a plant from the Obama administration, I just hope there is a creative sleuth out there who can connect the dots and reveal the relationship. You really think that just regurgitating the samed failed and false pretenses will gain traction with dulled and apathetic readership? Well, there seem to be a sizeable number of readers who doubt your claims, me being one, and again, have to ask the management of this site what is the message being sold here, if it is a blog to improve and educate on health care matters?
    I am not going to comment further on this foray into mistaken beliefs, if not just a focused agenda of claiming the world is really not what we see it to be, but what others skew it to be. It is unfathomable the claims this author has been making. Government run health care is not efficient nor effective, it is just solely about cost containment, and it sells people out. You can believe this woman, who I truly do not know if she has practiced clinical care for a sizeable period of time in the trenches, or, you might want to seek out providers, like me, who have worked in several different types of systems as a provider, seen the strengths and weaknesses of them all, who can educate you that the conclusion is government run health care does not, cannot, and will not take into consideration the needs of the patient, but just the needs of the balance sheet. And, unfortunately where the system is at this point in time, it cannot succeed at improving care. That is not insincere cynicism, but painful reality!
    It is that simple, I truly do not lie or embellish that comment, and I hope readers who have a brain and pump those neurons with consistency, will find the truth at the end of the day and not be failed by the adage this woman is selling.
    Good luck, further readers and commenters, I sense she will continue to displace and project her agendas onto you. It is what incorrect yet determined false logic does.

  81. HEY EINSTEIN — SMALL BUSINESS HATES OBAMA TAX-LOVE
    http://www.nfib.com/tabid/215/Default.aspx
    ” .. NFIB opposed the new healthcare law because we believe it will increase the costs for small business owners. But, we remain committed to helping small business owners plan and comply with this new law.
    ” .. Just because we have this new law, doesn’t mean the fight is over. There are still opportunities to right this wrong, and there are always new and different legislative approaches to be pursued. NFIB continues to advocate for policies and legislative proposals that will help small business ..”
    Einstein, there comes a point where POLITICAL BIAS becomes BLINDNESS.
    http://bit.ly/cLC0y3
    —————————————
    PEW: MOST AMERICANS DON’T TRUST GOVERNMENT
    http://bit.ly/9iC5f9
    “By almost every conceivable measure Americans are less positive and more critical of government these days. A new Pew Research Center survey finds a perfect storm of conditions associated with distrust of government — a dismal economy, an unhappy public, bitter partisan-based backlash, and epic discontent with Congress and elected officials.”
    THE POLITICALLY-BIASED BLATHER – OBAMA’S POLITICAL-PUPPET
    ” .. I would note that for much of the past 12 months a great many people–bloggers as well as readers commenting–said that health care reform would never pass and that I had my head in the clouds when I said (repeatedly) that it would.
    ” .. People also said that it could never pass without Republican votes. [YEAH — LYING WORKS GOOD]”
    NOV. 2: THE RECKONING — COOK POLITICAL REPORT
    http://bit.ly/d0MOYm
    “Whether Republicans can take control of the House in November is a close call.
    “I see it as more likely than not to tip to Republicans, which is a call many people in my business, for whom I have enormous respect, are not willing to make just yet.
    “There will likely be heavy Democratic losses in the Senate, as well, but not enough for Republicans to take control; it’s more likely they’ll gain between six and eight seats. However, with 22 Democratic and 10 Republican seats up in 2012, and 20 Democratic and 13 Republican seats up in 2014, there will be more targets for the GOP as they look to take control in the near future ..”
    ————————————-
    OK, play the sexism-card and the race-card.
    That’s all you got — you’ve never been on the front-lines of health care. You got nothing, like MESS-iah.

