Category Archives: Health Economics

This, from the April 18 LA Times, describes the rather complicated dance some insurers go through before approving a procedure, and why we pay so much for care, even if we carry insurance.

Ted Kamp wanted to make sure his daughter received the medical treatment she needed. That was his first priority.

nHis second was making sure his insurance would cover things and that he’d pay a fair price for any procedures.

The fact that this proved so difficult highlights one of the crazier aspects of the U.S. healthcare system: the inability of patients to know how much their treatment really costs.

Cigna’s  preapproval procedure required an evaluation of the indication for the MRI by  a third party contractor.  In this case the insurer paid nothing for the procedure as the family had not yet paid their $5000/year deductible.  When approved, the patient was expected to accept whatever was charged by the “approved” provider, and not afforded the opportunity to shop for the best price. 

The price paid was several times the cost of other providers in the area and  multiples (my estimate) of the amount charged if the insurer was paying the bill directly—this patient has a $5000 deductible and the bill came to $4700. 

Medicynical Note:  We have the most expensive health care costs in the world, no one else is even close.  

Insurers get the best prices for care through their negotiating leverage.  The uninsured, or in this case those still paying off their deductible are charged more, multiple of the insurance payment.   This is a system designed to assure profits not quality affordable care. 

Ezra Kline has a post on prices for health services in the U.S. versus other industrialized countries.  His data is taken from a report from the International Federation of Health Plans.  Guess where it is more expensive…it’s not even close!

Medicynical Note:  It’s hard to believe that some die hard reactionaries think this is the best health care “system” in the world. 

Brookings has an analysis of the impact of our uncontrolled health care costs:

By 2010 the U.S. health share was almost 7.2 percentage points of GDP (or 70 percent) higher than the health spending share in countries with comparable incomes. We can describe that estimate in a slightly different way: The United States spent about $7,500 per capita on health care compared to an average of $3,300 in other rich countries.

The article looks at income over the past 30 years including and omitting the cost of health benefits.  It notes that incomes have risen more than usual measures indicate when one includes the costs of health coverage for employees.

Medicynical Note:  The article notes that average income rose 35% in that time period while the cost of health benefits/capita rose 205% affecting the income increase when included in the calculation.  Of course we need a similar accounting of the increase in out of pocket medical expenditures to understand the full impact on disposable income.

Read this

Medicynical Note:  This is where we find out if in a democracy we can control health care costs by choosing the most cost efficient approaches.  Markets won’t work.  The rub is the influence of the big moneyed lobbies of the Medical Industrial Complex….the game is on!

Why markets won’t work in health care was discussed 50 years ago by Kenneth Arrow and nothing seems to have disproven his contentions since them.  Read this for an introduction… and this for the original discussion. 

Health care spending in the U.S. has been out of control for several decades.  It’s unsustainable and the two candidates for president have conflicting approaches.

The Romney/Ryan way is to ration care by cost.  If you don’t have the money you are out of luck, we might let you go to an ER.

The Obama administration’s reform, modeled ironically after the Massachusetts law which once was Romney’s great achievement, decreases spending by focusing on improved efficiency.  This Health Affairs piece highlights the approach to one of the most expensive patient care groups, the Medicare/Medicaid dual eligibles.

Here’s what ineffective care in our current non-system looks like:

Mary, like most of her counterparts, has never had a primary care relationship because primary care with the skills, intensity, and organization to meet her needs doesn’t exist. Instead Mary, like most of her peers, receives care from an array of specialists — in her case, Neurology, Pulmonary, Orthopedic, Gastrointestinal, and Endocrine specialists in three different non-communicating hospital systems — with no one capable of, or responsible for, providing the totality of her care. Thus Mary’s years of so-called “independent living” have been characterized by multiple recurrent hospitalizations for entirely predictable complications: pneumonia (in one case requiring a 14-month stay in a Medicaid-funded, post-acute respiratory rehabilitation hospital); poorly controlled diabetes; seizure management; and functional GI problems, with overall health, and functional decline.

These are the most expensive patients to care for and at present we do little to coordinate and anticipate their problems.

Massachusetts has instituted programs, many of which are in the President’s health care reform program to provide better, and it should be noted less expensive care to these patients.  An assessment of their approach showed:

• According to a Lewin Associates study commissioned by the SNP Alliance, hospital admissions and days were 56 percent of the risk-adjusted Medicare dual-eligible FFS experience (2009 to 2011).
• The NCQA risk-adjusted 30 day hospital readmission rate in 2010 was 4 percent compared with the median Medicare Advantage program rate of 13 percent (99^th percentile).
• The permanent nursing home placement rate for nursing home certifiable members between 2009 and 2011 was 34 percent of that seen in a Nursing Home Certifiable frail elder population in FFS care.
• The seven year annual average total medical expense increase is 3.3 percent and 2.8 percent for nursing home certifiable and ambulatory, enrollees respectively, well below the Medicare trend.
• CMS Quality Star Ratings of 4.5 Stars ranked in the 90^th percentile of all Medicare Advantage Plans and the 99^th percentile of all Medicare Advantage Special Needs Plans in 2010 and 2011.
• Multiple evaluations of the younger disability care program over many years found a high degree of satisfaction, a 60 percent reduction in hospitalizations, and a 50 percent reduction in surgical flap procedures for pressure sores in a spinal cord injured subpopulation.

Medicynical Note:  The President’s health  reform not only assures health care coverage, but has the capability to encourage more efficient services.

The Romney approach, farms out coverage to private insurers.  His does not mandate use of community ratings to determine rates.  That means a private insurer could and would charge whatever they wanted to dissuade people from choosing their plan–they really, really don’t want sick people in their covered patient pool.  Furthermore, with the dismantling of Medicare and to a great extent Medicaid that Romney envisions there would be no pressure to develop better, more efficient care for these patients.  

This election is crucial for health care in the U.S. and more than a choice of insurers is at stake.  In the end I suppose we’ll get what we deserve!

Escape Fire is a film documentary that is about to be released that looks at our non-system of health care.  The preview is here, and while I can’t say  that I agree with everything in it, it appears to have the diagnosis correct.  We have a medical industrial complex whose goal is to make money rather than provide care.  That’s a big problem.

What do you say to a health care non-system that’s going backwards?  Reform!

For the first time in several generations there has been a decrease in life expectancy in the U.S.

Four studies in recent years identified modest declines, but a new one that looks separately at Americans lacking a high school diploma found disturbingly sharp drops in life expectancy for whites in this group. Experts not involved in the new research said its findings were persuasive.

The reasons for the decline remain unclear, but researchers offered possible explanations, including a spike in prescription drug overdoses among young whites, higher rates of smoking among less educated white women, rising obesity, and a steady increase in the number of the least educated Americans who lack health insurance.

Medicynical Note:  It’s becoming irrefutable.  We lead the industrialized world in decreases in longevity.  The only question I have is whether current health reform will do enough to reverse the trend.

To repeat the mantra, we pay more per capita and get poorer outcomes than any other health care system in the industrialized world (I know of no other country with declining longevity).  We have nearly 50 million people without easy access to care (health insurance and all that goes with it) and we do lead the industrialized world in bankruptcies due to medical expenses–it’s unknown elsewhere.  We are truly numero uno.