Let’s Stop Bashing Profits and Business In Healthcare

I’m tired of profit-bashing and business-bashing in healthcare.  And every American should be, too!

Well-run, profitable businesses, along with our sense of decency, democratic institutions, education and free enterprise systems, and adherence to the rule of law, have made the United States the most extraordinary nation in recorded history.  Together they have unleashed the talents, creativity and productivity of our people, generated enormous sums of capital, and created unheard of social, economic, scientific and political advances.

Is there anything nobler than providing the environment and opportunity for people to fulfill their potential and achieve their dreams, and for providing the goods and services that enable people to raise their standard of living?  Not even the practice of medicine can do so much good for so many people. But that’s precisely what businesses do.  (That also may explain why far more Americans today are interested in job creation than restructuring healthcare.)

In our system, an individual has an idea, attracts capital, and hires people to build a product or provide a service. When they meet a need, they prosper – and attract more capital and hire more people. Everybody wins.  If they fail, they alone suffer the consequences.  That’s what capitalism is all about and that’s what has made America great.

Sure, there are ups and downs.  Some caused by business cycles, some by global competition, some by excesses on the part of companies and individuals. Unfettered competition can be terribly harmful and that’s where government comes in.  Government must ensure there is a level playing field so businesses and individuals have equal opportunity and can compete fairly.  Additionally, government should protect against harmful excesses, and apply monetary and fiscal policies to moderate the ups and downs.

The last thing we should do, however, is abandon the very values and forces that have made America great.  We should improve not destroy them, so let’s stop bashing businesses and profits.

For example, many think it crass and wrong for insurers, pharma or other healthcare vendors to earn a profit — so they want to get rid of profits.  But where will capital to support these activities and innovation come from if investors (who include Wall Street and Main Street investors alike) can’t earn a return on their capital?   From the government?  Hardly.  The government today doesn’t have reserves to fund the $37± trillion in future Medicare liabilities or our massive deficits.  Our children and grandchildren will have to meet them.  And how much in additional liabilities can our economy carry before our cost to borrow capital becomes prohibitive and we default on our debt?  At least the insurance companies have reserves to back their obligations – so shouldn’t we force them to compete fairly rather than disband the concept of private insurance?

Similarly, many docs who consider the pursuit of their calling as noble and the pursuit of profit unseemly, apparently don’t understand that they are just as driven to earn a profit and return on their investment as profit-focused companies are – only they use different words to describe what they do.  They claim they provide a noble service and therefore are entitled to large incomes because they have invested years of their lives and lots in tuition to develop their expertise.  Described in other terms, isn’t their expertise their trade, and aren’t their practices really small businesses?  In truth, aren’t they demanding a return on their investment – just like all businesses do?  (If they don’t, their practices won’t survive.)  And how much income does one have to earn before part of it is recognized as a return on investment?

Don’t misunderstand.  I recognize that all businesses, like all doctors, aren’t noble, and I don’t support the power of insurers today to dictate what they will pay doctors for their services, or most of the other distortions in our healthcare system.  But let’s stop the profit and business bashing.  Properly directed, the pursuit of profits just might solve our healthcare problems.

Merle Bushkin is Founder, President and CEO of Health Record Corporation, creator of the MedKaz®, a unique, patient-focused medical record system supported by a unique business model, that aggregates a patient’s lifetime health record on a device the patient owns, controls and carries on a key chain, and is updated by care providers.  A career investment banker and financial executive, he is an Incorporator of Mt. Ascutney Hospital and Health Center in Windsor, VT.

167 replies »

  1. Sorry Gary your not spreading your ignorant BS today.

    “The reason that many of Us Bash Profits is Because the product is inferior to the expense. Medicare would not have been established if it were not for the Fact that Private Industry wanted NO PART IN ELDERLY CARE!”

    NOTHING in history supports this. You bash profit becuase your an ignorant propogandist that doesn’t know anything. There are tomes of history that tells us exactly why Medicare was passed and exactly what it did. Medicare was passed so Grandma wouldn’t lose the shirt off her back. 13% of seniors had trouble paying catostrophic expenses. Medicare excluded the very catostrophic expenses it was suppose to protect them from. Its private insurance in the form of Medicare Supps, and retiree coverage that prevents Grandma from losing the shirt off her back. Today 19% of seniors have trouble paying their medical bills, almost a 50% increae after the solution was passed.

    Even Democrats at the time admitted it was all a fraud.

    Despite their limited coverage, the bills came to be known as “Medicare,” a term coined by a reporter to describe a previously established comprehensive health care program for military dependents. Many people therefore assumed that the bills before Congress would cover all forms of medical care, including outpatient physician fees and extended illnesses. When Rep. Albert Ullman (D., Ore.) cited allegations that the “public is somehow being hoodwinked” and “being misled” and asked HEW’s Wilbur Cohen about the degree to which the public misunderstood the program, Cohen stated that “we do recognize this problem and I think it has been complicated by the use of the term ‘medicare’ which is an erroneous term when applied to this program” (U.S. House Hearings 1965: 104). Although government officials sometimes expressed dismay about this public misimpression, the misinformation nonetheless fueled support for passage of a bill they strongly supported.

    The gulf between what the public thought and what was actually in the bill was enormous. The most pressing rationale for compulsory health insurance continually put forward by government officials and echoed by the public was the specter that responsible older people could be ruined financially by catastrophic illness. Yet neither the 1963 nor the 1965 proposal provided coverage for catastrophic illness. During the 1965 Senate Finance Committee hearings, Chairman Russell Long (D., La.) asked HEW Secretary Anthony Celebrezze, whose department had written the bill, “Why do you leave out the real catastrophes, the catastrophic illnesses?” (U.S. Senate Hearings 1965: 182). When Celebrezze replied that it was “not intended for those that are going to stay in institutions year-in and year-out,” Senator Long countered: “Well, in arguing for your plan you say let’s not strip poor old grandma of the last dress she has and of her home and what little resources she has and you bring us a plan that does exactly that unless she gets well in 60 days.”

    Celebrezze concurred, stating that means-tested public assistance would provide “additional help.” (U.S. Senate Hearings 1965: 182-83). Long added that “Almost everybody I know of who comes in and says we ought to have medicare picks out the very kind of cases that you and I are talking about where a person is sick for a lot longer than 60 days and needs a lot more hospitalization” (U.S. Senate Hearings 1965: 184). [14] Yet the very element that government officials continued to cite to win public support for Medicare was deliberately omitted from the administration’s bills.

  2. Health Insurance is a cruel Joke that became a exhorbinent Money Pit that puts the lemon nickel and dime automotive expense as loose change. The reason that many of Us Bash Profits is Because the product is inferior to the expense. Medicare would not have been established if it were not for the Fact that Private Industry wanted NO PART IN ELDERLY CARE! As they only wanted Healthy Patients!

    Putting profits first has absolutely driven Health Care from 1st among 40 Industrialized countries to 38th . Your Point on Profits has traded true Health Care as a Facade of providing quality Care at the expense of the patient!

    Thanks to Greed This Business has placed Patient Safety on the Back Burner , Increased Staph Infections,Never Events , and Medical Errors.

    Making a Profit is not bad in itself, But it should not be used as a Money soaking Milking Machine that seldom fixes the Problem. Driving prices thru the roof and managing to make patients worse.

  3. There are a lot of problems with the current system, and the PPACA does little to fix them. But you make 2 really powerful points:

    “For example, many think it crass and wrong for insurers, pharma or other healthcare vendors to earn a profit — so they want to get rid of profits. But where will capital to support these activities and innovation come from if investors (who include Wall Street and Main Street investors alike) can’t earn a return on their capital? From the government? Hardly. ”

    And the BEST one:

    “The government today doesn’t have reserves to fund the $37± trillion in future Medicare liabilities or our massive deficits. Our children and grandchildren will have to meet them. ”

    We should be embarassed about the condition we’ve put our kids and grand kids in. Economic growth is the only way to fix this mess, and healthcare is a huge part of the economy. PROFIT=ECONOMIC GROWTH=TAXES=MEDICARE—you can’t afford Medicare without Profits. Who will pay?

  4. Why only double? Is that arbitrary factor more pallitable than 5 times what they make now?

  5. I’ll stop bashing when the so-called “health care” system becomes about real health. In other words, when it becomes focused on prevention. Oops, I forgot there might not be any profit in that.
    Let just call the industry what it is – The Disease Care system.

    Denise H. Williams
    Licensed Massage Therapist

  6. Based on the definition of the profession of medicine for umpteen thousand years, and based on the fiduciary responsibility implicit in corporations responsibility to shareholders.

  7. Nate, those who put profit ahead of ethics are outliers amongst physicians. Those who put ethics ahead of profits are outliers amongst large corporations.

  8. Margalit and Nate –

    To clarify my earlier point regarding the pricing of medical devices, it’s the large teaching hospitals that can command the best prices from device manufacturers because of both their size and their influence as the surgeons trained at these hospitals fan out around the country to enter practice. Such a hospital may pay $4,000 each for a certain type of device while a relatively small community hospital that also offers the type of surgery that would use that device might pay as much as $11,000 for an admittedly smaller quantity per year. The rub is that the teaching hospitals are not allowed to tell any other hospital how much they paid because of confidentiality agreements. While it is legitimate to offer volume discounts because it’s cheaper to sell to, say, Wal-Mart by the truck or freight car load than to a much smaller vendor by the case, a nearly three to one ratio as in my device example is undoubtedly excessive. Reimbursing the hospital a percentage above cost would reward higher costs rather than help to restrain costs. How much the hospital itself marks up the device in its pricing to the insurer or the patient is a separate issue.

  9. Another great but unfortunant example happened where I live in Vegas. This wasn’t some big evil corporation but one ? I don’t know what would lead a person to do what he did, doctor. I can think of far more bad physicians then I can corporations.

    “LAS VEGAS (AP) — Nearly 40,000 people learned this week that a trip to the doctor may have made them sick.

    In a type of scandal more often associated with Third World countries, a Las Vegas clinic was found to be reusing syringes and vials of medication for nearly four years. The shoddy practices may have led to an outbreak of the potentially fatal hepatitis C virus and exposed patients to HIV, too.

    The discovery led to the biggest public health notification operation in U.S. history, brought demands for investigations and caused scores of lawyers to seek out patients at risk for infections.

  10. “I expect nothing from the current administration. Nothing at all.”

    Great news Margalit, it might be to early to give up all hope n change. It appears the Clown in Chief is ready to admit another critical mistake in ObamaCare and even more surprising is willing to consider fixing it!

    “Lawmakers in the House and Senate introduced bipartisan legislation Thursday to remove restrictions on tax-exempt health spending accounts, the latest provision of the healthcare reform law to come under attack by Democrats.”

    “The bill would nix a provision that since January has required a prescription for buying over-the-counter medicines with medical savings accounts such as Flexible Spending Arrangements and Health Savings Accounts. The language was added as a way to keep the bill’s costs down because it was estimated to save $5 billion over 10 years by cutting down on unnecessary drug purchases.”

    “But it appears to have had the opposite effect of increasing people’s use of medical services. Indeed, many doctors complain that they’re seeing patients for the sole purpose of writing out prescriptions for over-the-counter medicines.”

    “The White House is so far not opposing the repeal bill.

    “We look forward to studying this legislation,” an Obama administration official said. “As the president has said, anything can be improved, and we are open to ideas that make care better and more affordable.”

    Granted anyone that knew anything about healthcare and Insurance knew this would be a disaster before it started and ideally Congress wouldn’t screm up and cost millions of dollars to learn these lessons but at least when it becomes painfully obvious they fixed it. As long as they keep repealing all the mistakes in ObamaCare when they are obvious and cost us a fortune we should be rid of the whole bill before 2020.

    1099 reporting gone
    FSA OTC limits gone

    Next up Medicare revisory board?

    “The bill drops one day after Rep. Allyson Schwartz (D-Pa.), a key centrist, testified against the law’s Medicare cost-control panel. So far, at least eight Democrats have co-sponsored legislation to repeal the law’s Independent Payment Advisory Board (IPAB).”

    I was hoping for the annual and lifetime max or the appeal boondoggle to go next but those haven’t really kicked in on cost yet. I fear we are going to have to waste a few hundred million and another million or so people lose insurance before they fix those.

    How do you define corporate entities that don’t share the same interest and qualities as physicians. I would bet 90+% of all physicians work under a corporate entity. I think I understand the point your trying to make but aren’t you doing the same thing with your disdain for anything corporate? Not all, in fact most healthcare corporate entities share the same interest and qualities as physicians, why lump them in with the few bad corporations?

    For example, in the news this weekend is the story of the famous heart surgeon who lost his medical license. My quick read of it the hospital helped bust him and has done everything they can to make right by the patients that were subjected to unnecessary surgery. In this case the qualites you subscribe to phycians are only being displayed by the corporation hospital and the physician is acting the like corporations you despise.


  11. Merle,
    The funny thing about primary care is that, by definition, they cannot specialize. I agree with most of Dr. Gawande’s writings, but not all.

    Another pet peeve of mine is the purpose use of incorrect terminology hoping that if we use it often enough it will become a reality. There is no such thing as providers. This term lumps together physicians and corporate entities that are in the medical care business, presuming that they all have the same interests and the same qualities. They don’t.
    Education has professors and students, the law has attorney and client, culinary establishments have chefs and patrons, and health care has doctors and patients. Changing the paradigm to providers and consumers, is changing the color of the relationships and IMHO, is equally cheapening for both doctors and patients.

    And, no, I am not expecting the government to fix this. Yes, I do want to leave the physicians alone, but I do not want to leave hospitals and health systems alone (example why providers is not a good term). I actually like Nate’s suggestion below, plus agreed upon professional fees for physicians.
    I was expecting the government to move us closer to an equitable tax financed universal system, but that was not meant to be (yet). I expect nothing from the current administration. Nothing at all.

  12. There is an easy way around the hospital medical equipement supplier BS, insurance can write their policy in most cases to pay cost plus or some amount based on the invoice/actual cost, if the provider wants paid they are forced to provide it.

  13. Margalit, the suggestion that the explosion of medical information and the increasing pressure to keep up are driving doctors – consciously or unconsciously — to specialize and join forces with other providers, comes from Dr, Atul Gawande, not from me.

    I agree that all doctors, but especially PCPs, are catching the brunt of the pressure to reduce healthcare costs. They typically lack the political and economic clout of hospitals, insurers, vendors and government to shift the burden to the other guy. Ans sadly, these other guys aren’t solving our healthcare problems. They merely are rearranging their chairs on the Titanic while the PCPs and other docs are finding that they don’t have chairs to sit on let alone rearrange!

    The truth is we can’t afford the system we have. Period. On top of that, our system doesn’t work well. So what should we do? Your solution seems to be to leave the providers alone and shift the burden to government to fund everyone’s healthcare costs. Sounds appealing to some, I guess, but it merely preserves the same broken system and high costs. Besides, the government is us, the taxpayers, and we can’t afford to continue on our present course. It’s that simple.

    The solution must be to reduce costs at the care-delivery level. And the people who can and should lead this effort are providers. But they can’t do it alone and won’t do it unless their actions benefit both themselves and their patients. Their incomes should go up not down. And the way to achieve this is through competition combined with transparency, and ensuring that each provider organization is competently managed.

    I completely agree with you that the current fad of financially-weak hospitals acquiring financially-weak medical practices is destined to blow up in our faces. Selling to a hospital may look like the ideal solution today for many doctors feeling enormous financial pressures. But tomorrow, I predict many will unravel. In my experience as an investment banker, I can count on one hand the number of mergers where two weak organizations combined to form a strong combined organization.

