Healthcare Crisis, Healthcare Legislation, Government Role In Healthcare Reform, Healthcare Reform, email
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Mon,Tues June 15,16 2009
Today’s Zinger:
Healthcare Makes Me Sick
The Morning Briefing:
I recently went to my family doctor because I felt lightheaded and a little dizzy. I was then sent to the ER. I was given IV’s, medication, an MRI and then consultation with an ER doctor and then a Neurologist. I was told to go home and my condition would go away in a week or two. The cost: approximately $6,000. The final cost after negotiated discounts with my insurance company will be about $3,500.
I experienced the same condition approximately 15 years ago. I called my doctor. He called in a prescription and I was told the condition would go away in about a week or two. Total cost: less than $50. New technology, healthcare specialties and new treatments have improved patient care, but at what cost?
For two decades we have heard about the need for healthcare reform. After all, the cost of healthcare increases at twice the rate of inflation and healthcare now represents 16% of our economy. President Obama is making a strong push to reform healthcare this year and the Democrats have now produced a first pass at legislation. But will the proposal just add to the bulging federal deficit or are there real changes that will reduce costs? Adding more recipients without dramatic cost reductions will either cause higher deficits or higher taxes. Either way, this has the potential to cripple our economy.
There are five critical questions that must be answered to evaluate any healthcare reform proposal:
The Facts:
The Discussion:
The Democrats have produced their first healthcare proposal. As I read the proposed legislation, I was concerned that we are missing the real drivers of cost and as such we will end up piling on additional cost and complexity to an already complex and under performing system. As someone who has worked in and consulted to the healthcare industry for thirty years, and someone who has had to extensively use our healthcare system, I would like to share a few observations that I believe are critical to our governments’ ability to rein in costs and truly reform our system.
What drives these costs? There are two primary drivers of healthcare costs. First is utilization. This is how many people use the system and how many procedures occur for each patient. The second is the cost of treatment. This is how much we pay for any given procedure or service.
The government is looking to add upwards of 30-50 million new users of healthcare insurance. These represent the uninsured, children, illegal immigrants, those that can’t afford coverage and those that chose to forego coverage for their own reasons. Adding this many participants will clearly increase the utilization of healthcare system wide. This is a policy decision. The Massachussets experience of covering all (98%) of its citizens shows that while the cost of insurance goes down, the actual costs of healthcare goes up due to utilization and pricing of procedures. Raising taxes to pay the added premiums masks the costs and healthcare spending. Without dramatic cost reductions, healthcare will grow disproportionately to other goods and services. It is critical that our government address the cost of healthcare, and prove they can do it, before adding new participants.
The Congressional Budget Office (CBO) has proposed numerous alternatives to reducing costs. Several of these options limit the use of the healthcare system; others place a cap on how much the costs can increase year to year. One suggests tying pay to performance. However, the option that appears to be getting the most discussion is to mandate the use of Health Information Technology (HIT). This assumes the driver of cost is a lack of coordination between providers that results in duplication of procedures and administrative burden. CBO estimates a ten year savings (2010-2019) of $34 billion, or about $3-4 billion per year. CBO ignores the cost of implementing such a system, which is significant according to Medical Informatics and Decision Making, an industry think tank.
While coordination of care is a problem in our system, the CBO proposals fail to address a much more serious issue. The number of procedures using new technology or treatments to diagnose and treat a multitude of medical issues as well as the financial reward of providers (doctors, hospitals, laboratories, etc.) to utilize additional tests and treatments is the key driver in healthcare costs.
Over the years, insurance companies have negotiated costs with providers in an attempt to control costs. Medicare is one of the most aggressive. Doctors submit costs of $8,000 for a medical surgical procedure and they are paid $1,800 according to their reimbursement schedule. Hospitals submit bills of $3,500 for certain CT scans or MRI’s and they are reimbursed $1,200. Laboratories submit charges of $120 for a blood test and they are reimbursed $28. These reimbursement rates represent a significant discount for the insurance company but work against the providers.
It is the reimbursement rates that influence providers to increase medical utilization. It is this increase in utilization that drives much of our healthcare costs.
