36 thoughts on “The Commonwealth Fund’s Plan for Universal Coverage: Which Tier Would You Be On? Part 1”

1. Interesting that doc reimbursements would be scaled based on Mcare spending per beneficiary. In some ways, gainsharing at a macro level, a contentious issue as of today (hopefully less so as Mcare demos move forward…and succeed).
   If public program can be implemented so it competes on a level playing field (we’ll see), and if premiums are meaningfully lower, by sheer numbers of patients, providers may accept lower fee schedule–because they have no choice. In that case, high cost cities will need to get efficient fast to earn that precious update.
   In this instance, I agree, yes, doing this too quickly would really be a red mark. While it may be convenient to knock LA, Boston, NYC, etc., and perhaps deservedly so, they need time to evolve. The other rub is incentives and collectively working to bring costs down per beneficiary. If fixed pot of CMS dough, payments can only go so high regardless of how well providers do. Outcomes still crude–will practice move faster than we can oversee safely?
   These are all questions we are floundering with in he P4P world. Some similarities.

2. It will be very interesting to see how healthcare reform evolves. I’ll offer the following food for thought:
   First, I think we should consider making Medicaid a 100% federal responsibility. That way, we could have one set of eligibility rules and one set of benefits for the entire country. Payment rates could be raised to something comparable to Medicare rates. While federal taxes would have to be raised to finance this, states should be required to use their release from Medicaid financing to cover much more of the cost of elementary and secondary education while sharply reducing the hated local property tax which is not well correlated to a taxpayer’s ability to pay. Hopefully, the combined federal, state and local tax burden for the middle class would not increase as a result of this reallocation of responsibilities. For states with very low property taxes, they should reduce state level taxes.
   Second, regarding the public option to compete with private insurers, the cost advantage described does not reflect the probability that there is significantly higher fraud in Medicare and Medicaid than in private insurance now, though it is very difficult to measure or prove. Moreover, large self-funded employer plans have administrative costs as low as 5%-6% of total medical spend because they are not paying for the cost of insurance company underwriting, broker commissions, or state premium taxes while the insurer only earns a profit on the administrative services provided which generally cost in the range of $20-$30 per member per month (PMPM). The concept of paying providers Medicare rates which can be considerably lower than private insurer rates could mean that many providers will not participate in the program which, in turn, will make it difficult for policyholders to find doctors and hospitals who will take their insurance. I assume that providers would be allowed to make this choice while continuing to accept seniors in traditional Medicare.
   Third, to the extent that we can identify doctors and hospitals that utilize more healthcare resources than their peers on a risk adjusted basis without producing superior outcomes, patients should be charged higher co-pays if they want to use them. I think this would be a better approach than paying all doctors and hospitals less in high spending regions including those who practice cost-effective medicine. With good transparency tools and acceptable risk adjustment mechanisms, we should be able to reward the cost-effective providers with more patients while penalizing the high utilizers. Co-pay tiering has worked well in the prescription drug space, and I don’t see any reason why it can’t work with doctors and hospitals as well.
   Finally, the more I read about healthcare generally, the more I wonder about how much of the difference in health outcomes can be attributed to the quality of the healthcare system. For example, if there are more deaths from heart disease per 100,000 of population in the U.S. than elsewhere, how much of that is healthcare system related and how much relates to diet, exercise, stress and other personal behavior and cultural factors as well as differences in socioeconomic status? Conversely, if the suicide rate is higher in Japan than elsewhere, how much of that is driven by cultural factors related to honor and “losing face?” Once a society has done a good job of minimizing infectious diseases, providing clean drinking water and the like, attributing differences in death rates from heart disease, cancer, stroke, diabetes, etc. among countries solely to the quality of their healthcare system misses the mark.

3. I read some of the above with a little bit of dismay.
   Isn’t a two tier system something that is trying to be avoided? Don’t we have a two tier system now with Medicaid/Medicare/uninsured and private insurance? Part 2 of your post should shed some light on this.
   Isn’t a lower reimbursement rate what keeps better doctors away from Medicaid/poorer patients now? How can lower payments to doctors attract and retain them to serve the public plan? The better docs will migrate toward higher unregulated payments from private insurers. And how is this somehow new and innovative?
   Coordinating care by providing incentives for docs/hospital should not mean that docs/hospitals not compete for business. Competition will lower claims cost and their associated premium rates.
   Coordination of care is certainly important. But active engagement of the individual is equally, if not more, important – especially when they have an inherent self-interest in their own well being.
   I remain skeptical of a plan where doctors are forced to accept less than market reimbursements and consumers are forced to purchase something they do not wish to have at a cost they do not wish to pay.
   I look forward to learning from the next post.

4. Barry
   Meaningful outcomes measurement at a wholesale level are years away. On one hand, we need the data now for a system of value based payment required yesterday. On the other, we wont have a majority of it for decades (I am not saying we should not start). This aint gonna go quick and the antidote for our ills is years away. I suggest you read some posts on Bob Wachter’s blog as he articulates these concepts beautifully.
   You are right on the determinants of health. Maggie has posted on this before. When the powers that be will get the gospel is anyone’s guess.
   On the issue of “higher payments.” With health care inflation what it is, there are just so many patients around that will be willing to pay greater prices. Yes, a subsegment of docs will command a premium, but for your average Dr. Welby, the reality is, we are in for pay cuts. Read the writing on the wall. Business as usual is over.

