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1. Medical training and socialization of doctors has been depreciated such that the care they offer in inferior and insufficient, regardless of how they are paid. For most, it is no longer a calling, but rather, has become a game of dodging the darts tossed by insurers and the US Government.

   As for the crash victims sans insurance who want all modern care, keep in mind that there are dead beats in all businesses and industries, but free medical care paid by others should never be tolerated. The same folks find money for cigs, beer, and other.

   In the past, these patients were put on resident services run by Chief residents as teaching programs. they got care but they were also teaching cases. Let’s go back to that “free care” quid pro quo.

2. Uwe, you are looking for a way to save money. HSA’s demonstrate part of a method, but one can use the same payment system adding things like tax credits and even subsidies so that whatever program is enacted maintains our liberties and has the least effect upon the market place. I didn’t require your #2 because I am well aware of the problem you fear for we fear the same thing, but I am happy you mentioned it.

   I don’t even dislike your Social Solidarity Insurance idea whether said in jest or not, except I removed your idea from the hands of government and placed it in the market place. Since you didn’t want it to govern everyone’s life you didn’t need the government involved.

   In fact your idea isn’t that far off from some ideas of your courier John G. (Hoping that I am not excessively distorting a collection of his ideas, he utilizes Medicaid as a fall back already paid by the massive tax deductions we presently have in place. This can be augmented by the purchase of private insurance. I am not saying that he supports that type of plan nor am I saying that I support it, but it does provide space for a market place to develop and thrive while providing limits to government control.)

3. You are right Barry, Medicare is not a rational actor and neither is or will the ACA be one because under our system health care becomes politicized. Thus it’s not the prices (stupid) rather the vision that people have which is converted into politics.

   You provide an interesting fact that generic drugs are cheaper in the US than elsewhere which is likely to be mostly true, but over the counter medications are likewise frequently less expensive. Markets account for a good deal of that price benefit.

   There are many reasons our costs are greater than they should be, but to blame them on the market place in my opinion is foolish as we haven’t had a free market place in health care since WW2. We should place the blame where it should be placed… dumb governmental policy.

   Check out http://www.patmosemergiclinic.com who a number of years ago I was in contact with. When he first started his clinic he revealed a good deal of the financial details of the clinic and within a couple of years was making more money than most Internists in the nation and working a lot less. Since then he raised his prices so he must be making even more today. Check out his fee schedule that he posts and check out his credentials. Check out how his business functions. This is the market place, not employer sponsored insurance or Medicare.

   By the way since you are looking at comparisons have you checked out CONCORD?

4. I believe it was in an interview with Dr Reinhardt that the outgoing head of Medicare called his own program “a dumb price fixer.”

   My own study of Medicare claims has been brief, since as a layman the data is hard to come by.

   But my impression is that Medicare has both some very high prices and some rather average prices, by international standards. I believe that the astronomical prices paid for some transplants and cancer treatments and complex bypass cases just overpower the well controlled prices paid for many office procedures and diagnostic tests.

   A recent study of large claims in the Federal high risk pool showed that 45% of each claim went to drugs and devices, and 40 to 45% went for hospital facility fees. (usually for large academic hospitals) The surgeons were never the problem. (i am kicking myself for not saving the article.)

5. Dr. Reinhardt –

   I’m actually a fan of insurer choice and am willing to pay somewhat more for it but only up to a point. I think there is enormous room for consolidation within the insurance sector and there is also lots of room for insurers to shrink and simplify their plan offerings.

   I note that in numerous sectors of the retailing industry, two or three competitors in a market can provide plenty of competition in both price and service to customers. Think Wal-Mart, Target and K-Mart; Home Depot and Lowe’s; Walgreens, CVS and Rite Aid; Staples and Office Max.

   If there were only three or four health insurers in each market and each individual insurer paid providers the same price for a given service, test or procedure no matter which insurance plan the patient chose, administrative expenses could fall significantly. An insurer could differentiate its offerings on the basis of scope of coverage, deductibles, coinsurance amounts and the maximum amount that the patient or family would have to pay out-of-pocket in a particular year.

