Make the shell smaller, please!

So, Obamacare has passed, been legally upheld by the Supreme Court and appears to have met its enrollment goals.  So how far have we really come?  Not that far.  Let’s look at the statements and actions of some of those who actually run a portion of the system:

We need look no farther than The New York Times, May 26, 2014 for two separate indicators:

First, in an article titled “Hospitals Look to Health Law, Cutting Charity”, the author describes how some large hospital systems are reducing the level of charity care they provide, encouraging patients to sign up for Obamacare instead.  Or perhaps Medicaid.  Or if the patient doesn’t qualify for coverage, bill them directly.  One big shell game, as long as the hospital doesn’t have to eat the costs.  (The author didn’t say all of this- the author just stated the facts behind the cost shifting).

Then, in the editorial section, same date, we see responses to an earlier article that blamed the pay of insurance executives for the high costs of care, and attempted to shift the spotlight away from physicians.  It was the responses (letters to the editor) that interested me.

No less than three physicians wanted us to know it wasn’t the doctor’s fault.  Not to be outdone, a hospital association executive pointed out that it wasn’t the hospital’s fault.  Finally a nurse wrote in saying guess what?  If we only paid them more… (actually I do think nurses are the “good guys”).

So it’s one big shell game, and it’s not the doctors, hospitals or nurses at fault.

Here’s the news, all of you experts- we know it’s one big shell game.  Just make the shell (costs) smaller!  So the part that falls on us is tolerable.

With all of your expertise and training, you must be able to conceive of a solution to the problems of the health system that is more sophisticated than simple cost shifting!  Two children can do that (“make him pay…no, no, make him pay!).

So now that Obamacare has passed, been upheld and met the enrollment goals, do we all now get to sit back?

No.  It’s time to focus on costs.  Aggressively.  Now.

#Obamacare- The focus needs to be on Costs.

Now that an estimated 6 million + people have signed up for Obamacare, how have we done?  Is 6 million enough? Is the mix of young and old the right mix? Did enough previously uninsured people sign up?

Long term success will hinge not on any of the above questions, but on what we do about costs.

I am not talking about the cost of the insurance premium.  After all, if you insure something expensive, the insurance policy will be expensive.  Rather, I am talking about the costs of the underlying products and services- physicians, hospitals, pharmaceuticals, devices and supplies.

Here are several steps we can take that will decrease the costs of care:

-Allow Medicare to use its purchasing power to negotiate with pharmaceutical companies

-Implement tort reform

-Expand the scope of practice of physician extenders

-Open more retail clinics

-Allow, and reimburse more at-home care

-Encourage, and reimburse, more remote home monitoring

-Allow the sale of insurance policies across state lines

-Encourage more price transparency.  Increase the publication of prices.

Every one of these suggestions is either not done today or is limited in order to protect the finances of a particular interest group, be it physicians, hospitals, pharmaceutical companies, insurers or attorneys.  And in all cases, it is the consumer who suffers, either through lack of access, higher prices or higher taxes.

Don’t misunderstand me- I support Obamacare.  I am glad to see it happening.  But we need to focus on costs. Aggressively.  Now.

The only reasonable end-game is full transparency and significant downward pressure on prices.

As more and more people sign up for Obamacare, early indications are that there will be some adverse selection- more middle aged and older people, fewer young and healthy people.  This creates the “downward spiral” as those healthy people who signed up eventually drop out because prices are too high.  This worsens the risk pool and increases prices for those who remain.  Then more drop out.

This will accelerate as states and corporations discontinue coverage for some because they can now purchase coverage through Obamacare.  The people affected by this will mostly be retirees who are older and less healthy- more costs will be run through the exchanges.

If we don’t do something about the core issue of prices, this is not sustainable.

Whether the issue is people who only want catastrophic coverage but can no longer find it, or people who are forced to by coverage that cannot possibly apply to them (think 60 year olds purchasing maternity coverage), or part time workers whose hours are cut even further, there are many people who the market is presently ignoring, at great cost to the system as a whole and to those of us who participate in it.  And I am not talking about the price of insurance.  I am talking about the costs covered by the insurance- hospitals, physicians, drugs and devices.

