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Non-Alternative Facts About the Healthcare System

The economic fundamentals of healthcare in the United States are unique, amazingly complex, multi-layered and opaque. It takes a lot of work and time to understand them, work and time that few of the experts opining about healthcare on television have done. Once you do understand them, it takes serious independence, a big ornery streak, and maybe a bit of a career death wish to speak publicly about how the industry that pays your speaking and consulting fees should, can, and must strive to make half as much money. Well, I turn 67 this year and I’m cranky as hell, so let’s go.

The Wrong Question

We are back again in the cage fight over healthcare in Congress. But in all these fights we are only arguing over one question: Who pays? The government, your employer, you? A different answer to that question will distribute the pain differently, but it won’t cut the pain in half.

There are other questions to ask whose answers could get us there, such as:

  • Who do we pay?
  • How do we pay them?
  • For what, exactly, are we paying?

Because the way we are paying now ineluctably drives us toward paying too much, for not enough, and for things we don’t even need.

A few facts, the old-fashioned non-alternative kind:

  • Cost: Healthcare in the U.S., the whole system, costs us something like $3.4 trillion per year. Yes, that’s “trillion” with a “T”. If U.S. healthcare were a country on its own it would be the fifth largest economy in the world.
  • Waste: About a third of that is wasted on tests and procedures and devices that we really don’t need, that don’t help, that even hurt us. That’s the conservative estimate in a number of expert analyses, and based on the opinions of doctors about their own specialties. Some analyses say more: Some say half. Even that conservative estimate (one third) is a big wow: over $1.2 trillion per year, something like twice the entire U.S. military budget, thrown away on waste.
  • Prices: The prices are nuts. It’s not just pharmaceuticals. Across the board, from devices to procedures, hospital room charges to implants to diagnostic tests, the prices actually paid in the U.S. are three, five, 10 times what they are in other medically advanced countries like France, Germany, and the U.K.

  • Value: Unlike any other business, prices in healthcare bear no relation to value. If you pay $50,000 for a car, chances are very good that you’ll get a nicer car than if you pay $15,000. If you pay $2200 or $4500 for an MRI, there is pretty much no chance that you will get a better MRI than if you paid $730 or $420. (Yes, these are real prices, all from the same local market.)
  • Variation: Unlike any other business, prices in healthcare bear no relation to the producer’s cost. None. How can you tell? I mean, besides the $600 price tag on a 69-cent bottle of sterile water with a teaspoon of salt that’s labeled “saline therapeutics” on the medical bill? (Yes, those are real prices, too.) You can tell because of the insane variation. The price for your pill, procedure or test may well be three, five, even 12 times the price paid in some other city across the country, in some other institution across town, even for the person across the hall. Try that in any other business. Better yet, call me: I have a 10-year-old Ford F-150 to sell you for $75,000.
  • Inefficiency: We do healthcare in the most inefficient way possible, waiting until people show up in the Emergency Department with their diabetes, heart problem, or emphysema completely out of control, where treatment will cost 10 times as much as it would if we had gotten to them first to help them avoid a serious health crisis. (And no, that’s not part of the 1/3 that is waste. That’s on top of it.)

So who’s the chump here? We’re paying ridiculous prices for things we don’t necessarily need delivered in the most inefficient way possible.

Why?

Why do they do that to us? Because we pay them to.

Wait, this is important. This is the crux of the problem. From doctors to hospitals to labs to device manufacturers to anybody else we want to blame, they don’t overprice things and sell us things we don’t need because they are greedy, evil people. They do it because we tell them to, in the clearest language possible: money. Every inefficiency, every unneeded test, every extra bottle of saline, means more money in the door. And they can decide what’s on the list of what’s needed, as long as it can be argued that it matches the diagnostic code.

That’s called “fee-for-service” medicine: We pay a fee for every service, every drug, every test. There’s a code for everything. There are no standard prices or even price ranges. It’s all negotiated constantly and repeatedly across the system with health plans, employers, even with Medicare and Medicaid.

We pay them to do it and the payment system demands it. Imagine a hospital system that bent every effort to providing health and healthcare in the least expensive, most effective way possible, that charged you $1 for that 69-cent bottle of saline water, that eliminated all unnecessary tests and unhelpful procedures, that put personnel and cash into helping you prevent or manage your diabetes instead of waiting until you show up feet-first in diabetic shock. If it did all this without regard to how it is paid it would soon close its doors, belly up, bankrupt. For-profit or not-for-profit makes little difference to this fact.

If we want them to act differently, we have to pay them differently.

Paying for Healthcare Differently

But wait, isn’t that the only way we can pay? Because, you know, medicine is complicated, every body is different, every disease is unique.

Actually, no. There is no one other ideal way to pay for all of healthcare, but there are lots of other ways to pay. We can pay for outcomes, we can pay for bundles of services, we can pay for subscriptions for all primary care or all diabetes care or special attention for multiple chronic conditions, on and on, the list of alternative ways to pay for healthcare is long and rich.

