July 3rd, 2009 by admin in Better Health Network, Health Policy, Opinion
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[This post was written by Charlie Baker, President and CEO of Harvard Pilgrim Health Care, Inc., one of New England’s leading non-profit health plans.]
I heard this idea promoted at a luncheon I was at last week — that the best way to fix health care in the U.S. would be to move to a “Medicare-For-All” system. Needless to say, I find this odd — since I think many of the things people hate most about our existing system — too procedure driven, doesn’t support primary care and prevention, favors technology over face-to-face interaction, doesn’t support multi-disciplinary approaches to care delivery, etc. — derive from the rules of the game set up and enforced by…Medicare!!! Yikes!
But aside from that, the two things I always hear about why it’s a good idea are — Medicare has lower Administrative costs than private health plans and they’re a ”better” payer than the private plans. Hmmm…Let’s take the first one. What I’ve heard before is that Medicare only spends 4% of its money on a per beneficiary basis on administration, while the plans spend 14% per member on administration — a big difference. This is interesting, but misleading.
Medicare beneficiaries are over the age of 65. They spend almost three times as much money on health care as a typical private plan member — most of whom are under the age of 65. If the Medicare member typically spends $800 per month on health care, and 4% of that is spent on administration, that’s $32 a month on administration. If the private health plan member typically spends $300 per month on health care, and 14% of that is spent on administration, that’s $42 a month — a much smaller difference. But we’re not done yet. Medicare is part of the federal government, so its capital costs (buildings, IT, etc.) and benefit costs (health insurance for its employees and retirees (!), pension benefits, etc.) are funded somewhere else in the federal budget, not in the Medicare administrative budget.
Private plans have to pay for these items themselves. That’s worth about $5-6 per member per month, and needs to come out of the health plan number for a fair comparison. Now we’re almost even. And finally, Medicare doesn’t actually process and pay claims for all of its beneficiaries. It contracts with health plans around the country to do much of this for them. That’s not in their administrative number, either — and it is, needless to say, in the private health plan number.
People push and pull these numbers all the time, and there may be “some” difference between Medicare and the private health plans on administrative spending as a percent of total spending. But it’s not huge, if you try to compare apples to apples.
On the payment issue, the numbers I’ve seen suggest that nationwide, private plans — on average — pay somewhere between 120 and 125 percent of what Medicare pays for hospital and physician services. In other words, private plans pay MORE than Medicare pays, not less! If people want Medicare For All, they need to be prepared to either dramatically raise Medicare rates and payment — and therefore, Medicare costs — by a lot of money — 20 to 25% by this estimate — or kick the bejeebers out of the physician and hospital communities and make them eat the difference.
Medicare-For-All is not as simple as it seems.
*This blog post was originally featured at the Let’s Talk Healthcare blog.*
July 1st, 2009 by James Herndon, M.D. in Health Policy, Opinion
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[Dr. Jim Herndon is a past president of the American Academy of Orthopaedic Surgeons, and chair emeritus of the department of orthopaedic surgery at Partners Healthcare]
***
The challenges of health care reform are enormous. To expect that the vast array of problems that exist today will be corrected or solved in a couple of months is totally unrealistic. Witness the moving target of announced changes and options occurring daily in the press and media in general. And add to the confusion…these changes are being developed at the top (Congress and the White House)…not from the bottom up (from doctors, nurses and other health care providers, and importantly, patients). In their place are the powerful lobbyists…the health insurance industry, the hospital industry, the drug industry and even organized medicine (AMA)…who wield their influence over our policy makers by all sorts of tangible (financial donations) and intangible (spouses of leaders on corporate boards) pressures.
I must admit, although occasionally said without real meaning…I don’t hear an outburst of support for the essential mission/purpose of health care…the health of our citizens…”the patient comes first”. Where is the patient…who is supposed to come first…in this national debate?
Everyone knows that health care is expensive. In 1970 health care spending consumed 7% of the Gross Domestic Product. In 2009 health care spending is consuming 16% or more of our Gross Domestic Product. It is increasing more rapidly than inflation. Yet, as a nation, we have not…in all these years…had a serious conversation about Americans’ health. Where is it in our list of priorities? I don’t think we know. From recent events we do know it is lower than the need to remove Saddam Hussein from power…it is lower than bailing out investment companies and banks…it is lower than stabilizing the mortgage market…and it is lower than bailing out two automobile manufacturers. I am not knowledgeable enough to question the priority of the bailouts of banks and financial institutions or the mortgage companies…but I do question the priority of removing another country’s dictator or bailing out two automobile manufacturers instead of allowing them to proceed through bankruptcy in our court system…over health care reform.