  82. I don’t know what planet Maggie Mahar is living on but it isn’t earth. Virtually every state is cutting Medicaid provider payments NOW, because they are going broke.
    PPACA actually made it worse by requiring them to maintain their current eligibility between now and 2014, so cutting provider payments (hospitals, nursing homes, home care agencies, community health centers, etc) is the only alternative. The pulse of funding from the Stimulus Bill which helped offset some of those cuts expires at the end of the year, and every state is facing a funding cliff.
    I worked in a large state government once, and please accept my word when I say that Medicaid is the balancing item in every state budget. States expand Medicaid in booms and contract it in recessions. This is the worst recession any of us have seen. The fact that the feds are taking 100% of the expansion in eligibility for the first four years doesn’t alter the fact that most large states and many small ones cannot afford the programs they have now. If you’d start typing and start interviewing some teaching hospital execs or public health directors, maybe you’d have a different set of “facts”.
    Also spent some quality time with the community health center directors in Washington State. The pulse of funding they got from fiscal stimulus, which amounted to about $30 million was wiped out by over $200 million in cuts to their Medicaid funding, putting many of them in the unenviable position of having to consider capping the number of uninsured people they take care of. States will have a lot of pressure from hospitals and nursing homes, which are far better organized and powerful, to preserve them from some of the cuts, and thus the FQHC’s are virtually certain to see further Medicaid reductions, cancelling out much of the effects of the PPACA funding increases. Talk to some community health center directors before you go spouting off about how great their situation is going to be.
    Ask yourself why Medicaid expansion played such a large role (as much as 50-60% of coverage expansion) vs. private insurance. BECAUSE IT”S A LOT CHEAPER than private insurance. Why? Because a relatively small number of providers rely upon Medicaid, and caring for the poor is a lot less compelling a use of public dollars than caring for the “elderly”. How else can you justify Medicare paying so much more than Medicaid to the same hospitals for the same services?
    The 10% Medicare increase in primary care pay is temporary, and applies only to E+M codes and only if E+M codes are 60% or more of the doc’s billing codes. The Medicaid increase is two years only. If you’re burnt out and going broke, this isn’t enough to keep people in practice. Ask some of the docs in this blog and actually listen, for a change, to what they are saying. Maggie, you just don’t get it.
    Maggie needs to give her aching fingers a rest and go out and actually talk to some folks in the health system. She might be genuinely surprised at her knowledge gaps. Maggie used to be a first class “investigative journalist”. That was clearly a long time ago.

  83. Regarding the doctor issues:
    Switzerland may have more nurses than we do, but they also have more doctors than we do: 3.9/1000 in Switzerland and only 2.4/100 in the US, which is almost at the bottom of the OECD list.
    Switzerland also has a much higher ratio of specialists to GPs: 2.8/0.5 as compared to 1.5/1.0 for the US.
    Most disturbing is that we also manage to graduate less docs: 8.1/1000 in Switzerland and 6.3/1000 in the US. Again, we are at the bottom of the heap.
    So they have more doctors, more specialists and consequently more nurses, but still manage to provide health care for much less than we do. I know doctors’ income is lower in Switzerland, but this cannot account for the difference in overall expenditures.
    The costs of seeing an NP instead of an MD for a routine visit most definitely cannot account for the difference.
    The other issue is that the newer generation of docs is not interested in working 80 hour weeks, like the old timers did, and some still do, which will be exacerbating the shortage of primary care. The current generation has different priorities, and I’m sure that being salaried in a large corporation is not too terribly conducive to going the extra mile.