There are now surgery centers that put their prices up on the wall, just like McDonalds — and they can prove their quality. There are hospital systems that will give you a warranty on your surgery: We will get it right or fixing the problem is free.

Look: You get in an accident and take your crumpled fender to the body shop. Every fender crumples differently, maybe the frame is involved, maybe the chrome strip has to be replaced, all that. So there is no standard “crumpled fender” price. But it is not the first crumpled fender the body shop has ever seen. It’s probably the 10,000th. They are very good at knowing just how to fix it and how much it will cost them to do the work. Do you pay for each can of Bondo, each disk of sandpaper, each minute in the paint booth? No. They write you up an estimate for the whole thing, from diagnosis to rehab. Come back next Thursday and it will be good as new. That’s a bundled outcome. It’s the body shop’s way of doing business, its business model.

There are new business models arising now in healthcare (such as reference prices, medical tourism, centers of excellence, “Blue Choice” and other health plan options) that force hospitals and surgical centers to compete on price and quality for specific bundles, like a new hip or a re-plumbed heart.

Healthcare is a vast market with lots of different kinds of customers in different financial situations, different life stages, different genders, different needs, different resources, yet we have somehow decided that in pretty nearly all of that vast market there should be only one business model: diagnostic-code-driven fee for service. Change that, and the whole equation changes. It’s called business model innovation. If we find ways to pay for what we want and need, not for whatever they pile onto the bill, they will find ways to bring us what we want and need at prices that make sense. That’s called changing the incentives.

Already Happening

Is this pie in the sky? No, it’s already happening, but in ways that are slow and mostly invisible to anyone but policy wonks, analysts, and futurists like me. The industry recognizes it. Everyone in the healthcare industry will recognize the phrase “volume to value,” because it is the motto of the movement that has been building slowly for a decade. It’s shorthand for, “We need to stop making our money based on volume — how many items on the list we can charge for across how many cases — and instead make our money on how much real value, how much real health, we can deliver.”

Self-funded employers, unions, pension plans, and tribes are edging into programs that pay for healthcare differently with reference prices, bundled prices, onsite clinics, medical tourism, direct pay primary care, instant digital docs, team care, special care for those who need it most, all kinds of things. The Affordable Care Act set up an Innovation Center in the Centers for Medicare and Medicaid Services, and the government has been incrementally pushing the whole system more and more into “value” programs.

Are We There Yet?

So why hasn’t it happened yet? Why aren’t we there yet?

Because it’s hard, it’s different, and it hurts. And there is a tipping point, a tipping point that we have not gotten to yet.

It is very hard to loosen your grip on a business model as long as that business model pays the bills. We built this city on fee for service, these gleaming towers, these sprawling complexes, these mind-bending levels of skill and incomprehensible technologies. To shift to a different business model requires that everybody in the healthcare sector change the way they do everything, from clinical pathways to revenue streams to organizational models to physical plants to capital formation, everything all the way down. And it’s all uncharted territory, something the people who run these systems have not yet done and have little experience in. It’s guaranteed to be the end of the line for some institutions, many careers, many companies.

So far, the government “volume-to-value” or “value-based-payment” programs are incremental, baby steps. They typically add bonus payments to the basic system if you do the right thing or cut payments a few percentage points if you don’t. My colleague health futurist Ian Morrison calls these programs “fee for service with tricks.” They do not fundamentally change the business model.

Private payers such as employers have only gradually been getting more demanding, unsure of their power and status as drivers of change in this huge and traditionally staid industry. Systems such as Kaiser that have a value-based business model (so that they actually do better financially if they can keep you well) still have to compete in a system where the baseline cost of everything they need, from doctor’s salaries to catheters, is set in the bloated fee-for-service market. So movement is slow, and we are not yet at the tipping point.

Back to Who Pays

This is not a libertarian argument that everyone should just pay for their own healthcare out of their own pocket and let the “free market” decide. The risks are far too high, and we are terrible at estimating that risk, financial or medical. All of us are, even your doctor is, even I am. A cancer can cost millions. Heck, a bad stomach infection that puts you in the hospital for 10 days could easily cost you $600,000. Bill Gates or Warren Buffet can afford that, you and I can’t.

We need insurance to spread that risk not only across individuals but across age groups, across economic levels, and between those who are currently well and those who are sick. For it to work at all, the insurance has to be spread across everyone, even those who think they don’t need it or can’t afford it. You drive a car, you have to have car insurance, even if you are a really safe driver. You buy a house, you must have fire insurance, even though the average house never burns down. You own and operate a human body, same thing, even though at any average time you hardly need medicine at all.

If we are to have insurance for everyone, we need to subsidize it for those who have low incomes — and this has nothing to do with whether they “deserve” help, or even with whether healthcare is a right. It’s about spreading the cost of a universal human risk as universally across the humans as possible. At the same time, such subsidies need to be given in a way that helps people feel that they are spending their own money, that they have a stake in spending it wisely. This is not simple to do, but it can be done.

