Posts Tagged cost of care

Healthcare For Illegal Immigrants — necessary

prohibidoLouise Radnofsky of the Wall Street Journal published her story (3/24/16) about illegal immigrants with the observation they do obtain healthcare (at a low level) in the United States.   As with any good reporter she just reported the facts.  But, what is missing is WHY illegal immigrants receive medical care in the United States.  Clearly illegal immigrants are illegal and they don’t have insurance or money to pay for healthcare.  So why?

The simple answer is because healthcare providers on the front lines believe all lives are worth saving.  And, they will refuse to kill people by withholding care just because society says they should.  If society is so stupid to hire aliens, to pay aliens, to house aliens, to feed aliens, and not have a guest worker program then the healthcare system unequivocally refuses to be “the wall” — ask any doctor who sees a 19 year old with an appendicitis — they will fix the problem and ask questions later.

Here is an actual case:  18 year old Manuel (not his real name) is brought by ambulance to the emergency room after a fall and is barely breathing.  He is placed on life support then the ER doctors ask the on-call doctors in the intensive care unit to admit him.  No questions are asked, he is admitted.

The background later became clear.  Manuel’s father was killed in Mexico by a drug cartel leaving his widow and several children.  Manuel could not find work in Mexico so he crossed the border to find work to support his mother and his siblings.

He was hired by a contractor to build bleachers for a local school football field.  When Manuel fell off the bleachers and hit his head it was the contractor who called the ambulance.  There was no money to pay the hospital bill which was over $100,000 — all the services were a loss to the hospital and doctors.  And yes, this case and many others like it are passed on to the public and insurance companies through higher rates.  That’s how our healthcare system works — like it or not.  It’s been that way for decades.

The ACA with the push for universal insurance makes this under-the-radar care more obvious.  The ACA prohibits payment for illegals.  However, as many large counties in the US have found it is less expensive to provide healthcare, especially for pregnant women, rather than emergency care.  One case of cerebral palsy due to complications of pregnancy can cost millions of dollars.

Manual’s case includes some disturbing facts:  drug abusers in the US are the reason drug cartels exist and in this case were the root cause of Manual’s need to work.  A contractor to a government entity (the county school district) hired Manual and did not provide insurance or workers compensation.

The school district took the lowest bidder for the bleachers and did not specify the workers should have workman’s compensation insurance.  The school district should be responsible for the medical bills but they could not afford the medical bills — the hospital did not try to bankrupt the school with suits.  There was talk of sending Manual back to Mexico by air ambulance, but the health care system in Mexico could not provide high level care.  Absolutely nobody wanted Manual removed from life support because he was an illegal alien — if they did, they would be an accessory to murder.

So, the bottom line, the healthcare system is not ever going to be an accessory to harming people.  Be thankful.  If your son can’t find his insurance card and goes to the ER with an appendicitis he will get care — they will not tell him to go to the parking lot and just die.


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The Heart of Fee-For-Service — the CPT code

profitCurrent Procedural Terminology codes (CPT codes) are what makes health care fee-for-service work.  The codes function to increase profits for health care providers.  Fee-for-service is widely cited as a root cause of high cost in the US health care system.  The bottom line is: health care providers work to make money by performing CPT coded services whether the service is needed, whether quality is delivered, and whether a lower cost service would work just as well.

The American Medical Association (AMA) is dominated by surgeons and specialists who do procedures.  When the AMA first published a book of CPT codes in 1966 insurance companies were happy to have some basis on which to pay claims.  In 1983, for the same reason, Medicare adopted the codes.  But, what originally seemed like a good idea, like Dr.Frankenstein’s monster, turned out badly.  

The AMA followed simple economic principles and fractionated the health-care market with more and more codes until there are now thousands.  Every little thing a health care provider can imagine is now a billable service.  Fractionation of a market maximizes profit, and it really worked for doctors but not for patients, insurance companies or the government.

CPT codes in the US have driven fee-for-service to high levels, in fact, that was the purpose.  Now, the question for US health care:  how to get rid of fee-for-service and CPT codes as the gateway to payment?  How to change the incentive system for the benefit of patients and the national budget?

