This premium and that deductible — which to choose? If you ever had to purchase health insurance it’s not all that clear — and you wonder, what are they hiding?
We all face the risk of serious illness and the associated high costs. The above graph is about the risk for a couple age 60 to 64. The horizontal axis is the possible health bill from zero to something very large. The vertical axis is the number of people who accumulated the health costs enumerated on the horizontal axis. Although the most likely bill is about $10,000 there is a possibility of any amount. Unless a person has an extra million dollars lying around we purchase insurance to cover the unexpected health bill (or go bankrupt).
An insurance company keeps detailed records of health care bills for people of of various ages. Point C on the graph is the mean (average). Insurance companies have thousands if not millions of customers. So, they don’t need to know what might happen to any one person, all they need to know is the mean cost for the age group. 1 million people times the mean of $18,000 is $18 million — that’s how much they will pay out in a year (plus or minus a small percent).
The insurance company knows that point C on the graph for the benefits they offer. Then they devise an insurance plan to collect that amount so they can pay customer health bills. You might think that amount of money is a secret but not really. Below is a graph of the offerings on the internet of a real insurance company in May of 2013 for 2 people age 60-64. The yearly premium is on the vertical and the deductible is on the horizontal. The blue dots are the plans offered.
Interestingly, the blue dots are on a straight line! The line B to C is that straight line through the offered products. Point A (numerically the same as point C) is that amount you would pay in premiums if there was no deductible — in other words “first dollar coverage”. Point C is the deductible you would pay to have no premiums (true, no insurance offers such a plan). Thus, point C is that mean cost per customer as in the top graph (it also includes the operational costs and profit for the company — usually about 20%).
What is Point B? – it lines up with the blue dots of the actual plan. It looks like the amount you would pay if the deductible was zero. Not so fast, the difference between Point A and Point B is the amount the customer is likely to pay in co-pays and co-insurance.
The gap between the red line and the blue line is paid by the customer if they use health services. The part the customer pays is usually limited by the “out of pocket maximum”. If the customer does things to stay healthy it gives them a chance to actually pay less.
Comparison shopping is very difficult. The plans and benefits from insurance companies are different. The best advice is to purchase from a top rated company with good customer satisfaction. If you don’t have much savings a low deductible plan has advantages. If you can stand occasional high bills a high deductible plan may work. Check out insurance company ratings by Consumer Reports and JD Power.
How do the Brits do it? They made a healthcare system with twice the quality at half the price compared to the US (according to the Commonwealth Fund cost per person per year US $7960 UK $3487, developed country quality rank UK #2 US #7). Simply, they do it by having original ideas and a willingness to adopt good ideas from other countries.
The National Health Service (NHS) of the UK was born in the aftermath of WWII. Taxes pay for the system, which is free to citizens at the point of care. Internally, the system is based on capitation — doctors and hospitals are paid by the size of the population they serve. The system grew to be one of the highest quality and least expensive systems in the world. In the 90′s it was bogged down by waiting lines and old facilities until a modernization push got it back on track around 2000.
The DRG example: In 1983 Medicare adopted a way to pay hospitals with a single payment for each case based on the diagnosis of the patient. This revolutionary idea was called the diagnosis related group or DRG. NHS experts embraced the Medicare cost saving idea and renamed it the HRG (health resource group) and started using it in about 2003. Consequently, by adopting what works, the UK has strikingly transformed the financial workings of the NHS.
The NHS noticed cost variations between providers and solved the problem with “Best Practice Tariffs”. That means if the provider follows a well established guideline they get a full payment, if not, the payment is lower. In the US we call that concept “value based purchasing” (VBP) but the US only has a few pilot projects and only dreams about making VBP happen on a large scale.
The UK decided they wanted better results. The reform was called Payment by Results (PbR) and implemented in 2013. The results they expected were high quality, adequate volume of services, and cost efficiency. The NHS basically tweaked the capitation formula with incentives for the desired results.