    Barry, I was not aware that vendor relationships with healthcare providers frequently involve the types of confidentiality agreements you describe. Of course they should be outlawed.

  14. “Re: competition at the level of care delivery: it has largely been ignored, and the attention given to insurance has largely sucked the air out of discussions about how to assemble and publish competitive performance and cost information. We’ve got to raise its importance and get it done!”

    Merle –

    We also need to outlaw the confidentiality agreements that currently preclude the disclosure of actual commercial contract reimbursement rates and, in the case of device manufacturers, the prices hospitals pay to the manufacturers which can vary widely among hospitals based on their volume, power and influence. How are patients or referring doctors supposed to know what anything actually costs if these confidentiality agreements remain in place? If government wants to rein in healthcare cost growth, this is an issue it can do something about. What’s stopping them?

    I’m told that in Massachusetts, the Health Care Quality and Cost Council has already collected much of this information but, so far, has chosen not to release it even though it has the power to do so. Why?

  15. Merle,
    I am not a gambling person, but I would be willing to bet that you will not fine even one doctor citing inability to keep up with his/her profession as a reason for selling out to a hospital.
    Physicians in small practice, particularly PCPs are being terrorized into giving up private practice. With SGR cuts being threatened at least 3 or 4 time every year, and with unfair competition from large systems, and with misinformation regarding price and complexity of technology being rampant (see my post here from today), what else are they supposed to do?
    And I agree with you that government, or so called experts advising government, are largely responsible for pushing this agenda along. And hospitals are gobbling them up and paying more than they should, creating a bubble that will have to burst sooner or later. Guess who is going to get hurt then?

  16. First, I’d like to thank all of you who have posted an extraordinary number of comments to this blog. You have cited many facts and provided extensive information many of us didn’t know. So from all the heat, I think a lot of light has been generated. I know it has for me. Special thanks to Steve, Barry, Nate, Peter, rbaer and Margalit,


    “Unfortunately I don’t see how capital, investments, profits, and such have anything to do with direct delivery of medical care.”

    They are the life-blood of any business, and at the end of the day, the practice of medicine is a business and must be run like one. You strongly resist any fiscal or management constraints on care providers but thinking that they can provide their service without constraints is, to put it mildly, naïve and foolhardy. No society can write a blank check for healthcare. There must be mechanisms built into the healthcare system to improve its quality and cost-effectiveness.

    And I think you are sorely mistaken about what’s driving independent practitioners into the hands of hospitals and large practices. It’s not money-grubbing MBAs and business people!

    The reasons doctors are joining larger healthcare organizations are varied. Some are young with a lot of debt. They want the assurance they will have a steady income to pay off their debt. And as long as they owe a lot of money, they can’t afford many of the tools they would need to establish and equip an independent practice or to buy an established one. Many older docs refuse to lay out the money that will be required to meet the EMR and Meaningful Use requirements the federal government is forcing on them. In the short term, all they see is that doing so will disrupt their practice and materially reduce their income. In the longer term, they can’t see that they’ll ever get a return on their investment since the savings will flow to everyone else. (I must say I agree with them. Also, I can’t help but point out that it is government that is forcing this on them against their will! So much for the idea that control by government is benign!) Additionally, the increasing complexity of medicine and the masses of information they must digest to remain current, are overwhelming many doctors – so many of them prefer to join with others to ensure their patients are cared for properly.

    Peter, you asked a lot of questions. I’ll try to answer a few of them.

    1 Who is going to fund, collect, analyze and publish this “information?” Most of the established healthcare information providers and entrepreneurs most certainly will fill this vacuum at no cost to the public or our government.
    2 On what basis will patients be able to “make informed choices” when competitive information is available? On the same bases as they make other decisions. They’ll talk to their providers, friends, advisors, et al, do their homework and then decide whom they want to use.

    3 Re: competition at the level of care delivery: it has largely been ignored, and the attention given to insurance has largely sucked the air out of discussions about how to assemble and publish competitive performance and cost information. We’ve got to raise its importance and get it done!

  17. “TPAs and ASOs are privileged in the market by ERISA,”

    What is this privilege? If we make mistakes we personally go to federal prison instead of non ERISA plans where the company is liable? Can you name any administrative burden that is lessoned under ERISA?

    We have been doing ERISA and Fully Insured administration since 1980 but maybe I have been doing it wrong all these years? Our start was actually with the check book of fully insured carriers that was all we did then moved into ERISA. I’m sure you will get us straitened out though Jonathan.

    So laws that outlaw groups under 50 from self funding help self funding? Or saying groups must purchase a minimum specific deductible or aggregate coverage has to be a certain ratio all helps self funding? Medicare, Mediaicd, and VA look backs that fall outside stop loss policies helped self funding?

  18. Of course they should make money, and primary care should make double what they make now.
    The question here is whether they should have the ability to be independent and pay themselves, or should they all be forced to become employees and be paid by the non-clinical bosses. I prefer the former.

    As to the question that if they are so efficient, why don’t they flourish, this is because we constantly stack the deck against them. Small practices are placed at a major disadvantage by the current Darwinian system of negotiating contracts with payers, so they get paid a fraction of what large system are able to extract from insurers. Not only this makes health care more expensive for patients, but it also obliterates any type of payment based on better quality.

    And to Barry’s argument that technology is too expensive for small shops, this is a myth that we keep reinforcing to serve the larger purpose of industrializing medicine. There is plenty affordable technology out there, and there are plenty of solo docs who use it.
    As to the need for collaboration, isn’t that what computers and interoperability is all about? Collaboration regardless of one’s physical location. This team sport cliche is not like basketball, it’s like World of Warcraft. Technology has transcended geography and the only reason to insist on physically placing docs under the control of corporations is to manage them, control their practice and remove any professional autonomy that they currently have. The assumption is that some experts somewhere know better how to take care of sick people than those who actually do that for a living.

  19. Nate, you remain full of it on TPAs and never do acknowledge a basic truth: TPAs and ASOs are privileged in the market by ERISA, which greatly reduces administrative burdens and benefit requirements for self-insured plans compared to fully-insured plans. This advantage grew, rather than shrank, with the recent ACA legislation.

    I don’t have a firm view on whether the best way to deal with this is to make insurance (fully-insured) regulations national like self-insured, or keep the national vs state regulation discrepancy but just stop mandating benefits at the national level for fully insured while self insured is exempt.

  20. “small and solo private practices are currently the leanest and meanest organizations in health care; the most efficient and the most preferred by patients. Why on earth are we trying to destroy this efficiency in favor of unproven, untested and largely delusional “economies of scale” supposedly available in health care factories?”

    Self funded plans ran by TPAs are the leanest, most efficient, and much better service then huge government insurance companies and Democrats have been hell bent on eliminating them for 15 years or longer. I think there are two main possiblites on why Liberals insist and destroying what works.

    First idea is liberals are really so stupid they actually believe the changes they advocate will actually improve things. They have all these academics that have never worked a day in the field showing them all these studies proving their new idea will work and take us all to utopia.

    The second idea and the one I believe is power and control. Its very hard to get 100,000 small independent thinkers to do what you want. If you replace them with 100 mega organizations who own their existance to you then it is much easier to get them to do what you want.

    For example are ACOs as Obama and Berwick imagine them going to work, of course not they would be huge failures. But managing 100 ACOs would be a heck of a lot easier then 100,000 independent docs. If your going to try to change pratice patterns and the way an entire industry operates dictating to 100 ACOs who’s existance you control like a puppet is possible, 100,000 docs who mostly hate you already, not going to happen.

  21. Margalit,

    Why would any physician practice medicine if they don’t make money?

  22. “Thus, our first challenge is to provide the information people need to be able to select the “best” — and probably the lowest-cost – provider.”

    Who is going to fund, collect, analyze and publish this “information”? Why would the lowest cost be the best? I would argue that perception is the higher the cost determines the best. What you want is a value quotient, who will make that determination – Consumer Reports?

    “When this competitive information is available, patients will be able to make informed choices.”

    Are they? Based on what, with what expertise?

    “I submit that following your approach will diminish the quality of care and bankrupt both care providers and our economy.”

    The present “system” is doing a pretty good job of that already.

    “On top of this, small and solo private practices are currently the leanest and meanest organizations in health care; the most efficient and the most preferred by patients.”

    Under your “survival of the fittest” model then these types of practices should be flourishing – but PCPs are disappearing and complaining of low returns and long hours.

    “Such competition benefits everyone – and doesn’t require or involve intervention by insurers or government!”

    Then where is it? Wouldn’t the private market seize on this market opportunity?

    “Where do those funds come from in your system? Government?”

    Well a good portion of “those funds” are now coming from government(taxpayers). Actually in a single-pay/government run system the funds come from taxpayers. Hospitals are the high cost health care delivery model, if you want them to get more profits then they’ll just cost even more.

    “so we’d be bankrupt now!”

    As of August 2nd we will be bankrupt! Fixing SS is easy, fixing Medicare within the present “for profit system” would require a combination of cost reduction and revenue generation that leaves profits and provider revenues intact – get that past seniors.

  23. “I don’t see how capital, investments, profits, and such have anything to do with direct delivery of medical care.”

    Margalit –

    For commercial insurers, roundly 40% of their medical claims costs are for care delivered in a hospital setting – inpatient + outpatient with emergency room care counting as part of outpatient. For Medicare, Part A (hospital claims) account for approximately 45% of its costs. Hospitals are enormously capital intensive as well as labor intensive. In major cities like NYC and Boston, it costs at least $600 per square foot to build new hospital space excluding the expensive equipment required. At least 60% of operating costs are for staff wages and benefits. 85% of the nation’s hospital beds belong to non-profit organizations today yet hospital care is the biggest driver of medical cost growth. While I agree that no providers, especially hospitals, should be padding bills or doing procedures solely to drive revenue, they have to know their costs and cover their costs. They need to be able to raise capital in the debt market to expand when needed and to buy new equipment as well as to maintain their facility and replace what wears out or becomes obsolete. They need to attract and hold capable employees. No margin, no mission.

    As for doctors practicing solo or in small groups, technology and scale are becoming increasingly important. Larger groups and systems can more easily afford interoperable electronic records capability. Doctors are challenged to keep up with the literature even in their own fields. Treating complex elderly patients with multiple co-morbidities requires collaboration with other providers more easily accomplished in a multi-specialty group practice. Medicine is increasingly a team sport.

    I’m glad you agree that drug and device companies should be for-profit.

  24. I would choose the best alternative available. Unfortunately I don’t see how capital, investments, profits, and such have anything to do with direct delivery of medical care.
    I agree that pharma and device should be for profit and concentrate on these things.
    I agree that hospitals and large medical groups need professionals to manage the money. However, the overriding concern should be the practice of medicine, not the making of money. Medicine should not be the means by which money is made. Instead, money should be an outcome (good or bad) of practicing good medicine. So basically, the best interest of patients should take precedent over making another dollar. This cannot be accomplished in the classic capitalist structure you suggest.

    On top of this, small and solo private practices are currently the leanest and meanest organizations in health care; the most efficient and the most preferred by patients. Why on earth are we trying to destroy this efficiency in favor of unproven, untested and largely delusional “economies of scale” supposedly available in health care factories?
    Are there certain people that need to make more money than what they are already making now, so taking control of independent physicians and obliterating all choices for patients, is considered best strategy?
    This is not going to reduce costs of health care. It is only going to divert the flow of money to fewer and bigger pockets.

    I do agree that more information and more transparency from every quarter, including payers, would be a positive thing for all involved.

  25. Margalit, I have to disagree with you. The way healthcare works today, a patient doesn’t have a clue whether they are getting the “best quality” of care. How would they know? There is no information available with which to compare the effectiveness of care providers or the prices they charge.

    So what do they do? They typically go to the provider someone recommends. And even if the doctor was recommended by their current provider, they have no assurance that they are the “best” because their current provider doesn’t know who is the “best” either (a recent study found that most refer patients to the providers they know in their community). The best providers, of course, typically get the diagnosis and treatment right sooner, and make fewer mistakes, thereby providing better quality of care at considerably lower costs.

    What’s needed to ensure that patients can choose providers intelligently is information — the very kind of information currently not available! Thus, our first challenge is to provide the information people need to be able to select the “best” — and probably the lowest-cost – provider. What is their experience? What outcomes do they achieve? What is the survival rate of their patients? And so on. The next is to publish what providers charge for their service (there also are studies demonstrating that even today those charging the most often have worse outcomes than those charging less). When this competitive information is available, patients will be able to make informed choices. Those providers who give the greatest value will prosper; the others probably will fail. Such competition benefits everyone – and doesn’t require or involve intervention by insurers or government!

    The next issue is how to run a practice, a hospital or other care provider organization. You want to do away with management types because they don’t contribute to care and “profit figures.” I submit that following your approach will diminish the quality of care and bankrupt both care providers and our economy.

    Like it or not, it costs money to provide care, equip offices, develop new tools, meds and techniques, compensate providers, provide working capital, install medical record systems, pay rent, pay for insurance, protect against risk, etc., etc., etc. Where do those funds come from in your system? Government? That’s a bad joke! Neither our government nor any other government can afford to pay for ever-escalating healthcare costs let alone provide the funds healthcare systems require to maintain and improve their operations. (An IBM study a couple of years ago concluded that unless the escalating cost of care is seriously reduced by 2040, every country in the world would be bankrupt – and I believe they are right.)

    In my system, the required funds come from profits generated by the care providers and capital supplied by investors (who may include providers). How do you get profits and attract capital? By good management. Who should we rely on for good management? Good, trained managers – not providers and most definitely not government.

    I should add that I didn’t say care providers or care delivery should be “subservient to profit figures.” I said care providers together with their business managers should set the performance standards and policies that govern their organization so they can increase the value they provide patients.

    Your approach is out to reduce if not eliminate profits and administrative costs in healthcare. Mine is out to reduce the cost of care.

    I don’t know what the totals are for healthcare profits and administration, but it has to be a modest fraction of the $2.5 trillion we spend each year for healthcare. If you assume it is as high as 10%, that would total $250 billion. And if you can cut that by 30%, you would save $75 billion annually. In government-ese, that’s $750 billion over ten years. That would be sensational! But of course you have to reduce that by the capital our government would have to invest just to keep our system running, modern and growing, so the net gains would be something less — you pick how much. Also be aware that if our government used GAAP accounting like businesses do, we’d have to include unfunded liabilities like some $37 trillion for Medicare obligations and more for other obligations such as Social Security, so we’d be bankrupt now!

    On the other hand, if we continue to spend the same amount for administration and are able to attract capital, increase competition and, in the process improve the quality of care and reduce its costs by a mere 5%, we will save $125 billion per year, or $1.25 trillion over ten years – and our government won’t have to lay out money for capital improvements or working capital.

    Which alternative would you choose?

  26. Merle, this is utopia. When it comes to most goods and services, most people will shop for the best value. When it comes to medical care they will seek the best quality regardless of price. This eliminates usual competition theories.
    When MBAs set business goals, provision of care becomes subservient to profit figures, and the whole thing goes out the window.

  27. It’s that “peace of mind” I was talking about earlier. Nobody can take your Medicare away if they discover some secret disease or if you missed a premium date, or whatever…. It makes people feel secure even if it’s not as generous as some private plans. Perhaps policy makers should take notice….

  28. “According to Peter Medicare is failing to control cost,”

    Nate, if you re-read you’ll see I said private insurers are failing to control costs. You yourself bash private insurers and hospitals for high costs. Medicare is having little if any effect on system costs – given that you say providers “cost shift” from Medicare says you also believe Medicare has little effect.