This is also not necessarily an argument for a single payer system. Single payer, by itself, will not solve the problem. It doesn’t change the incentives at all. It just changes who’s writing the check. What the system needs most is fierce customers, people and entities who are making choices based on using their own money (or what feels like it) to pay for what they really need. This forces competition among healthcare providers that drives the prices down. That means the system needs variety, a lot of different ways of paying for a lot of different customers. If we can figure out how to do that in a single-payer system, well then we’re talking.

Obviously the ultimate customer in healthcare is the individual, since medicine is about treating bodies, and we have exactly one to a customer. But the risk is too high at the individual level, and the leverage is too low.

So employers, pension plans and specialized not-for-profit mutual health plans whose interests really line up with the interests of their employees or members can act as proxies. They can force providers of healthcare (hospital systems, medical groups, labs, clinics) to compete for their business on price and quality. They can refuse to pay for things that the peer-reviewed medical literature shows are unnecessary. They can pay for improvements in your health rather than just fixing your health disasters. They can help their members and employees become fierce customers of healthcare with information and with carefully-titrated incentives.

Here’s one example of an incentive: A payer says to its members, “You need a new knee? Great, fine. Here are all the high-quality places you can get that done in your area. You can choose any that you like. But here’s a list of high-quality places in your area that do it for what we call a “reference price” or even less. Choose one of those places, and we will pay for everything from diagnosis to rehab. You can choose a place with a higher price if you like, but you’ll have to pay the difference yourself.” With reference prices, the employee or member partners with the payer in becoming a fierce, demanding customer, and prices for anything treated this way come crashing down.

Both payers and individuals, by being fierce customers, can force the healthcare providers in turn to become fierce customers of their suppliers, forcing pharmaceutical wholesalers and device manufacturers to bid on getting their business. “This knee implant you are asking us to pay $21,000 for? We see you are selling it in Belgium for $7,000. So we’ll pay $7,000 or we’ll go elsewhere.” The “price signals” generated by fierce customers reverberate through the entire system.

What’s the look and feel?

“Healthcare for half” sounds to most people like a Greyhound bus station with stethoscopes, like flea market surgeries, and drive-through birthing centers. Paradoxically, though, a lean, transparent system catering to fierce customers of all types would feel quite the opposite, offering more care, even what might feel like lavish care, but earlier in the illness or more conveniently. It might mean a clinic right next door to your workplace offering private care on a walk-in basis, no co-pay, even your pharmaceuticals taken care of — or you could choose to go elsewhere to another doctor that you like more, but you have to schedule it and pay a copay for the visit. Why will providers make healthcare so convenient and personal? Because if they are paid to be responsible for your health it’s worth the extra effort and investment to catch a disease process early, before it gets expensive.

It might mean, when your doctor says you need an MRI on that injury, getting on your smart phone to conduct an instant spot auction that allows high-quality local imaging centers to bid for the business if they can do it in the next three hours. It might mean, if you are in frail health or have multiple chronic diseases, being constantly monitored by your nurse case manager through wearables, and visited when necessary or once a week to help keep you on an even keel. It might mean your health system not being so quick to recommend a new knee, and offering instead to try intensive physical therapy, mild exercise and painkillers to see if that can solve the problem first (Pro tip: It often does).

Changing the fundamental business model of most of healthcare will be difficult and painful for the industry. But if we look to other countries and say, “Why do their systems cost so much less than ours? Why can’t we have what we want and need at a price we all can afford?” — this is the answer.

Change the way we pay for healthcare, not just who pays, and we can rebuild the system to be at the same time better and far cheaper.

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snjy97Robert BowmanpjnelsonJoe FlowerWilliam Palmer MD Recent comment authors
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snjy97
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Ronald Graf
Member

Joe Flower says: “…It is 1983-84, when DRGs were implemented in the federal programs and coding began…the system of code-driven fee-for-service payments…there’s your problem.” Joe, I had the exact same conclusion in 1994. During the Hillarycare push I wrote a reform proposal to provide the incentives for efficiency you describe. My plan was basically to reproduce the Kaiser model of provider networks that one could subscribed to. The benefit is the dynamic you site, the provider has the incentive to efficiently keep its patient-subscriber healthy. That is “bundling” to the extreme. The drawback is limited networks and lack of coverage… Read more »

