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Large Hospital Systems Are Driving Up Healthcare Costs

The primary stakeholders in the healthcare system are patients and physicians. Without patients or physicians there would not be a healthcare system.

Patients should be the drivers of the healthcare system. They are not. The primary drivers are the government and the healthcare insurance companies.

Hospital systems play the next largest role in driving up the costs of the healthcare system. Large hospital systems are constantly playing a game of chicken with the government and the healthcare care insurance industry.

Somehow, large hospital systems have been able to stay under the radar.  They have been able to avoid the responsibility of the rising costs of healthcare.

Large hospital systems and large hospital chains know that insurers need them to service their network of patients.  The healthcare insurance companies know that the hospital systems can hold them hostage to increased reimbursement.

When a large hospital system demands an increase in reimbursement the healthcare insurance industry simply increases premiums.

An example is the Read more »

*This blog post was originally published at Repairing the Healthcare System*

Why No One Knows What Generic Lipitor Costs

Several days ago, the world’s leading cholesterol-lowering “statin” drug, Lipitor, went generic. Doctors are bearing the brunt of the conversion with little information about what the new drug will cost for their patients.

This, of course, is the plan.

Even the Wall Street Journal which has an excellent “user’s guide” to making the switch from name-brand to generic Lipitor offers little help as it mentions “co-pays” rather than actual drug cost:

How much cheaper will generic Lipitor be?

Insurance copayments should drop considerably, if patients are getting Lipitor or atorvastatin on the generic tier of their health plans. Currently, Lipitor has been on a higher, branded tier for prescription drugs. Copays for branded drugs average either $29 or $49 depending on the tier, according to Kaiser Family Foundation. Copays for generics average $10.

In addition, Ranbaxy Laboratories Ltd, one of the generic manufacturers of generic Lipitor, won concessions to maintain elevated prices for 180 days from the government (a la our own Food and Drug Administration while the Federal Trade Commission stands idly by complaining how consumers are gouged with this arrangement) to assure prices stay high a bit longer.

But if we forget the insurers and copays, how much will the generic drug actually cost consumers? Read more »

Patients And Physicians Must Control Healthcare Costs

The primary stakeholders in the healthcare system are patients and physicians. The incentives for patients and physicians to save money are non existent. The secondary stakeholders have taken advantage of non existent incentives to create a healthcare system that generates ever increasing costs.

Patients and physicians are the only stakeholders that can control costs. They initiate the use of the healthcare system’s resources.

Healthcare costs for medical procedures such as an MRI or CT scan have been found to vary by as much as 683% in the same town, depending on which physicians patients choose, according to a study by Change: Healthcare.

The implication is that individual physicians are responsible for the differences. Most physicians do not own MRIs, CAT scanners or PET scanners. Secondary stakeholders own the equipment. They price the procedures and profit from the equipment, not the physicians. Read more »

*This blog post was originally published at Repairing the Healthcare System*

The Five Biggest Misconceptions In Healthcare

Newsweek tries to refute the “Five Biggest Lies In the Health Care Debate.”

But I’ve heard much bigger lies than the ones in this article.

I mean, are people really showing up angry at town hall meetings over fears that “the government will set doctor’s wages”?

Misinformation – or just plain old confusion – about our health care system is common.  To try to help fix this, I offer five of the biggest, most commonly repeated misconceptions I hear regularly about the U.S. health care system.

1. Government plays a relatively small role in American health care. Government actually plays a big role.  In 2007, federal, state and local governments paid for more than 46 cents of every health care dollar – more than $1 trillion.  In fact, since 1980, the government has paid at least 40 cents of every dollar, and as early as 1960 – 5 years before Medicare – government paid a quarter of health care expenses.  Government is a massive health care customer and has the impact one might expect such a big customer to have.

2. Health insurance companies drive the increasing cost of care in America. Not true, and here’s why:  perhaps 200 million Americans don’t get their coverage from a health insurance company.

Most of these people, or a family member, work at one of the thousands of companies that self-insure (the rest are covered by government programs).  What this means is those companies take the health care risk themselves, and use an insurance company mostly to handle the bills.  For these companies, the cost of health care directly affects their bottom line.  It’s one of the reasons employers have implemented so many programs to try to help their employees live healthier lifestyles, make sure they’re getting good care, and many others.  Some data suggest it is working to control health care costs.

The exception is small groups and individuals.  They have to buy health insurance, and face few, expensive options.  There are many reasons for this, which I’ve blogged about extensively here.  One of the most important is that there is not a truly competitive market for this kind of coverage.  Still, many of these insurance companies are not-for-profit  (some say as many as half of Americans with health insurance are covered by non-profit plans), and so it cannot be that profit drives the premium increases they, too, experience.

3. America has a free market in health care. Health care may be the most heavily regulated industry in America, with layers of state and federal regulation of care and insurance.  For example, your doctor can only practice in the state in which he is licensed.  If he wants to move to another state and be a doctor there he can’t do it unless he’s gone through a licensing process in that other state.

One of the most important reasons why the market for health insurance is so uncompetitive is that it, too, is regulated by 50 different state bodies.  If an insurer wants to sell in another state, it has to go through an extensive process in order to do it, and be subject to all kinds of mandates and other requirements that make it very impractical to do so.  It makes for a market that is much less dynamic than it could be.

I suspect one reason people call the U.S. system a “free market” is that rich or well-connected people can get better care than those who are less fortunate.  This may be true, but this is just a reality of the human condition, not the health care system.

4. There is an Obama reform plan, and you’re either for it or against it. Much of the media – and even Chuck Norris – describe the various health care reform ideas as part of an “Obama plan” or “ObamaCare.”  But other than broad outlines of what the President thinks are important principles, the President has not proposed any plan.  Most of what people are talking about – including the entirety of the Newsweek article I started this post with – is the 1,017-page bill from the House Ways and Means Committee.  While there are indications that the President is going to propose something concrete in the coming days, calling what is on the table Obama’s plan is more politics than reality.

5. Rising health care costs are a uniquely American problem. America’s not the only country suffering with rising health care costs.  In Canada, for example, the government of British Columbia has seen its health care costs increase by 45% over the last 6 years.  It’s created a budget crisis, and efforts to steadily increase the premiums it charges consumers and employers.  The U.K. has actually experienced a higher rate of growth in health care costs than the U.S. over the last several years.  So while it is true that the cost problem is worse in America than in in other countries, this is a matter of degree, not of kind.

I’ve heard lots of others, but these are the ones I most commonly run into.

What kinds of misconceptions have you heard?

*This blog post was originally published at See First Blog*

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