  29. Sorry to be so late in responding to this discussion but I’m traveling and Internet access is limited.

    To me, the issue is not who insures healthcare but, rather, how healthcare is organized and delivered. How should doctors, hospitals and other care providers be organized and managed so they provide the greatest value – the best care at the lowest cost? In short, how can we get a lot more for our money? Once we have improved quality and reduced costs, we can address who pays for it, government or insurance companies. To do otherwise is to put the cart before the horse. To mix metaphors, it’s like rearranging the deck chairs on the Titanic.

    It’s time we recognize, first, that the delivery of healthcare at every level is a highly complex business requiring talent and capital and should be run in a businesslike way – providing appropriate compensation and generating profits to fund new investments and a return on invested capital. I’d like the motives of the care providers to be noble but unless they can survive financially, ie., earn a decent living and generate capital to improve their facilities, their motives won’t count. They’ll either be out of business or struggling as a cottage industry unable to keep up with the developments in their field.

    Second, that the most effective way to run a business is to provide value – high quality at low cost. Third, that the way to stimulate high value is through competition, tempered by government regulation that ensures a level playing field for all the players.

    Finally, that running a healthcare business should employ proven successful methods including the division of labor. Care providers should deliver care and not waste their time on administrative and business matters. Likewise, business people – yes, the MBAs of the world amongst others — should handle the administrative and business tasks and not meddle in the delivery of care. At the policy level, the providers and business managers together should set the performance standards that guide the delivery of care.

  30. “seniors remain happier with Medicare than those under 65 do with their private insurance.”

    There might be other studies that support this I don’t thinbk this one does, it just says people over 65, majority of whom have medicare are happier then those under 65 whom for the most part do not. Like above take away MA and Supps I bet this number is not nearly as high

  31. well this is disappointing. By far your one of the better/more fun people to debate with, you use real facts and know what your talking about. You would be one of the last people I would expect to use a study of studies of opinion polls for an argument.

    “We examined this issue through an analysis and review of 21 opinion polls ”

    “In October 1964, before the legislation establishing the program was passed, 61% of Americans said they approved of such a proposal (IISR),”

    I would like to see this study question because in the words of Democrats the Democrats “Hoodwinked” the public to pass this. They promised a plan so Grandma wouldn’t lose the shirt off her back and passed one instead that did the exact opposit. I wonder if the poll was of the plan as passes or the propoganda to pass it?

    “About two thirds (68%) of Americans believe that Medicare’s benefits are worth the cost of the program for taxpayers”

    Does anyone think 68% of Americans even know the cost? Of course they don’t link to actual studies just the name of it

    “Fifty-one percent of seniors, most of whom are covered by Medicare, rate their health insurance coverage as “excellent.” This is a significantly higher proportion than the 32% of insured Americans under the age of 65 who give their health insurance an “excellent” rating”

    Is it Medicare that is rates excellent or Medicare plus their Medicare supplement which gives them 100% coverage? The most of whom are covered by Medicare line tells me the study didn’t ask the qualifying question, are you covered on Medicare or Private Insaurance, without asking this question why would you bother to make the inference? Why not ask the question then use a real number?

    the rest is more of the same junk, made for a press corp looking to advance political agenda and sell papers not inform.

    “ealing with rejected pay for services,”

    Medicare denies more claims then any other insurer. The difference is you can’t appeal their denials. No sense in getting worked up over something you can’t change

  32. I do find it interesting that even with the new perks private insurers are supposedly offering, seniors remain happier with Medicare than those under 65 do with their private insurance. I suspect that reflects the difficulties in filing claims and ealing with rejected pay for services, rationing, but I a more detailed study would help. Hmm, will go look for one.



  33. The few post I have reserached from the incidental economist have been so fudenemently flawed they wouldn’t pass for anything more then propoganda fluff. I forget what the last subject matter was but it was really terrible excuse for science. Tried searching comments to find it but couldn’t.

    2. Whats the utilization advantage?

    3. Becuase doctors would balance bill for the difference. Medicare can pay its rates because they have the force of law. Courts have ruled Medicare reimbursements are arbitrary numbers not based on anything and can not be used by private insurance as R&C without a contract with the provider agreeing to it.

    Cost plus has held up in court but that is considerably higher then Medicare on hospital charges

    Facility charges are the issue of the day, much more so then Rx

  34. “The fact that private insurers are able to just continue to pass cost increases along means they are failing (assuming they are even trying) at any attempt at cost controls.”

    LOL Peter you really should stop writing on things you don’t understand.

    Following are all the new Medicare figures for 2011:

    •Basic Part B premium: $115.40/month

    •Part B deductible: $162 (was $155)

    •Part A deductible: $1,132 (was $1,100)

    •Co-payment for hospital stay days 61-90: $283/day (was $275)

    •Co-payment for hospital stay days 91 and beyond: $566/day (was $550)

    •Skilled nursing facility co-payment, days 21-100: $141.50/day (was $137.50)

    According to Peter Medicare is failing to control cost, if they are even trying, so Peter I take this means we should shut it down and move them to something else since they are failing, by your measure?

  35. 1) There is relatively little cost shifting.


    2) Medicare usually pays about 80% of what private insurance pays. For some specialties, they pay as little as 30% of what private insurers pay. For me, this is one of the best measures of relative costs. Since the two populations are so different, it is difficult to make direct comparisons. The one advantage private insurers have is utilization. If we were talking about Medicare we would call that rationing.

    3) I have long wondered why private insurers pay so much more than Medicare. They should only need to pay 1% more than Medicare to make sure that their patients get seen. I know that for my practice, we incur much higher billing costs with the private insurers. I believe it is even worse for PCPs.

    “I’ve heard numerous hospitals, especially teaching hospitals, claim that they couldn’t make money if they had to accept Medicare rates”

    That assumes that wages do not change. That the costs of devices and implants and drugs stay at their high rates and keep going up. That utilization is not changed. That every 100 bed hospital has a heart program.


  36. “The problem with Medicare is that it has no effective mechanism to live within a budget and respond to cost growth when it’s higher than expected. Private insurers and self-funded plans can raise premiums, deductibles, co-pays and adjust other benefits.”

    That’s why any comparison that Medicare is “single-pay” is false. The fact that private insurers are able to just continue to pass cost increases along means they are failing (assuming they are even trying) at any attempt at cost controls. There should be value added from profits, not just to pass pieces of paper from providers to patients.

    “I’ve heard numerous hospitals, especially teaching hospitals, claim that they couldn’t make money if they had to accept Medicare rates from all comers even if Medicaid patients reimbursed at Medicare rates and there were no longer any uninsured patients aside from illegal immigrants.”

    That’s assuming hospitals in their present form are suited to any kind of cost control. You assume hospitals are running efficiently and that “claims” have legitimacy.

  37. Margalit –

    The roughly 9 million poor people who are eligible for both Medicare and Medicaid account, according to a recent article in the WSJ, for roughly one-third of the combined cost of both programs with the bulk of the money spent on hospital care, nursing home care and care provided by home health agencies. I think it would be useful to look at the growth in the combined cost of both programs vs. private insurance. Medicaid costs continue to grow more rapidly than Medicare despite their very low reimbursement rates.

  38. Well, it makes sense to a certain degree, but I am left with a couple of doubts. First, people live much longer now, so that in itself should contribute to rising costs. Those end-of-life futile treatments that you always reference, Barry, have surely gotten more aggressive and more expensive over the years. Then there’s the proliferation of hips and knees replacements, usually performed on older folks. Don’t all these things balance out?
    Besides a payer that is impervious to extortion from large hospitals systems should be doing better, I would think.

    As to hospitals, I wouldn’t have expected them to say anything different.

  39. I was right. Nate was able to answer Margalit’s question a lot better than I could.:)

  40. “Also, I understand that the growth rate of Medicare is smaller than the private sector,”

    I can assure you what you read was partisian propoganda and not acturial sound comparison. First off Medicare benefits haven’t really changed in 46 years. Private insurance on the other hand has a clear trend line of increasing benefits since that time. One of the reasons private insurance has higher trend is the increasing benefits.

    Besides the debateable cost shifting of low reimbursement there is the non-debateable cost shifting of regualtion. For example a few years back government passed a law saying private insurance was prime for working adults. This would obviously effect the trend when you move liability from Medicare to Private Insurance. When they needed to save more money they strengthened the law and made it illegal to give people incentive to take Medicare.

    I would need to do more reserach but suspect medical innovation effects private insurance far more. For example premature babies seldom cost Medicare a penny, as younger and younger babies are kept alive the trend of private insurance increases. I suspect private insurance pays for a higher number of transplants per 1000 population then Medicare. The big inflationary items of old age Medicare dishes off, like nursing homes.

    by no measure is Medicare more efficent or succesful then private insurance when compared on an apples to apples basis. Medicare does excel at the utilization of smoke and mirrors though.

  41. “I understand that the growth rate of Medicare is smaller than the private sector, so I am not completely clear on why this is unsustainable.”

    Nate could probably answer that better than I can but my guesses are (1) the private sector has to deal with cost shifting to make up for what they see as inadequate Medicare payments, especially for outpatient procedures and all Medicaid services and (2) the average age and health status of the commercially insured population increased the cost of covering the overall pool independent of prices per procedure. Remember that people in the 55-64 age group consume 5-7 times as much healthcare as people in their 20’s while the average risk score of the Medicare population changes very little if at all from year to year.

    I look for private payers to start to more aggressively push back against powerful hospitals by refusing to sign contracts with them and reimburse their services at something like 110% of Medicare or less and let them balance bill the patient for the rest. Tiered networks and limited networks are finally starting to gain traction with employers while high deductible plans are also increasingly popular. Medicare Advantage plans continue to increase their market share within the Medicare population even as payments are phased down toward 100% of standard FFS Medicare.

    If Medicare covered everyone and there were no longer a private sector to shift costs to, it’s doubtful that the system would function properly even if there were no longer any uncompensated care. I’ve heard numerous hospitals, especially teaching hospitals, claim that they couldn’t make money if they had to accept Medicare rates from all comers even if Medicaid patients reimbursed at Medicare rates and there were no longer any uninsured patients aside from illegal immigrants.

  42. From what I hear from physicians Medicare is an OK payer all in all. Medicaid on the other hand is a disgrace, so much for leaving things to the States.

    Also, I understand that the growth rate of Medicare is smaller than the private sector, so I am not completely clear on why this is unsustainable.

  43. The problem with Medicare is that it has no effective mechanism to live within a budget and respond to cost growth when it’s higher than expected. Private insurers and self-funded plans can raise premiums, deductibles, co-pays and adjust other benefits. All Medicare ever does is try to squeeze provider payments, often to the point where more and more providers refuse to treat Medicare patients or at least take on new patients. It’s an open-ended entitlement and whatever it costs, it costs. Medicare and Medicaid are unsustainable in their current form and the biggest single drivers our federal deficit and the growth of our public debt.

    One of the few decent ideas that came out of PPACA, in my opinion, was the IPAB. Yet there is a huge effort underway to repeal it. Congress won’t let Medicare take costs into account in deciding what new drugs and devices to pay for. It’s a mentality of give everyone everything and we’ll deal with costs somehow, some way, some day but not today or soon or before the next election.

  44. Barry, they way I see it CEOs are responsible for all decisions made by a corporations. Whether they delegate or not is pretty much irrelevant. I’d still prefer elected public servants to be responsible (I’m sure they delegate too), instead of private business people whose main job is to define and achieve that 5% pretax profit margin.

  45. Margalit –

    The CEO’s of United, Wellpoint, Aetna, Humana, and others do NOT make coverage decisions. They have highly capable people running the various units – public sector, individual, small group, etc. with actuaries and clinicians supporting them. The executives with profit center responsibility know what the corporate goals are regarding profit margin on premium revenue, return on investment, return on capital, etc. Humana, for example, targets a 5% pretax profit margin on its Medicare Advantage business. That’s the extent of the CEO’s involvement – developing that target and communicating it to the Board of Directors as well as the rest of the team. The line executives run their business units and they’re accountable for results, including service levels as well as profits. When they introduce new products, they may experiment with different pricing levels to gage market acceptance.

    As for not knowing what policies cover, millions of Americans think Medicare covers long term custodial care in a skilled nursing facility while it actually only covers up to 100 days under limited circumstances such as following a hospital stay of at least three days. People also don’t know how much the hospital deductible is and that it applies to each admission. What most do know is that they need to buy a supplemental policy to fill in Medicare’s significant gaps if they can afford one.

  46. “People want to pay less for insurance then they know they are going to have in claims or they don’t buy this, ask any insurance agent.”

    If that was universally the case, you would be broke, so why make this type of statements?

    CEOs may not make each individual coverage decision, but they do make decisions on what plans the company offers, and they also decide on policies for how the company deals with disputed charges, or are you saying that those trained clinicians do not consult the plan and/or company policy?

  47. True steve buy paying 20% less for a procedure doesn’t make up for paying it 3 times and paying for 10 other procedures that never happened.

  48. “although they all have their share of problems, none are as ominous as the ones we have here”

    What about NHS why are they also irrelevant to this conversation?

  49. “People want, and are willing to pay for, peace of mind,”

    Thats why we have 50 million uninsured. People want to pay less for insurance then they know they are going to have in claims or they don’t buy this, ask any insurance agent.

    What benefit does making stuff up have in these discussion margalit?

    “CEOs do make coverage decisions”

    Check the law Margalit they do not make coverage decisons. Coverage decisions have to be made by people with the appropraite background and training to support such a decision, i.e. doctors and nurses.

  50. Barry, CEOs do make coverage decisions since they run the companies that develop the plans. Those decisions in the private sector are driven by profit and bottom line considerations, just like all decisions are, and should be, in private companies who need a healthy bottom line to survive.
    Yes, these are things that customers want and are willing to pay for. The problem with insurance and health care in general is that few customers understand what they are buying and many folks are under the impression that if they have insurance, they are safe. The ugly truth does not manifest until they get really sick as numerous folks posted on this very blog.
    People want, and are willing to pay for, peace of mind, and private insurance is selling illusory peace of mind. It’s not the same thing.

  51. No, those studies do not show that. I think I have read all of them by now. They are all retrospective studies. They all have major flaws. There are more studies that show people do better when insured by government insurance. Medicare is government insurance. The Oregon study will become an important study as it cranks out results because it is prospective.

    “d we already know what it does to cost. ”

    Government insurance pays less, a lot less for the same procedures compared with private insurance.


  52. Margalit –

    CEO’s, greedy or otherwise, don’t make coverage decisions. Companies develop coverage offerings that customers want and are willing to pay for and such offerings can differ among regions. In any one market, there are multiple offerings. I don’t think a one size fits all approach is the right way to go whether I personally can afford to buy what the government doesn’t offer or not. Most people in this country prefer to have some choices. Even within Medicare, 25% of beneficiaries choose a Medicare Advantage plan and that penetration rate is likely to continue to rise gradually. MA plans are especially popular among low income seniors because they don’t need to buy a supplemental policy which they usually can’t afford in the first place.

  53. I’m sorry, but having elected government make all these decisions is not frightening enough for me when compared to having a bunch of greedy CEOs making the same decisions, and I include the so called non-profits in this statement, as they do now.
    It’s working fine in multiple countries in Europe and although they all have their share of problems, none are as ominous as the ones we have here (please don’t write about Greece, Nate. It’s irrelevant to this comparison).
    And as I said before, it need not be single payer. It could be tax financed single collector.
    And if you must look after the interest of the poor rich people, note that they can still buy whatever the evil government won’t pay for.