   The best critique of single payer systems that I’ve seen can be found in the book, “Healthcare, Guaranteed” by Dr. Ezekiel Emanuel, now at the University of Pennsylvania. Specifically, see Chapter 7, pages 153-170 – Single-Payer Plans: An Outdated Solution for Modern Medicine.

6. Al:

   A card carrying Liberal would not endorse HSAs for two reasons:

   1. Because of the progressive income tax code, they (along with employment based insurance) do benefit high income people more than low income people. And two wrongs don’t make a right — just to be preemptive here and save you some ink.

   2. Unless everyone gets endowed by government with the same deposit in the HSA (and that’s all you can put into it on a tax preferred basis), the high deductible policies that are the sine qua non of the HSA deal do ration health care by income class. Liberals don’t like that.

7. Barry,

   What you say is true and well known among a subset of policy wonks, yours truly included. Years ago Mark Pauly wrote on it in Health Affairs. A group of us subsequently published “It’s the Prices Stupid” in Health Affairs. The McKinsey Global Institute in 1996 came out with a study making your point — also pointing out that we spend vastly more on administration than do other nations.

   It IS strange that we are so fanatic about evidence based clinical medicine, but never about evidence based administrative processes. The rationale is that we get “choice” for all that administrative hassle and expense, but that is just a credo — like, say, belief in the Virgin Birth.

8. Al –

   I don’t view Medicare as a completely rational actor because it’s vulnerable to political pressure from powerful interest groups. I remember the incredible pushback it got from what I thought was an obvious strategy to seek competitive bids from sellers of durable medical equipment. The committee that deals with reimbursement updates for doctors operates behind closed doors and is dominated by specialists who protect their own interests at the expense of primary care doctors. CMS is specifically prohibited from taking cost into account in deciding what to cover and not cover so it winds up paying for every expensive biologic drug that wins FDA approval.

   In the U.S., hospital length of stay is well below the OECD median. Physician consults per capita are also below average. We don’t consume any more drugs per person but pay 50%-100% more for many of the most commonly prescribed brand name drugs. Paradoxically, though, generic drugs are actually cheaper in the U.S. than elsewhere. The number of knee replacements per 100,000 people performed in the U.S. is below the OECD median. We are tied with Germany for first place in hip replacements but Germany spends a far lower percentage of GDP on healthcare than we do. The Japanese do more imaging than we do and they have many more patients at the end of life that stay on life support for years but they still spend far less on healthcare relative to the size of their economy than the U.S. does.

   I have never seen a good study that compares overall hospital costs per licensed bed for U.S. academic medical centers and community hospitals vs. their peers in Western Europe, Canada and Japan. We may do more diagnostic testing than most other countries because of our litigation environment and because too many patients think more care is better care when much of the time it isn’t. However, I think actual prices paid for hospital based care and for brand name drugs are far higher in the U.S. than elsewhere and that is likely a bigger contributor to our excessive healthcare costs than utilization but I’ll be the first to admit that I couldn’t prove it in court.

9. Barry, C. I agree with most of your response to Bob H., but I wonder about the referral to “It’s the Prices, Stupid”. We all recognize that prices count, but is that the real difference between nations? Maybe the difference is our individual visions of how things should be. If it were simply prices and Medicare was paying twice as much for colonoscopy than to privately owned out patient clinics Medicare and the government would be encouraging the growth of out patient clinics to do colonoscopies. But, they aren’t. In fact they are trying to stop the growth of these lower priced private outpatient clinics. If prices were the cause then why would the ACA not embrace HSA’s which have been demonstrated to lower costs? These inconsistencies tell us it is more than prices that are at issue.

10. Bob –

    If a hospital ER had capacity to treat 100 patients per night, they might have enough beds to treat up to six or eight or ten patients at any given time. Whatever the number is, if demand went to 200 patients per night, they would need twice as many beds as they had before and twice as many docs and nurses. They have to staff for their peak load though not all staff needs to be full time. So, the extra beds would double the amount of square footage needed for treatment space. The waiting room would also have to be larger to accommodate twice the number of family members as there were before. Everything needs to be scaled up.

    It’s like when school enrollment increases significantly, you need more teachers and more classroom space and you may need to add a new wing onto an existing school or maybe even build a whole new school depending on the size of the enrollment increase. It’s OK to look at marginal costs when you have lots of extra capacity and a modest increase in demand. When there is a step increase, though, the whole infrastructure needs to be scaled up to meet the new demand if you were operating at close to capacity during peak times initially.