Robert Bowman
Member

At some point those who design or influence health care design need to understand the strengths and limitations of the patient population of the United States. This is a Basic 101 Prerequisite to designing health care for most of the nation. As mentioned, much of the so called waste is due to poor health literacy and patient demand. Another major source is attempted micromanagement – often because the designers do not understand patients, physicians, or the endless permutations of interactions. If you do not understand this, you do not understand 32% of Medicare costs at the last year of life… Read more »

pjnelson
Member
pjnelson

Joe, . The level of thoughtful, heartfelt angst seems to have mushroomed in response to your post. It seems we had all agreed last fall that its gotten as bad as its going to get. We marginally knew what the issues were and what was coming next….MACRA, the increasing consolidation of healthcare enterprises, and the continuing institutional co-dependency between the providers of Complex Healthcare and the payers of healthcare. . But now, the level of Paradigm paralysis within Washington is beginning to evolve at a pace that could produce a governance disaster of unprecedented dimensions. One ray of hope. From… Read more »

Joe Flower
Member

Thanks for the thoughtful post, Paul. Great point. I hadn’t thought of Parkinson’s Law and its corollaries, but of course you are right. Your point about social capital is equally on point: “We only need a means to promote, sanction and energize a community by community strategy to manage the social determinants of health at the local level.” This is to name the Healthy Cities – Healthy Communities movement which mushroomed in the 1990s and has simmered along since. The rate driver, though, is economics: Any funding mechanism for healthcare (such as various population health funding mechanisms) that connects the… Read more »

Joe Flower
Member

One caveat, though: If you chart National Health Expenditures as a percentage of GDP for the OECD countries over time back to the Eisenhower era, they march along, gradually increasing in a pack as the world economy grows. There is a point at which the line for the U.S. breaks sharply from the pack and takes on a noticeably steeper angle. It is not 1964-65, when Medicare and Medicaid were implemented. That year shows barely a bump in overall expenditures. It is 1983-84, when DRGs were implemented in the federal programs and coding began to catch on with private insurers.… Read more »

William Palmer MD
Member
William Palmer MD

Joe, It’s hard to put our goods and services into value bundles. Maybe for a few obvious conditions, like for a hip or knee repair it is OK. But, if we did this for sepsis or even CHF or stroke, we and the hospital and the Pharma would be needing re-insurance. The variation and variety in a patient’s course is too wide. And, even for cancer, do you see the dynamic
flux in treatment alternatives coming out nearly every month in, for example, the National Clinical Cancer Network literature?

Joe Flower
Member

And yet, and yet…I notice that in the latest flurry of attempts at “volume to value” CMS programs, the oncologists and oncology programs over-subscribed, coming in at double the expected number. There is more than one way to skin a cat. Bundles in the strict sense are best for some things, not for others.

The idea “bundles are not right for everything” is not the same as “unbundled code-driven fee for service is the only way.”

Ronald Graf
Member

Joe, is there any reason that a bundle could not be coded and defined? I agree that every bandage does not need to be billed separately.

Joe Flower
Member

Sure. There is a crucial difference, though. Coding is done externally. Bundling is based on the work of the medical team at the institution.

Here’s why that makes a difference: If you define the bundle as the optimal pathway to a quality outcome for a given procedure or task (say, a mitral valve replacement) including the costs for necessary variation, then waste (unnecessary steps and procedures that do not increase the quality) become obvious and anti-competitive.

Bundling allows and encourages competition on price and quality between institutions.

Allan
Member
Allan

Joe, the surgeon operates to correct the mitral valve dysfunction you talk about above. He may not know at the time whether a valve replacement will be necessary or not. He also might see an advantage to do a simple correction of a partially closed artery. I am not saying bundling is bad for I bundled many services together in my office visit when patients paid cash and had insurance wasn’t involved. How do you bundle the above circumstances?

Ronald Graf
Member

If preset bundles were not coded how would the patient be quoted the price and what the price includes? Would it be custom quote? I am trying to make a system that gives the patient apples to apples comparison shopping for price and quality rankings.

Allan
Member
Allan

Ronald, unlike popular perception there are marked differences from patient to patient so one has to be judicious with the apples to apples comparisons.

William Palmer MD
Member
William Palmer MD

The reason for bundles is to get more for your money, it is to lower costs and get more bargains. I don’t see any conceivable mechanism that quality would be improved by bundling. In fact, providers might degrade quality by trying to fit services and goods into artificial bundles or by trying to exclude services and goods from artificial bundles. OTOH, If you can get FFS or bundles or capitation or salaries or global budgets or whatever low enough and reasonable enough then you do not need to care one whit about bundles. You are only interested in health care… Read more »

Joe Flower
Member

I’m not quite getting your argument. If you define “bundles” as “everything that’s causing a problem,” then well, yes, bundles are the problem. You say that if we can get the costs for all these different things “low enough and reasonable enough,” then we don’t need to worry about the mechanism. True, but then we have to ask why hasn’t it happened over the last 35 years? More to the point, what would drive costs to a “low and reasonable” level. In the usual way of doing things, there is no driver toward lower costs. All the drivers are the… Read more »

William Palmer MD
Member
William Palmer MD

Joe, you said: “In the usual way of doing things, there is no driver toward lower costs.”
Bingo. Exactly. This was the glaring defect of Obamacare. For some astonishing reason, no one thought to put in either 1. monopsonic purchasing–large buying by purchasers of health care or 2. shopping and competition or variants thereof such as indemnity insurance (patient gets dough first) or vouchers.