Too often in my lifetime I have seen the importance of health care reform pushed down the list of priorities over other needed programs…to wait for another day. How important is the patient, the health of Americans today? How far are we going to push the profession of medicine from “a calling”…a profession, as President Obama states to “a business”. It is known that patients trust their doctors, but not our health care system. When will patients begin to trust their own doctors less? It will happen if and when they believe doctors are more “concerned with the pulse of commerce” rather than the “pulse of their patients”. I submit we are getting very close to this tipping point…in losing the trust of our patients and society in general.
There is no unanimity of opinion regarding the health care reform debate…amongst Democrats, amongst Republication…amongst the public…amongst physicians in general…and orthopaedic surgeons specifically. I asked a few young physicians in an orthopaedic residency program their opinions about the health care reform debate. All believed that every American should have basic health care insurance coverage. Obvious to them, it would include coverage for care of patients with acute fractures or patients with severe pain or loss of function. They admit not knowing much about the “public option” and the swirling politics going on. They also were not comfortable with defining what situations or problems would not be covered by insurance…although they agreed that some restrictions above “basic care” would have to be implemented.
Their responses reminded me that in 1990, when I was in graduate school for an MBA…we had a class debate about whether health care was a right or not of all citizens? Although the discussion was lively and some felt health care was a privilege, the class conceded that health care was a right of all citizens…admitting historically it was considered a privilege for the few who could afford it, but then (1990 or earlier?) health care had become a right for all in the US. I then asked a few of my colleagues who enjoy leadership positions in the field of orthopaedic surgery their opinions regarding health care reform. They also could not agree on the issues of this debate.
One area where they did agree was that academic medical centers are not well positioned for the future…especially those that depend on state funding. We have already witnessed this in Massachusetts where apparently the state has decreased funding to some teaching hospitals that traditionally have cared for a large number of uninsured. Now that most citizens have insurance, they are seeking their care in other hospital emergency departments. My colleagues also agree that physicians will receive lower payments for specific treatments or participate in “bundled” payments to the entire healthcare team/facility for comprehensive care of the patient.
Otherwise my colleagues disagreed. On the one side some support the public option and universal coverage…although “the devil is in the details”. For this group they have become tired…like so many American physicians…with the convoluted way we finance health care and the associated paper trail/documentation overload. The system has made some patient conditions profitable and others not profitable…described by one as “perverted incentives”. These physicians (me included) are angry at the loss of our professionalism as hospitals and physicians chase dollars and not the health needs of each patient and the public. On the other side (against public option), my colleagues have some agreements…most orthopaedic surgeons are supportive of care of the uninsured and underinsured, especially for patients presenting with acute problems to hospitals’ emergency departments. Most also agree that there needs to be a serious realignment of incentives and improved collaboration of hospitals and doctors.
But they have many disagreements…including the provision of elective care. They argue…with good reasons…that with continued rising costs to practice medicine (rent, electronic records, employee wages and benefits, malpractice insurance, increased personnel requirements for the administration/paperwork overload) and continued reductions in reimbursement (Medicare, for example, pays an orthopaedic surgeon today approximately 50% of the reimbursement it paid for a total hip replacement in 1990)…it is becoming increasingly problematic to provide elective care for the underinsured and uninsured. They commonly ask…”How can you provide care that costs more than any receipts”?
Other disagreements include: the single payor system…they don’t believe it will work; although well-intended, they believe these reforms will result in overall lower quality of care for patients; that emergency departments will still be used by those with insurance because patients can see a physician at the patients’ convenience and avoid long delays to see a doctor in his/her office…for example there is a 40-day wait to see an orthopaedist in his/her office in Boston; the continued tremendous demands by American patients to have the latest technology, the latest treatment…even if evidence for its use is unknown; skepticism about the prevention of disorders that have a genetic basis, i.e. osteoarthritis…in the foreseeable future; the simple fact that to reduce errors and overuse/misuse of tests by an electronic medical record and computer physician-order system will cost enormous amounts of increased spending in the short term…before cost savings are eventually realized… and to draw attention to one specific unsolved problem area…Workers’ Compensation…where orthopaedists, daily, see ineffective treatments being used and large numbers of patients on disability.
