Posts Tagged ‘health care costs’


March 4, 2013

I began this rant a few years ago by lambasting corruption and waste in all segments of the health care system, from government to lawyers to doctors to insurers, even the patients themselves. I proposed 15 changes that would need to be implemented if we were serious about fixing what ailed it which I subsequently distilled down to the most critical five. So when an associate sent me a link to Steven Brill’s Time Magazine exposé, “Bitter Pill: Why Medical Bills Are Killing Us,” I couldn’t help but disagree with my colleague’s observation that it should be required reading for anyone in medicine. It should be required reading for anyone not suffering from rigor mortis. I was chagrined to have given such little attention to this superbly researched elephant in the room. This investigative report will take a bit of time to get through, but it’s time well spent.

For years I’ve known about the outrageous charges on hospital bills, the so-called “retail” charges that hardly anyone paid, or so I thought, because the insurance companies knocked them down, and the indigent “self pay” patients were served by programs with deep pockets or walked away from the bills without consequence. I ignored the high percentage of bankruptcies related to health care costs. As Brills points out, “Unlike those of almost any other area we can think of, the dynamics of the medical marketplace seem to be such that the advance of technology has made medical care more expensive, not less.” He dispels the arguments made that the exorbitant rates help pay for the poor. “A closer look at hospital finance suggests two holes in that argument. … [A]t most hospitals it’s not a Saudi sheik but the almost poor — those who don’t qualify for Medicaid and don’t have insurance — who are most often asked to pay those exorbitant chargemaster prices. Second, there is the jaw-dropping difference between those list prices and the hospitals’ costs, which enables these ostensibly nonprofit institutions to produce high profits even after all the discounts.” He goes on to elaborate, “So, what do these wealthy nonprofits do with all the profit? In a trend similar to what we’ve seen in nonprofit colleges and universities … the hospitals improve and expand facilities (despite the fact that the U.S. has more hospital beds than it can fill), buy more equipment, hire more people, offer more services, buy rival hospitals and then raise executive salaries because their operations have gotten so much larger. They keep the upward spiral going by marketing for more patients, raising prices and pushing harder to collect bill payments. Only with health care, the upward spiral is easier to sustain. Health care is seen as even more of a necessity than higher education. And unlike in higher education, in health care there is little price transparency — and far less competition in any given locale even if there were transparency. Besides, a hospital is typically one of the community’s larger employers if not the largest, so there is unlikely to be much local complaining about its burgeoning economic fortunes.”

The “chargemaster” referred to above is a list of charges often ten times the actual cost or Medicare reimbursement for a medication, device, or service. Ironically, while Medicare is able to more effectively limit chargemaster overpayments than many private insurers, special interests have lobbied to limit its ability to limit the excessive profiteering in areas of medications and devices. We, a debtor nation, continue to subsidize the world, which has no qualms limiting the pharmaceutical and device manufacturers’ charges.

To many this will sound like I’m backtracking on my free market ideology. Nothing could be further from the truth. Only in a free, competitive marketplace can the true value of goods and services be found. The government’s meddling, even when the intentions are good, tends to distort the marketplace and create unintended consequences down the line that create larger problems. Where the market is large enough, such as the competition between insurers (when allowing for commerce across state lines) it should be permitted to do its job. When there is a relative monopoly in terms of services, as is often the case when it comes to medical care, especially when it’s emergent, then regulation along the lines of fraud an abuse is necessary and appropriate. The behavior of many of these health care industry CEOs is tantamount to charging a dying man in the desert $500 for a cup of water. It perpetuates an economic milieu where they can “justify” seven-figure salaries by dint of irresponsibly inflated profit margins. The arguments for chargemaster prices and the dubious estimates of the magnitude of charitable services provided alluded  to in the Brill piece should be a wake-up call to us all.

Instead of reaching out to the government for handouts to help perpetuate a corrupt system, the American people must demand change in the system itself. I’ve often stated that the liberal view of government charity for those in need is misdirected. The old saws, “Give a man a fish and you feed him for a day; teach him to fish and you feed him for a lifetime,” and “A rising tide lifts all boats,” has never been truer than today.

It’s time that the American public viewed itself as a special interest.

Next: Some concrete suggestions for change.



May 7, 2012

A New York Times piece by Annie Lowrey from 4/28 discussed a ray of light at the end of the health care spending tunnel, “offering some fuel for optimism about the federal government’s long-term fiscal performance.” It seems that total nationwide health care spending grew less than 4 percent per year in 2009 and 2010, “the slowest annual pace in more than five decades.”

Several factors were surmised as accounting for this: the recession, with many patients now without health insurance and others skipping medical visits due to worries about job security, the greater use of generic drugs in the wake of “a dearth of expensive, novel drugs coming onto the market,” and the shift toward accountable care, where quality rather than quantity of care is reimbursed.