5. Fantastic post!!! Really appreciate it and look forward to the conclusion!
   The administration’s budget calls for approx $640 billion for a health care revamp fund. Half from increased taxes and the other half from cutting current waste. I would appreciate an opinion on being able to gather $320 billion by cutting waste in the current system and the effect this may have on our economy (both positive and negative)?
   Thank you,
   BBK

6. Once again the US tries to reinvent the wheel by refusing to look at what works elsewhere.
   One cannot have a system where private medicine competes with public funding in the same population group.
   Medicare and Medicaid “work” because their participants all belong to special demographic classes. We see that the one attempt to allow private insurance to compete with Medicare with their advantage plans was only acceptable to the industry with a suitable sweetener.
   What works is for the private sector to allow the wealthy to buy supplemental care via insurance or out of pocket spending. This exists in Canada and the UK, for example. It even exists in the US with medigap policies, although this is done poorly.
   No one wants to pull the bandaid off quickly, they prefer to make small painful changes to the health system rather than just doing what needs to be done as expeditiously as possible.
   The only thing that will achieve the dual goals of full coverage and lower costs is a government-administered universal health care system. Those who want extra coverage would buy it in a secondary market.
   The unwillingness to accept this truism is just delaying real reform and making reports such as this one suboptimal since they accept the present model and jump through hoops to accommodate to it.
   I admit that there would be a big political battle to get to government-administered universal care, but there will be a big battle no matter what is suggested, so why self censor before even trying?

7. On the topic of physician payment schedules, while working my way through college and grad school for a nursing degree I had many part-time jobs, one at a highly regarded survey research institute in Boston where I conducted lengthy telephone interviews with physicians for the HHS-funded “Resource Based Relative Value Scale” (RBRVS) study.
   Supposedly RBRVS was being done in order to rationalize and re-set Medicare physician payment rates (fee schedule) with the expectation that primary care-oriented docs (internal med, pedi, psych) would end up seeing their rates increase and that most surgeons and specialists would see their fees lowered. (Knowing that helped us interviewers to prepare appropriately depending on what type of doc we were calling!). I recall that some fee schedules were lowered but that the primary-care oriented fees never got the boost they were expecting. Maybe that’s part of the reason for the dearth of clinicians in those practice areas.
   Another aspect of RBRVS is that I remember being told that private insurers usually look to Medicare rates to set their own fee schedules, so I’m surprised to learn in this post that Medicare usually reimburses lower than private insurers! How long has that been the case? It makes me wonder if it’s something that’s evolved, at least in part, to quell the physician-community’s interest in national health reform along the lines of improved Medicare-for-All, aka single-payer financing reform. (On this MCare-for-all point, I share similar thinking as Robert Feinman, but having been through and lost many health reform campaign political battles here in Mass., being grossly outspent and outmaneuvered by industry lobbyists and CEOs, I don’t see how we can win the battle in one big step, but maybe in a series of step-by-step skirmishes we’d have a chance.)
   Barry Carol raises important points about the impact of socio-economic determinants of health, but I don’t think that socio-economic variables alone account for the vast differences in Medicare spending per enrollee in Boston and Miami versus in Minneapolis and Boise. I’m sure the over-supply of specialists along the east coast plays a significant role in this, too.
   For reform to work, reducing over-treatment is a priority, as is striving for improved performance at early diagnosis and disease management. I want to point out that primary prevention is also crucial for optimal cost savings to be realized (savings will be in both financial costs and in human costs by prevention of suffering and premature death). With the daunting tasks of other aspects of reform I hope we don’t overlook primary prevention efforts on a well-coordinated national level. The savings to be realized from these measures could be a major source of paying for universal quality healthcare coverage for all. How will we be able to undertake large-scale primary prevention within a healthcare system that is so fragmented and fee-for-service driven? Clearly we need a paradigm shift to health promotion along with vast improvements in care of the sick.
   This paradigm shift requires re-thinking the wisdom of keeping separate or of building an intentional inter-relatedness between the “health care system” and the public health system. Community health centers may be a great place to look for promising models. Codman Square CHC in Dorchester MA comes to mind as a shining example with their “Civic Health” component. See http://www.codman.org and feel free to contact Bill Walczak, CEO, Codman Square Health Center 617-822-8184.
   The Healthy People 2010 project is laudable in many ways but at the same time it’s laughable (or it’ll make you cry) that we’re attempting these worthy goals using such a badly broken healthcare system.
   btw I’m speaking as a health care professional who started out in oncology, then shifted to med surg, and now works and teaches in community health in Boston. I’m really looking forward to part 2 of this post — Kudos to Maggie and to the researchers at Dartmouth!!