We need to:

-force the publication of prices.  There have been several articles over the past year detailing how hospital and physician prices vary widely.  They seem unable to estimate prices until after you have received the service, then they are suddenly quite certain what you owe- and it’s a lot.

-broaden the scope of services for “physician extenders”, such as PAs and Nurse Practitioners.  If there is a “physician shortage”, the simple rule of supply and demand will ensure that they are in the “power position” in each and every discussion.  Allow more extenders, fix the shortage, reduce physician bargaining power and change the entire dynamic of the discussion with physicians.

-levy punishing fines, not token fines, when organizations are shown to have schemed the system, as one Florida hospital organization was recently shown to have done (driving up admissions and penalizing doctors who resisted).

-and yes- allow the market to provide products that are aligned with people’s needs.  If some want a catastrophic policy, they should be able to find one.  If a 60 year old couple does not want to buy maternity coverage, they should not have to.

I am not in favor of unfettered market freedom- after all, it is the market that gave us slavery and sexual trafficking.  I do believe, however, that a proper mix of regulation and market freedoms will provide the best answer.  Right now, we have swung too far in the direction of regulation, where attractive market options are forbidden by law.  We need to move back to a place where the market and regulations are in proper balance.  And if we provide transparency and allow the market to work, with some regulatory oversight, then prices will surely decline.

It is time to break the provider “monopoly” in health care.

Many of us believe the health care discussion is actually about money, masquerading as “quality”.  We see a number of versions of this:

1) The wave of hospital mergers.  They are presented to the public as “improving quality”, but a recent article (AARP bulletin, June 2013) cites cost increases of up to 40% following a merger.

2) Network restrictions imposed by insurers.  Large health systems whose prices are rejected during contract negotiations generally claim that to eliminate them from a network will “compromise quality”.  Pressure is then put on the insurer to include the prestigious hospital system in the network at a typically higher cost.

We also see some promising developments:

1) A recent New York Times article (“Lessons in Maryland for costs at Hospitals”, August 28, 2013) describes some results of using hospital price controls and encouraging patients to receive care outside of the traditional hospital (lower costs, better quality statistics, more satisfied patients, and yes, more profitable institutions).

2)     An increase in the number of retail clinics, and an increase in the range of services they are able to provide.

There are some commonalities here:  when we, the patients, are no longer considered “captive” by the local providers, and instead have alternatives where we can go to receive our care, interesting things happen- costs tend to go down.  Quality tends to go up.

So what then, are the benefits of granting local monopolies to select groups of health care providers?  There is an interesting lesson now playing out in New York City:

A hospital in lower Manhattan, St. Vincent’s recently closed.  Prior to the closure, providers predicted a drop in “the quality of care provided to local residents”.  Politicians predicted a disaster.  And what happened?  Nothing!  Death rates have not soared, the community has not suffered- in fact, many urgent care centers opened up to fill the void.

Some may argue that access in the neighborhood has improved- minor conditions can now be seen efficiently and at low cost, as opposed to lengthy waits in an emergency room that is also serving those with contagious conditions.

I hope this trend not only continues, but accelerates.  A provider “monopoly” tends to benefit only the providers.  It is time for the consumer to be at the center of this system!

Is it time to restrict consumer choice again?

In a recent New York Times article, (“A Health Provider Finds Success in Keeping Hospital Beds Empty”, April 24, 2013), the author discusses an Illinois based Accountable Care Organization that appears to be having some success in reducing health care costs.

The article goes on to describe several methods the ACO is using, such as care coordination and physician report cards.  But the article also questions the sustainability of savings and points to issues outside of the hospital’s or physician’s control.   These challenges include patients seeing “out of network” providers, who may not have an incentive to control costs at all.  In fact, these other providers may still be practicing under the unrestrained fee-for-service model, where providers have many incentives to increase the volume of services provided.  This increased volume, and related increased costs, will be counted against the Accountable Care Organization’s performance numbers and may affect negatively any reward or bonus the ACO may have otherwise earned.

