Why?
You’ve seen the headlines: “Health Care Industry Offers to Rein in Spending”; “Stakeholders to Obama: We’re Ready to Cut Costs”?
What does this mean? I think it means that the industry—and in particular the insurance industry—is afraid, very afraid that the healthcare reform train is going to leave the station without them. They’re desperate to have “a seat at the table.”
And so they are admitting what President Obama, White House Budget Director Peter Orszag and bloggers like yours truly have been saying for more than a year: we must rein in health care spending. Over the weekend, the Wall Street Journal announced that the president would be receiving a letter signed by leaders of of Pharma, Advamed (device manufacturers), the American Medical Association (doctors), the American Hospital Association, America's Health Insurance Plans, and the Service Employees International Unions. In that letter, the signers pledge “to do our part to achieve your Administration’s goal of decreasing the annual health care spending growth rate” by 1.5 percent a year, “saving $2 trillion or more . . . we are developing consensus proposals to reduce the rate of increase in future health and insurance costs through changes made in all sectors of the health care system." Today the president announced the industry’s promise.
In truth, the industry is not making a concession. It is recognizing an irrefutable fact. Current spending patterns are unsustainable. The nation’s health care bill is set to grow by 6.2 percent a year over the next 10 years. Unless you expect your wages to grow by 6.2 percent a year over the coming decade, this means that pretty soon, you probably won’t be able to afford healthcare.
Of course what can happen won’t. We’re not going to let the healthcare system swallow GDP.
Something will have to give. This could mean that we’ll wind up with a two-tiered system. The wealthiest 5 percent will continue to undergo far more tests and aggressive treatments than they really need, while consuming enough pills to turn many into walking pharmacies. They’ll continue to over-pay for over-treatment, and most will not be aware that too much medical care in the form of ineffective, often unproven remedies can be fatal. As for the rest of us, our employers just won’t be able to keep up with levitating costs. At best, we’ll wind up on something equivalent to today’s Medicaid. At worst, we’ll receive precious little healthcare.
Alternatively, spending will be pared throughout the system as we trim the fat from our health care budget. But, as I have said before, that fat is not hanging out on the edge of steak; it is marbled throughout the meat. Removing the waste will difficult and time-consuming. And it will have to be done with a scalpel, not a butcher’s knife. But if done right, we don’t have to sacrifice the quality of care. We will simply be cutting the dollars spent on inefficient, ineffective, unproven and over-priced products and services.
From a patient’s point of view, this is good news. But for those who make their living in the health care industry, a $2 trillion reduction in spending means that their revenues will fall. One man’s overtreatment is another man’s income stream.
Why, then, are they offering to help shrink the nation’s health care bill?
According to Ron Pollack, director of Families USA, a liberal group that supports coverage for all, the health insurance industry came up with the target of a 1.5-percentage-point reduction. Karen Ignagni, president of the insurers trade group, America’s Health Insurance Plans, took the idea to other major interest groups, said Pollack, who was familiar with the talks among the industry groups. .”
Is There A Quid Pro Quo In the Works?
As regular readers know, the insurance industry is terrified by the prospect of having to compete witth a public sector insurance plan. President Obama has said that public-sector alternative would “give Americans choices. And help keep the private sector honest,” presumably by setting high tandards for coverage while keeping preimums, deductibles and co-pays as low as possible.
Insurers claim that they cannot possibly compete with something like Medicare E (for Everyone.) It’s too good. Okay, they don’t put it that way. They say a government plan would have an unfair advantage because it doesn’t have to spend a fortune on advertising, lobbying and exectuive salaries. It doesn’t have to produce profits for shareholders. And , by being part of the federal government, it enjoys certain economies of scale. Finally, because of its sheer size, Medicare E would have clout when negotiating prices with drug-makers, device-makers, hospitals and physicians. Of course, the nation’s biggest insurers also have size on their side. They just haven’t chosen to use it. Instead, they have accepted sky-high prices for many products and some services—and then passed the cost on to patients in the form of spiralling premiums.