8. Barry –
   “the cost advantage described does not reflect the probability that there is significantly higher fraud in Medicare and Medicaid than in private insurance now, though it is very difficult to measure or prove.”
   A slightly more forthright way of saying that would be “there is absolutely no evidence that private insurance experiences less fraud than public programs.”
   Public programs are obligated by law to pursue fraud and are given the services of investigative agencies, up to and including the FBI, to do so. They find significant levels of fraud in some programs – especially in dealing with corporate entities that are not actual health care providers, such as supply companies and vendors of lab services. Actual fraud among physicians, hospitals, and other providers is very low, partly because the potential penalty of being excluded from Medicare is much more severe for them than for corporate entities that can just dissolve and reconstitute themselves under other guises.
   Private insurance largely ignores the whole issue of health insurance fraud, more or less counting on the public programs to provide the policing. In the few instances where outsiders have investigated the issue – a newspaper investigation in New Jersey a few years ago comes to mind – significant fraud was in fact detected among claims to private insurers.
   The recurring private insurance mantra regarding fraud is in fact entirely without anything that resembles proof, and is merely and expression of the conservative/free market cliché that government programs tend to be fraud ridden while private business is pristine – a cliché that has been permanently discredited by events of the last few months.
   “large self-funded employer plans have administrative costs as low as 5%-6% of total medical spend because they are not paying for the cost of insurance company underwriting, broker commissions, or state premium taxes while the insurer only earns a profit on the administrative services provided which generally cost in the range of $20-$30 per member per month (PMPM).”
   That is partly truth and partly fiction. The numbers, are for the charges by insurance companies for administration of self insured programs, and do not reflect additional costs incurred by the self insured companies themselves — including the underwriting they have to do to create appropriate set aside funds — just the charges by the insurance companies for their part of the project. More importantly, they do not reflect the other half of overhead for insurance: the costs for providers in processing claims. Claim filing with Medicare typically runs 2 to 3% of billing, while claim filing with private insurers runs 10 to 15% of billing, and is not affected by self insured status. The numbers also ignore the fact that large numbers of people and employers still are insured through more conventional insurance, where insurance companies expect to retain 20% of payments while paying out only 80%. Unfortunately, in this economy, the number of people covered by self-insured programs as employees of large corporations is declining every day. One additional problem for self insured programs in this environment is that terminated employees with self insured programs are not eligible for COBRA coverage under many circumstances.
   In the end, comparing Medicare with self insured programs the administrative overhead is at least 10% less of total health dollars, counting all components of overhead. Compared with conventional private insurance, the difference is at least 20% and often as much as 25%.
   I agree with you that federalizing Medicaid would be a very good step, partly in order to create a national program that is fair to citizens of all states, partly because the overhead for Medicaid in many states is ridiculously high for both the program itself and for providers, and partly because relieving the state of Medicaid costs would be a very effective form of aid to states. Medicaid recipients should be folded into Medicare to take advantage of the strengths of that system, and the program should be run in a system resembling the earned income credit, using tax returns to verify eligibility. Newly eligible people would have to be processed slightly differently, most likely through SSA offices or on line through various aid agencies and providers, but the ongoing cost of operation could be very low.

9. Ann Malone —
   Excellent points.
   Regarding your question:
   “Another aspect of RBRVS is that I remember being told that private insurers usually look to Medicare rates to set their own fee schedules, so I’m surprised to learn in this post that Medicare usually reimburses lower than private insurers! How long has that been the case?”
   Most private insurers routinely do set their charges based on Medicare, but set them slightly higher (about 10%), mostly, I think, for marketing reasons.
   However, for some types of providers private insurers do pay a great deal more. This occurs when providers have significant enough market strength in a given locale to be able to force insurers to negotiate prices under the threat of not accepting their insurance. There has been a great deal of publicity in MA recently regarding Partners Health Care and their successful efforts to force higher payments for their services. In some cases around the country, private insurers have been forced to pay up to 250% of the Medicare rate in order to prevent dominant provider organizations from excluding them.
   Needless to say, Medicare does not negotiate at that level. Medicare fees are affected by lobbying efforts and by the interest of politicians, but those changes are usually small and usually affect at least an entire geographic area if not the entire country.
   In a few areas of the country physicians groups have been successful in forcing private payers to abandon Medicare based pricing as a whole. I know that has happened with some specialties in Oregon, and have heard that it is happening in Pennsylvania but am less sure.
   In most of the country, however, private insurers make every effort to closely follow Medicare pricing in order to avoid what they call “cost shifting” between Medicare and them.
   Just as a note, it is always important to make sure when this topic comes up that the person is referring to Medicare, not Medicaid. Medicaid does in fact pay a lot less than both Medicare and private insurance in most markets, and people tend to confuse the two programs, either accidentally or on purpose.

10. Pat,
    On the Medicare and Medicaid fraud issue, the NY Times did a series of articles in 2005 that documented very significant fraud in the NY Medicaid program which is, by far, the most expensive in the country at over $50 billion per year including the federal share. For Medicare, the Inspector General does not enter the picture until well after the fact and then only if the magnitude of the fraud is significant.
    With respect to commercial insurance, approximately 160 million Americans, including family members, currently get their health insurance through an employer. Slightly over half of those are in self-funded plans. My own employer, with over 20,000 active employees, pays approximately $20 PMPM for claims processing, wellness programs and disease management. The cost is something over twice that for our thousands of retirees who generate a significantly higher volume of claims. For employers with 200 or more employees, roughly 99% provide health insurance as an employee benefit. The problem is in the small employer market defined as 100 or fewer workers. There is a genuine affordability issue here which continues to get worse. Small employers account for one-third of the workforce.
    Finally, when comparing administrative costs as a percentage of total spending between Medicare and commercial insurers, it is important to note that Medicare spends north of $800 PMPM for its beneficiaries while the typical employer plan for spends closer to $300-$350 PMPM for active workers. UnitedHealth, for its part, stated recently that about half of its fully insured commercial members produce premiums between $250-$350 PMPM, 25% are higher than that and 25% are lower. If you look at administrative costs per person per year as a percentage of total medical spending, you will find that the comparison to Medicare is much closer, especially among self-funded plans. At the other extreme, administrative expense in the individual market is indeed very high but the absolute premium cost for those that can pass the underwriting screen is lower than what large employers pay to insure their workers. The individual market, however, only serves about 18 million people and accounts for about 5% of the industry’s health insurance premiums. For a thorough discussion of administrative costs throughout the healthcare system, including doctors and hospitals, I refer you to Ken Thorpe’s Health Affairs article published in the early 1990’s titled “Inside the Black Box of Administrative Costs.”