Briefly, the follow are factors that have led to increased and inefficient health care in the US: high administrative costs; overuse of services and new technology; an increased prevalence of chronic disease; tremendous geographic variations in care; increased payments not resulting in improved quality; a continually high number of medical errors and complications; a broken professional liability system; a shift in costs from the uninsured to the insured; a predominant third-party payer system; overuse and misuse of care; focus changing from the patient to the pocketbook; insurance company abuses (cherry-picking healthy patients, denying care of patients with chronic disease, deliberately lowering the normal of “usual and customary” fees…to name a few); and continued issues of fraud and abuse, especially in the Medicare and Medicaid programs.
Finally I would like to close with the official position of the American Academy of Orthopaedic Surgeons (AAOS) on health care reform: “Any changes to the health care financing and delivery system…the well-being of the patient must be the highest priority. The AAOS strongly supports reform measures…that provide individuals with patient-centered, timely, unencumbered, affordable and appropriate health care and universal coverage while maintaining physicians as an integral component to providing the highest quality treatment”.
The AAOS is opposed to a single-payer health system or even a federal health care authority. The AAOS suggests “a number of tax initiatives…that will level the playing field and make health care coverage more affordable”. There should be “adoption of policies that restore equity and enhance market competition”. The AAOS also “strongly believes that patient empowerment and individual responsibility are necessary components of health care reform. Health choices should be recognized and preventive care should be promoted”.
June 30th, 2009 by Happy Hospitalist in Better Health Network, Opinion
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The drug makers have agreed to cover part of the costs of brand name drugs in the donut hole, that no man’s land of Medicare Part D where patients must pay for their own drugs.
As reported:
Obama said that drug companies have pledged to spend $80 billion over the next decade to help reduce the cost of drugs for seniors and pay for a portion of Obama’s health care legislation. The agreement with the pharmaceutical industry would help close a gap in prescription drug coverage under Medicare.
I see one problem with the assertion that drug companies will be “spending” $80 billion dollars to reduce the cost of drugs for seniors. Drug companies and by default, their board of directors have allegiance to their shareholders, not the the US government or the seniors of this country. I can assure you, this deal may look good on paper (for seniors) and it may benefit seniors a great deal (FREE=MORE) but it is also one step further to the promised land of the senior vote. And it will worsen access to drugs for everyone else. There is no free lunch in this world.
It may save seniors money, but it will not be revenue neutral. It will not save $80 billion dollars over 10 years or reduce overall costs of care. Somehow, someway, the costs will be shifted. It may mean higher drug costs for those privately insured or the uninsured. It may mean decreased access to compassion programs. It may mean higher costs to hospitals. Whatever the agreement means, it will not mean $80 billion dollars saved in the next decade.
Drug companies are not in the business of sacrificing their shareholders or bond holders for patriotic means. They are in the business of making money. And that means they have selfish interests to maximize their ROI for any agreement they make with the government.
The question isn’t really how wonderful this is for seniors. The question is how will buying off seniors affect the rest of America. And I’m telling you here, right now, you will see higher costs for everyone not lucky enough to bathe in a sea of FREE=MORE known as the Medicare National Bank.
*This blog post was originally published at A Happy Hospitalist*
June 24th, 2009 by EvanFalchukJD in Better Health Network
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Steven Pearlstein actually wrote that in the Washington Post on Wednesday, right after (another) long rant against physicians. At the end, he offers doctors an olive branch. Or maybe its an offer he thinks doctors can’t refuse:
The choice for doctors now is quite clear: They can agree to give up a modest amount of autonomy and income, embrace more collaboration in the way they practice medicine and take their rightful place at the center of a reform effort that will allow them to focus more on patient care. Or they can continue to blame everyone else and remain — stubbornly — a part of the problem.
After reading Pearlstein’s columns, I’m still sure not why he has such a problem with doctors. I am beginning to think it’s because he just misunderstands them.
Pearlstein is convinced that doctors go into medicine for the same reasons investment bankers go to Wall Street: to make money.