Political fear stopped #1. Ideology stopped #2.

I think these are the only two ways to drive prices lower.

Allan
Member
Allan

“In the usual way of doing things, there is no driver toward lower costs. All the drivers are the other way. There are no real price signals from the end user, and supply generates demand with no price-induced moderation.” That is because we killed the free marketplace so the end user is given a bill with a bunch of numbers on it that is automatically submitted to the insurer and paid. I have looked at my bills and my families bills and despite the fact that I am a physician myself I frequently don’t have the slightest idea of where… Read more »

Barry Carol
Member
Barry Carol

You could buy a CPT-4 code book for $100 or so. I bought one about 20 years ago but haven’t bothered to buy another one because I have Medicare and a comprehensive supplemental plan now that my wife and I pay quite a lot of money for.

Even in Canada’s socialized single payer system, doctors use billing codes to get paid.

Paul @ Pivot ConsultingLLC
Member

An excellent piece in most respects! Good for you to point out waste and harmful over consumption of health care (so infrequently mentioned by our pundits). 30-50%!!!! Hadler and many others have documented this….and finding ways to pare that back is the key…..but that cannot be done without the patient/consumer having a financial incentive to prudently use health care. That is why I like one of the examples (there are others) of how this can be done: as you say “here’s a list of high-quality places in your area that do it for what we call a “reference price” or… Read more »

Allan
Member
Allan

“Good for you to point out waste and harmful over consumption of health care … I don’t see “fee for service” as the root cause.”

That is the problem with Joe Flower’s piece above. He blames the wrong things for the problems that he lists. I think we are all knowledgeable about those things. We need the “patient/consumer having a financial incentive to prudently use health care. “

Joe Flower
Member

It’s not possible for me to be a fierce customer of your product, or even a reasonably prudent one, if you get to pick what’s in it and how much each item costs.

I can only be a prudent customer of a product if you can tell me what’s in the box and show me how good it is and what it will do for me. Otherwise? Not possible.

Paul @ Pivot ConsultingLLC
Member

It is already happening, though not as fast as it needs to. As you point out “Private payers such as employers have only gradually been getting more demanding, unsure of their power and status as drivers of change ” And individual employees in high deductible plans are asking in advance how much a recommended mri would cost and shopping for a better price…..a WSJ article about GE Imaging mentioned demand shrinkage and margin pressure and GE attributed it to the proliferation of high deductible employer plans. If providers are opaque, they will pay the price with lost business…..if we can… Read more »

Joe Flower
Member

Yes, with this caveat: An optimal system must keep the cost of deductibles and co-pays and co-insurance within the reasonable range of the consumers at their economic level, so that they will exercise their choices prudently and not simply opt out entirely and pray that they never get sick.

This is exactly the problem that is not understood (or swept away in a cloud ideological gas) in the current discussion in Washington. Sending deductibles even higher while reducing or eliminating subsidies for lower income people will actually drive National Medical Expenditures even higher, not lower.

Paul @ Pivot ConsultingLLC
Member

I agree. I think deductibles are great in general….and we made contributions to employees H.S.A. accounts to help them with their deductibles when they enrolled in catastrophic plans….voila! they turned into pretty fierce, demanding and savvy patients (well, to varying degrees…but all in the right direction). But the ACA went too far…..I call their deductibles Frankenstein deductibles…..and instead of giving subsidies to patients they gave them to the insurance companies. Wrong way to go.

Allan
Member
Allan

What you are talking about, Joe, is what occurs in socialism or monopoly. The buyer has one choice and no one else is around to provide a better one. If your doctor can’t explain what he is doing and an approximate cost (for his personal treatment) then you should find another doctor. He might not be able to tell you what your insurance company will pay, but that is your insurance company not his. A prudent customer goes to the seller and tells him what he wants. The seller tells him what he has and the price for those items.… Read more »

Barry Carol
Member
Barry Carol

I think insurers should consider offering patients a negative copay to use the most cost-effective high quality provider if the reimbursement rate differentials are large enough to justify it. I’ve heard of a at least a couple of instances of insurers doing exactly that.

Barry Carol
Member
Barry Carol

Every time I hear the statement that at least one-third of care is wasteful or unnecessary, I’m reminded of the corporate CEO’s who think that half of their advertising dollars are wasted. The problem, of course, is that they don’t know which half. Even if defensive medicine were not an issue, I don’t think there are many doctors who would tell a patient that the test he’s about to order is wasteful and unnecessary but he’s going to order it anyway. Indeed, one time, after a brain an examination related to a complaint about balance, the doctor told me that… Read more »

Steve2
Member
Steve2

Actually there are many studies looking at the costs associated with malpractice, including the costs of defensive medicine, which is actually the majority of costs incurred. I have linked to just one piece which, though older, links to many of the best studies done.