An auto-assembly worker is not paid according to every little procedure — using a wrench (APT code Q70506), installing a radio (APT code F402305) or looking up an exhaust pipe (APT code C403843).  No they don’t use Automobile Procedure Terminology, they get paid by the hour with some incentive pay for quantity and quality of the work. There is no reason health care providers should be paid in a different way.

CPT codes or something like them might have a place inside an organization to assess productivity or simply to know what health care providers are doing.  The old saying “measure to manage” is indeed true.  The mistake is to connect procedure codes directly to payment.  Diagnosis, outcome, and patient satisfaction should have input into the payment equation as well.

The way to purchase health care is in the aggregate, like the price of a car, the whole enchilada, or the total amount of care a person might need for a year.  The US needs a system of care whereby a patient, a business or a government can purchase  health care BY THE YEAR.  The incentive is turned around — a profit is present when the cost of care is lower.

Is there opposition to this idea?  Of course.  Health-care is a huge business.  Reorganizing health care takes different forms in different countries.  In the US the idea is the Accountable Care Organization (ACO).  It’s an organization big enough to actually deliver all the care a person might need in a year and big enough to manage the financial risk.  This is not a Mom and Pop operation, this is a huge business almost like an automobile manufacturer.  We need this type of care, we need cost containment, we need industrial medicine!  The US health care system is like a Dr. Seuss car when we really need a Ford.

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US Health-Care Costs — comparison of states

2009 Health Care Spending Per Capita

The graph is based on 2009 data from the Centers for Medicare and Medicaid Services and displays the spending in dollars per person.  There is a spread of costs from state to state.  Key drivers for any state include spending for hospital care, prescription drugs and physician services.  Utah has the lowest spending with outstanding performance in all three areas.  Utah has an advantage of few smokers, few drinkers and few obese people.  The explanation in other states is not so clear.  States next to each other like Georgia and Florida have extremes of spending levels not easily explained on demographics.  Florida has high spending like the Northeast probably representing a migration of both doctors and patients with a culture of high cost services.  One would think Utah demonstrates the best efforts of US healthcare with favorable demographics.  But consider other countries.

International health care spending

In the light of other countries Utah should probably be more like Sweden that has spending of $3722 per person.   The public spending alone  in the US should be achieving good health care for everybody but sadly that is not the case.  Our overall health-care spending is so much higher than other countries it makes the state to state comparisons seem less important.   But, the US needs a goal.  So, lets take a shot at the goal:  every state should have a goal of $6000 per person like Colorado.  Well, Congress — get to work!

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Financial Considerations — great graphs

Graph Graphic

Dan Munro of Forbes Magazine assembled several interesting health care economics graphs for 2012.  See his article for details and for the source of the data.  Here are some of the graphs:

The first shows the rise in costs for working Americans.  Currently the premium is 50% paid by employer and 50% by the employee.


The second shows how the US compares to other countries — basicaly the US spends more but does not get a benefit in life expectancy.


The third shows the US spends a lot more than other countries in the Medicare age group.


So what is the problem?  One would be tempted to conclude Medicare is the cause of the high costs in the older age group.  But Medicare is more efficient than private insurance based on loss ratios.  And, Medicare has spearheaded reduced payments to hospitals with DRGs.  If Medicare replaced private insurance many estimate a small reduction in total health care cost.   However, the inability of Medicare to set or negotiate prices for drugs, imaging  and devices is sadly lacking compared to the other 40 countries in the world with health systems.   Efforts to cap Medicare cost without giving Medicare the economic tools other health systems have will just result in low quality, high cost and poor access to care.

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International Comparison — sky high cost


The Washington Post has a couple of great articles about the cost of health care in which the US is compared to other countries.

The table below is from the first article listed above.

Click on the graph for an interactive version. (SOURCE: International Federation of Health Plans. GRAPHIC: Wilson Andrews - The Washington Post. Published March 2, 2012.)

Both articles are written by Ezra Klein.  The data itself comes from the International Federation of Health Plans.   Mr. Klein points out the US as a country does not have the financial controls common in other advanced countries.  He concludes the rate of growth in prices as well as the current prices of health care simply must be reduced.  Other countries should serve as a model.