  54. The more I read single payor advocates the more I agree me need single payor, but specifically for single payor advocates. I am more then willing to give them exactly what they ask for. As countless studies have shown your more likely to die covered by government healthcare then even being uninsured and we already know what it does to cost. At this point it will either kill them or bankrupt them, either way it should shut them up.

  55. “Single payer aims at eliminating private insurers and their profits, which contribute nothing to health care delivery.”

    Margalit –

    I think the assumption of actuarial risk adds considerable value as compared to making healthcare an open ended entitlement financed by however much in taxes it takes to cover all the incurred healthcare costs. To add to Nate’s comment, at least 40% of the fully insured commercial lives are insured by non-profit insurers including most of the Blues, Kaiser, Harvard-Pilgrim and others. Moreover, even the for-profit insurers who cover the rest of the commercial lives earn a relatively low profit margin on their premium revenue. Also, it’s easy to quantify insurer administrative costs which critics like to complain about but very difficult to quantify the cost of fraud in Medicare and Medicaid.

    The other issue regarding single payer that’s worth noting, I think, is that in addition to being the only payer for healthcare, the authorities running it would also be the only decider about which services are covered and paid for and which are not. It would also be the sole decider over who gets care and who doesn’t with the potential for age based rationing. Coverage decisions could also change with the politics of our elected officials so that a conservative government could outlaw coverage for, say, abortions. In short, be careful what you wish for.

  56. Nice to see you have learned nothing over 3 years Margalit.

    Single Payor would not only eliminate private fully insured plans it would also eliminate self funded plans which don’t have profits. And seeing as how far more then half of all private insurance is through self funded plans with no profit your argument is BS. You know this and continue to peddle the same tripe.

    Insurance is what allows someone with a million dollars in claims get treatment paid for with the premium of those that don’t have claims. Insurance does that far more efficently then taxes which is your proposed solution.

    The most expensive and inefficient healthcare system in the world is Medicare, a single pay system, and your proposed solution.

    What everyone should fear is overt misinformation and propoganda from people like you that care more about their politics then peoples lives and the future of our nation. How many more public hosuing, welfare, medicaid disasters do we need before you liberals stop murdering people with your dogma?

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  58. Merle, there are two entities involved here: private insurers and private providers of medical care. Single payer aims at eliminating private insurers and their profits, which contribute nothing to health care delivery. You can have single payer AND private practice coexist as they do in most other developed countries.
    What physicians should fear, on more levels that just finance, is those who advocate for corporatization of the delivery system, where all physicians are salaried employees in big corporations, so they can be “free to concentrate on practicing medicine and not worry about business”. Just leave the money management to the excessively paid hordes of executive MBAs, accountants and lawyers. All “patient-centered”, of course.

  59. Peter, when I say ” If they fail, they alone suffer the consequences,” I’m talking generally and referring to the individual(s) who launch a business and their investors who provide the capital. They lose what they have invested in the venture – generally their time and money. To the extent they have employees, the employees, of course, lose their jobs; if they have customers or clients, each of these groups loses their vendor or service provider.

    Re: competition and market power, I get very concerned when there are only one, two or three players serving any market. They generally have too much power, are able to control prices and limit competition. When that happens, we all lose. That’s why I expect the Justice Department and FTC to enforce our antitrust laws and regulations to ensure competition can thrive. And why is it important to have competition? Because where we have competition, quality goes up and prices come down! Specifically in healthcare, it’s hard for me to believe that there is strong competition when one or two insurers control 70% or 80% or 90% of a market. I know the argument that they have to be big and powerful to negotiate with powerful hospitals. But I don’t buy it. Where that’s the case, our antitrust laws and rules should be applied to the hospitals as well.

    MD as HELL, you’re right. Individuals don’t have profits. They work for wages, salaries, bonuses, etc. But the for-profit entities they work for do have profits (or they go out of business). However, if an individual owns, has stock or a partnership interest in their employer, they typically receive a wage or salary, plus a share of the organization’s profits.

    I agree that attacking or trying to eliminate profits is wrong, and I most certainly am not trying to get rid of private practice. That’s why I wrote this blog. The people you should fear are those seemingly good samaritans who want to remove profits from the healthcare equation and have government (“single payer”) take over.

  60. Professionals don’t have “profit”.

    Football players don;t have “profit”.

    Neither do doctors and lawyers.

    To attack profit is to attack private property and ownership.

    Is that what this is about? Getting rid of private practice?

  61. I refuse to believe that.

    My son predicts that his generation will be remembered as the Service Generation and based on what I’m seeing, I choose to believe him, and I choose to do whatever I can to plow the road for them.

  62. The excesses of US capitalism (largely financial/industry interests) at the turn of the 20th century and again after the 1920s was constrained for various reasons. If you believe in the ‘Great Man’ theory of history then TDR and FDR were the primary reasons. I don’t put much stock in the ‘Great Man’ theory myself because civilizations are too complex with too many moving parts. I do believe you need the ‘right guy in the right place at the right time’ and we simply haven’t had that since the 2008 market crash.

    Sadly, I think things have gotten so rotten that we are going to need an almost complete reset and the change that it will bring will likely not be pleasant, bloodless, or ultimately beneficial to most in the short run. That’s damn unlikely to happen though. What is almost certainly in the cards is that the US will continue to slowly atrophy, have to pull back on its global defense commitments due to fiscal issues, and end up a society where you have a small minority who live well enjoying good health/education/wealth and the rest who largely just get by.

  63. Full of half-truths and outright BS as usual Nate.

    Corporate welfare has run amok

    Companies absolutely get an amazing array of tax credits/write-downs/subsidies and the number has exploded since the Tax Code was substantially revised in 1986. The most recent estimate I have seen place the estimate at around $1T in total tax credits/writedowns/subsidies annually.

    While there are some large companies like GE and Dupont which have gotten a ton of negative press lately for their negative effective tax rates from 2007-10, most US companies do pay a fairly high effective tax rate. In 2008, GAO calculated the average effective tax rate for domestic corporate investment to be 25.2%, with the median at 31.8%. It still well below the top rate of 35% that gets constantly mentioned. Large US corporations pay nowhere near the 35% because of all of the tax credits/writedowns/subsidies.

    I would mind seeing a reduction in the overall top corporate tax rate if some of the subsidies were reduced. The problem is that each lobby fights tooth and nail for their pieces and that the government will potentially give an unfair advantage say if it reduced all of its subsidies for coal/natural gas/oil but left in place their considerable subsidies for ‘green energy’ especially wind and solar.

    The bigger issue though is more and more corporations are forming as S corps to avoid taxes. From 1981-2007, the C Corp share of business activity decreased from 87% to 64%, with a 10% decline since 1999 alone. The C Corp share of taxable income has fallen even more dramatically, from 70.6% in 1987 to 48.5% in 2004. Increasingly, businesses are electing to organize as “pass-through entities” (Subchapter S Corporations and Limited Liability Companies) where business income is reported on the individual level.

    What is good for GM is good for America – Not

    While it is true that larger corporations typically offer better and more benefits to their employees, your views are quite Pollyannaish and simply aren’t the case anymore. Increasingly, more and more of most large US-based corporations are not only drawing more revenue from overseas (not necessarily a bad thing) but they are taking dramatic steps to move their US-based workforce overseas. GE has struck it US-based workforce by 21% the last decade and other large corporations have followed a similar path. This notion that US multinational corporations have a very vested interest in the civic well-being of the various US towns they are in just isn’t the case anymore as it was say 30-40 years ago.

    Amazon – Tax avoiders indeed

    Sales tax avoidance is very much a key competitive differentiator for Amazon (and other online retailers). Amazon have actively pursued/threatened to pull operations and sever ties to businesses in states that enact a similar law to the NY state law including most recently CA.


    It doesn’t matter that Amazon already collects sales tax for other third-parties such as Target & has had their case to challenge the NY state law dismissed in NY state court. Amazon though is challenging the constitutionality of the NY state law and I am sure they will challenge other state laws/lobby hard against them.

    We aren’t talking insignificant amount of revenue here either. Talking tens of millions of dollars/hundreds of millions in sales tax revenues in larger states that absolutely should be collected by Amazon.

    Hell, even governors like Rick Perry and Texas are really going after Amazon and instead Amazon is trying to buy them off the the promise of 5,000 jobs there.


    Amazon knows damn well that they would take a real hit if all of a sudden the people in almost every state who had to pay sales tax would be charged that for their purchases on Amazon. Hell, there stock would go down the sh!tter and quick.

  64. A bigger problem than the for-short-term-profits might be the “overt-for-profits”: Non-profit hospitals who charge incredibly high rates (“rack rates”) to the uninsured and neglect their charitable role.

  65. Merle, as I said above, as long as those who provide direct care, also control, manage and retain the income, I don’t see a problem. By definition, this will limit practice size. Once you have executives and shareholders involved, the commitment immediately shifts from quality to maximizing profit to be shared by these additional layers of people who contribute nothing to patient care and often couldn’t care less about patient care.

  66. “Together they have unleashed the talents, creativity and productivity of our people, generated enormous sums of capital, and created unheard of social, economic, scientific and political advances.”

    Healthy dose of slavery, cheap labor, lax environmental protections, huge deposits of natural resources, and lack of war on home soil hasn’t hurt either.

    ” If they fail, they alone suffer the consequences.”

    Unless there are also injured patients in the mix of “consequences”.

    “I don’t support the power of insurers today to dictate what they will pay doctors for their services,”

    If doctors don’t like what they are paid then why do they sign the contracts? Would you rather see doctors “dictate” what insurers will pay? Do you support local market dominate hospital dictating to insurer what they will pay?

    “Additionally, government should protect against harmful excesses,..”

    Like 6% to 10% compounded health care costs per year leading to 20%+ of GDP?

    “And how much in additional liabilities can our economy carry before our cost to borrow capital becomes prohibitive and we default on our debt?”

    Would unsustainable health cost increases count as “additional liabilities” leading to default?

    “At least the insurance companies have reserves to back their obligations – so shouldn’t we force them to compete fairly rather than disband the concept of private insurance?”

    Reserves paid for by premium payers. If you believe in “free” enterprise how should “we” (government) force them to compete? Wouldn’t insurance companies say they already “compete”?

  67. My last comment at this thread:

    profit is a generic term, what is the concern is the focus on making money solely for the purpose of making money, not worrying how the qualtiy of care is impacted. So, if a person is making money above his/her expenses and continues to be a responsible, ethical, and moral provider, wonderful for this person. But, money has a strange way of altering choices and behaviors, irregardless of being a doctor, an administrator, a business person, etc. That is what I am challenging here, the pursuit of profit for the sheer effort to make more money, as I noted, just like an addict does with any other addictive problem.

    So, nothing is wrong with making a profit. But, if you are in health care solely to make a profit, I think you made a poor career choice until proven otherwise. Anyone remember the Kaplan MCAT courses back in the 1980-90’s, how they had this pamphlet about going into medicine for various interests, and how they spelled out that choosing medicine versus going into plumbing would take the doctor much longer to pay off debt and see income be plentiful versus the plumber’s options?

    Strange how I remember reading that and grasping the point the authors were intending, Reading here, I really wonder what people do remember when they completed their training. Oh well, it’s your soul to live with.

  68. Margalit, reversing Abraham’s Biblical dialog with God, if it’s OK for one doc, what about two? four? 10? 50? The only difference is that in larger practices and hospitals each is paid a specified amount and can’t dip into the till when they feel like it. In any case, amounts above reasonable compensation are profit (in non-profits they call this surplus) — which can be reinvested to improve and grow the practice or distributed to the docs.

    Peter, not only are profits acceptable, they are essential to the survival of medical care. If you don’t take in more than you spend in medicine or any other endeavor, you won’t survive very long. Would that our government understood that simple fact of life!

  69. For the love of God what is wrong with a doctor making a PROFIT. I am so glad that I have made a PROFIT practicing medicine. I did take a vow of poverty nor to break even. I practice medicine because it is challenging and I make money so I can live well. This isn’t a calling–it is a job.

  70. Well, I don’t see a problem with, for example, a private solo practice being independent and therefore could be classified as a “small business” with “profits”. I do, however, see a problem with compensation coming from for-profit, and quite a few non-profit, systems.
    I sort of think that when the income (compensation or profit or whatever) is managed, controlled and directly retained by the same person that delivers direct care day in and day out, we should be OK (with a rotten apple exception here and there), even if it does not involve civil service.

  71. using find this page and hoping the reply used a word not common in every post. Good old American innovation.

    I think, big if as it is so new, that the closing of the donut hole will mean going forward the difference between MA rx and FFS rx wont be that different. Cost from closing the donut hole are going to increase but I don’t think there will be a difference between where that cost is paid

  72. Rationalization gets old. I do not believe health care operates at maximal capacity when you introduce profit margins. And you don’t seem to understand my position in arguing as a business oriented person.

    Do some clinical care as a provider in some form for a few months and come back to this site and share your experience when you care for people, not a ledger. You are not going to convince me or others who embrace medicine for what it is to instead embrace those who have watched out for profit agendas while the latter mentality generally f—s health care.

    Sorry, I am not interested in debating something that I have watched erode a profession for the past 20 years. Find another audience!

    And, while you probably do mean well to some degree, we are not talking about a minimal minority here in “smaller numbers”. Hear the lie enough becomes the truth is an adage I will never accept as validation from those who say in so many words, “well, the other guy does it and gets away with it, so…”

    Man, this site really pisses me off at times!

  73. Made. Medicare Advantage plans could bid against each other if they wanted. Instead, they have tended to sort themselves out into areas where they avoid that.

    “When a state passes a las saying fertility has to be covered for example that drives up prices, is this a failure of insurance competition?”

    The increase in premiums is not solely caused by new coverage mandates. Increases are consistent across the country, even in states with relatively few mandates. Costs for procedures and evices continue to climb faster than inflation.


  74. Federal and State, some more info from the analysis

    Of the $714 billion in welfare spending, $522 billion (73 percent) was federal expenditures, and $192 billion (27 percent) was state government funds. Nearly all state government welfare expenditures are required matching contributions to federal welfare programs. These contributions could be considered a “welfare tax” that the federal government imposes on the states. Ignoring these matching state payments into the federal welfare system results in a serious underestimation of spending on behalf of the poor.

    Of total means-tested spending in FY 2008, 52 percent was spent on medical care for poor and lower-income persons, and 37 percent was spent on cash, food, and housing aid. The remaining 11 percent was spent on social ser­vices, training, child development, targeted federal education aid, and community development for lower-income persons and communities. Roughly half of means-tested spending goes to disabled or elderly persons. The other half goes to lower-income families with children, most of which are headed by single parents.

    Where did you get the 850 billion number I can’t find it anywhere.

    No disagreement on the bankers and wall street folk making way to much for doing nothing.

  75. Yes, too confusing. I usually use the drop off the page rule, but need a new one for this.

    How would this apply with Part D? At this point, I am more worried about costs than providing new services.


  76. Craig and DeterminedMD,

    You clearly are offended at the concept of doctors earning a profit. Somehow, that doesn’t jell with your self image.

    I’m not out to offend you but, as I said at the outset, you and I are using different words to say the same thing. As you put it, DeterminedMD,

    “Physicians back before insurance took hold instinctively as a whole took their ‘profits’ and put the money into their offices and support systems to improve their practices, which made them more attractive to patients for more care as the patients saw the physician was focused on improvement.”
    You also wrote “you get paid what is fair and reasonable and you survive as a doctor, and for your spouse and family if you live within those means from that income.”