11. Barry —
    In the end, I think the best way to resolve this debate is to create an optional public alternative insurance program run through Medicare offering health insurance to both individuals and businesses.
    Coupled with a universal insurance mandate incorporating mandatory community rating and mandatory acceptance of all comers for private insurers, that would allow this whole question to be settled in the marketplace, with the most efficient programs winning out.
    No argument that Medicaid is a mess, especially NY Medicaid. Medicaid should be ended as it currently exists, federalized, and folded into Medicare, as I suggested.
    However, Medicaid and Medicare have no closer relation than Medicare and the Dept of Defense in terms of rules and enforcement. Suggesting that problems with Medicaid — 50 different state programs — indicate problems with Medicare is no more rational than suggesting that problems with Medicaid indicate problems with private insurace.
    Second, to compare yearly net costs per enrollee between Medicare and private insurers is equally inappropriate. Medicare is primarily a program covering the aged and the disabled. Both groups have considerably higher health costs and many more claims than the working age employed people private insurance covers. It is obvious that health costs for healthy 30 year olds are lower than for 80 year olds. The comparison has no relevance whatever, and is akin to suggesting that analyzing costs of AIDS patients compared with college students can tell us something useful about health policy.
    There are no studies suggesting that even the most tightly administered self insured private programs have administrative costs lower or as low as Medicare when expressed as a percent of total health costs. Adding in the much higher costs providers must pay to deal with private insurance of all types makes the increased overhead for private insurance much more pronounced.
    Arguing that Medicare patients receive more health care per patient and consequently generate more total expenses is not relevant for comparison.

12. You are right to be concerned about the proposal to penalize regions for overutilization by reducing unit costs. We have years of experience in Medicare with the practice of cutting unit costs, only to see unit volume increase. This is a clear collective action problem, and the solution needs to provide rational incentives to docs to change the way they practice.

13. Pat S wrote “There are no studies suggesting that even the most tightly administered self insured private programs have administrative costs lower or as low as Medicare when expressed as a percent of total health costs. Adding in the much higher costs providers must pay to deal with private insurance of all types makes the increased overhead for private insurance much more pronounced.”
    Pat, I agree with your statement regarding the increased ovcerhead for private insurance.
    When you wrote about administrative costs as a percent of total health costs,doesn’t the higher medical costs per Medicare beneficiary make the percentage of administrative costs look better, than for the lower medical costs per private insurance beneficiary?
    When you consider Medicare administrative costs, you may also want to consider that the GAO has labeled Medicare as “high risk” due to billions of dollars lost to overpayments and fraud each year.
    Don Levit

14. Thanks for all of the comments. I’ll be back later to reply

15. Don —
    First, I guess I need to point out again that in terms of fraud and related expenses there is absolutely no evidence that private insurers do better than Medicare. Medicare has to pay attention to it by law,private insurers ignore it. The few times that outside agencies have examined private insurance and the issue of fraud they have found significant rates of fraud to be present. Offering the notion of fraud prevention as a defense of private insurance is simply not based on the facts.
    Second, in order to understand the impact of size of health expense on payment overhead, you have to realize that medical bills do not come in blocks. They are line item accounts for billing from a given entity, and often come from several — up to dozens — of different billers. Consequently, handling a bill for a patient with $50,000 or $100,000 in services is actually more complicated administratively and likely to create higher overhead per dollar billed than handling a smaller bill. Compare a bill for and outpatient physical to one for ten hospital days with three ICU days. However, by any measure, Medicare is lower in cost per dollar spent and lower per bill sent — including bills that are for high amounts and for low amounts. Private insurers overhead runs from 5-6% for self insured programs to 20% for standard group policies, depending on the type of policy, while Medicare overhead runs 2-3%. Morever, the difference for providers is often more significant, with overhead for dealing with payers running 2-3% for Medicare compared with 10-15% for private insurers.
    As I said before, it is impossible to make this go away. My challenge is that if you believe that private insurance can operate more cheaply than Medicare, please advocate a system in which there is a public insurance option available to everyone, coupled with a universal insurance mandate, community rating, and a no rejection policy for all insurers, public and private, benefitting from the universal insurance program. Then we will see for sure, in the bright light of the marketplace, which insurers can compete most effectively.

16. As a practicing family doctor, I shake my head at the faith people have in the idea of a patient-centered home. Outsiders just don’t understand the enormous disincentives facing med students considering fam med or general int med. The ACP and the AAFP are pushing the home idea as the next panacea in an effort to get more money, and good luck to them. But the idea just won’t work without one hell of a lot more of us because there are simply not enough of us to see all the pt’s that need to be seen. If you’ve got an overfull schedule(as most of us do) and someone calls his “home” wanting to be seen, you’ll have your office assistant send the pt to the ER, where they’ll get care much more expensively. I expect this to continue.
    My prediction: After much struggle and strife, the feds and insurance companies will pony up a little more money(increase salaries by 10-25%)for primary care, but it will not be enough to encourage arithmetic-capable med students to chain themselves to the primary care anchor and so system will be in worse shape in 5 years than it’s in now. Keep yourselves well.

17. Pat,
    I have no problem with a public competitor as long as the playing field is truly level. I define level by the following: (1) the public payer charges a premium that fully reflects all of its costs including its office space, the cost of enrolling members, pensions for its retirees, etc. and, of course, medical claims, (2) it covers all of its costs from health insurance premium revenues and reserves with no help from general federal revenue, and (3) doctors, hospitals, and other providers can refuse to accept the insurance if they don’t think it’s adequate while still accepting traditional Medicare that covers seniors at often loss producing administered prices. Cost shifting from government payers to private insurers is a significant issue now, and we shouldn’t do anything that would make it worse. I would add that in addition to a mandate to have insurance, community rating and no rejection, there should also be risk adjustment payments that would adequately compensate any insurer, public or private, that winds up with an insured population that is sicker than average. They should also receive a negative risk adjustment (paid less than the normalized rate) if their population is healthier than average. Humana said recently that CMS’ current risk adjustment mechanism for the Medicare Advantage population is quite good in that the medical cost ratio for Humana’s sickest members is about the same as for its healthier members.
    On administrative costs, I’m not arguing that self-insured private plans are lower than Medicare as a percentage of medical spending. I’m arguing that the gap is nowhere near as wide as liberal single payer advocates keep trying to tell us it is. I think most Americans prefer to have health insurance choices even if it means administrative costs are somewhat higher than they might be under a single payer system. To add a little more color to my earlier comment that more than half of commercially insured members are in self-funded plans, for UnitedHealth Group, 60.6% of members are in self-funded plans while 54% of Wellpoint’s members are. They are the two largest commercial insurers by membership and revenues.
    .