Docs seem to take it as a given that physicians in the United States should earn twice as much as doctors in the rest of the world — and five times more than their patients, on average. Mention these facts and you are guaranteed to get a lecture about the crushing debt burden that young docs face upon completion of their medical training. Offer to trade free medical education for a 20 percent reduction in physician fees, and you won’t find many takers.
Pearlstein has no source for these claims, but let’s assume they’re true, and do the math. The government says that there are 633,000 doctors in the United States, and they earned median salaries between $135,000 and $320,000 a year. If we take a number in the middle — say $200,000 — that means that American doctors earn about $125 billion a year. A big number, but total health care expenses in the United States are over $2 trillion, which means doctors represent about 5% of the total. Can physician salaries really be driving our health care problems?
It seems unlikely. But Pearlstein is desperate for it to be true, so he keeps trying to discount all of the other possible causes of our problems as examples of conspiracies or arrogance or sloppiness:
For example, medical malpractice litigation is a problem…
But one of the reasons malpractice suits are still necessary is because doctors have transformed local professional review boards, which are supposed to protect patients, into nothing more than mutual protection societies
The “infelixible bureaucratic processes” that insurers impose are a problem….
But given that there is overwhelming evidence that doctors tend to order up tests, perform surgeries and prescribe treatments whose costs far outweigh the benefits, you can hardly blame the insurers.
We think it is good to have “clever and creative” doctors…..
but . . . we could all have better health at a lower cost if docs were less inclined toward the medical equivalent of the diving catch and simply were more disciplined about kneeling down for routine ground balls.
Doctors should be applauded for embracing evidence-based medicine…
however, practicing physicians still think that nothing should interfere with the sacred right of doctors and patients to make all medical decisions, even when they are wrong.
Pearlstein’s views on how doctors think are fundamentally flawed. He thinks of them like stock brokers, pushing questionable stock to make commissions for themselves. He’s thought of all the different ways doctors are abusing the system to their own advantage, but he doesn’t seem to have thought that maybe, possibly, he’s wrong.
So, yes, some doctors abuse the privilege of being asked to help their patients. But the overwhelming majority don’t. They want to spend as much time as they can with their patients, collecting information, thinking about their problem, and offering good, sound advice. They are bothered by the involvement of the insurance company or the government or the plaintiff’s lawyer not because they believe they have a “sacred right” to total independence. Or because they think the way to fix health care is to give them “free rein to treat their patients . . . run the hospitals and set their own fees.”
No, it is because these things actually interfere with the doctor’s ability to think, process and decide with their patient on the right things to do.
Pearlstein and other would-be reformers of our health care system need to reconsider their assumptions on what motivates doctors. Maybe it’s something Pearlstein should ask some of his friends about.
*This blog post was originally published at See First Blog*
June 22nd, 2009 by DrRich in Better Health Network
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Thanks to Dr. Wes for pointing us to a remarkable video of a 20-year old Belgian soccer player having his life saved by an implantable cardiac defibrillator (ICD). DrRich hopes you will view it.
As it happens, DrRich will be traveling to Europe imminently at the invitation of Dr. Pedro Brugada, whom some call Belgium’s King of Electrophysiology, and for whom the Brugada Syndrome is namesake. (DrRich is deeply honored to be one of the “masters” at Dr. Brugada’s “Meet the Masters” event, which gives him the opportunity to spend two days with a hand-picked group of top European and American electrophysiology fellows. DrRich will undoubtedly learn a lot from them, and will try very hard not to ruin these fine young physicians before they’ve even started out.) In any case, one must suspect that Dr. Brugada (being, after all, Belgium’s King of EP) must have been somehow responsible for placing the ICD in this young soccer player.
DrRich will be sure to ask him how that young man managed to receive an ICD. Because most high-risk patients, in the U.S. and elsewhere, have to do without.
Despite the fact that ICDs are dramatically effective and dramatically life-saving in people who have dangerous cardiac arrhythmias (please do watch the video to see the drama for yourself), they are still used in only a tiny fraction of the identifiable patients who are at risk for sudden cardiac death. Consequently, in the United States alone, almost 1,000 patients each day die suddenly from cardiac arrhythmias who could have been saved by an ICD.