    What you describe is precisely what most business people do. In a small privately owned business they take reasonable compensation and invest the rest to improve their business. The “rest” happens to be profit — though you don’t like to call it that. In businesses with shareholders, they take reasonable compensation, invest part of what’s left in the company to finance its growth, and typically distribute the rest in the form of dividends to their shareholders who have invested their capital in the business. Larger healthcare providers do the same thing, though hospitals who have used debt rather than equity to finance their growth, use part of their cash flow to pay interest and amortize debt.

    Regrettably, there are smaller numbers of both physicians and business people who aren’t content to function that way and reach for much more. In the process, their behavior tarnishes the rest of their colleagues.

  77. “Medicare Advantage plans should be made to compete against FFS Medicare.”

    Made or allow? Its not fear that stops them but government not allowing it. There would be some bugs to work out. One of the driving problems of Medicare is skimping on Admin, private insurance needs to be able to invest in admin and cost containment. The problem is those investment might take 2-3 years to pay off. If they are measured on one year contracts they will never be able to make those investments.

    The 5% of high claimiants should all be moved to small plans focused on controlling cost and the top fraud areas in the country should be turned over to plans focused on fraud prevention. One size fits all plans onviosuly don’t work.

    “Private insurance companies competing against other private insurance companies have not held down prices”

    This is much more complex then your giving thought to. They have not held down prices compared to what? Price is a direct reflection of health care consumption. Healthcare consumption has many driving forces out of their control. When a state passes a las saying fertility has to be covered for example that drives up prices, is this a failure of insurance competition?

  78. finding replies in this new comment program is impossible, its cool you can respond to a specific message but it would help if the link took you to the message its informing you of.

    I wasn’t comparing MA to Medicaid, sorry that wasn’t clear. 19% of Medicare beneficiaries also have Medicaid because of their income, or in this case lack there of. I believe 25%, might be slightly off, of MA enrollees are low income. Since MA plans in major metro areas use to offer no premium and 100% coverage with small co-pays this would be cheaper then buying part B and Gap for low income individuals. If those benefits go away its possible that 25% will sign up for Medicaid thus whiping out any savings.

  79. FTR, I do support competition where I think it is likely to work. Medicare Advantage plans should be made to compete against FFS Medicare. If they can provide care at a lower price, then patients in that area should have to enroll in the cheaper MA program, or pay the difference if they want to stay in a FFS program. Allow drug reimportation and let those drugs compete against non- reimported drugs.

    Private insurance companies competing against other private insurance companies have not held down prices, so I have little hope there.


  80. ““In fiscal year (FY) 2008, total government spending on means-tested welfare or aid to the poor amounted to $714 billion.”

    Total discretionary spending for that year was $1.1 trillion, with non-defense at $508 billion. Total Medicare was $339 billion. Are you claiming that all but about $140 billion of the non-defense discretionary budget was for welfare?

    “Exactly how much per year are the “Robber Barons” looting us for?”

    In 2008 the top 0.1% of earners made an average of $6 million, which means they made about $850 billion. Now, I dont think these are all Robber Barons. Some earner their money, but there are is a lot of that money that is not explained by value added. U.S. CEOs and execs make much more than anywhere else in the world. The bankers and finance people are back to making record salaries and bonuses. They rank as Robber Barons, only worse, as the Barons did provide a few jobs.


  81. http://www.springerlink.com/content/hh3363753l7542n2/

    Should be able to find a copy in your hospital library if you do not have access. One of the leading peer reviewed health economics journals.

    I really do not follow comparing MA to Medicaid. Mostly different populations, except for the long term care part of Medicaid. If someone drops MA, they could go to FFS Medicare. Are you claiming that MA routinely provides long term care like Medicaid does? Which MA program and where?

    “many people would take MA for that reason alone. ”

    And some would not. That is why you study it to put a dollar value on that benefit.



  82. And that is the point of the Sherman Anti-trust Act and the New Deal: taming the nasty side of capitalism with organized labor, environmental regulation, public works, public infrastructure, a strong, free public education, state universities, the SEC, Glass-Stegal Act, etc.

    Large, powerful international corporations have way too much money and power. They need their wings trimmed a bit. This is what the government is for (among others).

    I argue that the practice of medicine is not something that should be done for profit. It should be a civil service like utilities, education, the armed forces, the police force and the fire department. We probably disagree. But that is OK. Now, I’m OK with device manufacturers, pharmaceutical companies, and the like being for profit companies. But not the practice of medicine nor the delivery of actual medical care.

  83. I read this after my last reply to an early comment you made today, but you don’t get it if you are not a clinician and practice responsibly, ethically, and morally, as well as maintaining standards of care defendible to your equivalent collegues in your field. And that is why I tire of these attempted justifications of basically demanding that doctors capitulate to a profit agenda in a service that does not operate in the boundaries of a business. Even my brother who has a strong business backround agreed with me in an overall conclusion when we had this debate several years ago. We are a round hole and business applications are the square peg.

    People who have the experience in both will conclude the same if they adhere to what they learned in medical school.

  84. Nate, you come across as either an apologist or enabler for profit agendas without boundaries, and your alleged analogy with illegal immigration is as far an attempted grasp at justifying the unjustifiable as one can go. I get it, you bleed green when you get cut. We are not Vulcans though.

  85. Excuse me, please quote my comment that all business people are unscrupulous and money grubbing. I am saying now as I have said at this site in numerous threads in the past that a profit making focus in health care matters and providing responsible and appropriate health care are basically incongruent. Yes, you are right, you don’t want me as a business partner, nor do I want you per your approach to this issue.

    Frankly, if you were a partner, there would come the day you would tell me to compromise the principles that I adhere to as a doctor to make the practice money, because that is what comes to be in making a profit. Being a physician is not about making money, it is about helping people, and you get paid what is fair and reasonable and you survive as a doctor, and for your spouse and family if you live within those means from that income.

    The people who demonize medicine as a profession use the minority examples of doctors who do not live by that philosophy and apply it to the majority. These are the same people who in the end, when forced to have that moment of candor and brutal honesty, reveal the hypocrisy that they are.

    And there are too many physicians who have reluctantly capitulated, actively been converted, or just silent cowards and allow poor judgment to go unabated by not speaking up about their failed colleagues.

    Well, I may use an alias here, but I am not silent out in the world.

    And by the way, your last paragraph is not grounded in reality as health care proceeds now, cheap as you call it does not stay cheap. It is bait and switch, and maybe you could surprise me with a bit of candor if you want respect and consideration from those who see through the sales pitches!

  86. Steve, Craig, Barry, Margalit, DeterminedMD and all others who think some corporations have too much power and billion dollar compensation is obscene, I agree completely (and Nate probably does, too). To me, they are examples of capitalism run amok. Fortunately these represent a small minority of American companies.

    There are far more companies where hard working people live and play by the rules. They may earn good livings and accumulate some capital but they aren’t obscenely rich and they don’t abuse their positions of responsibility. So why beat them up, too?

    The question becomes how do we control abusive behavior? My answer is to foster competition and, where that doesn’t work, adopt and enforce rules and laws that provide for a level playing field.

    I agree that unbridled capitalism can wreak havoc in our society and economy. But in every case I can think of, our system has remedied itself. It took time but the robber barons of the industrial revolution were humbled, the Standard Oil Trust and AT&T were broken up by the courts. Similarly, competition has put many out of business. If you look at the largest companies at the turn of the 20th century, I don’t think you’ll find any in existence today. And of the most prominent companies in the second half of the 20th century, a great many are out of business or have been absorbed into other companies — including our auto companies and many technology leaders.

    We all know that capitalism, like democracy, is sloppy at times. Abuses happen that shouldn’t. But it is the best economic system man has devised to date. Having said that, what do we do now, today? Abandon our principles? For what — government control? Not if I can help it! Our challenge is to restore sanity to our system, not abandon it.

    How do we turn these corny, patriotic sentiments into reality?

    We start where we can. And in healthcare, it’s doing some of the things Stave and Barry and Craig and Nate and Margalit have mentioned in their posts. It’s supporting companies, individuals, government officials and politicians who want to change the way things are. It’s looking for ways to innovate so established players lose their clout. The Internet changed communications. Google changed the Internet. Apple changed the music world. Facebook and Twitter changed Google and Microsoft. Traditional media are in disarray. Innovations in the lifesciences are changing big pharma — and most of these companies didn’t even exist ten years ago!

    Let’s get going!

  87. as long as you have the commas in there its not a run on. Use as many , as you like.

    Hoarded wealth, in Nevada there was a old casino guy that was murdered by a younger so so looking women, Binion, he had a bunker with coins and gold and such. That hoarded wealth had a cost to society, and his life. Building wealth in a bank account is good for society, that money is used to lend to others, if we had no hoarded saving we would have no lending. Price tag there would be $0

    Pollution by rich people isn’t nearly the problem you claim as they can be sued to clean it up, pollution by banbkrupt companies and people now that is an issue. Superfund needs hundreds of billions if I recall.

    Weapon purchases create jobs, building all those humvees and planes etc.

    privatized public services lower the cost and improve the quality usually so that would be a negative amount. I just wait for the day they privitise the DMV in Nevada, I would pay double to not deal with them. Thats a post all its own though,

    Foreign Tax shelters cost 50 to 100 billion per year estimated

    it still pales to the trillion plus I listed. Lets attack both that way we can eliminate the debt and prosper forever to come?

  88. “Besides, it is gone. It was just a bogeyman.”

    We could be so lucky…note the organization is already accused of ” misappropriated funds from a $3.2 million federal grant.”

    Same crooks same games. ACORN hasn’t left it just changed its name. If all it did was voter fraud it would not have been nearly the problem. Its housing shake downs were far bigger national problem.

    Judicial Watch says that in March, the U.S. Department of Housing and Urban Development (HUD) issued nearly $80,000 in grants to Affordable Housing Centers of America (AHCOA), which the groups says is an offshoot of ACORN.

    The group says the government’s website listing federal expenditures identifies the organization receiving the $79,810 grant as “ACORN Housing Corporation Inc.” and lists ACORN’s New Orleans address.

    The group also says that ACHOA maintains the same board of directors, executive director and offices as ACORN Housing.

    The group also notes that a HUD general counsel report from September 2010 says that ACORN Housing is “now operating as Affordable Housing Centers of America” and has misappropriated funds from a $3.2 million federal grant.

  89. “Exactly how much per year are the “Robber Barons” looting us for?”

    Difficult to answer. What is the price tag for hoarded wealth, polluted air, water and earth, inadequate infrastructure, dead troops (see Smedley Butler’s “War Is a Racket”), weapons purchases we don’t need, privatized public services, foreign tax shelters, lobbyist installed tax loopholes and subsidies, etc. Just because their behavior is not criminal by statute does not mean that it is not wrong, unpatriotic and poor citizenship. Please excuse the run-on.

  90. On the GM BK if there was an argument on why the Union should be moved in front of bond holders I would love to read it. The only argument I ever heard was labor peicce so the company could imerge from BK productivly. The lawsuite from the teacher pension fund? I forget who the lead plantiff was that was dismissed, was done on the grounds the court deferred to congress, I never did see something of an actual legal argument on moving the order of debt holders.

    Mortgages the one that killed me was previusly you could have 10+ mortgages then they cut it to 4 then 2 then back to 10 then I think back to 4. Not sure where it is now as the inability to refinance my mortages lead me to lose the properities. Investors that had the means to hold property and thus hold real estate prices up had their hands tied. This is a great example of how uncertainity kills business. I bought houses under one set of rules, then those rules were changed on me costing me my investment, then after I realized my loses changed again. If you had ARMs and the government said your not allowed to refinance any mortgages until you divest down to 4 or 2 that caused tens of thousands if not more of homes to be dumped into the market at fire sale prices.

    Record profits by who? Not sure what industry mix your using, S&P, fortune 500, etc, but I bet it includes a lot of oil companies and other businesses with overseeas operations and low labor. Oil made record profits but at the same time oil exploration off shore was cut down costing jobs. Your heavy labor sectors are not making record profits.

    Further you can be profitable and still get your ass whooped. Sorta like a girl feeling bad and giving you sympathy after seeing you get beat up.

    Would you hire another worker today not knmowing if they will cost you an extra $2000 in 2014? What about the 51st employee?

  91. “The robber barons currently controlling our government due to citizen laziness are looting our country for all it is worth.”

    Really the robber baron’s?

    Not the illegal/legal immigrants?

    “Overall, in 2008, the World Bank estimates that immigrants in the U.S. remitted approximately $100 billion to their home countries.”

    Not the welfare class?

    “In fiscal year (FY) 2008, total government spending on means-tested welfare or aid to the poor amounted to $714 billion.”

    Not the seniors?

    Mandatory Spending, at $1.61 trillion in FY 2008, was over half of the U.S. Federal Budget. The largest mandatory spending programs were Social Security and Medicare, as follows: •Social Security – $612 billion
    • Medicare – $386 billion

    Exactly how much per year are the “Robber Barons” looting us for?

  92. “1) When studied, seniors value those extra services at about 15% on the dollar.”

    Ah Maggie’s junk science never dies. Do you have the study to back this up? I’m specifically curious what value was placed on basic Medicare benefits.

    “so why pay for extra services when FFS is so popular?”

    So popular? Compared to what, they outlawed all other choices and if you try not to take it they take away your social security benefits. Moa and Stalin where popular when they held a gun to someones head.

    3) knowing facts and spin are two different things, I know liberal dogma but I’m not going to give it any credence in a discussion. If you want to flex your healthcare bonafides lets discuss MA as it relates to an alternative to Medicaid. If you push someone off MA to save 14% and they then go on Medicaid what have you saved?

    MA also use to have much better drug benefit then FFS, many people would take MA for that reason alone. Give up some provider access get all your drugs covered. With the benefit enhancement to Part D in PPACA this is not as necessary but once again you haven’t eliminated cost you just shifted it.

    How long until Medicare covers vision and dental? Eye exams specifically are very valuable for seniors, have we saved this money or just moved it to a different pot?

  93. Meaning raising tax rates on the lower income groups? Shouldnt we also then prioritize raising income for those groups?


  94. ” How about the companies that owned GM debt that got pushed aside so the Union could get paid”

    If you are interested, I can probably dig into my archives and find the Bankruptcy blog postings on this topic. This is not so cut and dried.

    “How times in the last three years has government outlawed then allowed then outlawed different types of mortgage.”

    The financial industry has pretty much dictated what it wants. Which types of mortgages were specifically outlawed?

    “The reason unemployement has stayed so high is becuase business is getting its ass whopped and doesn’t know where the next punch is comming from.”

    Record profits=ass whopping?


  95. Where can I go to see a model of this working? What country does it that way? Tell me how to make it work when so much of the care is concentrated among so few people? When we need to cover rural areas and urban areas? When consumers cannot return there product if it does not work?


  96. ACORN was a small organization, mostly dedicated to signing up poor people to vote. Dont lower yourself to that level. Besides, it is gone. It was just a bogeyman.

    ” think Chris Christi and the people of NJ would disagree with you.”

    Every governor has to balance budgets. Nothing special there, he is just popular with the MSM.


  97. Three reasons it gets left out.

    1) When studied, seniors value those extra services at about 15% on the dollar. Not values very much.

    2) It is usually discussed in the context of cutting costs. In that context, even if the services were valued by seniors, we do need to cut spending somewhere, so why pay for extra services when FFS is so popular?

    3) I expect people who follow the health care debate to know these kinds of basics.