The US Affordable Care Act (Obama Care) encourages the aggregation of doctors and hospitals in an economic model called an Accountable Care Organization (ACO). The US thinks it invented the idea behind the “Accountable Care Organization”. Actually, the concept is just a spin-off from the Primary Care Trusts and Hospital Trusts in the UK which have been functioning for over 60 years. Think: ”Trust”=”ACO”.
The recent “Perspective” in the New England Journal of Medicine (NEJM 668;16 April 18, 2013, page 1465-1468) describes the recent IOM report requested by Congress. The authors lament the “Geographic Variation in Medicare Services“. The NHS is well known for controlling health care costs. Looking across the pond to the UK, here are some references that might be helpful to them:
- A simple guide to Payment by Results
- A person based formula for allocating commissioning funds to general practices in England: development of a statistical model
- Payment by Results: time for a rethink?
- Regional variation in the productivity of the English National Health Service.
Some understanding about how the NHS works would also be helpful. The following diagram is an overview of how the NHS controls cost associated with hospitals and doctors. They also have a good system for dealing with drugs and devices — a good topic for a future blog.
Other charts of organization can be found at Nuffield Trust – New Structure of the NHS slideshow, NHS website – new structure, and History of the NHS.
In the UK 90% of health care is controlled by the government and 10% by the private sector. The UK Parliament sets a budget for health care which is administered by the Department of Health. Based on the funds allocated in the budget the Department of Health makes a national price list for services (unlike the US where there is no cap on expenditure) .
The “SUS” approves payments to providers based on the national price list (national tariff) and adds the features of PbR (payment by results). The commissioners are the paymasters and transfer funds to the providers. The providers keep track of actual costs and must provide cost data to the Department of Health (unlike the US where real costs are proprietary information and hospitals use the infamous “chargemaster“).
The US could learn a lot from other countries. The NHS in the UK seems very willing to share what they have learned over the years — and it is in English. The old saying ”America and England are two countries separated by a common language” is especially true for health care.
Two days ago the Centers for Medicare and Medicaid Services (CMS) published the fees hospitals charge uninsured patients. These fees are called the “chargemaster” of the hospital. Hospitals point out that most people have some type of coverage. That is true. But, 50 million people do not have insurance and the fees apply to them. The following are the statistics for Colorado hospitals for which CMS presented data on the charges for heart attack. The column in pink is the amount charged and the MC Allowed column is what Medicare has calculated as a fair payment.
Hospitals are businesses and can charge what they wish for services. Except, many hospitals are “not for profit“; which means the money they would normally need to pay in taxes is instead used to benefit the community. They often prove that benefit by writing off the money they can not collect from people who lack insurance.
The unfortunate effect is that hospital charges are the number one cause of bankruptcy. Furthermore, the extreme penalty of the “chargemaster” for people without insurance drives people to purchase insurance — certainly a happy situation for insurance companies.
If you go to any health insurance web site you can see what the “chargemaster” penalty actually is. Look at the charge for the highest deductible policy. That charge, in large part, is the fee to benefit from insurance company negotiations with hospitals. Of course, the hospital makes the charge very high so any mark-off for insurance companies is just for show. This is an old retail game — raise the price 100% then have a 50% off sale.
A simple solution:
If the charges by hospitals were restricted by law not to exceed 20% above the fee allowed by Medicare the cost of insurance would be substantially less. And, people who select a high deductible plan could really enjoy low rates with protection from the cost of catastrophic illness.
It is important to note insurance reform will NOT solve the US problems with high cost and low quality health care. Insurance just distributes financial pain over a greater number of people. The solution is to fix the underlying problem not distribute the problem to more people.
Denver Colorado is a metropolitan area with several hospitals so the city serves as good example of the dilemma people face to make a choice.
The Denver Metro area is lucky to have good hospitals. But, the experience one might have as an inpatient depends on many factors including the individual doctors, the nurses and the strength of the quality improvement program at each hospital. The Center for Medicare and Medicaid Services (CMS) sets quality targets for participating hospitals and measures how those hospitals perform. CMS publishes the data and several organizations extract the data and make them available online. One such site is WhyNotTheBest.org by the Commonwealth Fund.