So perhaps, some observers are speculating, Ignani is hoping for a quid pro quo here? Over at the American Prospect, one of Ezra Klein’s reader’s envisions the scenario:
Administration: "OK"
But yesterday, senior administration officials told Bloomberg : There was no concession from the administration . . .as a result of the letter.”
I’m inclined to believe them. The administration doesn’t have to make concessions. It now has the votes needed to pass the president’s health care bill. It would like to have the industry on board, and it would like the vote to be bi-partisan. It does not want to create a rift within the Democratic party. But the administration doesn’t need Karen Ignani.
Meanwhile, what the industry is offering is merely a promise: They provided few details about how the cuts would occur,” Bloomberg observes, “and said they don’t have a way to enforce the commitment.”
Details about exactly how industry would save $2 trillion were extremely hazy and included boilerplate references to “Reducing over-use and under-use of health care by aligning quality and efficiency incentives . . . “ There was no mention of sacrifice. No one said “we were willing to give up . . .”
The National Coalition on Healthcare’s response to the news seems appropriately skeptical “We are very cautious about the particulars of the voluntary effort that groups proposed to the White House today . . Most of the measures that they cited would help to make the health care system more efficient over time, but, as the Congressional Budget Office has indicated, should not be counted on to produce substantial savings soon.”
"Moreover,'' the coalition said, "voluntary efforts – without legislated requirements and enforcement – have not worked well in the past.”
In other words, this is all PR.
Why, then, did President Obama seem so delighted by the industry’s pledge? First, because it would be less than gracious to look a gift-pledge in the mouth. Secondly, if I am right, the insurance industry has blinked. They have admitted that U.S. health care cannot continue to be a growth business. This means that for-profit health insurance won’t be a growth business.
Going forward, spending on health care cannot grow more than GDP. And we know that GDP is not going to be growing by 6.6 percent –the projected annual growth rate for health care spending. Over the next year or two , GDP might grow by 1% to 2%. If we are going to provide coverage for all Americans, and provide subsidies for those who cannot afford it, we’ll need to save more than 1 ½ percent a year that the industry is talking about—or raise taxes substantially.
No doubt, the industry representatives hope that, by reaching out to the president, they will be included in discussions about how and where cuts should be made. If and when that happens, one can expect the “strange-bedfellows coalition” of doctors, hospitals, insurers, drug-makers and device-makers will break down, with each party pointing a scalpel: “Don’t cut me, cut him.”
No enforcement or accountability mechanisms defined? I am speechless?
HAVEN’T WE WITNESSED FIRST HAND WHAT CORPORATIONS DO WHEN LEFT UNREGULATED?
I don’t get this at all?
(maybe I missed something?)
Dr. Rick Lippin
Southampton,Pa
No enforcement or accountability mechanisms defined? I am speechless?
HAVEN’T WE WITNESSED FIRST HAND WHAT CORPORATIONS DO WHEN LEFT UNREGULATED?
I don’t get this at all?
Dr. Rick Lippin
Southampton,Pa
If it is good to be true…
Oh, but I could have sworn they’ve said that healthcare IT was going to save them all this money. That’s just wishful thinking and political smoke.
You’re braver than I for taking on the problems with healthcare.
Maggie,
I have a slightly different take on this one.
Far from blinking, the healthcare industry recognized that reform of some kind was inevitable. Secondly, they have seen, and likely been a part of, what is emerging from the Senate Finance Committee and probably the Obama White House – band aids to an inherently flawed system.
These “industry leaders” have concluded that they can live with these minor alterations rather than risk what might be possible in the way of true reform. Better the devil you know than the one you don’t.
The also have a number of institutional factors going for them – this President will not be around forever, Congress has a very short attention span and there are no downside risks to ignoring everything they have committed to once the spotlight is off reform.
I am sorry to say it, but tinkering has won out.
Bill
Bill–
We’ll have to wait and see, but I don’t think tinkering has won.
I think we’re going to move to a hybrid health care system with a public sector alterntive for health insurance. And if it is more affordable than the for-profit sector plans (which it shoudl be) over time it will become
the plan of choice.