No matter what the federal government does to encourage the use of Health Information Technology (HIT) or negotiating lower reimbursement rates, it will be very difficult to control healthcare costs. To control costs and extend healthcare coverage, a fundamental shift in the healthcare model is required.
The Conclusion:
To gain control over costs, there must be control over utilization, protocols (what procedures are permitted) and how and when costly treatments such as chemotherapy or scans are used. This control must be either by a very educated and informed patient or through patient coordinators. Who’s going to vote for that?
The long-term financial viability of our healthcare system is in jeopardy. Congress will be unable to make the most difficult, and needed changes. As a result we will enact some form of legislation, attempt to improve coordination of patient care and administration and declare success. Congress will pass this problem on to the next administration or the next generation because the tough decisions are too toxic to the politicians’ careers. The majority of Americans do not feel a need for radical change (71% of insured are satisfied with their healthcare) and will not support a radical change in the healthcare model.
Recent ZingerKing Articles:
Articles can be found under “Recent Articles” in the purple sidebar. Click on the title of the article that you would like to see. Older articles can be found in the archives that are stored by month. These are found at the bottom of the purple sidebar.
Here is a link to the most recent articles:
Have you Zinged someone lately? Please forward a link to a friend, family member or neighbor.
ZingerKing is Published on Monday, Wednesday and Friday of each week.
_______________________________________________________________________________________________
Mon,Tues June 15,16 2009
Today’s Zinger:
Healthcare Makes Me Sick
The Morning Briefing:
I recently went to my family doctor because I felt lightheaded and a little dizzy. I was then sent to the ER. I was given IV’s, medication, an MRI and then consultation with an ER doctor and then a Neurologist. I was told to go home and my condition would go away in a week or two. The cost: approximately $6,000. The final cost after negotiated discounts with my insurance company will be about $3,500.
I experienced the same condition approximately 15 years ago. I called my doctor. He called in a prescription and I was told the condition would go away in about a week or two. Total cost: less than $50. New technology, healthcare specialties and new treatments have improved patient care, but at what cost?
For two decades we have heard about the need for healthcare reform. After all, the cost of healthcare increases at twice the rate of inflation and healthcare now represents 16% of our economy. President Obama is making a strong push to reform healthcare this year and the Democrats have now produced a first pass at legislation. But will the proposal just add to the bulging federal deficit or are there real changes that will reduce costs? Adding more recipients without dramatic cost reductions will either cause higher deficits or higher taxes. Either way, this has the potential to cripple our economy.
There are five critical questions that must be answered to evaluate any healthcare reform proposal:
- Will
the providers of healthcare find ways around any form of change to
maintain their profits and incomes or are the proper incentives and
rewards in place to reduce cost, improve care and protect incomes of
key providers?
- Has healthcare innovation and advances in treatment exceeded our ability to pay for these improvements and how will we utilize or ration these treatments in the future?
- How many more people will we add to the health insurance roles?
- Does the proposal correct the pricing system which has relied on large yearly price increases and increased utilization to deal with declining reimbursement rates?
- Does the proposal make medical treatment pricing more transparent and increase competition?
The Facts:
- In the next 25 years, the number of Americans over age 65 will grow from 12% to 20% of the population.
- Social Security and Medicare benefits have increased 197% between 2000 and 2006.
- The United States spends 50% more than any other developed country on healthcare.
- The cost of healthcare is rising at twice that of general inflation.
- Massachusetts
implemented a healthcare insurance program for all citizens eight years
ago. The cost of health insurance premiums is half the cost prior to
the program but the cost of medical care has increased faster than the
national average.
- GAO projections show that by as early as 2024, Social Security, Medicare, Medicaid and net interest will consume all federal revenues.
The Discussion:
The Democrats have produced their first healthcare proposal. As I read the proposed legislation, I was concerned that we are missing the real drivers of cost and as such we will end up piling on additional cost and complexity to an already complex and under performing system. As someone who has worked in and consulted to the healthcare industry for thirty years, and someone who has had to extensively use our healthcare system, I would like to share a few observations that I believe are critical to our governments’ ability to rein in costs and truly reform our system.
What drives these costs? There are two primary drivers of healthcare costs. First is utilization. This is how many people use the system and how many procedures occur for each patient. The second is the cost of treatment. This is how much we pay for any given procedure or service.