Hospitals tend to emphasize heart care because it is profitable and it has a strong emotional appeal. However, the average consumer never really knows what will land them in the hospital. CMS provides many different hospital quality statistics but the “overall” statistic is actually the most helpful to consumers.
Quality can be measured by an “outcome” such as mortality. Or, quality can be measured by adherence to a “process” . Process measures are popular because they don’t depend on patient factors such as age or poverty.
For example, leaving home in the morning should include the process of putting on shoes and closing the door. Following that process does not guarantee a good outcome but lessens the possibility of humiliation at work or later finding a burglar in your home. Hospital process measures reflect the quality of management and the ability of an organization to execute a plan with numerous players.
The following table is CMS data organized by WhyNotTheBest.org. The “Overall” is a weighted average of all of the process-of-care, or “core” measures.
NAME — Selected Denver Hospitals
|University Of Colorado Hospital Anschutz Inpatient (CO)||99.38%||162 of 1792|
|Swedish Medical Center (CO)||99.17%||265 of 1792|
|Presbyterian/st Luke’s Medical Center (CO)||98.76%||460 of 1792|
|Exempla Lutheran Medical Center (CO)||98.59%||551 of 1792|
|Exempla Saint Joseph Hospital (CO)||98.33%||698 of 1792|
|Denver Health Medical Center (CO)||97.56%||1093 of 1792|
|Centura Health-st Anthony Central Hospital (CO)||95.62%||1619 of 1792|
Hospitals love the percentage statistic and hate the national ranking. There are hospitals in other states that indeed do score 100%. Just like climbing a Colorado mountain, the last mile is often the hardest.
99.38% or 99.62% means the hospital failed to follow a process 6 or 44 times out of 1000. One time out of a million would be better. Which hospital you choose may depend on where your doctor or insurance company sends you. But, if you have a choice the information from CMS may be helpful.
Making a diagnosis is difficult. And, doctors sometimes get it wrong. ”Wrong” is often harmless, usually expensive, and sometimes deadly.
An article about incorrect diagnosis appeared this month in the British Medical Journal Quality and Safety which has been widely reported, including by the Wall Street Journal. Dr. Tehrani and his co-authors correlated health insurance claims (diagnosis) with malpractice suits. They found “diagnostic errors appear to be the most common, most costly and most dangerous of medical mistakes.”
One might think the errors happen because the underlying problem is very rare. On the contrary, the bulk of errors happen with common conditions.
Another article this month in JAMA Internal Medicine by Dr. Singh and co-workers reported on common types of diagnostic errors — many of which were common in primary care: (italics are blog examples)
- no chest x-ray for cough and high fever
- no chest x-ray for cough and high fever
- Decompensated congestive heart failure
- no BNpeptide checked
- Acute renal failure
- no check of basic metabolic panel for fatigue
- ignoring Mammogram findings or blood in sputum
- Urinary tract infections
- not checking urinalysis or treating soon enough
The flaw in the process that contributed to the wrong diagnosis included:
- Inadequate patient encounter (too short or not focused on problem)
- Not seeking referral when needed (like not getting a cardiology consult for chest pain)
- Patient related factors (not returning for follow-up)
- Not taking risk factors into account (like family history of colon cancer)
- Losing track of test results (urinalysis report filed but not viewed)
- Not getting the right test (not getting a chest x-ray for shortness of breath)
Problems at the time of patient encounter are a major contributor:
- Poor history taking (provider did not listen or ask questions)
- Inadequate examination (provider did not examine problem area — like a breast nodule)
- Inadequate testing (not considering a colonoscopy for blood in the stool)
When a person has a health problem the whole idea is to connect the dots …problem…diagnosis…treatment. If the diagnosis is not correct then good treatment is disconnected.
Providers often do not consider enough possible causes for abnormal findings. Those possibilities are called the “differential diagnosis”. There are books and several free sites on the Internet that provide such lists. One such site is DiagnosisPro. If you like other sites leave a comment please. Some electronic record applications include a differential diagnosis automatically — nice feature which should always be installed.
