Archive for category Maldistribution of insurance
A recent U.S. presidential-candidate debate included proposals on Medicare-for-all, care for illegal immigrants and private insurance: supposedly a three tier system. Exactly which existing tiers would be removed, which would be funded and how would the budget for care work?
Consider the layer cake of U.S. healthcare, as it exists. Start at the top where little figures of a bride and groom might stand. That is the highly-privileged care provided to members of Congress and many government employees (“Cadillac” health plans with a large percent government subsidized plus pre-tax perks). That insurance provides good care (not as good as the care in the French system, but pretty good).
The next tier is the “CEO” or “rich guy” healthcare. They have so much money they don’t need insurance. They just buy what they want at big name hospitals with private suites staffed by nicely dressed doctors in suits and young nurses with little pointed hats. The motto is “whatever you want”. CT scans of everything happen at least once a year and heart tests proceed just because “you can’t be too careful”. And, heavens, the food you like is on your diet. Rating of care: poor.
The next tier is a hodgepodge of layers or “options” offered by many insurance companies like Blue Cross, UnitedHealthcare, Aetna etc. These are mostly provided through an employer group plan. And, sometimes purchased individually at a higher cost if the person is part-time or retired before age 65. Some plans have high deductibles and high co-pays that financially make care difficult to obtain. Some closed panels of providers limit where a person can obtain care and limit the options for moving or travel. The insurance companies scrape off 15% of the icing (administrative fees). Rating of care: fair to good.
Next is the Medicare tier divided into several layers including Medicare with a supplement (fee-for-service) and Medicare Advantage (per-capita). Rating of care is good with a plus for lower cost compared to the higher layers. Unfortunately, Medicare does not negotiate drug prices according to laws supported by drug companies. Rating of care: good.
Next are decorations of socialized medicine. These include the Veterans Administration, Indian Health Service and various levels of military healthcare (Tricare). Rating of care: good.
Next is Medicaid. A State run and federally supported insurance for the poor. It is limited by budgets and willing providers. Rating of care: fair if you qualify, but many who need care don’t qualify for a variety of reasons.
Finally, the bottom layer. The layer for those with no insurance and no funds. All States require emergency rooms to provide care to “stabilize” a mental or physical illness. Anyone can obtain health care in the U.S. based on this nearly insane model where people wait until they are really sick to receive care in the most expensive setting. The bills, which none in this layer can pay, are astronomical and serve only to further bankrupt the unfortunate. Rating of care: poor with no connection to a primary care provider or mental health follow-up.
In conclusion, the recent superficial debate about healthcare seems to hinge on hot-button issues like rich insurance companies, greedy drug companies and desperate immigrants who become sick. Of course healthcare costs money — only a politician would say otherwise. The healthcare system we have or will have is exactly what we plan.
Big Pharma blows the lid off the price for “specialty drugs”. Those drugs now cost more than an average American’s income. By 2020 the average specialty drug will cost $80,000 per year, just pray you don’t need two of them!
The data plotted above come from AARP. The raw data is concerning and three questions beg to be answered: WHY is this happening, IS THIS A PROBLEM and if it is a problem WHAT IS THE SOLUTION.
WHY? — because big pharma wants to make a lot of money. Somewhere, long ago and far away, some researcher wanted to help people with difficult medical problems. But, that altruistic thought was crushed as the drug was marketed.
PROBLEM? — absolutely, the US healthcare system can not afford the drugs and neither can average individuals. If a drug costs a trillion dollars it’s not a drug, it’s a joke. So where is big pharma going wrong? Here are some possible choices:
- Too much is spent on research
- Too much is spent on advertising
- Too much profit is paid to shareholders
Where is US healthcare going wrong?
- Too little regulation exists to require cost effectiveness research before marketing drugs
- Too little drug price control is being exerted by the government.
- Too little mirroring of price controls in other countries that shift profit taking to the US.
SOLUTIONS? — if the trend is allowed to continue “Bronze” health insurance will not cover specialty drugs but “Platinum” insurance will. Sadly, only the top 1% will be able to afford the “Platinum” plan. The US will have more of a two tier healthcare system with a huge gap between the 99% and the 1%.
- Impose cost controls on drugs — extremely high priced drugs should trigger rules to lower profits so such drugs will either cost less or not be produced.