I also think that the Obama administration will be using that comparative effectivness information.
This means that they are going to cut a large amoutn of the waste int he system (unnecessary, ineffective, overpriced services and products.)
I also think they will bring prices down on drugs, devices and some specialists’ services.
This won’t happen easily or quickly. But it will happen over the next 3 1/2 years.
They are not going to finance healthcare with deficit spending, so the only way to cover everyone is to remove the fat from teh system. We’e in a recession/depression–most people don’t yet realize how bad it will get.
Congress will have to stand up to the lobbyists–they won’t have much of a choice.
The money just isn’t there–and won’t be there–to continue overspending on healthcare.
If Obama has a second term, they’ll do more.
At this point, Obama and Congress are committed to universal coverage. The only question is whether the coverage will be comprehensive and equitable.
If they use the Federal
Employee Benefits model (farming universal coverage out to private sector insurers, I’ll be very disappointed–unless regulation is much, much stricter than it is for
Federal employees’ nsurance.
You may be right. But my sense is that events have brough us to a turning point in American History –not unlike 1932 or 1980.
John–
I agree. Healthcare IT–IF done right—should reduce errors, but it won’t save money for at least 10 years–if then.
Healthcare IT is an important idea; but today, most of the systems being sold are too complicated and too expensive.
Ray–
You wrote “It’s too good to be true.” That’s because it isn’t true. No one in the industry has offered to give anything up.
Rick–
The industry is simply making a hollow promise–without guarantee of enfocement.
I thin Obama is reacting with enthusiasm because, as I say in the post, ths is a sign that the idnustry is beginning to capitulate.
Rather than opposing health care reform, it’s trying to jump on the bandwagen. (See the beginning of my post on “Spinning”– as Luntz advises, there is no point in directly opposing health care reform . .
They need to appear as if they are making nice.
There are always unintended consequences for government policies. We’ll have to wait and see what actually happens.
Politicians are notorious for lying, and so are some of the people in the medical industry.
The industry’s profits have been humongous to date, enough to support $46 million in campaign contributions in 2008 alone. To protect the majority of those profits they are willing to give up a minority. $400 billion a year times 10 years is $4 trillion. They are willing to give up $1 trillion to save the other $3 trillion. (The numbers may vary but you get the point.)
But our conflicted politicians are faced with a tough decision. Doing it right by implementing a Medicare-for-all system that would save $4 trillion over 10 years, but cut them off from the campaign contributions, or doing it wrong and saving the $46 million in cash bribes.
I’ll let you guess as to what their decision will be.
Jack Lohman
http://MoneyedPoliticians.net
I feel the health insurance industry is like the oil industry. Do you prefer your 10% in health care 20% profit on $50 oil or $150 oil. Non of what anyone says makes sense until we have transparency as to where the money is going! How much does it cost per patient per year to see Dr. X versus Dr. Y and what are the outcomes. this would take into account if Dr. X owned or shared in his own imaging center or hospital or was employed or had an arrangement with Dr. Z who was the businessman. Where do the overhead dollars go in the insurance and pharmaceutical industries, to advertising, to executive salaries to shareholders and how much of my premium do I want to spend on each of these.
So the private HMOs and drug companies have said that, despite their obligation to maximize shareholder profits, they promise not to raise premiums or costs more than 1.5 percent per year for the next ten years. Do I have that right?
Have they agreed to cut their profits? If not, they will obviously be cutting treatment. To the HMOs, efficiencies and cost containment mean fewer medical losses, less paid out in claims. They’ll cut out the fat all right, by paring needed treatment to the literal bone.
You did a good job of explaining the proposal to the lay person, Maggie, but let’s ask some economists to have a go at this. Tell Peter Orszag to get out his calculator.
Medical IT might save money by coordinating treatment if everyone were on the same system, like the VA (a one-payer system), but coordination won’t work across multiple platforms. And doctors have complained in the NY Times that the costs of maintaining and updating the expensive software adds to administrative costs in their offices. I’m not a Luddite, but innovation should be user friendly and enhance patient care, not stock portfolios.