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Lack of Consistency — medical care variability

Combined target graph

An Interim Report from the Institute of Medicine (IOM) about geographic variations in care was just released.   This is a very scholarly report with massive statistical analysis.   The basic idea was to review what Medicare paid for various types of medical care, devices and drugs across the US to see if some pattern could be identified.  The hope was to find some way to alter the payment scheme to improve the value of health care.  Alas, they could not find a pattern, only wild variation.  An individual doctor might be cost-effective for one disease and a money-waster in another, doctors within a group would range from  judicious to wildly profit-motivated and the variations between hospital referral areas show the same scatter.

The graph.

The holes in the target above are an example of wide variation.  The archers did not hit the bulls-eye  very often — there is a lot of variation.  A particularly interesting graph from the report is redrawn above on the right.  This is about how often gastroenterologists in an unnamed state perform a stomach scope (EGD) with the billing diagnosis of heartburn  (i.e. gastroesophageal re-flux) .

The vertical axis is the number of EGD procedures per 100 diagnoses of heartburn (the procedure rate).  The horizontal axis is the ordered list of 403 gastroenterologists in the state.  The list is in order of the lowest to highest rate of performing EGD.  The ovals placed on the s-shaped curve represent 17 different doctors all in the same group.  The remainder of the 403 gastroenterologists are plotted as dots on the curve.  If all the gastroenterologists approached heartburn in a consistent and reliable manner the graph would just be a horizontal line somewhere in the lower part of the graph.  Instead we see some gastroenterologists performing a scope on 100% of people they see who have heartburn — to be clear, this is the picture of unnecessary procedures or “padding” the bill.

What does it mean? 

Gastroenterologists are poor marksmen.  No, no, no.  It means they are shooting at different targets.  Some aim to maximize revenue,  some aim to follow evidence based (lower cost) guidelines and some aim in-between.   Keep in mind that a gastroenterologist is paid about $200/hour for clinic visits and about $1000/hour when doing procedures.   The doctors on the right side of the graph clearly have targeted the high paying procedures “scope first and ask questions later!”

The IOM claims no insight into the mysterious variation.  It is not necessary to study this more!  Look at other countries, they don’t have this problem because other countries don’t pay doctors by the number of procedures performed.   Simply pay the gastorenterologist the same hourly wage for seeing patients in the clinic as doing a procedure.  In the big picture, the variation can be markedly reduced by having doctors employed by an accountable care organization (ACO).  The ACO sets the salary, pays the malpractice insurance and provides the office to practice — a doctor in an ACO just has to focus on doing what is right for the patient, not what is most profitable for the gastroenterologist.

What should be done?

Although the graph puts gastroenterologists in the spot light the data show the same scatter across the spectrum of doctors.  US health care is sliding more and more into the swamp of poor quality and high cost.  The US needs doctors to aim for the right target and to aim for reliability, which means to consistently hit the bulls-eye.   Hopefully the IOM will have the strength to recommend strong action to change the whole system of  payment for US doctors, hospitals, drug companies and equipment manufacturers.  Instead of trying to make a perfect system we need a good system that can be adjusted as needed to achieve both high quality AND low cost care.

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Second Opinion — really?

marcus welby 2nd opinion

Dr. Kiley asks Dr. Welby for a second opinion (circa 1970).  What was the story?  A crusty patient does not believe Dr. Kiley’s diagnosis and demands a second opinion from Dr. Welby.  Oh, the drama, the crushed feelings of Dr. Kiley, the wisdom of Dr. Welby, and the horror that neither knows how to use a microscope!

Holly Finn wrote an article today in the Wall Street Journal “First of All, Get a Second Opinion” (WSJ March 23, 2013).  She is strongly in favor of second opinions for two basic reasons:  there are now more successful companies that specialize in second opinions and 60% of people who seek a second opinion obtain recommendations which are less invasive and less costly.  But, she is taking the statistics out of context.  99% of people do not get a second opinion but the 1% who find a problem with the first opinion are often correct another solution is better.  The take-home lesson, like many things in life,  if something does not sound right,  it’s probably not.