  84. Actuary and Nate–
    You’re right: I’m not writing an Op-ed. The annoying thing about Op-eds is that too often they simply offer “opinions” off the top of someone’s head. No facts. No evidence.
    Secondly, I’m afraid you are wrong and MedPAC is right. This shouldn’t come as a surprise, nor should you feel badly. MedPAC is a non-partisan group of extremely intelligent people who have spent many years studying hospital spending. They also have access to all of the numbers that you don’t have access to–what different hospitals actually charge and what it costs different hosptials to care for patients.
    People like White House budget advisor Peter Orszag are very impressed by MedPac’s work. Granted, you have to be capable of reading 200 or 250 pages to read one of their reports. (They issue two each year.) These are not reports for people whose lips move as they read. (This is not directed at you; I don’t know you. I’m thinking of one or two regular commenters . . .)
    Take a look at their analysis debunking cost-shifting; I think you’ll find it interesting.
    Insurers don’t try to fight back: see the Boston Globe’s excellent investigative stories (there are several of them.)
    This has been going on for quite a while: I wrote about the situation in California (quoting insurers) where brand-name hospitals had huge market leverage back when I wrote Money-Driven Medicine.
    These hopsitals are charging 15% to 25% more than it should cost them to care for patients–if they were efficient. This is why it costs Medicare 50% more if a patient receives care at the UCLA medical center than if a very similar patient receives care at the Mayo Clinic — (see http://www.dartmouthatlas.org) UCLA is very inefficient: the patient sees more specialits, spends more time in the hospital, undergoes more tests and procedures, and yet outcomes are not as good. And both patient satisfaction and doctor satisfaction are lower.
    AS for reconciling the two statements– It’s not clear what you are asking. I suspect that there is a word or phrase missing in the sentence which begins: “If #1 is true . .” ??? Or maybe I’m just not following the logic. If you can spell out your question , I’ll try again.
    But for now let me just try to clear up some misconceptions about ERs and community clinics that may be confusing the issue. First, community clinics see people who are on Medicaid, people who are uninsured and people who have insurance (about 30% of their patients, if memory serves.)
    They certainly don’t see all Medicaid patients, nor do they see all of the uninsured.
    Secondly, ERs have become more crowded in recent years, not because more uninsured people are flooding ERS, but because more insured people are going to ERS because they can’t take time off work to go to a doctor, and an ER is a place where they can go in the evening or on week-ends. (This is well-documented in Health Affairs.)
    And because their insurance will pay for the ER, they don’t really care that it is more expensive.
    Meanwhile, these days the uninsured tend to stay away from ERS because they fear being admitted and being hit with hospital bills that they can’t afford to pay. Hospitals have become very aggressive about collection.
    Moroever, under current law (as amended by an exectuive order by Presdient Bush) ERs can turn someone away if he is capable of walking out the door under his own steam. And they do. In other cases, they simply let an uninsured person sit there for 20 hours–until he or she gives up. If you have insurance–or a valid credit card–they will take you. Otherwise, they may not–unless you’re totally incapacitated, unconscious, can’t walk out the door.. . .(I write about and document all of this in Money-Driven Medicine.)
    With more insured patients using ERS for routine care, the nation’s health care bill rises becaue care in an ER is always more expensive than care in a community clinic or a doctors’ office. Specialists charge a hospital far more to cover the ER than they do to work during regular hours. And ERS have to have more very expensive technology. Insurers pay the ERS bills–and then pass the added cost along in the form of higher premiums. So we all pay for this needlessly expensive care.
    This is why President Obama wants everyone to have a “medical home”–For many people community clinics will become their medical home as they expand, and offer more services (more specialty services, telemedicine etc.)
    With reform we will have more insured people–and more people on Medicaid– but community clinics will have doubled their capacity. And there will be community clinics in many neighborhoods and rural areas where they don’t now exist.
    They will help absorb much of the increased demand for care.
    On the question of people eligible for Medicaid who are not signed up–most are children in low-income families.
    Often parents have a hard time with the application process (which in some states in very complicated) or dont’ know their children are eligible.
    Under reform, with everyone required to have insurance, those who are eligible for Medicaid will find out (parents will have to show that their kids are insured and at that point, they’ll be told they are eligible for Medicaid) and the process of enrolling them will be streamlined.
    The federal government will be paying 97% of the costs.
    Nate:
    As alwalys, you are mistaken. The Exchanges will be
    filled with many self-employed who are quite healthy and often quite affluent, but don’t have insurance because it so expensive unless you can get a group rate. The Exchanges will also include many many employees from small businesses as well as their employers– Many of these employees are young, and in good health. Particuarly if they are 20-somethings or 30-somethings who married, have children, or thinking of having children, they woudl like insurance and group rates plus the subsidies will make it affordable. (The subisidies are quite generous, not only for low-income famlies, but for middle-income famlies–earning up to $88,000 for a family of 4.
    If they buy insurance outside of the Exchange, they don’t get the subsidy. So they’ll use the Exchanges. Common sense 101.
    Most small businessmen don’t know what is actually in the legislation. It’s complicated, it’s detailed and Fox News (or people like you) keep telling them “You’ll never be able to afford it! You’ll be ruined!
    For instance, many employers with fewer than 50 employees think they will be forced to buy insurance.
    They won’t.