The government is looking to add upwards of 30-50 million new users of healthcare insurance. These represent the uninsured, children, illegal immigrants, those that can’t afford coverage and those that chose to forego coverage for their own reasons. Adding this many participants will clearly increase the utilization of healthcare system wide. This is a policy decision. The Massachussets experience of covering all (98%) of its citizens shows that while the cost of insurance goes down, the actual costs of healthcare goes up due to utilization and pricing of procedures. Raising taxes to pay the added premiums masks the costs and healthcare spending. Without dramatic cost reductions, healthcare will grow disproportionately to other goods and services. It is critical that our government address the cost of healthcare, and prove they can do it, before adding new participants.
The Congressional Budget Office (CBO) has proposed numerous alternatives to reducing costs. Several of these options limit the use of the healthcare system; others place a cap on how much the costs can increase year to year. One suggests tying pay to performance. However, the option that appears to be getting the most discussion is to mandate the use of Health Information Technology (HIT). This assumes the driver of cost is a lack of coordination between providers that results in duplication of procedures and administrative burden. CBO estimates a ten year savings (2010-2019) of $34 billion, or about $3-4 billion per year. CBO ignores the cost of implementing such a system, which is significant according to Medical Informatics and Decision Making, an industry think tank.
While coordination of care is a problem in our system, the CBO proposals fail to address a much more serious issue. The number of procedures using new technology or treatments to diagnose and treat a multitude of medical issues as well as the financial reward of providers (doctors, hospitals, laboratories, etc.) to utilize additional tests and treatments is the key driver in healthcare costs.
Over the years, insurance companies have negotiated costs with providers in an attempt to control costs. Medicare is one of the most aggressive. Doctors submit costs of $8,000 for a medical surgical procedure and they are paid $1,800 according to their reimbursement schedule. Hospitals submit bills of $3,500 for certain CT scans or MRI’s and they are reimbursed $1,200. Laboratories submit charges of $120 for a blood test and they are reimbursed $28. These reimbursement rates represent a significant discount for the insurance company but work against the providers.
It is the reimbursement rates that influence providers to increase medical utilization. It is this increase in utilization that drives much of our healthcare costs.
No matter what the federal government does to encourage the use of Health Information Technology (HIT) or negotiating lower reimbursement rates, it will be very difficult to control healthcare costs. To control costs and extend healthcare coverage, a fundamental shift in the healthcare model is required.
The Conclusion:
To gain control over costs, there must be control over utilization, protocols (what procedures are permitted) and how and when costly treatments such as chemotherapy or scans are used. This control must be either by a very educated and informed patient or through patient coordinators. Who’s going to vote for that?
The long-term financial viability of our healthcare system is in jeopardy. Congress will be unable to make the most difficult, and needed changes. As a result we will enact some form of legislation, attempt to improve coordination of patient care and administration and declare success. Congress will pass this problem on to the next administration or the next generation because the tough decisions are too toxic to the politicians’ careers. The majority of Americans do not feel a need for radical change (71% of insured are satisfied with their healthcare) and will not support a radical change in the healthcare model.
Recent ZingerKing Articles:
Articles can be found under “Recent Articles” in the purple sidebar. Click on the title of the article that you would like to see. Older articles can be found in the archives that are stored by month. These are found at the bottom of the purple sidebar.
Here is a link to the most recent articles:
Bubble Economics, The Energy Bubble
Retirement Crisis, Baby Boom Generation
Lessons Learned In Obama's First Four Months
Outsourcing Torture to Middle Eastern Allies
California Is Going To "Pot" To Cure Its Financial Crisis
Nancy Pelosi's war with the CIA
Running On Empty, Federal Deficits
Shameless Request For Support:
Have you Zinged someone lately. Please forward a link to ZingerKing to a friend, family member or neighbor. If you enjoy reading the Zinger please subscribe (see the subscribe box at the top of the article in the purple side band). Subscribers receive the "Morning Briefing" when published with a link to the full article. Your email address will not sold to others and will not be shared.