- Demand cost benefit analysis on all drugs before marketing — if the benefit is not worth the cost then don’t add them to the formulary for Medicare or Medicaid.
- Wrap drug costs inside health plans. That way other factors get consideration, like preventive care, hip surgery, simple childhood vaccinations, and pregnancy. The big pharma bill should not be coming “off-the-top”.
Wishful thinking is not sound public policy. (Bjorn Lomborg) The South, unlike the rest of the US, has rising numbers of the uninsured. The “Health Reform Monitoring Study” from the Urban Institute is disturbing . Why? Because insurance subsidies were supposed to insure more people. The problem seems to be the money is not reaching the people who can’t afford insurance. The original ACA plan was for Medicaid to cover the very lowest income people then at some higher income level the ACA insurance subsides would take over. Many states in the South did not elect to expand Medicaid so there is a gap between Medicaid and the income level at which ACA subsidies are available. According to the study, the most frequent reason given by uninsured people for not having insurance is: “it costs too much” and second “it might affect immigration status”. The following is a graph is a comparison of each region between 2013 and 2014: The South has a huge problem with health literacy — many residents have no idea how to approach health insurance. About 11% of Southern uninsured people say they do not want insurance — it’s like asking someone if they want a kumquat — if you don’t understand what it is or what it costs you might not want one.
The Governors of the Southern States are hurting people, not something expected. Somehow they thought by not expanding Medicaid and ignoring the ACA the health care problems in the South would go away or get better by magic. Wishful thinking is not a strategy for success.
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.
The above graph is from a recent publication of the Institute of Medicine entitled “U.S. Health in International Perspective: Shorter Lives, Poorer Health (2013)”. The graph depicts the causes of death for males less than 50 years old. Compared to other wealthy countries the U.S. life-expectancy ranks 17th for men and 16th for women According to the report “The tragedy is not that the U.S. is losing a contest with other countries, but that Americans are dying and suffering from illness and injury at rates that are demonstrably unnecessary.” Several causes were cited including lack of insurance, lack of access to primary care, high poverty rate, poor diet, lack of exercise and use of firearms in acts of violence.
Although the report is blunt enough the bottom line is we have good doctors, good nurses, good medications, good equipment, good hospitals, and good clinics but we have poor management of our health care system. The equation is:
Good Providers + Bad Management = Bad Health Care
You may ask: what is health care management? In a word a “PLAN” or simply coordination of action — we truly do not have a health care system. We have a variety of types of insurance, government programs and fee for service (i.e. no money no service). Even the very wealthy get poor health care because of a lack of quality management. Some States do much better than others. If Minnesota was a country it would rank near the top. If Louisiana was a country it would be a third world country ranked near the bottom.
One of the big political concerns is cost. We pay more for health care than any other country. One third of our cost is attributed to waste (i.e. paperwork). When a system is poorly coordinated the cost is high. So, why would any country spend more money on such a system?
The above report is just another in a long series of bad reports on U.S. health care. Although the Affordable Care Act (Obama Care) is helpful it will never move life expectancy to the top of the list.
There are lots of solutions. But, they all require planning and system thinking. Trying to solve one problem at a time to evolve a better system will take about as long as human evolution. Perhaps in a million years we will have evolved beyond illness — yes, that’s the plan.
Graph from N Engl J Med 2012; 367:3-6July 5, 2012
The graph above comes from an article in the New England Journal of Medicine by David C. Radley, Ph.D. MPH and Cathy Schoen, M.S. It shows the distribution of uninsured adults across the United States. Large parts of Texas, New Mexico and Alaska have over 50% uninsured adults. Wisconsin and Massachusetts have less than 15% uninsured adults. The graph is the result of an analysis of US Census Bureau data from 2009-2010.
The areas with low rates of insurance are also the areas with other health problems. The authors conclude the uninsured areas are associated with low quality care, poor access to care, unsafe prescribing, increased visits to ER for avoidable conditions, and more avoidable deaths.
The bottom line is the US healthcare system is designed for high cost and low quality care especially for those who choose not to have insurance or those who can not afford insurance. Unless a person is extremely wealthy it is very unwise to forgo insurance in this environment. The maldistribution of insurance enhances the argument for those in states with high rates of insurance not to pay more in taxes to cover those in states with low rates of insurance. It seems strange that the states with enhanced revenue from oil and gas can’t seem to correct the insurance gap.