  85. “Secondly, Small businesses with up to 100 employees will be able to participate in the exchanges and pool
    together for coverage. They will get the much better large “group” rates that large companies get.”
    Maggie apparently you need more then three hours of reading to understand a subject cause that aint want the exchange does. All you need to do is look at history,who was it that said, “These days, not too many people study history.” Exchanges have never lowered prices, and they have never lasted very long. Common knowledge is the exchange attracts poor risk that can’t afford coverage otherwise. Healthy groups will buy coverage outside the exchange becuase it will be cheaper. Insurance 101.
    “So all in all, reform is not terribly onerous for small businesses.”
    How many hours of study did it take you to come up with that one? It’s not really my place to say, I only actually talk to hundreds of small businesses about how onerous it is, but I hear different, and hear different every day. Maybe I should just tell the small business owners to worry Maggie studied the subject for three hours and assures everyone it is not onerous at all.

  86. Cliff–
    Cliff-
    First, as you note, only emploeyrs with more than 50 employees will be required to offer coverage. And today, 96% of these companies already offer health insurance. So only a tiny group (4%) will be affected.
    Secondly, Small businesses with up to 100 employees will be able to participate in the exchanges and pool
    together for coverage. They will get the much better large “group” rates that large companies get. “The exchanges will maximize small business bargaining power to negotiate better coverage, promote transparency and informed choice, and increase competition to lower rates. ” (This is from the Main STreet Alliance for Small Businesses. http://www.thcc2.org/PDFs/smbizbene.pdf
    Employers will be required to pay 60% of the cost of the employee’s insurance.
    If the remaining 40% equals more than 9.8% of the employees income, and the employee earns less than 4 times the federal poverty level ($44,000 for a single person, $88,000 for a family of four) he will be eligible for government aid.
    Here’s how it would work: your employer would give you a voucher equal to the 60% that he would pay toward your premium and you will be allowed to take this voucher into the Exchange where you can purchase insurance along with self-employed people and the uninsured. There you woudl get group rates. If your share of the premium costs more than 9.8% of your income, the government pays the difference.
    (Note: I think it’s 9.8%–it could be 9%.)
    So if you’re a low-income employee earning $17,000 a year, you would not have to pay more than roughly $1500 or $1600 a year for good insurance– that’s about $130 a month. Many low-income people wind up paying close to that much out of pocket for prescriptions, a couple fo visits to the doctor–and far more if they have a minor accident– break an arm, get stiches in an ER, etc. In additon, there will be exemptions for “hardship” cases– people who truly can’t afford the 9.8% (or 9%).
    Finally, if an employer with more than 50 employees is one of the 4% who doesn’t offer insurance to his emmployees, and he decides that he still doesn’t want to buy insurance, he will have to pay a penalty if any of his employees qualifies for the federal subsidies available to people who earn under 4 times the poverty level.
    In that case, he pays $2,000 for each of his employees–, after substraciting his first 30 employees. So if he has 55 employees, he pays $2,000 X 25 or $50,000.
    This is to repay the government for providing subsidies for his employees. That works out to less than $1,000 per employee–almost certainly less than he would have had to pay if he offered insurance. In other words for
    companies that have, say, 50 to 75 employees, this is a big break.
    Finally, employers with fewer than 50 employees are not required to do anything. But if they decide to offer insurance, they can get tax credits.
    So all in all, reform is not terribly onerous for small businesses. Those who will see the greatest increase in costs are the 4 percent who have more than 50 employees and don’t now offer coverage. The other 96% of small to mid-size employers are paying higher premiums because they are “free-riding”–which isn’t really fair.

