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To it’s great credit the Washington State Hospital Association has made available hospital charges for various type procedures in member hospitals around the State. These figures compare our local Bellingham hospital (selected hospital) with others in the state–you can make other comparisons on the site.

The hospital association’s explanation of the variation in pricing follows:

“Payer mix – As with other businesses, hospitals cannot survive if costs exceed revenues over a long period of time. Government programs (like Medicare and Medicaid) generally reimburse facilities at rates that do not cover the costs they incur to provide care. Therefore, hospitals that have a relatively high percentage of government-program patients are forced to recover a greater percentage of their operational costs from privately insured and self-pay patients through higher charges. “

“Facility cost structures – Facilities differ in their approach to pricing based on operational costs. Some facilities try to spread the cost of all services and equipment among all patients. Others establish charges for specific services based on the cost to provide each specific service. Furthermore, some facilities may decide, or be forced, to provide certain services at a loss while other facility operations subsidize the losses. Any of these situations can result in significantly different charges among hospitals for a given type of service.”

“New technology – The equipment facilities use to provide services differs in age, sophistication, and frequency of use. Facilities with the latest technology may have higher charges than those with older, less sophisticated equipment.”

“Staffing costs – Salary scales may differ by region and are typically higher in urban than rural areas. Shortages of nurses and other medical personnel may affect different regions differently. Where shortages are more severe, staffing costs, and, therefore charges, may be higher.”

“Intensity of care – Some facilities are equipped to care for more severely ill patients than others. Patients within the same diagnosis or procedure category may need very different levels of service and staff attention, causing variation in charges.”

“Range of services provided – Facilities differ in the range of services they provide to patients. Some may provide the full range of services required for diagnosis and treatment during the stay. Others may stabilize patients and then transfer them to another facility for more specialized or rehabilitative care.”

“Service frequency – The per-patient cost of services is generally higher if the type of hospitalization occurs infrequently at the facility. Furthermore, a single case with unusually high or low charges can greatly affect a facility’s average charge if the facility reported only a few cases in a given time period.”

“Capital expenses – Facilities differ in the amount of debt and depreciation they must cover in their charge structure. A facility with a lot of debt may have higher charges than a facility not facing such expenses. Furthermore, facilities may choose to lease or purchase equipment or facilities. The choices made about financing of capital projects may affect charges in different ways”

Variations in cost of 50-100% within a region for the same procedure category reflects the system’s inefficiency and the patient’s inability and unwillingness to shop for health care based on price. It represents a failure of the market system to control costs. As a matter of fact, it appears from the Washington State data that where there are multiple hospitals available pricing actually increases.

These hospital cost numbers do not include the additional fees for doctor’s services and perhaps other costs. We are also told that these are not the amounts insurers pay. They are given a preferential rate. We can also presume that those least able to pay, i.e. the uninsured working poor, do not get a break on their bills and perhaps that explains the huge proportion of bankruptcy filings (something like 50%) attributable to medical bills and also the large amount of noncollectable accounts receivable that hospitals experience. It should further be noted that with a well functioning national health insurance plan both of these problems, as well as the Canaries in the Mine issue, disappear.

It’s unclear what these procedures cost in the past but since 1980 national health expenditures have increased over 800%. In the same period of time the proportion of total expenditures for hospital care have declined from 38% in 1980 to about 30% in 2004. In dollars however expenditures for hospitalization in this period have increased more than 600%. This “moderating” of the increase in hospital expenses has been more than offset by even higher increases in prescription drugs and professional fees accounting for increases in national health expenditures from 232 Billion in 1980 to almost 1.9 Trillion at present. There also is a marked increase in “other expenses”, perhaps reflecting the uncontrolled administrative overhead of the current system.

from Health Care Industry Report 2006 KPMG pg37
A noncompetitive marketplace, rife with patent monopoly, conflicts of interest, and less than fully informed consumers under duress, will not foster competition on price or for that matter quality. In our private health care system the primary responsibility (indeed the fiduciary responsibility) of each entity is to increase profits rather than deliver a service in the most economical fashion. This has to change.

After 9/11 there was an Anthrax scare. During it, the U.S. government threatened the Bayer Company, the patent holder for the antibiotic ciprofloxin, that they would abrogate the patent because of the risk of Anthrax to the U.S. population.

Patent issues bedevil AIDS treatment programs with drug companies after many years of legal maneuvering finally lowering prices of AIDS drugs for the developing world. Their best price, however, remains twice to several times that of generics. Meanwhile the AIDS epidemic continues with millions already dead and over 20 million currently infected. Only a small fraction of these people are under treatment, in part because of the expense and unavailability of medications to treat the disease.

The U.S. government treatment program limits medications to patented ones and controls the education program–requiring emphasis on abstinence rather than a more broad education program.

The Clinton Foundation has tried to help by raising funds and contracting with generic drug manufacturers and distributing medications to countries with the greatest need.