As to comparative effectiveness, will physicians who have the best interests of the patient in mind be subjected–not only to the HMO gauntlet of approvals, but also to the “comparative effectiveness police” and the billing bundlers? Gimme a break!
“They say a government plan would have an unfair advantage because it doesn’t have to spend a fortune on advertising, lobbying and executive salaries. It doesn’t have to produce profits for shareholders. And, by being part of the federal government, it enjoys certain economies of scale.” Well said, Maggie! And a national, nonprofit publicly funded system would make even more sense.
Thanks for letting me vent my rage at the President’s pandering to that “gang of six” today.
No, Harriette, I think they said they’d cut their inflation BY 1.5%, not TO 1.5%.
Three points:
We are determined to get the best reform we can to reduce utilization without altering the jackpot tort system. Don’t hold your breath. Until freak bad outcomes are regarded as such, as they are in Enlightened Europe, few doctors are going to scale back, knowing that some doctor from out of town will cheerfully tell a jury that he always does something more expensive in just this situation.
Exaggerated hospital charges contribute much more, by a factor of ten, to our nation’s doctor bill than the doctor. I don’t see much in the pseudo plan by insurers or reformers that addresses this.
Medical IT is sold to hospitals as a method of retaining patients. Doctors that are plugged in electronically to one institution now have a hassle factor keeping them going to that institution. This is medical mercantilism. Princeton colonies get specialty services from Princeton specialists. This is great for the institution, but bad for the patient.
It is also bad public policy. If there is a gastroenterologist in Exeter, (as there happens to be) who is a superstar, why shouldn’t the Princeton patient be sent there? Open IT should allow a referral to the best available and not restrict the patient to the best available in the (Grand Falloon) Vertically Intigrated Institution. IT should not ossify rigid referral patterns. If we are going to fix healthcare, let’s do it in a way gives patients more choice.
$2 trillion!!! Did we hear correctly, only two trillion dollars over a ten year period? I’m not an economist and maybe Paul Krugman and others think more of this, but I’m thinking about that Austin Powers film in which Dr. Evil announces a $1 million ransom of the planet Earth. It broke the fictional president and his staff up.
I hope the Obama administration is privately having a good belly laugh on this industry announcement too. I mean, if they are voluntarily giving up two tril, what should Obama’s private response be?
Perhaps this: Ah, it’s 2009 Ms. Ignagni, not 1993 and you’re not as cute as Mini-Me. Nice try, but get serious.
Thanks to Jack Lohman for pointing out my error. A friend in our local single payer cohort is a CPA. She has pointed out that the health care industry is proffering “a 1.5% reduction in growth of cost.” She goes on to say, “I don’t know if people really don’t understand what a reduction in increases means or if they are simply trying to trick us. I realize that to most people a 2 trillion dollar savings sounds great, but how about looking at the whole picture. I think maybe I should offer a math class in understanding political number games.”
Obviously I should sign up for her class!
suppose we’re all somewhat guilty about refighting the last war– especially inasmuch as we lost.
but I’d argue the significance here is that the providers remain in the tent. with clinton they felt locked out of the debate– because they were. so they took to the airwaves with Harry and Louise to convincingly share their perspective.
by including them in the conversation Obama is delaying — and hopefully avoiding — such a confrontation where our side typically doesn’t do very well.
so the important thing isn’t whether their promises are credible. who knows? rather it is that they are participating in the process rather than trying to halt it.
that’s good news
If 1.5 percentage points could be removed from annual medical cost growth that would, indeed, be a big deal over time. In his most recent blog post, Bob Lazewski noted that medical costs grew from $75 billion or 7.2% of GDP in 1970 to an estimated $2.5 trillion or 17.6% of GDP in 2009. During that 39 year period, nominal dollar GDP grew at 6.9% per year on average and increased approximately 14 fold over that time to $14.2 trillion. Medical costs, by contrast, grew 9.4% annually or 2.5 percentage points PER YEAR faster than GDP growth and increased 33 fold over 39 years. Had medical costs increased only 1 percentage point faster than GDP instead of 2.5 percentage points faster, healthcare this year would cost “only” $1.46 trillion instead of $2.5 trillion or 10.2% of GDP instead of 17.6%.