Contrary to popular belief most physicians are very happy to help a patient get a second opinion.  Why?  Because a patient who feels uneasy with a situation will not follow directions, will not take prescribed medications, and will be hyper-critical if the outcome of treatment or surgery does not meet their expectations.  So, all a patient has to do to get a second opinion is to ask the provider (“do you think a second opinion would help us?”).

It is important to keep the primary care provider “in the loop”.  The best consultations or second opinions happen when there is a good exchange of information — what has been done, what tests show and what medications have been tried.

When should a person ask for a second opinion?

  • When a provider is unable or unwilling to discuss your questions or the information you have found in books or the Internet.  An unending barrage of questions is counterproductive — be prepared by doing your homework and ask a few good questions.
  • When you simply do not understand the diagnosis.
  • Give your provider an opportunity to adjust medications if side effects happen or if medications are not working as expected.  A second opinion is a good idea if the treatments and modifications are not working.
  • When the provider is unable to make a diagnosis of a problem.
  • When you have been diagnosed with a life threatening condition — you may not get a second chance for a second opinion so don’t wait.  Sometimes a bad situation can not be cured — at least you will have some comfort that what can be done is being done.
  • When your doctor is not giving you more than one option for treatment — there is always an option (perhaps not a good one, but there is always a choice)
  • When you are uneasy about the need for any surgery.  A CNN report  lists 5 surgeries that should trigger a second opinion:
    • Heart bypass surgery (get a second cardiologist opinion)
    • Hysterectomy (often not needed)
    • Pregnancy termination for fetal abnormality (because the diagnosis can be difficult)
    • Surgery for varicose veins (often not needed)
    • Treatments for brain tumors (a really big step)
  •  Sometimes insurance companies require a second opinion for certain problems.  Listen carefully to that second opinion even if you were happy with the first opinion.  There is indeed a lot of unnecessary testing and surgery which can be  dangerous for you and expensive for the insurance company.

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High Cost of Care – Bad and Getting Worse

Four in ten Americans report that within a year illness caused a severe family financial problem.  Americans obviously have not solved the problem of rising health care cost.  During the past 50 years insurance seemed like the answer.  If insurance premiums were the same as 20 years ago who would complain? The situation has changed.  Now some can not afford insurance and almost no one can afford the cost of catastrophic illness. Businesses that provide insurance to employees are strained, so insurance  deductible levels are higher.   Pooled risk (insurance) has concealed the lack of health care cost control for a long time — hindsight is great.  Now we wish we had paid more attention.

According to the Kaiser Family Foundation  31% of the healthcare dollar is spent on hospital care and 20% on physician and clinical services.  Furthermore, major drivers of health care cost are:

  • Technology and prescription drugs
  • Rise in chronic diseases
  • Administrative costs (currently 6% for medicare and 30% for private insurance)

The “where” we spend more money and “why” we spend more money are interesting facts but do sick people feel a lot better as a result?. America spent $2.6 trillion in 2010 but the “Sick in America Poll” very clearly shows dissatisfaction.  The World Health Organization ranks U.S. health care at number 37 just after Costa Rica.  In simple language, Americans are not getting a good bang for the buck.  The phrase “drivers of health care cost” might be associated with the image of someone driving a car, following a map and getting good mileage.  Erase that image.  Replace the word drivers with “culprits” to get the right picture.  We spend too much for technology and prescription drugs, we spend too much on chronic disease and we spend too much on administrative cost.  The philosophy of each category needs to change to help solve the financial problems:

  • Technology and prescription drugs:  the current philosophy is “safe and effective”, the new philosophy needs to be “safe and cost effective”
  • Chronic disease:  the current philosophy is treat the same as acute disease, the new philosophy is prevent, treat early, follow-up to prevent progression.  Also, exercise more, eat less sugar and remove nicotine from all products.
  • Administrative costs:  the current philosophy is to “manage complexity”, the new philosophy needs to be “keep it simple”.  Reasonable efficiency demands 94% of premiums for all public and private insurance should be used to pay for care.   By some estimates 30% of all health care cost is related to “paperwork”.

The current US health system is perfectly designed to deliver high cost low quality care with an ocean of paperwork.  What a mess.  Fortunately, there are islands in the paperwork ocean where low cost high quality care is delivered.   There is hope. 

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