US Health-Care Reforms: Cut Expensive Procedures/Prescriptions
Jun 28th, 2009 | 15 responses
I have no hesitation in admitting that I generally turn to The Economist when I am looking for details regarding any hot world issue, or if I fail to understand its different dimensions. This venerable British magazine has some interesting points to offer regarding the US health-care reforms.
“Because health insurance is so expensive, nearly 50 million Americans, an obscene number in such a rich place, have none; those that are insured pay through the nose for their cover, and often find it bankruptingly inadequate if they get seriously ill or injured.
“The costs of health care hurt America in three other ways. First, since half the population (most children, the very poor, the old, public-sector workers) get their health care via the government, the burden on the taxpayer is heavier than it needs to be, and is slowly but surely eating up federal and state budgets.
“Second, private insurance schemes are a huge problem for employers: the cost of health insurance helped bring down GM, and many smaller firms are giving up covering employees. Third, expensive premiums depress workers’ wages.
“This summer’s debate about health care may determine the success of Barack Obama’s presidency. What should he do?
“If he were starting from scratch, there would be a strong case (even to a newspaper as economically liberal as this one) for a system based mostly around publicly funded health care. But America is not starting from scratch, and none of the plans in Congress shows an appetite for such a European solution.
“America wants to keep a mostly private system—but one that brings in the uninsured and cuts costs. That will be painful, and require more audacity than Mr Obama has shown so far.
“A bolder president would start by attacking two huge distortions that make American health care more expensive than it needs to be. The first is that employer-provided health-care packages are tax-deductible. This is unfair to those without such insurance, who still have to subsidise it via their taxes.
“It also encourages gold-plated insurance schemes, since their full cost is not transparent. This tax break costs the government at least $250 billion a year. Mr Obama still shies away from axing it, as do the main congressional plans on offer; but it ought to go (albeit perhaps in stages).
“The second big distortion is that most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get—even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes.
“Private providers everywhere are vulnerable to this perverse incentive, but in America, where most health care is delivered by the private sector rather than by salaried public-sector staff, the problem is worse than anywhere else.
“The trouble is that many Americans are understandably happy with all-you-can-eat health care, which allows them to see any doctor they like and get any test that they are talked into thinking they need. Forcing people into ‘managed’ health schemes, where some species of bureaucrat decides which treatments are cost-effective, is politically toxic; it was the central tenet of Hillary Clinton’s disastrous failed reform in 1994.
“But to some extent it will have to be done. There is solid evidence to suggest that by cutting back on unnecessarily expensive procedures and prescriptions, anything from 10% to 30% of health costs could be saved: a gigantic sum.
“But in the end it will be up to the private health-care system. One thing that should be unleashed immediately is antitrust: on a local level many hospitals and doctors work as price-fixing cabals. Another option, favoured by many Democrats and the president, is for the government to step in with a results-based plan of its own, to compete against the private industry.” More here…
“A poll carried out for The Economist by YouGov highlights Americans’ beliefs about the state of their system. Although 68% of them rate the care they receive as ‘excellent’ or ‘good’, 52% are dissatisfied with the quality in the country as a whole. Only 25% think the system works pretty well and requires only minor changes; 40% think fundamental change is needed and 29% think it should be completely rebuilt.
“After decades of failed attempts at reform, a consensus appears to be emerging in America around the principles needed for universal coverage. One likely change means a restructuring of America’s failed health-insurance markets. Firms are today allowed to pick the safest patients and reject the sickest.
“In future they will have to take all comers. Because this imposes unfair burdens on firms that attract lots of older or sicker people, reform is likely to include government-funded mechanisms for risk pooling or reinsurance. The Netherlands, in particular, uses such an approach.”
Here’s my earlier post on Health-care reforms…please click here…
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15 Responses to “US Health-Care Reforms: Cut Expensive Procedures/Prescriptions”
Here's an interesting article from the New Yorker about the misplaced financial incentives that can lead doctors to order unnecessary tests.
Why is it that every article regarding health care costs fails to take on the lawyers who have driven up the costs of malpractice insurance to astronomical measures? Our litigious society is rampant and no one addresses the clowns that drive it.
An article from the New York Times indicates that there is not much correlation between malpractice premiums and claims paid out by insurance companies:
From the conclusion:
US Health-care Reforms: Cut Expensive Procedures/Prescriptions ……
I have no hesitation in admitting that I generally turn to The Economist when I am looking for details regarding any hot world issue, or if I fail to….
GeorgeS you're looking at the malpractice issue the wrong way. The current litigious climate encourages doctors to order a lot of tests and do a lot of procedures. This can't be measured by looking at caps and malpractice insurance rates.