  98. Actually, Mr. Bushkin, we are all capitalists here. However, some of us recognize that there is such a thing as too much profit, too much personal wealth, and not enough investment. Some times you make a profit so you can turn around and spend it on people who cannot afford to pay. Some times you take a position that doesn’t enrich you personally quite as much money, yet you get to provide services to people who would not otherwise have access to them.

    My complaint is with short-sighted capitalism. Yes, we want to make wealth, but we want to make it so we all do well. The New Deal was invented to save capitalism, not destroy it. The robber barons currently controlling our government due to citizen laziness are looting our country for all it is worth.

  99. DeterminedMD,

    “Physicians back before insurance took hold instinctively as a whole took their “profits” and put the money into their offices and support systems to improve their practices, which made them more attractive to patients for more care as the patients saw the physician was focused on improvement.”

    Wow, under that curmudgeonly crust, you are a capitalist at heart!

    Since you really are an in-the-closet believer, let me ask you a question. Why do you lambaste all business people as being unscrupulous and money grubbing? You know they aren’t — any more than all doctors are hacks and charlatans just because some are.

    And how would you control these bad guys and put them out of business, whoever they are? There aren’t enough police, DAs and other law enforcement people to do the job.

    How about relying on competition to root out most of them. It’s efficient and cheap. When they cut corners, produce shoddy products or products their customers don’t want, try to monopolize their markets, or fail to provide the quality service their customers expect, their customers go elsewhere, and they are put out of business. That leaves law enforcement people and regulatory agencies to focus their attention on the really bad, egregious villains.

  100. You want the attitude of “if I can make more and keep it then that is my right” in a profession that is about giving and supporting others? Physicians back before insurance took hold instinctively as a whole took their “profits” and put the money into their offices and support systems to improve their practices, which made them more attractive to patients for more care as the patients saw the physician was focused on improvement.

    Imagine that, improving to promote improvement in others. You don’t nor won’t see that kind of mentality in 21st Century business mindsets.

    Whoever has the most money wins. Yeah, it buys you a prettier coffin you won’t see in the afterlife. Doubt all that cash will buy you much there either!!!

  101. DeterminedMD,

    I assume you are a thoughtful, caring and extremely competent physician and I undoubtedly would be pleased to have you as my doctor.

    But, with all due respect, I wouldn’t want you as my business partner. You know as much about running and growing a business as I do about performing open-heart surgery! For society’s sake, I suggest each of us stick to our own knitting. 🙂

    To grow a business, develop and launch new products or services (maybe even new life-saving meds or instruments) and meet the needs of customers, employees and communities, a company must be able to attract capital. That’s not always easy because investors – pension funds, money managers, individual investors such as you and me, et al — want to see growth and profits before they part with their capital. Thus, responsible directors, executives and managers make every effort to earn profits and grow their businesses. That’s good because then a company can prosper and all those connected with it directly and indirectly, including its investors, can benefit. That’s how people are enabled to fulfill their potential and living standards are improved. It is also how people can turn modest savings into substantial retirement funds.

    You call the pursuit of profits an addiction. In a strange sort of way, you are right. To do it well and succeed, you need focus and passion — just like a doc needs in his or her in practice. In that context, I’m just as proud of my “addiction” as I assume you are of yours.

  102. Craig and rbaer –

    The father of a colleague worked as a UAW assembly line worker for one of the Big Three automakers most of his career. Even when workers were caught actually stealing from the company, they weren’t fired because the union protected them. My biggest gripe with unions these days, though, especially the public sector unions, is that they don’t know when to fight for their members and when to back off. For too many of them, every issue big and small turns into a confrontation that either needs to be litigated or gets bogged down in a cumbersome grievance process. When you have a monopoly, can’t go out of business and are not subject to the discipline of the marketplace, you get a lot of bad behavior and mediocrity that often results in poor performance and unsatisfactory customer service.

    As for Bill Gates and his wealth, most of it already has or eventually will find its way into the Bill and Melinda Gates Foundation. The same is true of Warren Buffett’s wealth. A lot of social good around the world will come from that money. That said, to the extent that they realize income from qualified dividends or long term capital gains, they should pay a higher federal tax rate than 15%. I think something in the 25%-28% range would be more appropriate. The top ordinary income tax rate, by contrast, should be reduced to the 28% rate we briefly had after 1986. The tax base should be broader as well.

  103. But sometimes I feel the US needs a little bit more meritocracy.

    Amen to that one.

  104. Bill got rich because he was smart, hard-working AND had an awesome economic, communication and labor infrastructure on which to build. Bill deserves to get rich. But, he also needs to pay back some that money he got from the system that helped him get it. That’s what progressive taxation is all about. It’s also patriotic, I might add.

  105. rationalizing, minimizing, and denial, if not an extra dose of projection; the defenses of the addict.

  106. I find this debate very interesting. I lived and worked in Germany, which has very strong unions, except for th last decade. For some reasons, I rarely saw truly dysfunctional union activity in Germany (i.e. not much incompetence and laziness), and even in France (maybe I did not pay close enough attention; yes there are occasional paralyzing strikes, esp in France, but all in all, workers seemed competent). Here in the US, I saw, among some other examples, a large county run hospital that was clearly horribly underperforming because its unionized staff did not have any work ethics whatsoever (e.g. one had to “bribe” – I believe small favors were enough – the MRI tech to get another patient into a slot that became available on short notice, or the phlebotomists and pt transport staff rarely did any work in a timely manner and sick patients were moved by medical students). EVERY medical student said that unionization and inability to fire lazy and/or incompetent staff was the problem (and many of these state school students had a low class background, so I don’t think class perception was the issue).

    I wonder whether US unions should be continue to fight for pay and benefits, but otherwise no longer be able to protect their members if performance is the issue. One needs to make sure though that public workers/officials who hire and fire are double checked, because otherwise, we’ll get into arbitrariness and cronyism. But sometimes I feel the US needs a little bit more meritocracy.

  107. “have the same interests? Is what’s good for United Healthcare the same thing that’s good for you?”

    In most cases yes, where you diverge from that and violate the constitution is when governemnts start passing laws and regualtions to favor one person(company) over another. We should all, people and companies, have the same rights and opportunities.

    Most busineeses want the opportunity to compete and do what they do.

  108. “Arguing that the $5 guy should shoulder all the burdens”

    What burdens? The $5 guy pays a minute share of taxes compared to the top 5%. They take far more out of the system then they ever put into it. Your not arguing burdens your arguing how much in handouts and charity they are entitled to.

    List these burdens then I’ll respond to them.

    “here should be an age when people realize that the excuse for not doing your homework in 5th grade because Bill did fabulously without ever graduating from college, is pretty lame.”

    Not nearly as lame as your excuse that since Bill did famously you don’t need to go to school, or work, or support yourself we’ll just take Bill’s money and support you.

  109. “You liberals just can’t have an honest discussion can you?”

    So lumping together a guy who sells coffee to student unions on the internet and the likes of Microsoft and Google, makes for an honest discussion?

    Arguing that the $5 guy should shoulder all the burdens because of the 1E-27 chance that one day he will be just like Bill Gates, is the same as supporting special privileges for star athletes at the expense of everybody else because you may end up being just “like Mike”. Would you go for that argument?

    There should be an age when people realize that the excuse for not doing your homework in 5th grade because Bill did fabulously without ever graduating from college, is pretty lame.

  110. “Teachers, particularly in elementary school, should have higher educational and credentialing requirements and much larger salaries. We want some of those “best and brightest” in those classrooms.”

    Then why do liberals and the Unions demand we pay the poorly educated ones and those that can’t succeed as much and why aren’t we allowed to get rid of the bad teachers. The average IQ of those going into teaching is substantially lower then it was 20 years ago and that is in spite of compensation sky rocketing.

    The public would be happy to pay better teachers more but liberals and the Unions won’t allow it.

    “Policemen should be financially comfortable enough to remove any shreds of temptation from consideration.”

    So evil corporations and CEOs making millions are crooks who deprive working people of their fair share AND you want to pay cops enough to eliminate temptation. Well if CEOs aren’t above temptation then that means every cop would need to make more then CEOs currently do.

    Do you even think about what you type before putting it out there?

    “It is very interesting to see how all our woes are now attributed to teachers and policemen….”

    ? The inability to afford teacher and policemen retirement benefits is not related to teachers and policemen?

    And just for clarification how did Barry’s example of public employee unions get cut to just teachers and police? I know its a fun game you lioberals love to play but Barry pretty clearly said public employee unions, its pretty dishonest to then spin the argument and say teachers and cops are all of our woes. You liberals just can’t have an honest discussion can you?

  111. “To evaluate whether most professionals are performing at least adequately requires a dose of subjectivity. It doesn’t lend itself to precise quantification.”

    Since after all this is a health care blog, I would suggest that we keep this very true statement in mind when we go about evaluating physicians’ “performance” based on how many e-Prescribing transactions they performed this month, and other similar “measures”.

  112. Depends upon what you mean by business. Small, local businesses are over-regulated. Large, multinational corporations are under-regulated, and have pretty make taken over the government. Thus, we are living in a fascist state right now.

    Generally, I do not trust the government to construct and manufacture things. Government tends to be better at providing low cost public services like education, health care, utilities, police, courts, prisons, and the military. I trust neither business nor the government to look after our civil liberties.

    PPACA is a nightmare that should be scrapped. I see it as a big, wet kiss to large insurance companies.

  113. Nate, just curious, do you think that mega corporations with multi-million dollar CEOs, and those small and medium size businesses that you service, have the same interests? Is what’s good for United Healthcare the same thing that’s good for you?

  114. “For those with $5, the statistical probability that one day they will be able to purchase the Rockefeller estate is nil.”

    go back to school Margalit


    “While most of the world’s richest people earned their money, some had farther to climb. Neither Bill Gates nor Warren Buffett inherited wealth, but they were raised in affluent homes so they didn’t have to worry about keeping their families fed. In contrast, there’s something reassuring about a billionaire who grew up poor—something that goes beyond the classic, clichéd tale of the American Dream. For all the allure that stems from the lifestyle afforded by such wealth, the billionaires on this list say their mission was rarely about the grand money game. Making a billion dollars from nothing was most often about filling a need and getting started in a small business. Whether they were born in poverty, dropped out of high school, immigrated to the U.S., or even lived homeless for a time, these 20 Americans started at the bottom and worked their way to the top.”

    If you can’t grasp the value of nil no wonder none of this makes sense to you.

    “If anything, those big corporations are just thwarting their already impossible dreams by denying them a fair share of the fruits of their own labor.”

    Look at this list of millionairs created by Microsoft, then look at everything those individuals have done, and what those indeavers then lead to and so on and so on.

    “Today’s NY Times has an article about Microsoft millioniares, they being the approximately 10,000 Microsoft employees who became millionaires because their stock options went into the stratosphere.”

    “Stephanie DeVaan cashed out of Microsoft in 1995, after five years of marketing office software. Just 34 at the time, she went on to spend several years volunteering at charitable institutions. But by 2002, she was itching to do more, so she put her wealth to work in support of abortion rights and helped to found a political action committee called Washington Women for Choice.”

    “others, like John Sage, try to create them. By his own estimate, Mr. Sage’s Internet-based coffee company, Pura Vida, is 1/3,000th the size of Starbucks. But, he added, it has managed to displace Starbucks, Green Mountain and other premium brands in selling to student unions and dining halls at 75 colleges.

    Mr. Sage said he owed much to the strategies he picked up when he worked in Microsoft’s consumer and office software businesses. The most useful strategy he borrowed is to change the way customers evaluate a company’s product.

    When Microsoft started bundling its word processor, spreadsheet and some other applications in the Office suite, Mr. Sage worked with the team that persuaded users to think more about how well the programs worked together and less about whether each, by itself, was the best on the market.

    In the coffee business, customers may choose a brand by price and quality. But Mr. Sage wants to add another criterion: Does it do good for the world? Pura Vida’s coffee is grown organically, and the company donates a portion of its profits to poor families in coffee-growing regions. This mix of good coffee and good works appeals especially to students, which is why Aramark, the big food-services company, approached Pura Vida to supply some of its college accounts.

    Trained at Microsoft to think big, Mr. Sage says he hopes to inspire others to create socially responsible businesses. Pura Vida offers newsletters, trips to Costa Rica and blogs to connect customers to his cause. A Harvard Business School case study on Pura Vida may also help spread the word.”

    Margalit its sad your deeprooted bias against business prevents you from learning there is good that comes with the bad. Your so closed minded you don’t even allow yourself to perceive that business might be positive. Even if you were shown a million possitive deeds you wouldn’t see them.

  115. “Right now, business has way too much power,”

    Wow, I guess if you bury your head in the sand and ignore everything going on around you then you might be able to make such a statement.

    Government is running over business without even wasting the time to pass laws to make it legal. How about the companies that owned GM debt that got pushed aside so the Union could get paid. How times in the last three years has government outlawed then allowed then outlawed different types of mortgage. In 20 years in insurance we have never been so heavily regulated. Government now tells us what types of light bulbs we will have to buy. Government is rehaping 1/6th of the economy with half witted bills most of them don’t even understand.

    The reason unemployement has stayed so high is becuase business is getting its ass whopped and doesn’t know where the next punch is comming from. They are scared to add employees becuase they have no idea what government is going to do to them next.

    What things don’t you trust the government with, I can’t ever recall a time when government wasn’t the answer for you.

    Do you think PPACA kept regualtion to a minimum?

  116. Margalit –

    As a taxpayer, I want to pay enough to attract and hold people who can perform their jobs in a competent and professional manner. In this context, pay means total compensation including health insurance and pension benefits, not just salary. When there are literally dozens and sometimes hundreds of well qualified applicants for every opening even when the economy is booming, it suggests that we’re paying more than we need to. Conversely, when we find it difficult to attract people with scarce skills like math and science teachers, I would be the first to suggest that the compensation for those positions is inadequate. However, the teachers union won’t countenance differential pay among teachers with similar education credentials and years in the system.

    In the case of teachers specifically, it’s extremely difficult to get rid of poor performers because of tenure which is awarded after three years on the job to the vast majority of teachers. To evaluate whether most professionals are performing at least adequately requires a dose of subjectivity. It doesn’t lend itself to precise quantification. Most people know good teaching when they see it or experience it but they can’t necessarily reduce it to contract language or prove it in court. From a union leader’s perspective, though, paying teachers based on years of service and education attained is precisely quantifiable and therefore “fair and objective.” This is basically how compensation works on an industrial assembly line, not in professions outside of teaching.

    Police also are paid very well in most of the suburbs of NYC. Paradoxically, police who work in the wealthiest towns with the least crime make the most money. It doesn’t make any sense. At some point, enough is enough but the unions seem to know only one word – MORE. Most taxpayers in NJ who don’t happen to work in state or local government think Governor Christie is a breath of fresh air even if his personal style can be direct or blunt at times.

  117. Nate,
    I would suspect that the employers you deal with everyday do not qualify for “big corporation” status. I have nothing against business (started a couple myself), until it gets so big that it begins calling the shots for all of us.
    For those with $5, the statistical probability that one day they will be able to purchase the Rockefeller estate is nil. If anything, those big corporations are just thwarting their already impossible dreams by denying them a fair share of the fruits of their own labor.

    As to teachers and policemen, Barry, I would really like to understand how is we think that we can have a successful economy when teaching as a career is perceived to be barely a notch up from being a cashier at the bank. Teachers, particularly in elementary school, should have higher educational and credentialing requirements and much larger salaries. We want some of those “best and brightest” in those classrooms.
    Policemen should be financially comfortable enough to remove any shreds of temptation from consideration.
    It is very interesting to see how all our woes are now attributed to teachers and policemen….