18. Pat and Barry:
    Pat, I will concede to you that Medicare has lower administrative costs than private insurers.
    The more important point, however, is the second criteria that Barry mentioned in competing private and public plans – both plans use premium revenue and reserves to pay claims, with no help from general revenues.
    Apparently, from my posting of the 1937 Supreme Court case, it would literally take an Act of Congress to disallow general revenues (actually, issuing more debt) from helping to pay claims.
    Don Levit

19. Barry and Don —
    I agree that for a level playing field that the public plan cannot use taxes to bail it out, at least without borrowing at interest and paying the borrowed money back on a reasonable schedule. This is the same principle as the idea that the private insurers would have to stop doing case underwriting and accept all comers and base premiums on community rating rather than case underwriting — otherwise the danger is that the private sector would cherry pick the better patients, creating a private system for the healthy and a public system for the unwell.
    A few weeks ago on this blog someone proposed the idea of adopting the Ezekial Emmanual model to this problem: give everyone a voucher for health insurance, valuing the voucher appropriately based on the patient’s risk status, but setting the value of the voucher to the price the public option charges. All insurers accepting any vouchers would have to accept all of them, not turning away any potential insurees. The voucher would cover 100% of the cost of insurance by the public insurer, but private companies that could deliver health care more cheaply could keep any extra money, and private companies that had costs above the voucher would lose. If the private companies could indeed beat the public insurer, the public insurer would gradually lose business and disappear. If private companies could not match the public insurer, they in turn would disappear.
    Since the voucher would be set to 100% of the public option cost, the danger of the public insurer using some kind of nefarious socialist trickery to take advantage would not be a concern, since the voucher would be set to pay the public option expenses.

20. Pat,
    I think a voucher approach as you described it might be viable once we’ve had a few years of experience with a more conventional voucher system. At the outset, we won’t know what the public system’s costs will be and we won’t know to what extent providers will accept the insurance until the reimbursement rates are promulgated and out in the marketplace for awhile.
    In my last comment, when I said that Humana was satisfied with CMS’ risk adjustment mechanism for Medicare Advantage, I failed to mention that they were NOT satisfied with the risk adjustment mechanism for Medicare Part D during the first couple of years of that program’s existence. It takes some time to gain enough experience to adequately refine these things. I’m also not sure how sophisticated risk scoring at the individual patient level is at this point. As I understand it, CMS’ individual risk scores, which insurers have access to, range from about 0.5 to the low single digits with 1.0 defined as an average score. The system may not be able to adequately capture the costs of serving people with extremely high medical costs over an extended period of time. We might need a reinsurance system available to both private and public insurers that would cover medical claims above, say, $250K in a single year. Risk scores would also have to be continuously updated each year based on patients’ changing health status and medical claims experience.
    I think we would also need to remove so-called any willing provider laws and other regulatory obstacles that currently impede insurers’ ability to build high quality networks of cost-effective providers. To the extent that insurers can distinguish between good quality, cost-effective doctors and hospitals and lower quality high utilizers, they should be allowed to do so. The public insurer, of course, should also be permitted to do the same. Finally, one thing I didn’t mention in my prior comments relates to state imposed premium taxes. If private insurers have to pay them, the public insurer should too.

21. Brad F. (see comment below)
    All other commenters: .
    Thanks very much for keeping the thread going. I’ll be back tomorrow to respond to everyone.
    One of the many things I like about HealthBeat’s readers is that you talk to each other and continue the thread, even when I’m swamped.
    Brad F:
    You write: “If a public program can be implemented so it competes on a level playing field (we’ll see), and if premiums are meaningfully lower, by sheer numbers of patients, providers may accept lower fee schedule–because they have no choice. In that case, high cost cities will need to get efficient fast to earn that precious update.”
    I agree –IF regulations create a level playing field, some providers may well have to accept lower fees (and here I’m thinking of many of the physicians and hopitals that now demand the highest fees , especially in the areas where the Dartmouth reserach finds the most over-treatment.
    Meanwhile,I am quite certain that reform will raise fees for physicans at the bottom of the income ladder–because Medicare and White House budget director Peter Orszag know those cognitive services can give us a better bang for our buck.
    And hospitals that are now struggling abd in the red because they are located in areas where they have many poor patients should be better off under healthcare reform, especially if we raise fees for Medicaid providers to Medicare levels)
    But I also agree that if we try to do this too quickly, we create chaos.
    Physicans would retire early, others would switch jobs. others wouldn’t go into the profession. Hospitals would close—including some good hospitals. (Though we could use some hospital closings nationwide, based on quality.)
    As you suggest, and as Dr. Atual Gawande writes (see my January post on Gawande) all of this must be done in stages– all the time watching to see what is working, what isn’t– admitting what isn’t working, and trying something else.
    And yes, as you imply, outcomes research is still in its infancy.
    We do have some very good research telling us that some procedures and drugs just aren’t very effective for most patients.
    But measuring outcomes is something else.
    That said, there is no quetion that patient care is better when providers are collaborating, so paying more for collaboration seems to me like a good idea, even if we are doing it somewhat blindly (without quite knowing what targets we will be hitting.)
    I favor providing financial incentives for physicans to move into large multi-specialty situations where they will be talking to each other, working on salary, with someone else worrying about the back office