Retirement Crisis, Baby Boom Generation
Lessons Learned In Obama's First Four Months
Outsourcing Torture to Middle Eastern Allies
California Is Going To "Pot" To Cure Its Financial Crisis
Nancy Pelosi's war with the CIA
Running On Empty, Federal Deficits
Shameless Request For Support:
Have you Zinged someone lately. Please forward a link to ZingerKing to a friend, family member or neighbor. If you enjoy reading the Zinger please subscribe (see the subscribe box at the top of the article in the purple side band). Subscribers receive the "Morning Briefing" when published with a link to the full article. Your email address will not sold to others and will not be shared.
I agree. We should address the cost of healthcare before adding new participants. Let's just let those who are not participants suffer and/or die from lack of healthcare while we are figuring this out. Why not? I don't know any of those people. They are not me, my family or my well-off friends. Those are the only people I care about. But I do have some questions for ZK. What percentage of the cost of the current proposal will be attributable to covering illegal immigrants? What is the source of the statitic that 71% of those with coverage are satisfied with their healthcare? What percentage of adult citizens as a whole are satisfied with their helathcare? What percentage of those satisfied with their healthcare still think the system should be reformed to help those who are less fortunate?
Reply to this
The Deloitte 2009 Survey of Health Care Consumers shows 80% of consumers are satisfied with their health insurance. Rasmussen survey of those with health care rate their insurance good (40%) or very good (31%) (the top ratings). JD Powers evaluated consumer satisfaction with their health insurance and found 80% of large companies employees are satisfied while small company employees are less satisfied.
According to Rasmussen, Americans overwhelming oppose including illegals in any national plan and 46% of Americans believe we should do something now while 45% believe we should wait for the economy to improve.
Rasmussen: 41% believe that we need a public health insurance policy while 41% disagreed.
Of the 47 million uninsured Americans, 14 million are illegal aliens. Assuming the cost of the administrations health program is $950 billion over ten years (according to the administration) and assuming that we will cover approx 90% of the uninsured and the cost of the lowest income will be at least 50% more than the cost of the higher incomes in the uninsured then the cost per person per year of the uninsured is $3,500. Assuming 14 million illegals and 10 million will be covered then the annual cost of illegal aliens is $35 billion per year or $350 billion over ten years. This of course assumes the government estimate of $950 billion is correct. Others estimate the total cost at $1.5 to $1.8 trillion in 10 years. The administration has consistently underestimated costs and overestimated revenues (according to the CBO). The administration has not made these same estimates.
I believe the administration will not disclose the cost of providing insurance to illegals as most Americans will be stronly against such a policy.
There are no estimates of adults with insurance that believe we should reform healthcare to help the less fortunate, however 45% of those covered believe we need to reform the system.
One thing to consider, people in this country, poor and without health insurance, do not die because of lack of insurance. Any person with a life threatening situation or medical emergency can obtain healthcare at just about any hospital in this country due to federal regulation. The cost of these uninsured is passed on to taxpayers. The average cost of uninnsured seeking healthcare and unable to pay is $1,000 per incident according to the administration.
As a final thought. According to Rasmussen and Deloitte (results are similar) 94% see our health care costs as a threat to our financial future while 52% of those with insurance feel that 50% of healthcare spending is wasteful.
Zinger
Reply to this
Thank you, ZK. That paints a much clearer picture,advances the debate, and eliminates the impulse that prompted a sarcastic response. So it sounds like the best solution would be to exclude illegal aliens and move forward with reform that would not require the uninsured to resort to last-minute emergency room care, which actually increases costs and can hardly be considered minimally adequate and humane care. Perhaps if we exclude illegals, then the 46% to 45% plurality in favor of reform now would increase and make reform politically feasible. And if Obama's push for cost-saving medical malpractice reform (previously an issue only championed by conseravtives and absent from your discussion) is added into the mix, the plurality might increse even more. You have given me reason for hope. I apologize for the sarcasm in my orignal comment (my wife says if I don't stop it, I won't have any friends), but sarcasm helps to put the implications of a policy decison in stark terms and advance the debate. And I think the debate has indeed advanced. One final note. When Obama pushes for medical malpractice reform, it is like Nixon going to China. Perhaps he can accomplish what the conservatives could not. Aren't you glad we don't have to worry about John Edwards?
Reply to this