That said, I still support tort reform since I think this is such an emotional issue for physicians. I think if this was resolved it would make docs more willing to participate in broader efforts at fixing health care.

http://theincidentaleconomist.com/wordpress/meme-busting-tort-reform-cost-control-2/

Barry Carol
Member
Barry Carol

Steve2 – I don’t a think cap on non-economic damages is an effective approach to medical tort reform. I’m not a doctor and have never worked in the medical field in any capacity. I have had a lot of experience as a patient, however, especially over the last 18 years. Some negligence cases are pretty clear cut like wrong site surgery. The big problem area, in my opinion, is the so-called failure to diagnose cases which, I think, account for roughly 20% of malpractice claims. It seems to me that there should be safe harbor protection for doctors who follow… Read more »

Steve2
Member
Steve2

I am hardly an expert on tort reform, but I think there are some obvious things we could do. The safe harbor one has always struck me as a god idea. I think that venue reforms are important. Malpractice attorneys try to drag cases to places with sympathetic judges and juries known to give out awards. Make cases stay local. We have specialized tax courts, so health courts also strike me a s a good idea. That said, I don’t really expect it to change costs that much, or at least not for along time. In my experience, and seems… Read more »

Barry Carol
Member
Barry Carol

With good, sensible tort reform, it seems that at the very least, medical school training might change and practice patterns as developed by the specialty societies might start to reflect less need for defensive medicine. Since the new docs coming out of training won’t have any experience with the prior system, costs could moderate as the newer doctors become a larger percentage of practicing doctors over time. Admittedly, it would take quite some time to have a noticeable impact but you have to start somewhere. The main loser from tort reform would be trial lawyers and I think that’s a… Read more »

Barry Carol
Member
Barry Carol

The other tort reform idea that I would like to see is to get malpractice cases out of the hands of juries who can be easily swayed by a glib lawyer, especially if the plaintiff is sympathetic. These cases should be heard and decided by specialized health courts with specially trained judges who have the power to hire neutral experts who can sort through conflicting scientific claims that are well beyond the ken of most of the population. Malpractice cases generally involve straightforward findings of fact as opposed to weather or not constitutional rights were violated. Defendant doctors want to… Read more »

Joe Flower
Member

Actually, you should look at the actual studies, of which there are many. Defense medicine is not at all the major waste of healthcare dollars. The studies are describing the multiple major things done across medicine that are, as I said, “tests and procedures and devices that we really don’t need, that don’t help, that even hurt us.” Things that the peer-reviewed literature show are unnecessary and not helpful, but we do anyway, like complex back fusion surgery for a diagnosis of simple back pain. Like colonoscopies as first-line mass screening for colon cancer. Like the literally hundreds of common… Read more »

Allan
Member
Allan

I’ve looked at the actual studies in the past and they were all over the place. Many studies limit the variables to those that prove their desired case. Let me give you an example I remember a malpractice suit that happened a couple of decades ago. The neurosurgeon was sued for not doing a CT scan early enough. After about 5 years it turned out that the physician won the case and that there was no need for the CT scan early in the game. It was unnecessary. The care provided was good. The cost of that case didn’t add… Read more »

meltoots
Member
meltoots

Cute article. But lets point out a few things: 1. Wasted tests: Nearly every patient I see wants EVERYTHING done. If they don’t get their MRI for their achy knee, they want to sue. Which also leads me your waste argument. Fear of devastating lawsuits only takes one. When you are threatened with loss of MANY millions, and at times MORE than what you are insured for, you feel a lot less bad about ordering that MRI for them. Don’t forget, I can get sued for a followup visit for a painful knee from a Medicaid patient for MILLIONS, even… Read more »

Steve2
Member
Steve2

Just do what the ortho guys in our area do. Everyone form into one group. Then refuse to take call. The hospital does not want to lose the income from the ortho cases since the pay so well, so the hospital has to hire docs just to do the emergency cases. No night hours, weekends or holidays.

Steve

Niran Al-Agba
Member

Steve – increasingly fractured care provided by different physicians is NOT value.

Niran Al-Agba
Member

Meltoots, you are my hero! I agree with absolutely everything you wrote. So well said, I have almost nothing to add except to emphasize that writing about healthcare is VERY different than practicing medicine. Joe, be careful with your words… you have wandered into dicey territory.