22. Maggie, You say Orzag wants to raise payments to us cognitive specialists. I wish I had more faith, but I remember the mid-90s when when we were going to the integral to saving money for HMOs. That didn’t work out so well. Much of the discussion on HC is based on wishful thinking at the macro level, completely neglecting the micro-level of how medical students make their specialty decision. I precept for first-year med students. They have no interest in primary care. reality. Given the huge disincentives to go into primary care(it’s not just the money, it’s the lifestyle), I think a salary raise of 50-100% would be needed to get the PCPs we need. This is not going to happen. Five years from now things will be worse for people trying to get a doc. All these gyrations about financing sort of miss the main point.

23. Barry, Scott, BBK, Robert, Ann Malone,
    Barry-
    I agree that Medicaid should be folded into Medicare and become a federal program, paying providers the same fees.
    We cannot rely on the states to provide good healthcare for the poor because some states (Alabma for example) are too poor –the tax base just isn’t there–and other states (Texas, for example “has never and will never care for its poor’–a direct quote from a Texas doctor who disgusted with her state.)
    But I disagree with asking states to take on a larger share of the cost of elementary and seondary education. Just as we cannot rely on states to provide good care for the poor, we cannot rely on them to provide good public school education.
    Property taxes are not a good way to fund education. (Though we do need property taxes; a huge amount of private wealth is concentrated in real estate and should be taxed.)
    Re: outcomes in the U.S. vs. other countries:
    As I have written in the past, we have very good studies comparing only white Americans to white patients in other countries
    When you do that, you exclude a large number of America’s poor- which means you exclude a great many whose health is harmed by environment and “lifestyle factors”—(obesity (tied to not being able to afford nutritious food and not having a place to exercise ) , smoking and addiction to other drugs, all , all tied up with the extreme stress of being poor.
    So you’re much closer to comparing apples to apples.
    When you do that, you discover that ourr outcomes are worse because we have chosen to turn healthcare into an unregualted for-profit enterprise. This attracts too many people who are mainly interested in the money: drugmakers and devic-emakers who hype their products on American TV, fee-for-service doctors that overtreat; hospital CEOs who are paid millions and focous on attracting the rich to their hospitals rather than improving the safety of those hospitals . . .
    Overtreatment creates the greatest risks for U.S. patients. Unlike other countries, we jump in and begin using the most lucrative cutting-edge procedures and products before they are fully tested.
    I think other readers have answered other points–about measuring outcomes, etc.
    Scott-
    Yes, we do have a two-tier or three-tier system now– that is the huge problem.
    Not only is it not fair, the people on the top tier are not well-served by the system. They are over-treated (and exposed to unncessary risks) while those on the lower-tiers are undertreated.
    On collaboration: having doctors and hospitals compete–or doctors compete with doctors–or hospitals compete with hospitals is destructive competition. .
    I’ve written about this in my book:, Money-Driven Medicine (2006, Harper/Collins.)—I’m not trying to sell the book. It’s widely available in many libraries. Also many used copies are available for a few dollars on Amazon.. I would make nothing on these sales, but am always glad to see the ideas circulating.)
    This competition does Not lower prices. In almost any other sector of the economy, it would. But all of the reserach shows that when more hospitals or more doctors enter a market, prices go up, not down.
    This is in part because patients are not bargain-hunters. Tell a patient that hospital B will do his surgery for less, and you frighten him. He doesn’t want discount surgery. He wants “the best” surgery. And he assumes that the most expensive must be best.
    Secondly, when healthcare providers compete, they do not share information with each other. In the book I describe how the head of the Insitute for Healthcare Improvement called a hospital in Texas to say: “we’ve heard that you’ve come up with a better system for treating pneumonia patients. We’d like to hear about it.”
    The hosptial refused: “That’s proprietary information. We don’t want our competitors in town to get that information.”
    Competition among doctors has slowed some medical research–when they won’t share their work with each other.
    Finally, much reserach shows that, in general, you find the best care, at the lowest price , at medical centers like the Mayo Clnic where all of the doctors work on salary (and after the first 5 years, all docs in a given specialty receive the same salary) and collaborate, constantly, all looking at the same medical record for a given patient.
    In other hospitals where doctors are in private practice and don’t work for the hosptial , too often they fail to communicate with each other. They don’t return each other’s phone calls.
    And patients die as a result.
    Mayo isn’t alone: Group Helth Co-operative in the state of Washington, Geisinger in Pennsylvania, etc. are other examples of collaborative rather than competitive medicine.
    Brad F–
    You’re right, we are years away from having the outcomes research that would be needed to run the whole system based on medical evidence.
    We can use some comparative research to steer patients and doctors toward more effective care (with financial carrots and sticks) but we need to be aware that medical knowledge is a matter of continuous education. constant revision.
    And we simply do not have the quantitative models needed to measure the quality of individual doctors or small groups of doctors.
    At the extremes (the very best and the very worst) I think we can get a rough idea of the quality of fairly large hospitals by bundling what the hospital did with what doctors who saw the patient before and after admission did, looking at the total package, and comparing outcomes and costs for a large number of patietns.
    Even then, risk-adjustment is very difficult. Some hospitals see much sicker, poorer patients.
    And poverty is a much more important factor in premature deaths than medical care.
    Also, as you know so well, deciding what counts as a “better” outcome can be very subjective. Patient A died in the hospital, receiving palliative care. Patient B survived after 3 weeks in the ICU and then was shipped to a nursing home where he was bedridden and largely unaware of his surroundings until he died 8 months later, without palliative care.
    Which is the “better” outcome? And this is a crude example. There are more subtle comparisons that are harder to call.