While I applaud the stakeholder groups for their efforts, regardless of their motivation, I don’t think it really gets at the core of the problem. It’s fine if insurers cut administrative costs by simplifying their offerings and, perhaps, developing a common claim form that can be used industrywide. It’s also good news for drug companies to support comparative effectiveness research whereas they have opposed it before. Even that won’t do much good, however, unless we embrace it to drive coverage and payment policy and either refuse to pay for drugs, devices, tests and procedures that can’t pass a cost-effectiveness standard or we at least reimburse them only at the rate of the least costly alternative treatment.
The core problem, as I see it, has to do with comments Dr. Pat S. made in response to my post on the Provider Backlash thread. He stated that doctors in the U.S. perceive that the standard of care always or almost always makes maximum use of high tech interventions. As it happens, high tech interventions are also the most lucrative for doctors and hospitals and they afford the most protection from lawsuits. With respect to end of life care, he said that nobody will pay for time consuming complex discussions of available options so inertia leads in the direction of doing more rather than less. Again, doing more pays more and provides better protection from lawsuits. Even if we got rid of all the insurers and shifted to a single payer system tomorrow, this dynamic would not change. Medicare hasn’t had any success to date in driving down utilization and single payer won’t either without significant changes in payment policy and efforts to measure and reward good performance and penalize subpar performance by doctors and hospitals.
Finally, I want to comment on the Obama administration’s contention that anyone who likes their employer provided coverage can keep it. Many if not most employers offer their employees insurance from only one health insurer though it may be possible to choose from among several plans offered by that insurer. If the government offered insurance that did not have to cover all of its costs from premium revenues and patient copayments and used Medicare’s dictated (as opposed to negotiated) prices, it could probably price its plan 20%-30% below private sector offerings. Employers would dump private coverage in droves to save money and force employees into the government plan. Presto, single payer arrives. Now there would no longer be a private sector for doctors and hospitals to shift costs to. What would care be like then? Would face time with the doctor shrink to five minutes like in Japan? Would most hospitals go broke? Beware of unintended consequences.
Who cares about a decreas of 1.5% growth, from 10% to 8.5%? I’d rather see an elimination of the 31% of insurance bureaucracy waste with a single payer system. Problem is, I don’t have the $47 million to match the industry bribes.
Step One: Agree to voluntary growth caps. Trade associations convince their members the voluntary nature and the quid pro quo of PR and maybe a seat at the table. CBO can’t score any savings, so largely window dressing.
But:
Step Two: Legislate limits on growth rates, with new Health Board being granted extraordinary flexibility/BRAC-like authority to cut benefits, reduce paymetns, and control utilization. CBO scores this; trade associations’ counter-arguments are neutered since they’ve already committed to the income reductions, and ball is tossed to Tom Dashle, notional CEO of the resultant Health Board.
Messy details delegated.
Savings scored.
Congress and Obama happy.
Trade associations recruiting for new CEOs.
What’s not to like?
Jack, Barry, Jim, Hariette, Rob, Christopher, Hariette, Hubert, Jack, Tommy
Thanks for your comments.
Jack– As I’ve explained before, insurers administrative costs equal about 4.5% of our $1.7 trillion health care bill.
Barry–
First, on what cutting growth by 1 1/2 percent means.. As Bloomberg points out, cutting growth by 1 1/2 % a year for 10 years would mean cutting Growth in health care spending by 20%. (note we’re not talkign about cutting total spending by 20%; we’re talking about cutting GROWTH in spending by 20%)
This is not “a big deal”
Right now, health care spednding is set to spiral by 6.2% a year. Over the next two or 3 years, GDP is likely to grow by 0 to 2%. After that, it might grow by 2% to 3% a year; it’s hard to forecast beyond a couple of years.