Joe Flower
Member

Excuse me? Do not accuse me of a crime. You want me to be very careful. You need to be very careful. I did not practice medicine in this column. I did not recommend any particular course of action for any particular patient. Nor did I say, “we tell every patient you need a new knee … without attempts at all kinds of conservative care and treatment.” I was discussing a course of action that you “routinely advocate.” If it were an illegal practice of medicine to opine in print that maybe people should consider this course of action rather… Read more »

meltoots
Member
meltoots

Easy Batman, you said “pro tip” that means “professional tip”. Which basically means you are giving professional advice. So you should be very careful. You are NOT a licensed medical professional nor should you give out “pro tips”. No matter how long you have been a writer about healthcare or a self-proclaimed healthcare expert. I would never give a pilot a pro tip, even if they routinely push the stick forward and increase power in a stall. I am not a licensed pilot. I actually respect professionals that actually are practicing their profession. You obviously do not. Your response is… Read more »

Joe Flower
Member

I respect doctors and physicians’ expertise enormously. As I mentioned, I have no idea where you find insult to your medical abilities. Nor in my suggestion that an ideal industry, paid differently, might trend more toward practices that you “routinely advocate.”

Barry Carol
Member
Barry Carol

Medicare already pays low prices and it pays for bundles of care called DRG’s. Medicaid pays even lower prices. Indeed, hospitals complain all the time that Medicare reimbursement rates don’t cover their fully allocated costs for providing care and Medicaid rates don’t even come close to doing so. The main reason the system works as well as it does for hospitals is that there is still a significant private commercial sector to shift costs to. Historically, employers, especially large self-funded employers, wanted happy employees. Competition for good employees included offering comprehensive health insurance benefits with a broad provider network. Employees,… Read more »

Steve2
Member
Steve2

1) We post prices for our hospital. We are the lost cost provider in the area. We have had very little response. Just doing this is not enough. 2) In concept I like the idea of reference pricing. However, insurance companies could have been doing this all along, but they have not. Why? I suspect this is because people really don’t like narrow networks, which is essentially what this amounts to. They want to see the Doc of their choice or go to the hospital of their choice. Often cost is not the primary determinant. Insurance companies are profit making… Read more »

Allan
Member
Allan

Steve, why should most people with employer sponsored healthcare opt to go to the lowest cost center? There is no benefit to the patient. However, if the patient had to buy insurnace and pick from companies that offered different prices based in part upon which hospitals are used I am sure more people would gravitate to the less expensive hospital and insurer causing other hospitals and insurers to cut their costs. Competition allows people to pick and choose driving prices down. The author of this article doesn’t understand that fee-for-service isn’t what causes high costs. It is the lack of… Read more »

Steve2
Member
Steve2

” However, if the patient had to buy insurnace and pick from companies that offered different prices based in part upon which hospitals are used I am sure more people would gravitate to the less expensive hospital and insurer causing other hospitals and insurers to cut their costs. ” You have just described narrow networks, which is one of the things conservatives complain about with Obamacare. With employer sponsored healthcare employers have to pay for at least part of the insurance. Why aren’t they clamoring for reference pricing and why aren’t insurers already offering it? This is not a new… Read more »

Allan
Member
Allan

Steve, narrow networks can save money and some people prefer them to wider networks if that is the case. The problem with the ACA is that it forced people into the narrow network. It wasn’t voluntary. Healthcare is mostly personal so government force should be quite limited. I prefer choice because no one is more knowledgeable about a person’s personal needs than the person himself. Yes, Steve, you know more medicine than that person, but as long as he is competent he should control his course, not you. “Why aren’t they clamoring for reference pricing ” People are clamoring for… Read more »

Steve2
Member
Steve2

“Humans (and that includes anyone involved in healthcare or anywhere else) will optimize their incomes. ” This + FFS= Increased spending. This is just simple math. “The problem with the ACA is that it forced people into the narrow network.” No it didn’t. That was what the insurance companies decided to do to bring down costs. No one forced the insurance companies into narrow networks. Was it known that they would probably do that to cut costs? Yes. If you have followed health care policy over the last 20 years you know that there are predictable methods by which companies… Read more »

Allan
Member
Allan

“No it didn’t. That was what the insurance companies decided to do to bring down costs.” Of course the ACA caused that problem. Patients have to buy insurance from ACA approved insurers. Patients were given little choice and in many circumstances no choice or a Hobson choice. It was predicted that the ACA would be unsustainable and that insurers would have to cut costs in other ways. Insurers were not permitted to act the way insurers generally act so they were *limited* to changes like narrow panels. If you want to argue about the term *limited* and say being limited… Read more »

Barry Carol
Member
Barry Carol

Private exchanges are one approach that employers can use to offer employees a variety of health plan choices. The employer would provide a defined contribution that would likely be sufficient to pay for the least expensive plan and employees could buy a better plan and pay the difference in premium out-of-pocket. A very high percentage of employees would have to participate for insurers to accept the risk as each choice is priced on a community rated basis with no age rating. So far, the private exchange concept has been slow to gain traction.

Allan
Member
Allan

Barry, assuming what you say about private exchanges is correct, the problem is that the ACA with its higher deductibles and copays along reduced panels hasn’t left the average worker in a place where he has money available to increase his out of pocket expenditures. The ACA has killed the ability of many individuals to act on their own behalf.