Meanwhile the Gates Foundation and Bill and Melissa, the generous ones, are missing in action and not at all or minimally involved in the effort to provide medications to AIDS victims. As they put it:

“We support efforts to stop HIV transmission, including development of:

• A safe, effective, and affordable HIV vaccine
• Microbicides-gels or creams that women could apply to protect themselves from sexually acquired HIV infection (medicynical note: recently shown to increase the risk and the study stopped)
• Large-scale initiatives to expand access to existing HIV prevention tools, both in countries with emerging epidemics and those already with high HIV infection rates
• Advocacy to build commitment for a science-based approach to stemming the epidemic”

Medicynical note: I tried without success to find a treatment program on the Gates site

Meanwhile Gate is doing this.

Do you think the issue of intellectual property rights keeps the Gate Foundation from providing generics for HIV treatment?

Technorati : Patent Drugs

What’s wrong with this picture?

The Bush administration maintains that we can wage war—the financial costs of this war already exceed those of Vietnam–and cut taxes to the wealthy at the same time. 

But now the writing on the wall (Animal Farm revisited) has changed.   We are told we need to charge more and cut costs of social programs in order to balance the budget and in this way help pay for the war.  

“Bush is proposing $95.9 billion in savings in mandatory spending, the part of the budget that includes the big benefit programs of Social Security and health care.

Medicare, which provides health insurance for 43 million older and disabled Americans, would see the bulk of those savings _ reductions of $66 billion over five years. That would come about primarily by slowing the growth of payments to health care providers.”

Now I’m not an economist but additional premiums and cost cutting (which inevitably result in decreased benefits) sound something like a tax increase that hits mainly the poor, the working poor, the middle class and the elderly.  Not a particularly progressive solution.

I encourage cost cutting in health care but believe we need to address this by attacking monopolistic pricing, lack of interest in efficiency (the pass costs through mentality), and the conflicts of interest that drive health care expenditures.   Perish the thought but one place to begin would be to negotiate prices with pharmaceutical companies to assure the best price for our citizens.

Some myths about U.S. Health Care from Paul Campos:

• “The government doesn’t pay for health care.  In fact, in America the government pays more for health care, per person, than any other government in the world, including the governments of countries that provide comprehensive cradle to grave health care for all their citizens. Yet despite this very high level of government spending, nearly one out of six Americans has no health care coverage of any kind.”

• “Unlike in nations with “socialized medicine,” Americans have the freedom to choose their own doctors.  It’s a tribute to the power of ideology that people who haven’t had the freedom to choose their own doctor in decades don’t notice that this claim is flatly untrue. The vast majority of Americans under the age of 65 who have health insurance at all are enrolled in group health plans that severely restrict their health care choices at every turn.”

• “American health care is expensive because it’s of such high quality.  Well it’s certainly expensive: the U.S. spends about twice as much, per person, on health care, as other developed nations. Indeed, despite being the richest nation in the world, we spend a higher percentage of our GDP on health care than anybody else.  And what do we get in return for having what is by far the world’s most expensive system? Lower life expectancy, higher infant mortality rates, and fewer physicians and nurses per capita than the average developed nation.”

Conservatives point out  that there are also disparities in health care in countries with various national health approaches. But this doesn’t fully explain our mediocrity given our expenditures.

 What is not in dispute  is that the disparity in health care  is greater in the U.S. and that our costs almost double that of other industrialized countries.  Moreover, uncontrolled health care costs will bankrupt us (GM and Ford are the canaries in the mine),  or result in excessive mortality from lack of access to expensive care unless something is done. 

 

Yet another view of the Bush plan for non-health care reform.

More on the Bush health care plan. 

The January 27th BBC From Our Correspondent podcast has a succinct description of the U.S. health care quagmire. (To listen click on the January 27th program)

The compassionate one, President  Bush, is proposing a new standard deduction for health insurance — $15,000 for families and $7,500 for individuals. If I understand it correctly,  employer health insurance benefits would be added to taxable income of the employee and then is eligible for the standard deduction. Those purchasing individual policies also qualify for the tax deduction.  The hope is that the tax deduction will help the uninsured purchase coverage.  The plan would raise taxes for about 30 million people with costs exceeding the standard deduction. 

Bush’s plan, which is said to make health insurance more accessible for the nearly 47 million Americans who lack health insurance, would start in 2009 and supposedly be revenue neutral over its first 10 years.

The Washington Post further states: "Others fear the plan would prompt more employers to drop health coverage and offer employees an immediate increase in wages to buy coverage on the individual market. But those plans tend to be more expensive, less comprehensive and harder to get for consumers who are already sick."  Given that many industries complain that they are uncompetitive because of the health insurance costs it seems  naive to expect that they will pass all or even a large part of their savings on to employees. A more likely scenario is that they will offer less or no insurance and pocket the savings.    