    When we try to define good “outcomes” we need medical ethicists involved.
    I think you are right that doctors on the high end of the income ladder are going to see their incomes come down. Those on the low end, however, are likely to see their incomes go up.
    A small group of doctors may be able to command very high fees by practicing concierege medicine for the very rich.
    But I do think that in coming years the percent of the population that is rich will shrink, partially as a result of new tax policies that begin to reverse 29 years of redistributing wealth and income upstream.
    The stock market melt-down also will hit the wealthiest (who have much more invested in stocks) hardest.
    And the death of the investment banking business has destroyed many high-income jobs that won’t come back for a long time.
    I can see Dow 5000–followed by very little progress in the market for years, as in the 70s–as a real possibility.
    At some point shareholders will rebel, and CEO salaries will plunge.
    All of this means that people will have less money to pay for exorbitantly expensive healthcare, and the healthcare industry will have to adjust accordingly.
    This will all happen over a period of time, so won’t feel quite as cataclysmic as it sounds when described in a few paragraphs.
    BBK– Cutting waste means that some industries are likely to shrink–we’re already seeing it in Pharma and we will continue to see shrinkage in the private insurance indusry as they lose their automatic windfall bonus for Medicare Advantage.
    Hospitals will be doing less business as fewer patients go for elective surgery–either because they don’t have insurance, can’t afford the co-pay, or co-pays are raised for less effective elective surgery.
    On the other hand, I think that hospice care will continue to expand as we continue to move away from “do everything possible” end-of-life care to something more humane.
    And insofar as the administration begins to invest in public health, we’ll see job growth there.
    We also should see some growth in jobs for home health aides as we try to get people out of nursing homes and hospitals (the most expensive settings for long-term care).
    But this is not a good solution for lower-income patients; too often, “home” is not a healthy place where they can rest.
    In addition, cutting some of the waste should help employers in other sectors of the economy who have been watching health insurance premiums spiral.
    The premiums were going up because the cost of care was going up as doctors and hospitals “did more” to patients.
    So many more surgeries, for instance.
    Insofar as many people are overtreated, a cut-back will mean that they won’t be absent from the workplace for an unnecessary by-pass surgery that they never quite recover from–But it would be impossible to measure how they might boost productivity.
    All I can say is that while it may not help the economy, it will help society–all of those people who won’t be over-diagnosed, won’t walk around in fear, and won’t have unnecessary treatments. Insofar as we have become the victims of disease-mongering, quality of life could be better as we cut back on unnecessary testing and treatments..
    For too long, this economy has been “hooked on growth”
    This is the corporate model: growth is always better– growing revenues, growing earnings.
    But the truth is that much of that growth was based on cooking the books, and in other cases “growth industries” were hurting us (growth in junk food, growth in production of gas-guzzling sometimes dangerous SUVs; growth in production of MRI units leading to overdiagnosis; growth of Pharma leading to a seriously over-medicated nation.)
    The fact that something is profitable and creates jobs does not necessarily mean that it adds to the health or even the “wealth” of the nation.
    If we spent more human capital creating art, improving education, improving public health and creating beautiful public spaces one could easily say that we would be a wealthier nation.
    Producing, buying and consuming more “stuff” may grow GDP but it leaves our closets, basements and garages crammed with “stuff” we don’t use.
    Read John Kenneth Galbraith on all of this. A delightful writer, he saw where this country was headed–with wit and irony–so many yeas ago.
    Robert–
    First, in Germany, private sector insurance competes with public sector insurance. The public sector insurance is less expensive You have to earn over a certain amount (roughly $70,000) to buy private sector insurance– the govt wants to make sure you can afford it.
    What’s interesting is that only about half of those who are wealthy enough to buy the private sector insurance do so. The other half prefers the public sector plan. IT’s very good care (better than ours) but without frills (fewer private rooms, and you wait longer for elective surgery).
    So public sector and private sector insurance can compete. And the result is good—
    Germany has much better care and outcomes than either the UK or Canada, which are both “single-payer, govt-run plans.
    Most Americans know so little about the complexity and variety of health care plans in other developed countries that they believe what some single-payer advocates tell them– that in Europe healthcare is single payer.
    Not true. The plans are all very complicated hybrids based on circumstances at the time when they were developed.
    As for just “pulling the band-aid off quickly.”
    First, we’re not dealing with one wound or one problem..
    Our healthcare system is riddled with inequities, and inefficiencies, and excess capacity that hurts patients. Our health care dollars are maldistributed we spend too much on ineffective acute care and too little on preventive care and chronic disease management. We have too many hospitals and doctors in some places—which leads too overtreatment—not enough in others.
    There are also major problems on the provider side. Working conditions in our hospitals are so bad that it is very hard to find nurses; the majority of hospitals are understaffed. Working conditions for primary care doctors are so bad that few are willing to go into the specialty. A 5% to 10% pay raise is not going to change that.
    If we rolled out universal healthcare next month we would increase the demand for primary care doctors and nurses to work in our hospitals. But where would we find the supply??? We need to restructure the way health care is delivered.
    The “medical home” is a fine idea, but in order to work it depends on healthcare IT and most primary care practices are small—they cannot afford healthcare IT. We need to develop less expensive, less complicated IT. In the meantime, a medical home is supposed to offer 24/7 access by phone or e-mail. In the typical small practice—fewer than 4 doctors—no one wants to take turns being on call 24/7.
    Today’s doctors are much more concerned about life-style issues—getting home to see their children at a certain time every day.