Now this point is not unfair.  Yes, maybe the patient goes out-of-network because the ACO physicians don’t keep convenient hours, or maybe the quality is perceived to be better elsewhere.  But maybe the patient wants to go to the doctor they know, or the one who is closest.  Should the ACO be penalized for this?

So what should we do about this?  Should patient convenience trump other concerns?  Should all of us pay, through increased premiums, so someone else can visit whichever doctor or hospital they want, regardless of costs?  What should we do as a society?

Here are some thoughts:

a)      Should insurers ban out-of-network visits, meaning no coverage for them?

b)      Should out-of-network visits be made financially unattractive, by reducing coverage to something like 50%?

c)       Is it possible to exempt the ACO from the costs of out-of-network care (and if we did that, are we rewarding the ACO whose service is poor or whose hours are inconvenient)?

d)      Is there some other option?

What do you think?

How should the system treat visits to out-of-network providers that threaten the financial performance of Accountable Care Organizations?

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Maybe Doctors Can Learn From Lawyers

On May 2, an article was published in the New York Times, titled “Top Judge Makes Free Legal Work Mandatory for Joining State Bar”.  The article describes how more and more people need urgent legal services but cannot afford them.  It goes on to describe the pros and cons of requiring lawyers to provide some free services (pro bono) as a condition for joining the New York State Bar.

We have a similar problem in health care- a large number of people who cannot afford health care services.  And I am not talking about insurance.  I am talking about the doctor and hospital visit.

In health care, we have doctors refusing to see patients because Medicare or Medicaid do not pay enough.  And these patients have nowhere else to turn.  The doctors use the threat of refusal as a key part of their strategy when negotiating for higher reimbursement.

How can we allow this?

In a previous post on this blog, I have proposed that doctors be required to accept Medicare as a condition for receiving or renewing their DEA license (federal level- the DEA license is what allows them to prescribe), and to accept Medicaid as a condition for receiving or renewing their Medical license (State level).

We place physicians on a professional and social pedestal, and their incomes are higher than that of any other profession.  In return, we should require something of them- not grant the right to walk away from persons in need.  Doctors, take a lesson from the lawyers, or lose your protected, lucrative turf!

 

A Brief Comment on the Ryan Medicare Plan

Medicare is too expensive and becoming more unsustainable every day.  Congress has also demonstrated that they will bow to special interests before implementing what they have already passed- the so-called “doc fix”, whereby reimbursement cuts to physicians that are already mandated by law are deferred, year after year.

One approach is the Ryan plan, named after Representative Paul Ryan of Wisconsin.  Without delving into the details of the plan, which are debated hotly by very partisan commentators, one great flaw in the plan appears to have escaped comment:

That is, the notion that physicians will compete for patients, thereby reducing costs.

This assumption is deeply flawed for one simple reason- there is a well documented shortage of physicians.  Economics 101, and the basic law of supply and demand, teaches us that if the supply is low, the price is correspondingly high.

Physicians will never have to compete aggressively for patients (the Ryan Plan assumes that they will) as long as there is a shortage of physicians.  Rather, patients will have to chase physicians and endure long wait times to get an appointment.  Physicians will continue to raise fees, not lower them, and they will threaten to stop seeing patients whenever their fees are reduced- hence the “doc fix”, which happens year after year.

If Medicare is changed to a voucher system, as Rep. Ryan proposes, seniors will be at the mercy of physicians, who are in short supply, and who will retain any negotiating leverage as long as there is a shortage of physicians.

Until we are able to address the shortage of physicians (train more and/or allow the greater use of nurse practitioners, midwives, pharmacists and other “physician extenders”), it is wrong to place seniors in this ruinous position.

Which of the key health industry players is to blame for the current problems?

Who is to blame?  All major participants have good and bad aspects:

Insurers:

  • The Good:  They bargain provider prices down.  They pay our bills when we get sick .
  • The Bad:  They deny coverage inappropriately.

Pharmaceutical companies:

  • The Good:  They provide medications that heal.  I’d rather take medicine than receive surgery.
  • The Bad:  They overcharge and put drugs on the market that are far more expensive and no more effective than what they replace.