    Conversely, in some of our large cities, there are too many hospitals and some need to close and are indeed closing but often not without a big fight to try to protect the jobs of the people who work in them.

    After several recent lengthy New York Times articles about the cost of colonoscopies, low risk childbirth and, most recently, hip replacements, that highlighted the enormous cost differences in the cost of these procedures in the U.S. vs. other developed countries, our biggest problem is the prices per service, test and procedure for hospital based care and for brand name drugs. As Dr. Reinhardt and several others said in their famous 2003 Health Affairs article, “It’s the Prices, Stupid.”

11. Barry , I know precious little about running a hospital, but here is what I was thinking:

    If an ER goes from 100 patients to 200 patients a night, it needs some number of extra nurses assigned and more visits by hospital physicians.

    If these people are already on the payroll and underutilized elsewhere, there are no extra costs. If there is new hiring, there is some extra cost I admit.

    But the hospital mortgage and utilities and utilities and accounting departments are barely touched at all. I was under the impression that this fixed overhead was a big part of hospital cost accounting.

12. Bob –

    You’re not looking at this correctly. If an ER can accommodate, say, 100 patients per night, if demand swelled to 200 patients, it would have to double its capacity even though it might be able to handle an extra one or two or three patients without too much trouble. Conversely, if we could cut imaging use in half by eliminating unnecessary defensive medicine driven tests, the radiology department could effectively serve twice as many patients across its region without having to build expensive additional capacity. Or, it could retire rather than replace one or more of its expensive imaging machines, law off radiologists and techs and divert some of the freed up physical space to other productive uses.

    As for expensive ER charges, I’ve said numerous times that there needs to be special rules limiting how much can be charged for care that must be delivered under emergency conditions. My preference is to limit this charge to 115% of the Medicare rate. NJ limits all hospital charges to this amount for uninsured patients with income below 500% of the FPL.

    For other care that can be scheduled in advance, we need price and quality transparency so both patients and referring doctors can easily identify the most cost-effective high quality providers in real time and direct more of our business to them. To do this, we need to outlaw the confidentiality agreements between insurers and providers that currently preclude disclosure of actual contract reimbursement rates. We also need to develop relevant quality metrics including risk adjusted outcomes for surgical procedures, risk adjusted infection rates and avoidable readmission rates, and how good a job hospitals and doctors do in following evidence based guidelines and protocols.

13. Bob, when I lived in Toronto the issue of ER over use (instead of waiting to see PCP) was an ongoing discussion about how to curb it and it’s costs. There everyone walks into an ER and walks out without a bill.

    Some numbers on the cost of the two systems here:

    http://www.cihi.ca/cihi-ext-portal/internet/en/document/spending+and+health+workforce/spending/release_03nov11

    http://www.cdc.gov/nchs/fastats/hexpense.htm

    Apparently free controls costs better.

14. In theory, Barry, if the ER was fully funded by tax dollars, would it make that much difference how many people went there?

    The marginal cost of an extra ER patient cannot be that high, I would think, once the fixed costs are met.

    A fire department that fights 600 fires a year cannot be that much more expensive than one which fights 300 fires. The personnel and equipment costs go up a little, the cost of extra water is trivial.

    But I see what you are saying…..that extra ER admissions will lead to a bulge in more expensive hospital admissions.

    Is there a way to solve this, other than our current “method’ of huge charges for ER use?

15. The Rugged Individualist would surely agree that any charges the hospital and docs care to make is “appropriate”, or at least not to be questioned by the gubmint.

    A better question I think is how we arrive at the federal poverty level.

16. Far too sensible. 😉

17. Bob –

    Many hospitals get half of their inpatient admissions or more through the ER. When patients call their PCP with a problem, they are often told to go to the ER, especially if it is after normal business hours. Many poor people routinely go to the ER for even minor problems because they perceive it as a better and cheaper (for them) one stop shop that eliminates the need to schedule multiple appointments, try to arrange transportation and take time off from work. If people knew that emergency care were funded by taxes, even more patients would go to the ER for issues that could easily wait because they would feel that they’re already paying for the care through their taxes anyway even if they don’t pay income taxes. There would be huge potential for unintended consequences here.