Still, “[s]ome experts caution[ed] that there remains too little data to determine whether the current slowdown will become permanent, or whether it is merely a blip caused by the economy’s weakness.”

As with the general economy, I encourage readers to look past the fog of “expert” opinion and at fundamentals when deciding where we’re headed. Remember, there was a collective silence from the experts just before the economy tanked in 2008. All of the above reasons for the medical spending slowdown cited, in my opinion, are accurate. However, one of them requires ongoing economic failure for us to “succeed” in capping health care costs, the other a lack of innovative new therapies, and the third a shift to a managed care model of health care delivery (the hazards of which I’ve previously discussed). On a more positive note, the article states that many people have moved into high-deductible plans and thereby reduced their spending by 14 percent, proving once again that when the consumer is back in the loop, market corrections follow. The downside is that some of the savings were carved out of essential spending, such as that used for vaccinations, and will have health and dollar repercussions in the longer term. It should also be remembered that health care spending did increase yearly with the percent of the GDP remaining flat, at just under 18 percent.

What the “experts” may be missing is that an enormous group of aging baby-boomers are about to storm the health care citadel. In my bailiwick, I see high-cost new devices rolling out to prolong the life of the very elderly a few more years—often the very elderly with multiple other medical problems requiring expensive attention, many of whom will have limited quality of life at the end. I see murderers and sexual predators receiving costly and extraordinary care rather than palliation so we can spend more on their incarcerations for untold years to come. In short, I don’t yet see a clear societal attitude change.

We need to actually deal with these thorny issues up front. Or the tunnel will collapse before we reach the light.


April 30, 2012

I’ve ranted in the past that we, as a society, seem to be playing ostrich-in-the-sand when it comes to the dire state of our economic duress. Here are some more clues that we’re clueless:

A ninety-year-old patient came to the office for routine a routine follow up visit (whether nonagenarians are good candidates for specialist evaluation in this financial climate is a discussion beyond the scope of this rant). She had recently been seen in the emergency room for abdominal discomfort and constipation. The physician on duty dutifully ordered an abdominal CT which was negative. I asked the patient if an old-fashioned digital exam had been done (forgive me for those of you who are squeamish) and the answer was no. She reportedly received no effective treatment for the complaint, and the daughter cured her with an enema after they returned home. I can only imagine the hospital charges for this unproductive visit.

I recently used one of those handy “double deal” coupons to buy dinner from a barbecue place I hadn’t patronized in a long time (please don’t tell my patients). I was shocked by the rise in prices over the past few years—about 85%. The meal was barely worth the discounted price, in my estimation. Yet, they seemed busy enough, mostly with young folks. Perhaps these youthful patrons were availing themselves of the same deal, although, based on the cost of one young couple’s order relative to the coupon value, I doubt it. I wondered how all of these customers, almost certainly in a much lower tax bracket, could afford these prices.

Two seemingly unrelated events, each illuminating the same principle: We’ve moved further and further away from the common sense frugality that characterized the mindset of our Founding Fathers. In any case, I’ve seen this pattern over an over: Movie theater popcorn, a large McDonald’s Coke, pricey designer jeans with strategically placed holes. I read about the large percentage of people that haven’t put aside anything for their retirement, much less their future health care needs, and can’t help but wonder if they’re the ones standing on the daily Starbuck’s line. It often seems to me the concept of value has vanished from the American consciousness, replaced by the notion that lifestyle comes before sacrifice, and that the government safety net will always be there. Perhaps our rulers are nothing more than a reflection of this mindset.

I think it’s time we all look down and realize we’re walking a tightrope, not a path, and the safety net below is frayed and riddled with holes. And the repair crew is miles away, sipping Starbucks.


June 13, 2011

Two reports from the ACC News Digest, juxtaposed, nicely indicate the sickness pervading our health care system and the underlying mindset that permits it to continue:

NYTimes Highlights Poll Showing Popularity Of Massachusetts’ Healthcare Law.

The New York Times (6/10, Subscription Publication) editorializes, “Discount most of what you hear from Republican critics about the alleged failures of health care reform in Massachusetts, the template for the national reform law,” because according to “a poll by the Harvard School of Public Health and The Boston Globe” 63% of state residents “supported the state reforms, up 10 percentage points from 2009. Only 21 percent opposed it.” The Times concludes, “The most important takeaway from the poll is that after five years of real-life experience, support for reform in Massachusetts is strong and growing stronger. Support for the national reform is apt to follow the same trajectory.”

HHS Data Show Uninsured Typically Leave $49 Billion In Unpaid Health Bills Annually.