But the bottom line is that we need to cut annual growth in health care spending from 6.2% to 2% or lower. That means cutting growth by roughly
66 percent–not 20 percent.
And that’s assuming that we can cover everyone for the same amount that we’re spending to cover some of us today.
The truth is that co covering everyone will be More expensive–unless we
cut back on the unnecessary overtreatment that well-insured people receive today.
Some well-meaning reformers argue that if we just roll out “health care for all” medical care would magically become less expensive. After all, if everyone is insured, they say, everyone will receive more timely care, and fewer people will wind up needing expensive hospital care.
But as I pointed out in past posts the research points in the other direction: while the uninsured are more likely to land in the hospital, they also die significantly sooner than the rest of us—saving society the money that might have been spent treating them for Alzheimer’s or other diseases of old age.”
Indeed, as Paul Ginsburg points out in “High and Rising Health Care Costs: Demystifying Health Care Spending,” “over the past decade, the decline in the percentage of Americans who have insurance has slowed the rate of health spending growth. “ If everyone had been insured, our national health care bill would be even higher. (See this HealthBeat post http://74.125.47.132/search?q=cache:3wf6YJ_UcaAJ:www.healthbeatblog.org/2008/11/the-truth-about.html%2520+%22save+money%22+and+uninsured&cd=1&hl=en&ct=clnk&gl=us.
So the promised 1 1/2 percent annual cut in growth isn’t early enough.
Industry leaders are throwing that number out in hopes of heading off the larger cuts that are needed.
A second point– you say that Medicare has failed to rein in spending. This is simply untrue. For the last 12 years, growth in Medicare spending has been 2% to 3% lower than growth in spending by private isnuers. (For instance, from 1997 to 1999, Medicare spending grew only 1.2% a year, while reimbrusements by private insurers grew by 4.2% a year. You can see the numbers here http://74.125.47.132/search?q=cache:WRx0IgdrEiEJ:www.tcf.org/Publications/Healthcare/Maggie%2520Agenda.pdf+Medicare+and+growth+and+spending+and+private+and+chart+and+%22Maggie+Mahar%22&cd=1&hl=en&ct=clnk&gl=us
Medicare needs to rein in spending further, but why say it “hasn’t had any sccess”?
Finally, the end of your comment is pure speculation: “Employers would dump private coverage in droves to save money and force employees into the government plan. Presto, single payer arrives. Now there would no longer be a private sector for doctors and hospitals to shift costs to. What would care be like then? Would face time with the doctor shrink to five minutes like in Japan? Would most hospitals go broke?”
See my post on “Spinning.”
What you are doing here is exactly the type of “fear-mongering” Luntz recommends by using the phrase “It could lead to . . ” leading up to what Hitler called “the Big Lie” : the suggestion that most hopsitals would go broke.
This is typical of the rhetoric Karl Rove conservatives and people like Rush Limbaugh have been using for the last 15 years as they appeal to people’s worst fears.
Jim– I agree it’s good that the conservatives are not running Harry & Louise ads.
Though as Republican consultant Luntz points out (see my post on Spinning, also posted yesterday) these days, it would be political suicide to directly oppose healthcare reform. Most of the country wants reform.
But you are right, I think, that Obama would prefer to have them in the tend, and that including them in the process will also draw things out, giving him and his administration more time to explain to the public what “reform” means, why “cost containment” is essential, and why it doesn’t mean denying effective care, it means squeezing the hazardous waste out of the system.
Harriette– You are right, many people are likely to assume this means shrinking our national health care bill by 1 1/2 percent a year, when in fact they are talking about cutting the growth of that bill by 1 1/2 percent–which means it still woudl be growing faster than GDP–or workers’ wages.
Rob- Welcome–and yes, $2 trillion over 10 years just isn’t that much. . . . It 1993 it might have been, but healthcare inflation since then has created a whole new ballgame.
Christopher: You make statements such as: “Exaggerated hospital charges contribute much more, by a factor of ten, to our nation’s doctor bill than the doctor.”