  87. Maggie —
    Seems like you are writing a book here (as opposed to an op ed)!
    First, cost shifting is real, and all hospitals try to practice it. The most successful in doing this are the “big name” hospitals and hospitals which hold a near-monopoly in medium-sized(or smaller) communities.
    Insurers do try to fight back, despite what MedPAC says, except many are using quality outcome-based bonuses (less readmission rates, less infections, etc.) to differentiate hospitals that are superior from the rest.
    Managed care is still being used, but with the mass exodus from HMOs in the 2000s, the tighter HMO restrictions that helped moderate costs in the mid-90s went away. Consumers picked choice over price.
    Rising costs are also caused by more utilization and costlier technology, not just an increase in prices.
    Finally, unhealthy habits account for a significant chunk of the higher utilization.
    Please reconcile the two statements,
    1) Other critics of reform worry that millions of formerly uninsured patients will flood hospitals, and we’ll all wind up waiting on line. The fact is that community clinics now care for many of the uninsured, and the legislation provides $11 billion in new funding for these clinics, enough money to let them continue to care for those patients, while treating 20 million additional patients, or almost two-thirds of the newly-insured.
    2) Reform will actually SAVE money because all the newly insured won’t be tying up the ERs
    If number 1) is true, which you assert here, then one of the many MYTHs perpetrated by the Obama administration is that ER visits from the uninsured increased everyone’s premium and “reform” would fix that.
    We already have around 15 million people eligible for Medicaid, etc. that haven’t signed up, so are their ER visit patterns going to change?

  88. louisdous-
    First , we are not talking about building a community health system from scratch. We are talking about providing additional funding that will double capacity. (Think of it this way–if you already have 10 factories, expand 7 of them and build 3 new ones, that costs less than building the first 10 from scratch.)
    In any capital expansion you get more bang for your buck spending additional dollars.
    Secondly, there are probably some things that you don’t know about communitiy clinics that lets them provide good care for less. For instance:
    –Enhanced Medicare and Medicaid reimbursement (including Medicare reimbursement for ‘firstdollar’
    services because deductible is waived if the “Federally Qualified Health Centers (FQHC–i.e. “community clinics)) is providing services to Medicare recipients)
    — They receive Medical malpractice coverage through the Federal Tort Claims Act
    They are Eligibile to purchase prescription and non-prescription medications for outpatients at reduced cost
    — Access to National Health Service Corps practitioners. These are docs who receive generous scholarships in med school and train to treat underserved low-income populations. Under the legislation, the Corps is greatly expanded.
    —Access to the Vaccine for Children program
    — Eligibility for various other federal grants and programs; for example:
    –Federal loan guarantees for capital improvements
    — Access to on-site eligibility workers to provide Medicaid and Child Health Insurance Program
    (“CHIP”)
    In 2008 the clnics handled 67 million patient visits. (In other words, the roughly 20 million patients served by these clinics visited the clinic more than 3 times over the course of the year.) Of the almost 67 million patient encounters , physicians saw almost 32 million, while
    nursing personnel performed another 18 million encounters. Dentists engaged in 7.3 million encounters and
    mental health professionals and paraprofessionals delivered care in 3 million patient encounters.
    Going forward, these clinics will be expanding their use of “telemedicine’–and reimbursing doctors for the time they spend with patients on the phone (espeically in rural or isolated areas). Specialists also are training PCPs to perform some of the services that specialists now perform (just as NPs are performing some of hte services that PCPs now perform). The Clinics will also be getting part of the separate funding that hte government has set aside for Health IT
    for docs serving Medicare and Medicaid patients.
    You will find all of this, and much more, in this report: http://www.changefoundation.ca/docs/symposium-STEINMAN.pdf
    I realize that this is probably more than you want to know. People who say things like:
    “public school stink. Screw and short change the 90% of students that are productive and functional to accommodate and coddle the 10% of students that are disruptive, no account, losers”
    usually prefer assertion based on predjudice and sheer ignorance to facts, but as I said in an earlier comment, I always try to be hopeful.