Physicians:

  • The Good:  They provide good, compassionate care.  They save our lives!
  • The Bad:  They put us on a financial treadmill and churn patients to increase their incomes.

Hospitals:

  • The Good:  They provide the infrastructure within which healing and recovery take place.
  • The Bad:  They build empires and overbuild in general, driving up costs.  A cath lab in every town?

Device and supply manufacturers:

  • The Good:  They invent and produce live improving and life extending devices, e.g. pacemakers, MRIs.
  • The Bad:  They inappropriately work the system to sell more of their products.

So what does all this mean?  There is no universal “good guy” or universal “bad guy”.  In improving our system, all parties must be looked at carefully, and all parties must accept change!

Would you sacrifice choice this time around?

In the ’80’s and 90’s, when HMOs first became widespread, we all experienced lower costs but less choice- we had to choose from a list of doctors and hospitals, i.e. “in-network providers”.  But costs did stop rising, and in some cases actually fell.

Then came the managed care backlash and insurers allowed a much broader choice of doctors and hospitals.

Health care costs have nearly tripled since 1990 and now, the federal budget and nearly every state budget is threatened by extremely high health care costs.  Of the many methods being used to try to contain costs, limiting consumer choice of providers is once again a common approach.

The way this works in practice is that health plans offer one set of prices for using “in-network providers”.  If we use “out-of-network” providers, the amount we have to pay out of our own pockets is higher.  Sometimes much higher.

Here is the question: How do you feel about having a limited choice of doctors and hospitals in return for lower costs?

Is limiting our choice of doctors and hospitals fair, if costs are significantly lower?

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Fourteen Zeroes!

Part 1- the problem.

If you look at our present level of health care spending ($2.6 Trillion), and project it forward, growing at 6% annually for the next 20 years, the total exceeds $100 Trillion.

That’s 14 Zeroes:

  • Just for health care
  • Just in America
  • Just for the next 20 years (if we look at 30 years, the number is over $200 Trillion).

That number is incomprehensible.  Not only is it not sustainable, it is not even possible to finance this number.  Yet, that is the path that we are on.

The present discussion aims to “bend the cost curve” and to somehow shift the burden:

  • Blame the insurers
  • Blame the pharmaceutical companies
  • Reduce provider reimbursement
  • Limit what Medicare pays on behalf of seniors.

Whomever we choose to blame, we are clearly headed for a scenario where we all  work our entire lives just to pay for health care, and when we get old, all of our assets, if there are any left, get paid over to our huge, for-profit health system.

We must fundamentally restructure our health care system, and our expectations of living and of dying, or life will become one long health-care payment treadmill.

Part 2- the discussion.  Please answer the following questions. One answer per question:

What is the responsibility of consumers (the system calls us "patients")?

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What is the responsibility of insurers?

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What is the responsibility of the government?

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What is the responsibility of providers (doctors and hospitals)?

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What is the responsibility of suppliers (pharmaceutical companies and device manufacturers)?

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Now, please consider all of the answers you provided.

What do your answers, taken together, mean for the 14 zeroes in our future?  Something to think about…

Should physicians have the right to refuse Medicare and Medicaid patients because they are not paid as much as they feel they should be? What options does society have?

This is a tough one…

On the one hand, physicians have to run their practices, which costs money.  They want to live well, as we all do, and that costs money.

On the other hand, they provide a vital service which not just anyone is allowed to provide- so in a way, they are on “protected turf”- protected through licensing and long years of training.

But when physicians refuse to see Medicare or Medicaid patients, those patients have nowhere else to turn.  In fact, the threat of physicians refusing Medicare is often used as a reason not to cut Medicare rates.

This sets up a sort of “health care hostage situation”, where we, as a society, can no longer afford the costs of care, but seem to be powerless to do much about it.

So here is the question.  Actually 2 this time.  What do you think?

In return for the right to practice medicine, should physicians be required to accept at least some Medicare and Medicaid patients?

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As a society, what should we do when physicians refuse to see Medicare and Medicaid patients because the pay isn't high enough, and we have nowhere else to turn? Select up to 3 answers.

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