Evidence? Is this another example of telling a lie that is so Big that people will think it must be true, otherwise, you wouldn’t say something that perposterous?
As for sending patients to the center of excellence for a particular treatment, Medicare is already talking about lowering co-pays if the patient goes to a center of excellence. Vertic
ally integrated institutions can refer to each other.
Harriette–
I agree with much of what you say, but even if we had single-payer we would need to use comparative effectivness research to weed out more expensive treatments that are less effective (or totally ineffecive.)
Medicare is now planning on using comparative effectiveness research. This is what good government-run healthcare does in countries that have single-payer (UK and Canada) and in countries that have hybrid public sector and private sector plans like Obama’s (most of Europe).
These days the HMOs are no longer trying to “manage care”. The backlash made them back off. But or government that is trying to figure how to best contain costs –without lowering quality–this will mean saying “no to some treatments that provide no benefit to that particular patient.
Hubert–
Well we know that 15% to 20% of your health care premium goes to those administrative costs –and shareholder profits.
We also know that if you add up the 15% to 20% of the premiums that each insurer keeps, that totals only about 4.5% of the $1.7 trillion that we, as a nation spend on healthcare.
OF course 4.5% of $1.7 trillion is a nice chunk of change, and knowing that a part of it is being spent on lobbying our Congressmen, and over-paying exectuives, and wasting too much on advertising and marketing is troubling.
Even more troubling is the fact that drug-makers spend more on marketing and advertising than they do on research. (This is all a matter of public record since they are publicly-traded companies you can look at their annual reports. It takes some digging, but the facts are there.)
As for how much doctors charge for individual procedures, that could be made transparent, as Naomi wrote in a recent post.
But a comparison of individual doctors’ outcomes really isn’t feasible– the pool of patients any doctor treats is too small and too easily skewed by non-compliant or simply very sick patients. When you start trying to compare outcomes fr individual doctors, doctors begin avoiding non-complliant (which usually means very poor) patients.
They also refuse to take difficult patients. We’ve seen tha when we tried to compare mortalities for individual heart surgeons. A good number of surgeons simply refused to take difficult cases–where the patient was more likely to die.
This is why health care reformers prefer comparing outcomes by looking at how well large groups do–i.e. all of the doctors that come into contact with a patient during a paricular episode of care–plus the hospital invovlved. In that case, the number of patients seen by that large group is large enough that non-compliant patients don’t skew the numbers.
Moreover, these days when someone is very sick there are rarely treated by one doctor. (And we are most interested in outcomes when people are very sick) So you really can’t pin the outcome on one person. Too many people are involved–you need to look at how succesful the group as a whole is in collaborating. Collaboration is, if anything, more important than the skill of any one individual. When a patient is killed by an error, usually more than one person is involved in making the error (or shoudl have caught the error.)
Finally, when insurance companies pretend that they are “ratning ” individual doctors, they really are trying to steer you to the doctors who submit lower bills. Their bills may be lower because they are more efficient–or because they are under-treating you, and not giving you the care you need. There’s no good way to tell.
Jack– again, your facts on the insurance industry are simply wrong. As any shareholder in America who has owned insurance stocks recently can tell you–these companies are not doing well. Their profits are not “humongous.”
The only thing that is keeping them afloat is their Medicare Advantage windfall and Obama has made it clear that will be cut.
As of Congressmen bendig to the insurance lobby– they didn’t do it last summer and I don’t think they will do it this year, though we’ll have to wait and see what shape the government insurance plan takes. They may dilute it–which would be a major blow for reform.
Tommy–
There will always be unintended consequences. This is why we need to roll out reform a step at a time, so that we can try to make corrections as we go along.
>>> Maggie: “As I’ve explained before, insurers administrative costs equal about 4.5% of our $1.7 trillion health care bill.”
What are you saying here, Maggie? That 31% of healthcare costs are NOT spent on the wasted insurance bureaucracy?