DrRich has written before about the covert rationing of ICDs, which is done so openly that one is tempted to drop the modifier “covert,” and has even written about how a former government official has admitted that he had no choice but to juggle the statistics of a randomized clinical trial (i.e., to bastardize the science) in order to avoid having to pay for ICD therapy in broader categories of patients. That’s old news, and there’s no reason to beat it to death again here.
Instead, DrRich would like to explore another question – Why are ICDs still so damned expensive?
Having worked closely with ICD manufacturers since the early 1980s (which, DrRich knows, makes him a very bad person), he perhaps more than most appreciates the engineering magic that has gone into making and improving these devices over the years. It is a truly remarkable thing that one can build a tiny implantable device that a) houses a computer that runs an extraordinarily sophisticated heart rhythm analyzer that, from beat to beat, accurately diagnoses the heart rhythm in real time; b) can deliver a tiny electrical pacing impulse to the proper cardiac chamber at the proper time, from beat to beat, to coordinate and optimize cardiac function; c) then, if a fatal arrhythmia develops, to deliver a very big shock to the heart within 10 – 15 seconds, to restore the rhythm to normal (please do see the video); d) wirelessly communicate via the Internet to tell the doctor (and anyone else who needs to know) its own condition and the condition of the patient; e) all the while surviving in a hostile, high-temperature, salt-water environment (i.e., the human body), for 5- 7 years, without (for the most part) corroding, leaking, rusting, blowing up, or otherwise malfunctioning.
Try to get your iphone to do that.
At this point, most of DrRich’s regular readers are likely expecting him to say: No wonder these beasts cost $15,000 to $25,000 apiece. Just look at the sophisticated technology that is built into them!
And it is indeed true that over the past 27 years, hundreds of millions of dollars have been invested in making ICDs smaller, more reliable, longer lasting and safer. It is also true that the companies that make these devices ought to be fairly rewarded for their efforts in this regard. And for many years (DrRich estimates that the “right” number of years was about 18) the high cost of ICDs was easily justifiable, given the steady, remarkable, important and meaningful improvements in technology that took place during that time, improvements that were being funded by the cost of the devices.
But DrRich argues that by the turn of the millenium, ICD technology had become largely mature, and that since that time improvements (while still happening) have been merely incremental. “Gingerbread” might be too strong a term, but nonetheless that’s the term that pops into DrRich’s mind. The fact is that by the year 2000, all ICD manufacturers were building reliable, safe devices that were really good at preventing sudden death, and improvements since then have not altered (or materially improved on) that fact.
Here’s a truth that ICD manufacturers would not like us to know: It only costs them a couple of thousand dollars to build an ICD. DrRich does not know the precise dollar amount (very few people even in ICD companies know these precise amounts) but based on his experience he cannot see how it could be much more than about $3000 per unit. Now, lest you think that the roughly $22,000 difference between the cost to manufacture and selling price is pure profit, it’s not. ICD companies continue incurring expenses as long as an ICD remains in service. These “lifetime” expenditures include monitoring of device function; maintaining expensive, rigorous quality and reliability processes; and backing up every implanted device with a large force of highly-trained and expensive field clinical engineers who are available to electrophysiologists 24/7, anywhere and everywhere, for “troubleshooting” and even for routine follow-up. All this “extra” stuff must be fully accounted for in the initial price of the device.
Still, ICD manufacturers make a very, very nice margin on every device they sell. Few businesses in the world enjoy this kind of price margin.
With all that “room” to play with, one might think market forces would by now have brought the price down for a mature technology like this, especially since over the past few years the growth of the ICD market has flattened, and ICD companies now must compete with each other for more market share if they want to grow their businesses.
But classic market forces usually do not work in healthcare, and that is especially true when it comes to ICDs.
It all begins with Medicare reimbursement, which sets the price for ICDs, and consequently the cost of ICDs is likely to remain at $15,000 – $25,000 forever.
Now, to be sure, the government does not directly determine what companies get paid for ICDs. Rather, they indirectly determine the price by deciding what hospitals and physicians will be reimbursed for implanting ICDs. Those reimbursement rates apparently vary substantially from region to region and hospital to hospital (who knows how the government determines these things?), and the rates are not publicly available to DrRich’s knowledge. But ICD manufacturers, at worst, can impute the reimbursement rates by figuring out the top price specific hospitals are willing to pay for ICDs (hence the range in prices).