  118. Are governments corrupt and do they shake down the citizenry? Absolutely. Wherever there is humanity, there will be corruption. That’s why we need checks and balances. Right now, business has way too much power, thus our new Gilded Age. Government needs to be there to check the power of capital. Labor is now insignificant, sadly.

    This is a good reason why I am not a socialist. We need private capital to run things (mostly). But we don’t need capital to run everything. Certain things it cannot be trusted with; and similarly the government.

    Government needs to keep the regulations to a minimum while keeping everybody safe and the system fair and open. Capital needs to stay out of government and pay its fair share of taxes.

  119. Mr Ogden, I think your last retort illustrates Dr Vickstrom’s point to the point. Greed is just one form of addiction, and if you pay attention to those who focus on profit, picture them in street clothes working the dealers for their next fix. Fits for me!

  120. Margalit, way to find the pennies. Most of it goes to low or no part B premium. little to no co-insurance. Dental and vision care is very important for seniors, I rather they be on high deductibnle plans but either way dental and vision should be covered, especially at that age.

  121. Actually living in NJ and being one of these people Barry is not nearly as accurate as Margalit’s opinion she formed from liberal Media. Listen to Margalit she knows better then you, think what your told or it will only get worse.

  122. “Capitalism tends to devolve into monopoly or oligarchy, and corrupts the government.”

    Speaking of victims and defending, is it capitalism that corrupts government or government that corrupts capitalism? Long before a business has the power or money to buy influence, government is shaking it down for money. If the mop comes smacking you around and breaking things in your store for protection money are you arguing the shop keeper corrupted the mob?

    Its very easy to have a slanted opinion Craig when you start at the end.

  123. “Governor Christi is not fighting the people’s fight.”

    Margalit –

    Many of us in NJ would disagree with you. Even my liberal wife believes that both teachers and police are overpaid, greedy and totally insensitive to both taxpayers’ ability to pay and what’s going on in the real world. One of my wife’s friends, whose son is a public school teacher, brought home a petition protesting Governor Christie’s proposed cuts and asked his wife to sign it. She refused.

    Governor Christie, with help from Democrats in the state Senate, including the Senate president who is himself a leader in the ironworkers union, pushed through legislation that takes health insurance benefits outside of the scope of collective bargaining, requires workers to contribute a higher percentage of pay toward their pensions and caps property tax increases at 2% with some room for exceptions.

    The public employee unions wanted to deal with these issues through collective bargaining. What they don’t say is that none of the individual towns are powerful enough to take the unions on which is how we got into our fiscal mess in the first place. My own town took a teachers strike in the late 1970’s and it accomplished basically nothing aside from tearing the community apart for a time. Police, who are not permitted to strike, have their disputes resolved through binding arbitration. Historically, arbitrators were notoriously insensitive to either taxpayers’ ability to pay or the large number of qualified applicants for every opening even when the economy was booming. Meanwhile the cost of public employee pensions and health benefits are skyrocketing and crowding out other priorities despite the fact that we already pay the highest state and local tax burden in the country.

    That all said, it’s perfectly legitimate to deal with wage increases through collective bargaining because they’re transparent. If the union asks for a 5% wage and private sector workers are getting zero to 2% (if they still have a job), it’s easy to assess the reasonableness of the demand. By contrast, few people among the public ever knew the exact makeup of the health insurance benefits or the cost to provide them. People also didn’t know how much it cost the state, as a percentage of worker pay, to adequately fund the pension benefits. Accordingly, I think it’s appropriate to take pensions and health benefits outside the scope of collective bargaining while continuing to allow wage increases to be determined through negotiation.

  124. “I never understood why people with all of $5 to their name (not aimed at you personally) are willing to go out and fight the good fight for corporate welfare and more concession for the super wealthy.”

    Its becuase your so anti business and anti capitalism to your core you wear your blinders 24/7 and can’t see the truth.

    First how is taking 15% of someone’s money instead of 25% welfare? Very very few companies get true corporate welfare, actual handouts not being taxed at a lower rate.

    Second and the main reason is these people hope to have more to their name then $5 somedays and the smart ones know that isn’t going to come from government. While you want to pretend all business and rich people are evil the truth is most have a great relationship with their employees. As a business owner and someone that comes into contact with business owners every day I see all the good they do. Flexibile work schedules so they can take care of family and needs. Loaning them money to get through a tough spot. Covering something under the insurance plan that usually would not. Free schooling or training so they can learn and advance and make more money. Its business and rich people that give to local charities and step up in times of disaster. They support the schools and sports teams.

    Look at the inner cities and people that tied their hopes to government, only a fool would tie their horse to that cart. You don’t understand these people becuase your a closed minded liberal that thinks you know better and they should be doing what you think is right not what they know is right.

    “Amazon is closing warehouses in states that insist that Amazon pays sales tax.”

    Margalit can you at least get the facts straight, show one example of this happening. Amazon is only doing this when being required to do third party tax collection. Why should Amazon have to be the tax collector for the government? And why would a warehouse that ships to other states be a physical presensce that triggers local taxes, its not like you can go to the warehouse, buy something, and take it home. They were taxes that singled Amazon out, some even named Amazon tax.

    “Governor Christi is not fighting the people’s fight.”

    The people that elected him to do exactly what he is doing sure disagree. Another great example of your sheltered liberal dogma being more correct then others actual experience, actions and beliefs.

  125. It is interesting as to why people defend the new robber barons. I suppose it is due to ideology? We have a class of people that are hoarding wealth, stifling political debate, degrading the lives of most of the people on this planet, poisoning their environment, and decreasing their life-expectancy. Yet their victims defend them. Propaganda maybe?

    The profit motive is not always good. Capitalism is not always the solution. Capitalism tends to devolve into monopoly or oligarchy, and corrupts the government. But to the ideologues in the debate, these statements are heretical. Strange days, indeed.

  126. Nate,
    I never understood why people with all of $5 to their name (not aimed at you personally) are willing to go out and fight the good fight for corporate welfare and more concession for the super wealthy. I don’t consider this an achievement.

    As to corporations, and Merle’s point regarding Apple and Google replacing Microsoft, that is akin to replacing the fire with the frying pan. With Microsoft, I could at least pick my hardware and pick my apps without Mr. Gates’ approval. With Apple I cannot do either. As to Google, who makes its money from reading my emails, the least they could do is pay taxes, but they don’t. Amazon is closing warehouses in states that insist that Amazon pays sales tax.
    When these were gutsy little startups, they were very cute. Unfortunately as they get bigger and more powerful, they get corrupted. It comes with the territory. Bigness is dangerous to democracy. Just look up Alcoa and Standard Oil, two “American” icons, and how they behaved at the onset of WWII. There’s nothing new here. This is a fight that started a long time ago and right now corporations have a most definite upper hand. Governor Christi is not fighting the people’s fight. Nobody is.

  127. “but the fact is that powerful industry lobbies are controlling the political process and their interest, as always, is purely profit.”

    What industry do you classify SEIU under? ACORN? Soros? What industry is advocating we expand our debt ceiling so we can continue with trillion dollar annual deficits?

    “It would be naive to assume that a bunch of well meaning citizens can change anything at this point.”

    I think Chris Christi and the people of NJ would disagree with you. There are some schools in WI that would surely disagree with you, just read the paper to see how the citizrns of WI spoke up and achieved fundemental change in a matter of months.

    There are a number of states that balanced budgets with no or minimial new taxes for the first time in years. That was achieved by voting democrats out of office so I am cetrain you would rather have no change then have that happen.

    You won’t like it but I would be willing to bet the election throwing Obama and his crook friends out of office is going to solve a whole lot of problems. Time will show you the power of the people.

    “if things continue on the path currently laid out, all these large corporations will only get larger and more powerful.”

    Circuit City

    Health Insurance what happened to Principal, Nationwide, Guardian, and the dozen other big names that couldn’t cut it?

    “Large corporations have no such ethics.”

    Catholic Healthcare would be sad to hear you say that. How about all the work Google does? Ben & Jerry’s ice cream. Whole Foods? Pretty stupid comment margalit

  128. DeterminedMD,

    I’m selling neither snake oil nor anything else. And the healthcare IT company I founded will never be in the position of being able to “withhold care outright or provide cheap and unreliable interventions. . . .” so you need not fear it. Neither am I trying to advance a political agenda.

    I’m merely presenting a sharply different non-defeatist point of view than you and others seem to share about healthcare. I think it can be fixed by employing the very principles that have made this country so successful, not by abandoning them. You clearly don’t. That’s your prerogative.

    But please understand that repeatedly writing that “Turning a profit and allowing people to access care are incongruent in the end” doesn’t make it so. It merely blinds you to other points of view and actions you might take to remedy the ills that offend you.

    It’s like the guy who thinks the world is flat. His belief doesn’t change the shape of the world but it most certainly changes the way he relates to it! Similarly, believing that the power of any particular healthcare player is unshakable, leaves you impotent and unwilling to challenge them. I don’t have that mindset.


    Sorry that you, too, are so cynical about the possibility of changing healthcare. American business history — both long past and recent — is filled with stories of failed corporations that were once considered omnipotent.

    Look no further than Microsoft. Once viewed as an oppressive, monopolistic and unstoppable juggernaut, it now is being outgunned in virtually all its markets by upstarts like Google, Amazon, Apple and many others who weren’t intimidated by Microsoft’s power and clout. They merely went their own ways and disrupted Microsoft’s markets — leaving Microsoft to play catch up, if they can.

    We can do the same thing in healthcare if we have the will.

  129. Merle,
    The problem is, as always, that there is very little that people can change nowadays. Evidently there is very little that a President with a majority in both houses can change.
    What this says for our Democracy, I don’t know, but the fact is that powerful industry lobbies are controlling the political process and their interest, as always, is purely profit. It would be naive to assume that a bunch of well meaning citizens can change anything at this point. Perhaps later, when everything truly goes to hell in a hand basket, we will be able to.

    Unfortunately, if things continue on the path currently laid out, all these large corporations will only get larger and more powerful. All those advocating against the “fragmented” delivery system, are in fact advocating for corporatization and increased political power for those whose prime directive (perhaps only directive) is to turn a profit.
    A small business (like an independent small practice) can make a small and decent profit by aligning its services with customers’ best interests. Large corporations have no such ethics. Never had and never will.

  130. The author of this post is either out of touch with the realities that have been repeatedly shown since managed care took hold in the late 1980’s and the blatant greed of the pharmaceutical industry and medical device companies and how they continue to withhold consequences of their products until flagrant media exposures come to light, or, here we go again how this site lets someone run a post who is only sellling the snake oil that favors PPACA and other non clinical agendas. Turning a profit and allowing people to access care are incongruent in the end. Business minded people do not understand this or want to accept it.

    At the end of the day, if you have a bottom line for your company and share holders, you will withhold care outright or provide cheap and unreliable interventions to bring those monies in. Deny it all you want, Mr Bushkin, the facts are fairly obvious to those who are paying attention, not buying the sell rhetoric.

  131. “On Medicare Advantage, it costs on average about 14% more than FFS Medicare.”

    Because it provides 14% more in benefits, why does that always get left out?

  132. “There’s no question in my mind that competition can change our healthcare world.”

    How about a bit of J.D. Kleinke?

    “…All but the most zealous free-market ideologues recognize that some markets simply do not work. Indeed, reasoned free-market champions often deconstruct specific market failures to elucidate normal market functioning. The most obvious examples of such failures (such as public transit and the arts) are subsidized by society at large because such subsidies yield benefits to the public that outweigh their costs. Economists refer to these net benefits as “positive externalities,” defined as effects that cannot be captured through the economic equation of direct cost and benefit.

    The positive externalities of an HIT system approaching the functionality of our consumer finance IT system include reduction of medical errors like the one that killed Joe Wilson; elimination of tens of thousands of redundant and expensive tests, procedures, and medications, many of which are not only wasteful but harmful; and the coordination and consistency of medical care in ways only promised by the theoretical version of managed care. These public health benefits are well beyond the reach of a health care system characterized by the complexities of medicine and conflicts of multiple parties working at economic cross-purposes. They are trapped outside the economic equation, positive externalities of a stubbornly fee-for-service health care system that inadvertently rewards inefficiency, redundancy, excessive treatment, and rework…”

    “…The first step in understanding the real intrac- tability of the problem is ignoring the rhetoric. There is a veritable cottage industry involving the articulation of moral outrage over the health care quality “crisis,” much of it public relations spadework for someone’s political or commercial ambition and most of it culminating in a the naïve insistence that the system is on the verge of col- lapse and cannot go on like this. Actually, it can and will go on like this forever, ab- sent any major intervention by the nation’s largest health care purchaser—the U.S. government. Why? Because in the crude fee-for-service (FFS) reimbursement sys- tem inherited by that purchaser in the 1960s and fundamentally unchanged since then, the Las Vegas hospital has little real interest in knowing Joe’s medical history. In most cases, access to such information would represent a reduction in billable services. In an industry rife with dirty little secrets, this is health care’s dirtiest: Bad quality is good for business. And the surest road to bad quality is bad or no informa- tion. The various IT systems out there are expensive to buy, implement, and train staff to use, but this expense pales in comparison to all of the pricey and billable complications those systems would prevent…”

    I was specifically citing him on HIT here. But, he has long been all over the more general economic conundrums.


  133. Barry- Yes, that is true. My point was just to point out that not everyone will be able to have $600 MRIs. Also, doing so may have unintended consequences on hospital finances. The other factor that gets ignored at these OP MRIs is utilization. They are often physician owned and we know that physicians increase utilization when they own the facility. So, we probably can gain savings using OP MRIs. It probably wont be as much as one would like. (Most smaller hospitals have just one MRI. There is not much to shut down or sell off.)

    On Medicare Advantage, it costs on average about 14% more than FFS Medicare.


  134. I’m struck by two important threads running through these comments (and elsewhere) that inevitably lead some to conclude that the profit motive poisons the well and little can be done to improve care quality and reduce care costs, short of government takeover of healthcare. I simply don’t buy that.

    First, there’s the omni-present argument that healthcare is different and too complicated for conventional solutions to work. In my experience, people in every industry say the same thing about their particular industry. And in virtually every instance, they are proven wrong. Their mistake is to pose their problems in such broad, general terms that they can’t possibly solve them. But when they break them down into ever-smaller pieces, simple, common sense solutions generally emerge.

    The same holds true for healthcare. We can’t reduce all costs at once but by taking a lot of little steps, such as introducing simple healthcare IT systems, we ultimately can save many billions of dollars and greatly improve care. For example, by making a patient’s test results available to their providers, we can eliminate redundant or unnecessary testing. By making their records available from all their providers, we can reduce medical errors. By measuring and comparing quality we can identify the good and poor performers. And by publishing providers’ success rates and prices for various services, value providers will prosper; others will fail.

    Second, there’s a passive acceptance of powerful entities in healthcare and an assumption that their power is irreversible. Big hospitals, big payers, big pharma, big vendors – all are accepted even though they distort markets and in some cases corrupt providers and the care process. This doesn’t have to be! Public disclosure of abuses followed by vigorous law enforcement can level the playing field. When that happens producers of bad or unnecessary products or services will fail.

    There’s no question in my mind that competition can change our healthcare world. All we have to do is take off the blinders and make it happen!

  135. rbaer

    “. . . most of medicine is highly individualized services of teams of highly trained specialists that are rather sought after and rarely have overcapacities).”