USA Today (5/10, Kennedy) reports, “Uninsured Americans — including those with incomes well above the poverty line — leave hospitals with unpaid tabs of up to $49 billion a year,” according to a study released by the Department of Health and Human Services. On average, the study found that uninsured families “pay only about 12% of their hospital bills in full.” Researchers also found that most “uninsured people have ‘virtually no’ savings and that about a third have no financial assets.”

As to the first, I think the “most important takeaway from the poll” is that people receiving much more in value from a system than they’ve paid in will, of course, favor a policy that supports this, regardless of its sustainability. The second is self-evident.

This past weekend I rounded on two patients in their nineties with end-stage heart disease (among other problems), snatched from the jaws of death at great expense. They are not very functional, and will live, at most, a short time longer, while the families continue to struggle even with the idea of giving them “do not resuscitate” status. In years past, such individuals would have died quickly, and peacefully.

Two questions come to mind: How long can the current bankrupt system continue to underwrite such extravagance? And would these same families be as quick to want “everything” to be done for their loved ones under such dire end-of-life circumstances if they were the ones footing the bill?

Things to think about.


May 15, 2011

Last post I discussed some reflections Dr. Steven Schoeder from the Department of Medicine at UCSF shared in a special article in the April 25th edition of the Archives of Internal Medicine. He makes some other points that are equally deserving of wider dissemination. He references the introduction of CT imaging and upper GI endoscopy in the 1970s and remarks that estimated charges were 3-6 time higher than their cost to provide. When reviewing the efficacy of technology in the late ‘70s to early ‘80s, he noted that new technologies were rarely not accepted and coverage was dissociated from price setting, and tended to be additive in nature. Interestingly, the prices never came down, even as the procedures became routine.

In the 1980s prospective payment plans were instituted to attempt to change hospital utilization incentives and increase efficiency. They had the effect of decreasing hospital lengths of stay, but didn’t slow the rising costs, shifting much of the surgery to the outpatient setting.

Dr. Schroeder became aware of the discretionary nature of hospital use when he served as director of the GWU HMO. Upon tracking all hospitalizations, he found that all psychiatric inpatient lengths of stay were 30 days. Not surprisingly, this was the benefit limit for individual hospital stays for the Washington, D.C. Blue Cross plan at the time. Although the psychiatry chairman warned of an uptick in suicide attempts if stays were shortened, a program to institute reduced stays with aggressive post-discharge follow ups was instituted. There were no suicide attempts.

The doctor concludes (pessimistically or pragmatically, depending on your viewpoint) that implementing such strategies as widespread electronic medical records use, curbing fraud and abuse, paying for performance, and comparative effectiveness research, while all reasonable endeavors, will in themselves be unlikely to be more successful than prior efforts at cost control. In his opinion, what is required is a stiff political backbone able to resist the industries benefitting from the 17% of the economy spent on health care and the consumers who expect unlimited access to what they perceive they need. He favors a comprehensive strategy of reform, otherwise “politicians and health policy experts will continue to embrace tepid and ultimately ineffective solutions that may sound good in theory but will fall short in practice.”

Another voice giving weight to the concept that if a tree falls in a forest and there’s no one there to hear it, the tree still falls. Thank you, Dr. Schroeder.


May 9, 2011

In the April 25th Archives of Internal Medicine Dr. Steven Schroeder, now UC San Francisco affiliated, but a former medical director of GWU’s outpatient clinics and HMO (my medical school alma mater), presents a comprehensive analysis of the rising costs of health care over the past few decades. While his perspective is not available online to nonsubscribers, I thought it worthwhile to highlight a few of the many salient points he presents.

Those of you who have read my previous rants know that I’ve placed heavy emphasis on the need for a change in physician practice patterns to impact on the escalation of health care costs. I proposed that physicians be provided with feedback as to where they stood relative to their colleagues to promote voluntary assessment of choices made, and surmised this would result in a reduction in wasteful ordering of tests. Well, it appears this has already been tried with some success. Dr. Schroeder noted a wide variation in practice patterns when at GWU, varying by as much as 17-fold among physicians in annual laboratory costs. When clinicians were notified of this, solely for informational purposes, a second, behind-the-scenes audit revealed a 29% reduction in costs of laboratory use. Interestingly, reductions were similar for those physicians in the highest-cost and lowest-cost thirds, while those in the middle were unchanged. Dr. Schroeder argues, rightly, that medical cost containment is not synonymous with rationing needed care.

I’ve argued in the past that care will inevitably be rationed as the patient ranks burgeon and patient age and infirmity rise; it will either be done rationally and purposefully, or desperately and reactively when the system is on life support. Clearly, the component of overspending cited above falls into the “waste” category and should not be confused with rationing. Much of the other health care spending that I predict will be curtailed in the coming years will be subject, I suspect, to greater philosophical and moral debate.

Dr. Schroeder’s dissertation covers a wide range of issues, among them hospital and specialist utilization and costs, and some of these will be addressed in subsequent posts.