    One thing I would favor though is fully paying academic medical centers for their education function on a fully allocated basis with a separate revenue stream whether it’s through Medicare or some other mechanism. That would eliminate the need for these centers to build this significant cost into their pricing of medical care.

18. Because the ACa tries to solve all health care issues through private insurance, albeit with subsidies, we have all become a little fixated on how to persuade or compel everyone to buy private insurance.

    There is another solution, as follows:

    – Treat emergency medicine as a public service, not unlike fire and police departments.

    And pay for emergency care with taxes, not backbreaking user fees or backbreaking insurance policies that are needed to cover the user fees.

    Every individual and every employer in the country would pay 1% of income, or whatever, and the money would go to emergency facilities.
    Whether the money goes fee-for-service or in a global budget is very important, but not something to work out in one brief post.There is also an issue of how to pay for people who are uninsured when they come into the ER and are then admitted to the hospital.

    Any form of taxes is less precise than user fees. I say, so what? Some of the people who need to call the fire department have caused their own fire by carelessness. We can live with this. Imagine the chaos if each of us had to sign a contract with competing local fire departments. As a whole we benefit for a certain degree of imprecision.

    Bob Hertz, The Health Care Crusade

19. While I would support denying people the chance to buy health insurance later if they don’t buy it when they are first eligible for it, I don’t think such a bill could ever get through Congress for the reasons I explained in my last comment.

    One alternative approach might be to require those who didn’t buy the insurance initially to prove insurability if they want it later. That means they would need to pass medical underwriting unless they could qualify under a legitimate exception like losing employer coverage or coverage under a spouse’s plan or aging out of coverage under a parent’s plan. This is the way Medicare supplemental and most large employer health insurance plans work. Guaranteed issue cannot work unless there is a mandate to buy insurance coupled with a substantial penalty if you don’t buy it. Otherwise, the pool will be dominated by sick people and insurance will be too expensive for most people to afford and you wind up with an adverse selection driven death spiral.

20. I lived in Alaska for about 5 years – place is full of self described “rugged individualists. The joke is though that the anti-guvment type vent their worst as they walk to the mailbox to collect their guvment check.

    “but to the extent possible we would cover their full bill – possibly at charges — by expropriating any assets they might have and garnishing any income above the federal poverty level they subsequently might earn.”

    One question on the above Uwe, since we have the most expensive system in the world how would you arrive at the “appropriate” charges? The mandate forces us to buy the Cadillac in the high priced rental district.

    If everyone spent their fun money on health insurance the economy might wake up and get those prices down.

21. I have not always agreed with this author, but this time, he nailed it.

22. Thanks Dr. Reinhardt,

    Brilliant – I’m for it -But Uwe- this isn’t a “civic nicity” – It is a moral obligation of any nation that calls itself a civil society.

    The US has not yet achieved that preferred status 🙁

    Dr.Rick Lippin
    Southampton,Pa

23. Barry, you seem to be missing the point here. It is precisely those rugged individualists, not liberals, who want to spend other people’s money. They don’t want to buy insurance, but they expect to be taken care of when they crash their bikes. Buying insurance is spending your own money.

24. I don’t think liberals would ever agree to even a five year ban on buying health insurance for young people who opted out of the health insurance mandate. They would say it’s unfair to penalize them for being young and immature and irresponsible and for perceiving themselves (wrongly) as invincible. Their hearts bleed too easily and they’re too quick to want to spend other people’s money to make themselves feel good and righteous about their claimed belief in fairness and social justice.

    As for the broader issue of people wanting government programs that benefit them and their family but favor getting rid of other programs, I go back to something I’ve suggested numerous times before. Invite every large interest group to a summit to find ways to cut the federal budget deficit. The only rule is that each group can only recommend program cuts or tax increases that directly affect them. I’m tired of hearing people say cut spending but not my program or raise taxes but not those that I would have to pay. The greed and hypocrisy are stunning.

25. U.R.:”My proposal is to make that a lifetime exclusion. An individual would have to choose one or the other system by age 25.”

    I think it is a great idea!