Having determined the top price they can possibly get paid for ICDs, the only logical strategy for manufacturers is to figure out how they can always get paid that top price for every device they sell. They do this by making ICDs specifically aimed at keeping the decision makers happy. And the decision makers, by and large, are the electrophysiologists.
Electrophysiologists decide who gets ICDs, and they decide which ICDs to implant. So, to keep prices at the highest possible level, ICD companies must cater to the wants and needs of electrophysiologists (their true customers), and so must produce a steady stream of new, improved ICDs whose novel features are requested by these very high-end, high-maintenance physicians.
Electrophysiologists have a clear agenda in this regard. Their “demands” on ICD companies, expressed in rigorously conducted marketing surveys and focus groups, inexorably lead to ever more complex devices. This complexity helps electrophysiologists (a small community whose growth is tightly controlled) to maintain a professional stranglehold over the implantation and management of ICDs.
It’s a matter of turf protection.
Since ICDs are already exceedingly complex devices, and grow more complex with each succeeding generation, then “obviously” one must be a high-end specialist like an electrophysiologist to understand and manage all their nuances. (In real life, ICDs have become so complex that not even a majority of electrophysiologists can keep up with them any more, thus necessitating armies of “clinical engineers” in the employ of ICD companies who can do troubleshooting in the field.)
All the ICD manufacturer needs (and wants) to know is: what gingerbread do I need to add to my next generation of ICDs to make them even more stupefyingly complex, so as to maintain the loyalty of my electrophysiologist customers? If they can answer this question manufacturers will continue to be paid top dollar for their product (again, as determined by regional reimbursement rates set by the government).
And this is why, despite the fact that ICD technology has been fully mature (says DrRich) for most of a decade now, which in a functional market would cause the price to plummet, the cost of ICDs remains so high. Whatever has developed in the complex interplay between ICD manufacturers, electrophysiologists, hospitals and the government, it’s not a functional market.
Among other things, this dysfunctional economic model (if that’s what it is) utterly precludes ICDs ever becoming available to a large proportion of individuals whose lives could be saved by them. They’re simply too expensive and complex for widespread usage.
Covert rationing, of course, thrives on opacity, obfuscation, confusion, inefficiency and complexity, and the convoluted ICD “business model” provides many, many avenues for covert rationing. So while the price remains high, relatively few ICDs actually end up being implanted (compared to the number of patients who have clear, FDA-approved indications for ICDs). In fact, the growth curve for ICD implantation has been successfully flattened for almost five years now (despite projections earlier this decade for 20% annual growth for years and years) – and it is likely to stay flat.
If we were to have a system of fully transparent, open rationing, then the ICD business model would rapidly be seen as the travesty of confusion that it is. Furthermore, a system of open rationing would quickly goad ICD manufacturers away from catering to the turf-based requests for more complexity by electrophysiologists. They would quickly develop ICDs that are simple, reliable, effective, easy to implant, long-lasting and cheap, and which could be safely implanted and managed by non-electrophysiologists.
The technology to do that exists today.
This is an example, DrRich believes, where open rationing would ultimately lead to more usage of a life-saving technology, by driving industry to put their development efforts into reducing the cost and increasing the simplicity and reliability of their products, and thus making them more cost effective, rather than striving to make them more attractive to high-end-physician decision makers. If they did this, then videos like the one Dr. Wes has shown us would no longer merit mention on blogs or on any other form of media, as ICD rescues would become very common.
DrRich has been telling all this to ICD companies for many years to no measurable effect. Of course, it has been well documented that DrRich is more than willing to tell his clients stuff they may not particularly want to hear. (It’s truly amazing that he can still make a living as a consultant.)
In any case, here’s DrRich’s investment advice for this week: The growth of the ICD market is destined to remain flat as long as high-priced, gingerbread-laden ICDs that only an electrophysiologist can love remain the norm. Avoid companies whose growth depends on these devices. On the other hand, the ICD market is ripe for a major disruption, if one of these outfits ever figures it out.
DrRich will now fade into quietude here for a week or so, as he entertains those nice people in Europe with his crazy ideas about healthcare.
*This blog post was originally published at The Covert Rationing Blog*