  89. Tim and tcoyote
    Tim– I’ve decided to take “charming” and “fairy-tale princess” as compliments.
    I would note that for much of the past 12 months a great many people–bloggers as well as readers commenting–said that health care reform would never pass and that I had my head in the clouds when I said (repeatedly) that it would.
    People also said that it could never pass without Republican votes.
    And they said if it did, the bill would be a disaster or totally lacking in any real change. IT’s quite possible that you think it’s a disaster, but I tend to agree with people like Bob Wachter who pointed out (on THCB as well as on his own blog) that while the process was ugly, the results are suprisingly good. Far from perfect but a good step forward.
    As Matthew has noted, 32 million uninsured Americans will have insurance. This is major.
    As for whether CMS will cut needed care–the legislation says explicitly that Medicare cannot cut benefits. It cannot say “we will no longer pay for mammograms.” Over time, it may increasee fees for some services and lower fees for others– as it always has.
    Will Medicare be run in an intelligent fashion? With Dr. Don Berwick at the helm (he will almost certainly be confirmed), I think 95% of knowledable people within the medical professions would say yes. No doubt, there are some on the far, far right who will try to demonize him, but very few.
    So there is every reason to be hopeful that Medicare will be changing the financial incentives to encourage higher quality care at a lower price.
    I realize that many people are not optimistic about what government can do. This is understandable– we have had 30 years of poor government interrupted by only a few glimpses of what good government might look like. (Carter was well-intentioned, but not effective. Clinton’s lack of impulse control left him wide open to attacks by conservatives, undermining his ability to lead. Reagan will be remembered for being well-liked, but Reaganomics has been totally disproved –as has the deregulation that brought us Enron and the banking blow-up.
    But I do remember good government: Johnson on domestic policy. Many people believed that we would never get civil rights legislation. But we did. His war on poverty greatly reduced poverty for the elderly and for children. (After 1980, the percent of children living in poverty began to climb again, undoing what he had achieved.) Many people swore that we would never pass Medicare (including many doctors who said–guess what– that they would quite the profession of it passed.!)
    Even Nixon had some excellent ideas– rapprochment with China, and a very good plan for universal health care. If he hand’t been mildly insane and more than mildly parenoid he could have been an excellent president.
    I’m too young to remember some of other good governments, but Truman, Eisenhower, FDR, Teddy Roosevelt–all head and shoulders above most recent presidents.
    These days, not too many people study history. But if you do, you realize that the history of the U.S. is a history of pendulum swings– from good government to bad government. We’re at an inflection point, ready for a major step forward.
    tcoyote–
    Throughout the post, I back up my analysis wtih research. For example, the Medicare Payment Adivory Commission (MedPAC) has done a very good show of showing that efficient hospitals break even or make a profit on most Medicare patients. MedPAC does this by looking at the hospital’s financials. What they find is that if a hospital doesn’t have the leverage in its maketplace to command high fees from private insurers, it may barely break even or even lose money on private patients. In those cases, a hospital will really focus on being as efficient as possible–and as a result, make a small profit on Medicare patients. That’s how it stays in the black.
    If you read the MedPAC report that I reference, you’ll see the evidence. IF you don’t read the MedPAC report, you can tell yourself “Maggie’s making this up. She doesn’t know what she’s talking about.”
    As to whether all community hospitals have the same leverage in the marketplace: they don’t. For example, in Boston insuers pay some hospitals much lower fees than others. The same is true in NYC, L.A., etc. etc.
    There are brand-name hospitals and perfectly fine hospitals that don’t have the name (and usually don’t have all of the cosmetic extras or splashy ads.)
    Surveys show that the public is more interested in the hotel-like amenities than infection rates when ranking hospitals. So these are the hospitals they want in insurance networks.
    You assert that there is a “strong likelihood of Medicaid funding cuts.” Facts? Evidence? Proof?
    Here are the facts. Under reform legislation: “the federal government will pay 100% of the cost for newly eligible individuals from 2014 through 2016. The reimbursement rate to states declines to 95% in 2017 and gradually is reduced to 90% after 2019.”
    IF the federal govt is paying all or almost all of the bill, the states will not be cutting Medicaid. Moreover, as Ezra Klein has pointed out, quoting The Century Foundation’s Greg Anrig:
    “Since its inception in 1965, Medicaid’s financing has been shared jointly between the feds and state governments. That arrangement has much to do with Medicaid’s huge shortcomings: wide state-to-state variations in eligibility rules and benefit levels, chronic under-funding, and limited medical options for beneficiaries. . . .
    “The reform bill would not require state contributions to pay for expanding Medicaid eligibility to 133 percent of the federal poverty level [until 2016]because, the committees correctly note, state budgets are already overwhelmed due to the recession. [After 2016, the state contribution would be very small]