Ronald Graf
Member

Allan, when you ask why should most people with employer sponsored healthcare opt to go to the lowest cost center, the answer is obvious if they have $1000 or more deductible, they want to save their money. But in today’s market price is very opaque and quality is practically blind. Allan I agree with you that the author of this article is not taking into account what could change if there were true price and quality transparency. In such a market the overall cost for the hip replacement would be posted as a statistic for that doctor as well as… Read more »

Allan
Member
Allan

“why should most people with employer sponsored healthcare opt to go to the lowest cost center, the answer is obvious if they have $1000 or more deductible, they want to save their money.” Ronald, when the individual ends up in a hospital they are generally going to meet their deductible so there is no benefit for the individual in saving money. The insurer who benefits doesn’t gives the insured a part of that benefit. “Allan I agree with you that the author of this article is not taking into account what could change if there were true price and quality… Read more »

Ronald Graf
Member

Allan, we agree that the overall answer is to enhance market forces with more patient participation. We also agree on a willing buyer/seller agreement. My way of insuring the contract is clear is by using the ACA idea of standardizing contracts so that there is a template for each type of customer immediate affordability as well as degree of investment desire. This keeps purchases decisions apples to apples and also allows the takeover of policies by any insurer that goes under. Where the patient is restricted in buying insurance after their higher risk is realized, I put the same restriction… Read more »

Allan
Member
Allan

Ronald, I understand what you say, but I am quite reluctant to tie the hands of market forces and believe one template is good enough with expectation that market forces will push changes for various insurers and groups of patients. The size of the deductible is a personal consideration that the insurer attempts to satisfy. I don’t believe it is the place nor is it adequate to serve the function to allow takeover of policies for those insurers that go under. I am nervous when we rely upon artificial codes. What is the difference between an office visit with the… Read more »

Ronald Graf
Member

Thanks for reading my plan. Regarding “one template,” there can many levels of deductible but what I have seen is insurers that simply randomly mix up deductibles and co-pays for types of items just to declare it a new contract. My goal would be to break the practice of raising the rates of those that renew as the profit (back end) strategy and use lower rates on essentially the same policy for new sign-ups. The consumer then has the choice of switching every year or paying the administration costs (essentially) of those who switched. The regulation needs to promote competition… Read more »

Allan
Member
Allan

#1 I don’t think multiple templates solve the problem you wish solved.
#2 You have to think about what the feedback would do and how that feedback would be utilized.
#3 Presently you seem to want to replace the marketplace with all sorts of ideas. All your suggestions should be voluntary and act as information to other patients. We are seeing a bit of that today and the information isn’t terribly effective.
#4 Online marketplace in healthcare? A possibility in the future but today would be additive to what we have.

Ronald Graf
Member

#1 Templates simplify comparisons. Insurers are experts at risk, the consumer has no idea how how much cost each component contributes to a plan. Templates commoditize so that value is clear and plans can be more easily regulated. There can be templates to satisfy every market need. And when circumstances cause a need for industry change all can step in unison, maintaining order, fairness and security. #2, #3 The founders of Ebay thought about what feedback would do and luckily for them they patented it. Amazon recognized the concept and did its best to copy the feedback marketplace concept with… Read more »

Allan
Member
Allan

#1 You are adding complexity and that is not good. I don’t like to interfere in market decisions so I even hesitate advocating one template. Such interference can cause problems (example: see Heisenberg principle), however, the patient needs a method of comparison so he knows what he is getting. #2 #3 Amazon’s feedback doesn’t involve a government entity, is voluntary and organically grown. #4 I may have understood what you meant. If you mean selling insurance or something similar over the Internet etc. I have no problem. That is a marketplace phenomenon. If you mean treatment over the net, that… Read more »

Ronald Graf
Member

Allan, I’m not sure that you mean by adding complexity. If we want the consumer to be a vigorous decision maker my aim would be to facilitate that by supplying fast relevant information without burying in over-choice chaff. I hope I’m thawing you a little:) I would like the marketplace to be run with government license and regulatory authority but the consumer feedback would voluntary and anonymous, even to the provider (unlike Ebay). They would need the billing supplied key code to log their anonymous rankings. Insurance could be sold on the marketplace or directed to the insurer’s interface just… Read more »

Allan
Member
Allan

Ronald, as a rule less is better, but if you like a lot of paper rattling around I won’t try and dissuade you from that idea..

A free marketplace is not run by government. Government is political so expect a political marketplace if it is run by government. Government will perform for the voters and pass legislation for the lobbyists.

Hootsbudy
Member

Yep. That’s market economics at it’s best. America’s system is rationing by affordability — those with the most assets get the best of everything, those with less settle for less. Further down are those who can just afford the basics and just before the safety net for destitution (Medicaid) there is going to the ER when needed, hoping nothing serious makes it worse. In many ways dental care illustrates rationing according to affordability better than health care. We live with that (except for a few fatalities from spreading infections — QALY losses from dental issues are statistically small) which is… Read more »