I agree with Dr. Lippin and Bill Blake. The health care “industry” can’t be trusted…”concessions”, just words and no action… c’mon, puhleeze suddenly overnight they decide it’s time to do what’s best for society.
Right.
I don’t think we should give this anymore lip service lest others come across this post and might think “industry concessions” have merit or credibility. But, as always, love your posts, Maggie!
The financial projections for Medicare look just like the numbers for GM. There can be a TARP plan for the banks and the auto industry, but there is no bailout for the US Government when Medicare goes bust. Ergo, the Obama Administration and chiefly Orzog of OMB, are taking the preemptive approach. Whatever the solution that all the players mentioned will come to “agree” upon, it will have to be economically sustainable. Orzog will have the last word on the numbers. And the magic number is an immediate 10% cut on the insurance premiums, drugs, devices, and hospital prices. Trust me, every stakeholder will find a way to make cuts that make that work….goodbye to all the bonuses and exorbitant salaries, bloated staffs, marketing dollars, lobbyists, needless paperwork, and it goes on and on. If you don’t get the cuts down, and you have a competitor that did,then you are going the way of the Pontiac. They will do it. Everybody has to have skin in the game. The patient: no smoking, no recrereation drugs, alcohol abuse, eating to obesity, lack of exercise, failing to comply with medical treatments, and the patient gets hit with an income surtax of a dollar amount that gives him the incentive to clean up his/her act and take ownership of a healthier life. Fix it now or watch it go bankrupt with no bailout.
Maggie,
I can’t believe that you don’t see high hospital charges as a big part of the problem.
Let me give you a personal example: I broke my leg, and had an operative repair. The surgeons fee was less than $700. The hospital charges for an overnight stay were over $12,000. What don’t you understand about this?
Byron–
If you read the hundreds of pages of reports that Orszag has written about containing healthcare costs, you’ll find that he
talks about slashing prices.
He aims to rein in spending by reducing utilization of ineffective and unneeded tests, treatments and medications.
Prices for some specialists’ servcies will fall, but prices for other doctors’ services (that provide greater benefits to patients) will rise.
Reduced demand for very expensive drugs and devices will probably mean that drug-makers and device-makers will begin to focus on producing less
expensive products.
Medicare will not go broke. Thee is plenty of money in the system- as long as we reduce the waste. About 1/3 of the dollars Medicare spends are spent on unneeded treatments. Excise even 1/3 of that waste, and you have solved the problem.
I don’t knwo where the fantasy of a tax on people who are obese or suffer from addicitons comes from.
But in the 21st century we recognize that addictions like alchoolism are diseases and that the notion that if trully obese people just eat less and excercise, they’ll lose weight is a myth. Obesity is a very complicated disease that we are just beginning to understand.
We also understand that the problems you mention are highly correlated with poverty.
You don’t punish (or tax) people for being poor or for sufering from a disease.
At least this administration wouldn’t.
Byron–
Sorry– a typo in my response. The first sentence should read: “he never talks about slashing prices.”
We also have a theory about this. It’s not necessarily a competing theory, but we note that in the 1991 to 1994 period of Clinton health care reform, the health industries, without any public coordination cut the rate of growth in health expenditure by more than half and more than they are promising to do here — until the threat of reform passed and then prices went up again. Our post at CenteredPolitics.com asks if this is really an attempt to undermine reform rather than support it.
I think that there should have been some well defined or outlined enforcement or accountability mechanism that should work. I am apprehensive about what would happen as consequences of government policies are always unpredictable.
It is very doubtful as to what such a statement would mean in effect. It is true that may be the insurers are getting a bit anxious by this statement.
Sheryl–
An interesting parallel.
Though given the industry’s recent re-phrasing of their promise (“we said we’d do it Gradually”) it looks like they have no immediate plans to reduce costs.
In every democracy, all deficit reduction programs consist of increased spending NOW, and fiscal discipline in the OUT YEARS. No one wants to be specific now about cuts. Why negotiate with yourself? You are simple making unilateral concessions. If any player wanted to do that, nothing was stopping them ten years ago…