    Is this really the case? More than 50% our doctors are in one or two doc practices. Combine that fact with the fact that most patients say their doctors don’t coordinate their care. If both of these statements are true, then most medicine can’t possibly be provided by teams of highly trained specialists. And, I suspect, most providers, whether working individually or in teams, know what their average revenue is per patient visit. I also suspect most know what they are paid for their most common complaints. Why can’t these data be posted for patients to see?

    Similarly, in my experience most specialists treating complex problems can give you a reasonably accurate ballpark approximation of what their care will cost. For example, what does an individual physician or team of physicians charge for a hip replacement? A hysterectomy? A heart bypass? Dialysis? The treatment of various forms of cancer (from surgery to chemo to radiation)? If you ask any doctor who performs these or other elaborate procedures or who cares for a chronically ill diabetic, don’t you think they can approximate what that care will cost? Their informed guesses will be pretty accurate. And for starters, that’s all we need. We can then ask that they as individuals or teams cap their charges at the amount they estimate so they don’t publish a low-ball price just to get the patients. And if they publish their capped rates, patients can combine this information with information about individual providers’ success rates and make an informed decision about whom to select.

    That happens to be the way most other professionals work, whether they are lawyers, architects, accountants, consultants, engineers, designers, or others. Why can’t it work in healthcare? The good docs who provide real value – ie., high quality care at low cost — will thrive. Others will either improve or watch their practices shrink. That’s what competition is all about!

    In short, if we make this type of information easily available, we most certainly will reduce the cost of care — without touching today’s fee-for-services compensation structure or other third-rail healthcare problems.

  136. Margalit –

    Eventually, all Medicare contracts with hospitals may be either shared savings plans or Medicare Advantage plans. If the traditional arrangement is still part of the mix, the beneficiary may have to pay a higher premium to have access to it. MA payments are gradually being phased down toward 100% of FFS Medicare. While savings from reduced utilization currently accrue to the health plans and not Medicare, I think that, over time, bids will drift down below FFS Medicare, especially if we get better at individual risk scoring.

    Personally, I think there is a lot of gold to be mined in focusing more on the sickest 5% of patients who account for up to 50% of program costs in a given year. There are savings to be had from better care coordination, case management, discharge planning and paying PCP’s sufficiently to properly oversee medical (as opposed to custodial) care that takes place in nursing homes. I don’t think any hospital could afford to keep the doors open if they didn’t accept Medicare.

    As for Medicaid, the states are flocking to move their beneficiaries into managed care plans because they save money. Kentucky was the latest state to move in this direction earlier this past week. While price is not the only factor considered in determining which companies get the contracts, it’s the most important factor.

  137. Barry,
    I don’t see how Medicare Advantage is lowering the amount paid per beneficiary. If anything, it seems to be higher. If they managed to reduce utilization, then the savings are not accruing to anybody but the plan, which is the case with other private HMOs as well. There is no basis to assume that this will somehow change now for no particular reason.
    As to the shared savings program, why would a hospital system voluntarily reduce volume of services, which will force the hospital to aggressively manage its costs down (not so easy), just to make the same profit as they did before the shared savings program? Wouldn’t it be easier to continue business as usual and not participate?

  138. Steve –

    While most hospital costs are fixed in the short term, they are quite variable over the long term. If all the easy and non-emergency imaging cases left the hospital for non-hospital owned centers and the number of images performed at the hospital declined by, say, 50%-75% over a period of time, there is no reason why the hospital could not significantly downsize its radiology department. Equipment could be sold off or not replaced when it becomes obsolete and the space could be converted to some other use including more patient rooms or OR’s. To say that the non-hospital owned centers are skimming off the easy cases is like saying retail clinics staffed by NP’s are skimming off the easy cases from PCP’s. Why should I need to see a more expensive doctor for a simple matter that an NP can handle perfectly well if one is available? From a system perspective, we should always be trying to provide all necessary care in the most cost-effective setting possible and drive out unnecessary care.

  139. Margalit –

    There are two answers to your comment. First, regarding doctors tethered to a hospital or hospital system, if we move toward global payments and away from fee for service, these health systems will take a make or buy mentality as to where the patient should be sent for the most cost-effective care. The more the system can control costs while still achieving high patient satisfaction and good care quality, the more net income it will earn.

    Second, Medicare and, I believe, Medicaid pay some hospitals more than others in an area for the same work. Academic medical centers are generally paid more to reflect their higher costs. As more Medicare patients choose Medicare Advantage plans and more Medicaid patients are moved into managed care, there should be more use of case managers to better control utilization, especially among the very expensive 5% of patients that account for 50% of healthcare costs in any given year. A lot of those expensive patients are shuttling back and forth between nursing homes and hospitals and/or getting a lot of unneeded therapy in nursing homes mainly to drive revenue for the home. Paying PCP’s enough to properly monitor their care could go a long way toward mitigating costs here. CHF patients, who spend a lot of time in and out of hospitals, could also probably be better managed than they are now. For the middle class and upper income elderly, much higher deductibles coupled with a reasonable OOP and/or tiered networks could also help to make them more cost conscious.

  140. I see two problems here. Pretty soon most referring docs will be tethered to a hospital or a hospital system and they will refer where they are told to refer.
    And then there is Medicare. Why should anybody on Medicare or Medicaid shop around? Prices are fixed at the low end anyway.

  141. Imaging is a revenue center for most hospitals. Their incentive is to use these to generate income to offset their cost centers. Cutting MRI fees means cutting spending elsewhere. The free standing centers support only themselves. Also, just to round out the information, the free standing centers are skimming off the healthier patients. Older, sicker patients who have trouble getting into the machine or require monitoring during the procedure will done at the hospital. It will cost more.


  142. Fair question Merle. When we lived in smaller communities, people knew each other. When businesses were smaller, businessmen knew their buyers. If you tried to make money by offering a marginal product through slick marketing, you hurt people you knew. It was less likely to happen. With our very large corporations and the ascendancy of the investment banker, short term profits are most important. It is possible to make so much money so quickly, that long term performance is not an issue.

    If people do not have the internalized morals to compete honestly and ethically, I think we have to provide external restraints. We also need information that device makers and others are unlikely to provide. They have little incentive to do CER. We providers have every reason to want that information.

    I think that there are areas where competition could help, but most of medicine does not fit. Lots of care is provided at tiny rural hospitals with no other facility close enough to provide competition. In small to medium sized towns you end up with enough business for two dominant providers. They learn to not compete. Finally, on the consumer side, 50% of people consume 3% of the care. That means most health care is consumed by relatively few people. Geographical, time and quality constraints are most important.


  143. I did not absolve those people. The device makers pay physicians millions to help develop these products. These guys then go out and give talks, influencing others to buy them. It is well planned, keeping profits, and fees, up for all. No one looks at whether or not there is enough difference between the old and new joints to determine if they are worth the differential. The patient does not have the knowledge to choose. Many of those buying are doing so based upon recommendations from those with financial interests in the product.

    “In regards to moprtgage they did offer that product and people, again choose, to buy the arm instead. No one forced them to take arms instead of 30 year fixed.”

    The 30 year fixed has been around for a long time. What was the new product the finance industry came up with that fits the quote? It does not exist. They came up with risky products that increased their own income, while putting consumers at higher risk. As the experts, they were believed by consumers when told that there was minimal risk. It has been well documented that brokers talked buyers out of conventional loans into riskier ARMS. (The Dutch system for mortgages would have accomplished the quoted requirements for a better mortgage.) Still, you are partially correct. It is a good idea to always be suspicious of those selling you something. Making money by selling a better product at a better price is so passe.


  144. “there are countless free standing imaging centers where members can get MRIs for $600. This is compared to the $2400 to $3000 we see at the hospital.”

    A friend of my wife who lives in Ohio needs to get a brain MRI every year. After I told her about my favorable experience at a non-hospital owned imaging center in NYC, this year she went to a non-hospital owned facility near her home: She was charged $659. Last year, she got the same test at her local community hospital. The cost: $2,300. The year before that, she got it at her regional academic medical center. The cost there: $4,000! If both patients and referring doctors were more aware of these huge price differences, it should either drive virtually all non-emergency and non-inpatient imaging business to non-hospital owned centers or force the hospitals to drastically lower their prices.

  145. Are you claiming non profits are more efficient and cost effective? Better to have a closed non profit ER then a functioning for profit one right?

  146. Take the F-O-R out of profit in health care matters and you might see the system be more efficacious and responsible. Until then, see the incongruency between care and profiting.

    But, business people don’t want others to know that basic premise, eh?

  147. Medical Imaging is a great example of the problems the system faces. Private business has done a great job creating competition, there are countless free standing imaging centers where members can get MRIs for $600. This is compared to the $2400 to $3000 we see at the hospital.

    We have a preferred alternative availabe but getting members to use it instead of the hospital for outpatient imagining is difficult. All the talk and handouts at enrollment and in the mail are forgotten when the need arises. Doctors have no interest or incentive to worry about the cost to the plan.

    So far the only slightly successful solution is rerquiring MRIs to be pre-certifed and change the benefit plan to co-insurance instead of flat co-pay. When a doctor calls to pre-certify we then have to convince them to use a free standing instead of hospital.

    Price competition isn’t going to cut spending 30% by itself. I bet from the claim we pay it could easily cut 5-10% though. Couple that with some other changes and we could easily cut spending 30% in a few years.

  148. almost every workers already has “including protection in the event … borrowers lose their job”

    Its called unemployement insurance and they are forced to buy it by law, why would they buy it a second time? In fact in most cases you can’t double up such policies otherwise you would have incentive to lose your job and not work.

    This is a great example of the mentality Merle talked about, look how quickly the usual cast of flaming liberals agreed.

  149. Steve who do they force to buy the new knee? They don’t stop selling the old one, they are making and selling a product people want, people are free to choose the less expensive knee.

    In regards to moprtgage they did offer that product and people, again choose, to buy the arm instead. No one forced them to take arms instead of 30 year fixed.

    Your placeing all the blame on business for allowing people to make bad decisions. how about assigning some blame with the people that actually made the mistakes?

  150. “Price competition could work for certain standardizable services such as medical imaging”

    Ah, but this is exactly the idea that drives much of the advocacy for delivery system reform (as opposed to insurance reform). Somehow, the policy driving crowd seem to think that medical care can be largely organized into standardized services, using evidence-based guidelines and protocols, with the ultimate result that these standardized packages can be priced and delivered competitively, with very little expertise and very little variation, in which case you could indeed price and compete like gas stations.

  151. I see – at least in metropolitan areas – plenty of competition. It’s competition in terms of new facilities, valet parking, birthing suites, fancy technology of often questionable value such as robotic surgery (and to some extent in terms of service, friendliness which are good things). To interpret quality data is extremely challenging (as it has to be adjusted for age, comorbidity and other factors) and for a lot of patients, excuse me consumers of marginal interest. Not every car buyer does an informed, reasonable decision after going to consumer websites (and for cars, that’s OK).

    Price competition could work for certain standardizable services such as medical imaging (and it should be used in the US), but most of medicine is highly individualized services of teams of highly trained specialists that are rather sought after and rarely have overcapacities). You may get a price break on a quick divorce if there are enough competing lawyers, but you will never get a deal due to price competition from a legal team doing a complex class action law suits (except pro bono work). The price lists make sense, but barely anyone pays the same price due to negotiated rates.

  152. Steve, Margalit, Maggie,

    The question is not whether some of the heads of companies and other organizations in our society, including government at all levels, have lost their moral compasses. While most haven’t, many clearly have, including care providers who knowingly order unnecessary or ineffective procedures — or, as Atul Gawande found in McAllen, TX, stimulate demand to meet the available supply of services!

    It’s been my experience that most people want to do the right thing and try very hard to do so, but I take it as a given that there are “bad” guys. The question is how do we as a society control, correct and even preclude their harmful behavior?

    Too many — including many who post on this blog — are content to take the seemingly-easy way out. Their answer is to replace free enterprise and competition with government-run programs. In other words, throw the proverbial baby out with the bath water. I guess they’re content with the Postal Service that costs us billions of dollars annually! I’d rather support UPS and FedEx, both of whom provide better service and make a profit.

    In short, what is your solution? Mine is to promote competition, make sure that consumers have the information they need to make informed decisions, and require that our government ensure a level playing field.


    In healthcare, to the extent we have competition, it clearly is at the wrong level. To paraphrase Michael Porter (Redefining Health Care), there is virtually no competition among care providers, which is where it would count. The competition that does exist focuses on who pays for coverage (employers, payers, consumers, government), not on who can provide the quality of care required at a reasonable price.

    The public doesn’t know who gets good outcomes versus bad, or what different providers charge for similar procedures. And since most of us behave as if care providers are commodities – assuming that they all are equally knowledgeable and skilled, we don’t demand the information we need to make informed intelligent decisions.

    So one first remedy should be to demand that performance information be published and readily available. This is happening ever so slowly. A second, might be to require that care providers publish a price list for the services they provide, much as Minute Clinic does or service stations do for the price of gas. A third might be to aggressively apply our anti-trust standards to consolidations in healthcare. That would limit the ability of hospitals, insurers, vendors or other large groups to dominate their market.

  153. In health care, there is a great distortion of the free market. For a lot of services, patients have no idea how much money X should be worth, but they and their physician are involved in “purchasing” yet the do not pay for X (or at least not most). That’s the reason why we (as a society) pay for so much worthless surgeries and drugs that are similar (or even inferior) to generic alternatives. The libertarian fix is: copays/high deductibles. The progressive is: basically regulate and incentivize. The problem with the former fix is that it will prevent a lot of highly beneficial and cost effective care – and a lot of that is already happening.

    And then, the medical-industrial complex creates its own quasi government; it has its own huge bureaucracy and collect its own taxes (that’s the feeling you get after you had discussions with seniors how they pay for their – usually bloated – medication lists, on top of medicare D, and when you know that certain drugs – say MS drugs that cost more than the median income – become unaffordable for many, but the industry says: let’s give the many needy folks rebates – industry sponsored drug assistance programs -, we take all money they can afford to pay and we don’t look like we are withholding drugs from the poor?).

    I can somewhat understand the tea partiers who want to go back to silver coins or the gold standard and live only with the most rudimenatry forms of administration (both corporate and governmental); but society and technology has become too complex for that – we no longer live in the 19th century.

    If the US cannot stop these developments (too many resources going into barely or not useful medical care and to the military-industrial complex, impoverization and marginalization of large parts of society, and decline of infrastructure, the US will be even less able to compete with parts of Asia, Europe and South America. Certain islands such as parts of the coasts (e.g. Boston, SF) likely will hold up well for a while, while the rest of the country will look more and more like the 3rd world.

  154. “Well-run, profitable businesses, along with our sense of decency,”

    There is the problem. If corporations were actually run in the best, long term interests of shareholders, we would need almost no regulations. If companies competed by trying to provide a better product at a lower price, we would have few problems. Now, let us look at pharma or the device makers. Paying generic companies to not make drugs so they can make higher profits on their proprietary drugs. Me too drugs. A new total knee every 6 months not significantly better than old ones. Unfortunately, we lost a lot of the morals we should have if business is to work best.

    Adam Smith wrote compellingly on this topic. The recently deceased Alison Jones wrote on the intersection of morals and business. Just a sample.


    Imagine if bankers had come up with the following.

    ” a good mortgage product with”low transaction costs and low interest rates” that “would have helped people manage the risk of home ownership, including protection in the event their house loses value or borrowers lose their job,”

    This holds for much of medical care also. Capitalism remains the best economic system we have ever had, but without a moral compass, it has badly deteriorated.