Bush’s plan also does nothing about the costs of care and indeed will increase the amount spent in our inefficient health care system.   Private insurers main fiduciary responsibility is to increase the company’s value for stockholders not to provide quality care efficiently.  If costs are higher, premiums increase.  Without addressing the conflicts of interest and inefficiencies in our system the new plan will fan the flame of health care inflation. 

Lastly Bush’s plan offers tax breaks for those with insurance but does little, if anything, for the working poor, a significant part of the 48 Million uninsured.   "While more than 100 million people would get a tax break, the administration estimates, more than 55 percent of the uninsured – about 25 million people – have such low incomes that they pay no income taxes, Davis said. So the tax changes would not make insurance any more affordable for them, she said." 

A trickle-down plan that works through tax cuts is doomed to fail if implemented.  The delusion that tax credits are health care reform is similar to the notion that introducing democracy to Iraq would be easy.  Health care reform is a multi-headed nasty beast.  The money driven marketplace hasn’t worked for innumerable reasons (see Medicynic’s archives).  Sadly Bush’s proposal is not even a first step toward taming it.

I’m tired of hearing about 4 hour erections and the amazing benefits of various drugs on TV.  In these ads  benefits are exaggerated, the side effects glossed over and costs ignored.  They drive bad practices in the medical community; encourage the use of expensive medications when inexpensive generics work just as well; and distort the already dysfunctional medical marketplace.

Every penny devoted to drug advertising must be paid for by the consumer–4.5 billion dollars this year.   Medicynic suggests:

1. Prohibit direct to consumer (DTC) advertising. In a 30 second ad provision of complete information is not possible. As a result manipulation of information is inevitable and patients do not fully understand the limited benefit and costs of any given product. It is a fact that few countries allow such advertising.

2. If we do not wish to completely prohibit DTC advertising, we must insist on  full disclosure. This would include mention and clear explanation of  risk of treatment, a summary of proven benefits and competing approaches in clear language that a lay person can understand. The price of the medication, with estimates of monthly and yearly costs both in absolute terms and in comparison with alternatives should also be provided.  Finally a measure of cost effectiveness (cost/unit of additional survival time or other approved measure) must be also be provided to fully inform the consumer.

We need to face the fact that uncontrolled market driven medical care is a luxury we can no longer afford–it also doesn’t work.  Write your Representative or Senator now!

Such visionaries as John McCain observe “I want to keep health-care costs down until I get sick, and then I don’t give a goddamn,”  McCain’s views, of course, reflect the complicated schizophrenic relationship the American public has with it’s health care system.  Stated another way, we are willing to pay  for a used Chevy but want a Mercedes’ performance.

Despite such feckless sentiment there is growing momentum to do something about health care.    Schwarzenegger’s plan is a variant of the solution being tried in Massachusetts. Another approach  provides universal coverage as a part of an expanded Medicare program. The President  has recently suggested this very limited plan using tax incentives.  It, of course, doesn’t address the issue of the working poor who have no discretionary income for health insurance or aggressive cost containment. There are other plans out there including one from the governor of Pennsylvania, and this from a coalition of private insurers.

There are many admirable aspects of the health plan proposed by the governor of California.   It recognizes there is a problem, provides a scheme for providing health insurance to all,  pays for it and puts the prestige of his office behind it. 

LA Times:  Among other provisions, the governor’s proposed health overhaul would:

•  Require every Californian to have health insurance.

•  Require employers with 10 or more workers to offer health benefits or pay 4% of the payroll to a coverage program.  It also taxes hospitals at 4% of revenue and doctors at 2%.

•  Extends government insurance for poor children to more families.

•  Ban insurers from denying coverage because of medical conditions, occupation or age.

Health care solutions are stymied by unrealistic expectations (see McCain above), conflicts of interest at every level of the system, and the ethos of profit driven private enterprises.  This last factor allows and even encourages insurers, providers, suppliers, and medical monopolists (the Medical Industrial Complex) to maximize profits at the expense of health care access and quality.   Add to that the fact that  sick patients are not rational consumers and are unable to shop for the “right” price we hear so much about in economic circles.  

How else to explain the current costs of health care?  Price increases in the health care sector exceed inflation on a consistent basis. Many new drugs cost more each year than new automobiles (including the above mentioned Mercedes) or for that matter, than the median and average salaries in the U.S.  Over a lifetime there are single drugs that will cost the system more than the value of homes.   Hospital costs are 5-6 times those of just 20 years ago. Total health costs are expected to  be 1.9 trillion dollars this year and 2.9 trillion by 2009–that’s real money by the way!

Any new health plan will have to tamp down expectations and expenditures with improved efficiency and resource utilization.  The challenge is to do this without decreasing quality, and access while maintaining the support of the public.  Whether our culture is up to this task is very questionable given our track record over the past 50 years.