So, what is the solution? Most experts agree, the quality of the provider-patient interaction must improve. Providers need to follow known guidelines plus use differential diagnosis aids. Patients need to look out for themselves by using the Internet or books to understand symptoms and test results. The best solution is a stronger partnership between patients and providers. See earlier posts in this blog about shared decision-making and patient centered care.
Can all errors be prevented? NO. To err is human. The point is to minimize the errors, and there is obviously a lot of room for improvement.
Payment of health care providers by volume of service (fee-for service) rather than quality of service is blamed by many as the cause of high cost and low quality in the US health care system.
A possible solution was proposed in 2006 as the Accountable Care Organization (ACO). The concept is modeled after other advanced countries which have lower cost and higher quality health care than the US. The idea is to pay a large organization (the ACO) to provide all the care needed for a large group of people. In other words, a per capita system, with payments not related to volume of services.
Medicare and the Affordable Care Act are betting on ACOs. The private sector is moving that way as well. The following graph shows the number of ACOs in the United States (CMS data)
The following graph shows the increase in the number of ACOs starting in 2009 and ending the first quarter of 2012.
The insurance industry is so entrenched it is hard to think outside of terms like deductible, out of pocket cost, and premiums. And, current ACOs indeed use those terms. But, under the hood, the ACO is run with a budget based on the cost to take care of a person for a year.
So, perhaps sometime in the near future you will just purchase health care by the year — something based on your age and ranging between $100 and $400 per person per month. Undoubtedly, there will still be some co-payments in order to avoid over use of services by some people.
A well formed ACO has a strong focus on a medical home and should include pharmacy service (not Walmart,Target or Walgreens etc.), hospital service (not every hospital), doctors, nurses, physician assistants, x-ray services, medical equipment, and devices. Not every hospital in the ACO would duplicate services — some would have specialty expertise, like brain surgery or heart surgery.
The materials to run the ACO would be purchased in bulk. The providers would be predominantly on salary and the hospitals under a strict budget with mandatory quality levels for all.
The rise of ACOs is encouraging but the actual number of covered patients is not large and the internal payment for ACO providers is still rooted in volume of services. But, with time and pressure (mostly from the business community) ACOs should begin to lower costs to levels enjoyed by other countries.
Congress could speed the process to be ready for the aging baby-boomers. But, action in Washington seems nearly impossible. It seems hard to argue against lower cost and higher quality, but they will.
Patient NON-CENTERED care is a physician looking at a computer rather than the patient, not letting the patient have a minute to express what they are concerned about or not making follow up appointments for diabetes. Patient centered care is better care.
The International Alliance of Patients’ Organizations (IAPO) has listed the ”Five Principles” of patient centered care. The list includes:
- Choice and empowerment
- Patient involvement in health policy
- Access and support
Four cultural phenomena are at the root of the patient-centered movement.
- Doctors are not always right and communicate poorly.
- One third of US citizens are illiterate about health issues.
- The Internet has exposed items 1 and 2.
- People are wary of the government changing the healthcare system
The slippery slope for many patients starts when doctors tell patients what to do, patients don’t know enough to ask questions, treatment is given , advice is not followed and the outcome is not what the patient wanted.
Patient-centered care may be the solution. Focus on the provider-patient interaction, improve provider-patient communication, educate the patient about the problems at hand, and let the patient have a larger say in their own health care.
There is a political side to patient-centered care which is the battle between the public good and the patient’s wishes. There is plenty of work to be done at the point of interaction between the provider and the patient. Worry over fluoride in the water, organic vegetables and workplace dangers are different topics, important, but not patient-centered care.
The insinuation fee-for-service medicine is somehow more patient-centered than other health-care systems is not logical. No matter what health care system is in place the notions of good communication, patient education and patient autonomy remain critically important.
Patients will suffer the consequences of their decisions. So, providers should never agree to bad medical care. The purpose of patient-centered care is not to “give the patient what they want”. But, rather to listen to the voice of the patient, communicate the best evidence-based guidelines and be a partner with the patient to make good decisions.