There is a saying among obstetricians – you can never be sued for deciding to do a C-section, only for deciding not to. The current malpractice climate encourages doing every possible test and intervention.
What's more is the public likes having a lot of tests. Fixing this problem will take not only a change in malpractice laws but a change in public attitude. You don't need an MRI for every back ache.
The current reimbursement system also rewards doctors for doing a lot of procedures, reimbursing them at a much higher rate than cognitive services. If you pay doctors more for doing procedures than thinking about and talking with patients what do you think happens?
This article really gets at the key to controlling health care, although as it implies it is a tough sell since Americans currently enjoy “all you can eat” medicine and resist any restrictions.
DaGoat–
I appreciate your response.
I agree with one of your points:
In fact, that is the main point of the New Yorker article from my first comment–that the financial incentives are out of whack.
As for malpractice insurance, I was responding to the previous commenter. Maybe you're right, maybe I'm looking at it the wrong way. (I'm well aware that we live in a culture where someone recently sued a dry-cleaner for a million dollars over a pair of pants.) But the idea, put forth by that previous commenter, that this is a problem caused by lawyers, seems unsupported by actual data.
If you're interested, here's another New Yorker article by the same author called “The Malpractice Mess”.
The 46 million uninsured figure (from the Census Bureau) includes all in the United States without health insurance including non-citizens, both legal and illegal, those who elect not to have insurance although they can afford it, and those who qualify for some sort of insurance but have never applied for it.
In the interests of intellectual honesty I think we need to tailor our statistics to what we're proposing. If we don't plan to insure all comers including illegal immigrants, we should reduce our claims of the number of uninsured commensurately. If we do plan to insure all comers, I think we need to explain how we plan to finance it.
tort reform is another hot button issue. On one side you have the kidney cancer patient who had the wrong kidney removed and now will suffer even more on the other you have the doctor/hospital that screwed up. The patient wants damages and the hospital doesn't want to pay.
The problem with tort reform – the same the health reforms and every other big issue – is no one wants to meet in the middle. You have both sides pulling full force and not willing to look for any middle ground.
“Why is it that every article regarding health care costs fails to take on the lawyers who have driven up the costs of malpractice insurance to astronomical measures? Our litigious society is rampant and no one addresses the clowns that drive it.”
How about the fact that IT ISN'T TRUE? Malpractice is only 2% of health care cost, and malpractice insurance has increased while actual malpractice awards have dropped. Some states though have done what you suggest, by capping damages for malpractice. Guess what? In the states that have done so, malpractice insurance rates went UP! Savings from this strategy? Less than ZERO. That's right, negative improvement.
Next?
I know you don't want to hear it, but the low hanging fruit in lowering health care cost is the insurance companies' high costs and inability to negotiate better rates. As I've pointed out before, insurance companies admit they charge 12% more than Medicare, and Medicare pays doctors 19% less (hospitals 25% less), yet as many doctors and hospitals take Medicare patients as new private PPO patients. That's a 31% reduction in cost for doctors, and 37% less for hospital care.
Does anyone have ANY suggestion that can yield that kind of saving??
GD if physicians and hospitals had to get by on Medicare patients alone many of them wouldn't stay in business. It would be like if all airline seats were sold at economy fare, it just won't work.
I agree with your point that Medicare has a lower overhead than private insurers and potentially that could give some savings, but if you're trying to say we can solve the health care problem by paying all physicians Medicare rates it will lead to a mass exodus from primary care.
DaGoat, that's your opinion. In the entire rest of the world, doctors “get by” on government negotiated rates. We suffer from the fully false assumptions that 1) we're getting more for our high priced health care and 2) that providers need what they're charging to “get by”. Anyone have a hospital bill? Take ANY line item on that bill and check the price against full retail. See? Believe me, there's 25% reduction possible in there without hurting them one bit. Besides, I know from my own physician that he makes just as much from Medicare patients, because for the private insurance folks, he needs 2 full time employees to deal with the hassles, the multiple claim forms, the pre-authorizations and all the other jive that easily eats up that 19%.
“It would be like if all airline seats were sold at economy fare, it just won't work.”
Visit a few dialysis clinics sometime and ask them what they think of Medicare.
“doctors 'get by' on government negotiated rates”
Dialysis providers complain about losing money on Medicare reimbursement.
In the real world, physicians frequently decline to accept Medicare or Medicaid patients.
And it was a really poor move (could be ineptitude, or poor knowledge of public opinion, if they cared, which they may not have) for Team Obama to say that already-low Medicare reimbursements will be deliberately lowered as part of “paying” for the vast new ambitious health care proposal. (The providers and anyone to whom they can shift costs will be doing the paying in addition to taxpayers directly.)
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