    Let us create an insurance company called the Social Solidarity Insurance Company and anyone that wishes to join can become a member at age 25 and pay for this pooled care.

    Ahhh, do I hear one saying ‘that is not what I meant?’

    I think I do hear that squawking already because those that actually join the company will have to pay the piper directly no longer believing that the piper is paid by someone else.

    ( Pers: I am hoping to leave your grandchildren with a free society where they can prosper as well and take moon trips with their children to decide instead of being told what the moon is made of.)

26. Several years ago there was a debate in-print between Malcolm Gladwell and Adam Gopnik on national health insurance. (I think it was in Harper’s or The Atlantic)

    Anyways, the point was made that in general, it is men who want heroic heli-copter rescues and are OK with large deductibles, whereas it is women who must visit doctors much more often and want first dollar coverage.

    I am a faithful reader of health care blogs, both left and right wing, and with rare exceptions this sexual divide seems to hold true.

    This divide is also a part of the ACA debate. The angriest opponents of a mandate are men, and the strongest supporters of free contraception and free preventive care are women.

    The same pattern may hold sway in coming national elections. Let’s see.

27. A great post. You have it exactly right. The only government programs “conservative” Americans want are the ones they personally benefit from. If they are old or have old parents this certainly includes Medicare. If their son impregnates a young poor girl it would include Medicaid OB care. If their bank fails, they will appreciate the FDC. Just not those benefits they don’t use.

28. Good one!

29. sounds like you’re in need of a memory refresh:
    https://thehealthcareblog.com/blog/2012/12/04/deja-association-the-republican-health-reform-idea-hiding-in-obamacare/

30. Govt politicians will fold the very first minute that CNN runs a sob story about how some poor bloke “forgot” to buy insurance and suddenly gets hit with a catastrophic illness w/ uncontrolled medical bills.

    In light of such sympathetic stories in the media, the outcome will be inevitable — govt will write “exceptions” into any mandate so that their constituents wont be punished.

    This is ESPECIALLY true since Democrats are the ones writing the legislation on healthcare. Seriously, do you really see democrats telling their constituents that they are “out of luck” by failing to sign up for insurance?

    I can nearly guarantee you that wont happen. The only politicians who tell people “tough luck” are republicans, and the republicans didnt write the healthcare law.

31. Brilliant! Let’s do it!

32. I’ve struggled with this issue for decades and there’ve been times when I was not even willing to be as generous as Reinhardt. And this is not merely because I was cranky. The injuries of the victim of the impending motorcycle crash in his article may cost much more than a helicopter ride and a hospital stay. Indeed, they may leave that “individualist” with no income at all for the rest of their days. Then what?

33. Ding, Ding, Ding, we have a winner!
    __

    “only calling the self-styled rugged individualist’s partisan bluff, knowing how much they actually cherish … their parents’ Medicare”
    __

    And, we KNOW why they love it. Socializes the cost of the crushingly expense of inevitable acute, LTC, and/or end of life care for those parents, leaving way more behind in the estates for The Rugged Individualists to distribute (Death Tax-free, of course).

    I just finished not too long ago cutting more than $300k worth of private-payer LTC checks for my late Ma, as her POA. Wasn’t much left in the estate after she died. The attorney who did the Guardianship for me on my disabled WWII vet dementia-addled now late Pop tried to get me to “explore legal avenues for asset protection” — meaning foist off the nursing home care on the taxpayers, basically. So you can inherit more (minus, of course, the $300/hr cost of the lawyer for artfully setting things up).

    I just gave her the “Talk To The Hand. Not Goin’ There” cutoff response.

34. This failure to follow logic has flummoxed me for decades: I want to drown government in the bathtub, but not the part that gives me the stuff I like. Oh, and once I’ve drowned that bad government baby in the bathtub, I wanna throw that baby right out with that bathwater. Oh, except for farm subsidies, and 365-day tax holidays for big banks and the Fortune 100.

    This is the nugget: “It is a safe bet, though, that even the most rugged uninsured individualists among them would expect a helicopter from Denver to pick them up and fly them to Denver, should they take a severe spill in the mountains. They would expect the finest health care Denver can offer, even if they had no means to pay for either helicopter or health care.” Yep, they would expect that. ‘Merika!