    . . . a potential long-term payoff to this reform would be to open the door to federalizing the program entirely down the road. Federally run insurance programs like Social Security and Medicare are vastly more efficient and effective than federal-state counterparts like Medicaid and unemployment insurance. Economies of scale, uniform national rules, and the inability of 50 state governments to each do mischief to the programs have demonstrably led to far superior results for national social insurance.
    “If some new Medicaid beneficiaries have their benefits entirely paid for by the feds, it’s conceivable that other categories — such as those eligible for both Medicare and Medicaid — could be similarly shifted entirely to federal funding in later reforms. That would create opportunities for the federal government to exert greater control over the largely dysfunctional program, perhaps ultimately folding it into the proposed public health plan. In the process, step by step, the fragmentation that contributes so much to the flaws in our health care system would begin to wither away.
    “On a related note, a lot of people have been arguing for a third stimulus focused on state budgets and services. One way to do that would be to simply federalize Medicaid funding. It would be good long-term policy, good short-term politics, and a huge relief for state budgets.”
    These are reasons to expect increases in federal funding, not cuts.
    Note that the legislation raises payments to primary care docs caring for Medicaid patients to Medicare levels. This means that community clinics will be getting much better pay for Medicaid patients than they do now.
    As Anrig notes, many in Congress and in the White House favor folding Medicaid into Medicare and making it a federal program. The states would be deligihted– and this would build support for the Obama administration among state governors.
    Finally, on your prediction that baby-boom docs are going to be retiring, and that we’ll see a enormous shortage of primary care docs . .. .
    Primary care docs incomes will be rising– Medicare payments will climb by 10% a year for five years. Medicaid payments will rise by about 30%–to equal Medicare payments. Primary care docs who join accountable care organizations, create medical homes, or participate in being paid for outcomes rather than volume will be eligible for bonuses.
    Why would primary care docs who didn’t quit two or three years ago quit now, just when compensation is about to get better?
    Moreover, surveys should that younger primary care docs like the idea of joining large, multi-specialty organizations where working conditions are better (regular hours), they don’t have to worry about running a business, hiring staff, paying malpractice insurance, etc., and they can easily collaborate with specialists without playing phone tag.
    That, combined with a huge increase in loan forgiveness and scholarships for med students is likely to lead more to go into primary care. Reserach shows that med students coming from low-income homes–who will be most likely to receive scholarships– are also much more likely to choose primary care. Many med schools are actively recruiting these students.
    Finally we will be making much greater use of nurse practioers to deliver primary care. Countries like Switzerland, Sweden, Germany the Netherlands, Norway,Denmark and Austria have many more nurses than we do– In these countries the number of nurses per 1,000 people ranges from 9 to 13.4
    In the U.S. we have only about 8 nurses per 1,000 people. Only 3 OECD countires have fewer nurses per 1,000.
    In these other countries, nurses deliver much more primary care. Healthy children rarely see a pediatrician; they see a pediatric nurse. Nurse midwives deliver 85% of babies; in the U.S. they deliver 10%.(Research shows outcomes are bettter for avearge risk women with nurse midwives–many fewer C-section and inductions.) Over all health and health outcomes are as good or better in these countries, and they spend 50% less on care.
    Our work-force of highly trained nurse practioners is expanding rapidly–more and more are getting PH.Ds–upt to 8 years of training. More and more primary care docs report that they like working with NPs. There is more controversy about NPs working solo; little controvesy about them working with docs who they consult on difficult cases. NPs can now prescribe medication in all states.
    Reform legislaiton riases Medicare payments to NPs by 10%. As I note in the post, it also provides funding for nursing school education. (We have had a shortage of nurses in large part because we didn’t have enough places in our nursing schools for qualified applicants.)
    Some primary care docs have been very unhappy for years. They compare their salaries (median $175,000) to cardiologists’ salares and feel woefully underpaid.
    They feel overworked. They don’t like the idea of health care IT. OR they don’t like the idea of working in groups. OR they don’t like caring for so many elderly patients. Those earning significantly less than the median are underpaid.
    For years, they have been saying they will quit. Some have, most haven’t. Those who do quit won’t be missed in this sense: we really don’t need primary care docs who don’t like their work. Inevitably, they can’t do their best work.
    These days, NPs are increasingly satisfied in their careers–pay has been going up, they are getting more responsbility, and growing acceptance by many (not all) patients and doctors.
    I predicts that they will play a major role in taking up the slack and we will wind up being more like Switzerland, which has 10.7 nurses per 1,000 patients, versus 8 in the U.S. Switzerland also has excellent medical care.

  90. Ms. Mahar…”The fact is that community clinics now care for many of the uninsured, and the legislation provides $11 billion in new funding for these clinics, enough money to let them continue to care for those patients, while treating 20 million additional patients, or almost two-thirds of the newly-insured.”
    Let’s review the math. $11 billion to cover 20 million. Therefore, $17.6 billion to cover 32 million (farcical and fictional number). So, for $17.6 billion we could cover all the uninsured? So, why the trillion dollar law and half trillion cuts in medicare or in other words, spend $1,500,000,000,000 when according to Ms. Mahar it could be done for $17.6 billion a year. Why screw with the one hundred and sixty million privately insured and basically happy folks. Is it to make them as miserable as the uninsured and the reformers?
    Same reason public school stink. Screw and short change the 90% of students that are productive and functional to accommodate and coddle the 10% of students that are disruptive, no account, losers.
    Liberals are the champions of losers. LD

  91. I don’t understand how mid size businesses, businesses with over 50 employees, will be able to afford the cost of health insurance for their employees. If it is a low wage business with employees earning minimum wage, and the cost of health insurance for an individual on average is at least $400 per month and $1200 for a family. The government will mandate that the business contributes 65% of the cost and the employee has to pay the balance. Since the business in many cases will not be able to afford these payments and the employees still may not be able to afford their share, what happens. Does the business cut salaries or fire workers to afford the insurance? What does the employee do if he cant afford his 35% share? I see no good solution to this forced situation. Does anybody?

  92. “Medicare also will be experimenting with ways to pay hospitals for value, not volume. Those that have relied on overtreatment and over-testing to stay in the black will be in trouble.”
    And, of course, CMS’ regulatory skill will be like the sharp knife of a careful surgeon. No needed treatments or testing will be excised.
    Maggie, what an exercise in adoration these posts are. Your faith in government efficiency is necessary for your world-view, probably charming in person, and utterly religious. You actually operate with the assumption that what is written in the black-text of the law is what will be done.
    I never encounter anyone in real life who believes that. So reading your “journalism” is like reading letters from a fairy-tale princess. Wonderful stuff.

  93. This series is so irritating. There are no “facts” about the future, only opinions. These are actually “conventional wisdom” opinions among the left wing, Washington centric policy community, not opinions grounded in actual understanding about how markets work.
    Cost shifting isn’t just a lobbying talking point for insurers; it’s how hospitals make money. Ask any hospital CFO. It’s one of the reasons why rates are going up in the individual and small group markets now, because hospitals are attempting and succeeding in recouping losses from rising bad debts and recession refugees.
    And it isn’t just the Partners (Boston) or Sutter (California) that have pricing leverage, but most sole community providers. Even large cities have only two or three owners of hospitals, and excluding any one operator exposes insurers to a loss of employer business. While Maggie is correct that insurers will have to push back because of the political climate post-reform, it’s not clear how successful they will be. Maggie, this is bloviation masquerading as analysis.
    On community health centers, yes, there’s pulse of new funding from health reform, but there is also the strong likelihood of intervening Medicaid funding cuts that will handicap them from expanding. And because hospitals are hiring docs and pushing up the salaries, it’s far from clear that loan forgiveness and the new funding will be enough to enable them successfully to recruit.
    No facts here, but an alternative prediction: we’re going to see a catastrophic outflow of retiring baby boom docs from practice in the next five years, a huge shortage of primary docs across the marketplace because they won’t be replaced by new young docs, closed practices, remaining docs dropping Medicaid and Medicare (flooding not only community health centers, ER’s and anywhere else people can go to get care). Look at Massachusetts, where close to 60% of primary care practices are closed to new patients. This is a real problem, not a figment of the provider community’s imagination.
    Of course, if you don’t know what you don’t know, anyone can be an “expert”.

  94. I just got back from DC. Anyone who loves DC traffic will love government healthcare. No myth, just insanity and poor planning. Always behind the curve. Got to tour the public area of the White House. Used to be easy. Now it takes a Congressman and sheer luck to get tickets. Sounds like the future of joint replacement or heart transplant; if you know someone they can get you in.

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