    We need to restructure the way we deliver care. We need many more very large multi-specialty centers.But many doctors are accustomed to small practices— especially on the East Coast. And their patients are too. . . .
    Fee-for-service Medicare is a hugely wasteful, extravagant system that does Not provide high quality care. It spends too little on preventive care and chronic disease management, too much on often unproven, ineffective and risky acute care. As ATul Gawande points out in the New Yorker article, the VA spends 30% less and provides more effective safer care. This is in part because the doctors work on salary, not fee-for-service, so there is less incentive to overtreat. But we cannot suddenly tell the nation’s doctors that, starting tomorrow, they are all government employees and will be on salary.
    The VA also has an IT system that works very well within the VA but could not be easily adapted to work outside the VA.
    Some private for-profit insurance is better than Medicare. For example, the private insurance I have now pays quite generously for a huge amount of physical therapy.
    It pays for annual eye exams. (Medicare doesn’t. Medicare will pay for Glaucoma treatment. But how do you find out you have glaucoma if you don’t have eye appointments?) My private insurance is also hugely expensive (and wasteful in many areas). We could not afford to offer it to everyone in the U.S.
    Secondly, and I cannot repeat this often enough: Roughly 85% of Americans have employer based insurance, with their employer paying a large share of the premiums. This is the circumstance that we are dealing with. (See Dr. Atul Gawnde’s article–I give you the reference below)
    Under a single payer plan, many of these workers who have employer-based insurance would have to pay More than they do now. In Switzerland—which has a more efficient system than our Medicare– , everyone still has to pay up to 10 percent of their income for health insurance.
    Today, employers who offer insurance pay an average 75% of the premium for workers earning over $70,000. They pay 100% of the premium for 15% of those “better paid workers.” They means those workers win up paying somewhere between zero to $3,000 for a good insurance plan that covers a family.
    Under single-payer, those workers would pay more than zero to $3,000
    CBO has figured out that if we offered Medicare to everyone 55 to 65, tomorrow, individuals would have to pay about $12,000 a year for it. (That’s individuals, not families.)
    Even if we included younger healthier people in the pool, an American family earning $70,000 would have to pay $6,000 to $7,000 for the government plan —unless Medicare is reformed, very carefully (using a scalpel, not an axe) in several hundred ways. (We are not talking about one piece of legislation).
    We are talking about changes in what we cover (not covering many ineffectives services and products that Medicare now covers), changes in how we deliver care (many more very large groups of doctors, collaborating) how we pay for it (moving away from fee-for-service and finding ways to reward doctors and hospitals for value, not volume) and making care much safer (another reason our fee-for-service Medicare is so expensive is because there are so many errors in our hospitals, and so many infections. )
    Unlike hospitals in other countries, our hospitals are designed to make a profit—so they emphasize hotel-like amenities. German hospitals are much plainer, more sparser—but they are also cleaner, there are fewer infections, fewer errors. The hospital is designed to do one thing: deliver efficient care. It is
    Not pretending to be a luxury hotel. But in the U.S. a huge number of people—from the architect down to the person who picks out the art and designs the gourmet menu—make a nice profit on the hospital-as hotel. Again, the fact that our healthcare system is all about making profits skews the priorities.
    All of this has nothing to do with whether the payer is private sector or public sector.
    Another thing that has not been clearly explained: Under national health reform–including a single-payer system– the people who will benefit economically are those in the bottom 40% of the income ladder. The result of us will have to subsidize their care; which is why many of us will wind up paying more than we pay now. Insuring everyone will not make healthcare less expensive. ( In fact, Researchers point out that over the last decade our national health care bill would have grown even faster if the number of people who were uninsured had not also grown. They received less care than they would have if they were insured. And they died earlier than they would have had they been insured. When we begin insuring everyone it will be more expensive.)
    In theory, if our employers no longer have to subsidize our insurance, they will give us all raises. I’ll believe it when I see it. In the middle of a Depression??
    So if you live in a household earning more than, say, $55,0000 joint income, and have employer-based insurance that now requires you to pay $200 to $300 a month for premiums on a family plan, expect to pay more under national health reform (including single-payer.-)-
    Medicare saves only about 5 percent to 10% from lower administrative costs than private insurers– see the Urban Institute report here which does a very good job of explaining this. http://www.urban.org/UploadedPDF/411762_public_insurance.pdf (Single payer advocates should read this report. Please do not suggest that single payer would save more than 5-10% in administrative costs unless you can rebut the Urban Institute’s facts, point by pont.
    Finally if we were going to go directly to a single-payer government system, everyone would have to be in that system (or it would only attract those who don’t have good employer-based insurance–low-income sicker people and the unemployed.)
    There is simply no way that we can wake up one morning and announce to the American public that we have decided that you all have to give up your insurance and switch to this govt plan next week.
    We live in a democracy. This will not happen.
    Moreover, as Atul Gawande asks: what if you have surgery scheduled for next week?
    You cannot suddenly put healthcare on hold for a few month (or even a few weeks) while you go through a transition.)
    Please read Gawande’s New Yorker article. It’s brilliant; you’ll like it.
    You’ll find a link in the first post on Gawande that I wrote last month.
    If we set up a hybrid system with tightly regulated private insurers competing with the public sector on a level playing field, over time we may well find that over time, people pick the public sector plan (as many have in Germany) and for-profit insurance withers away.
    At that point, I suspect that for-profit insurers who focus on selling supplemental policies, as you say.
    But none of this can happen by fiat.
    Anne—
    Thanks very much for your comment.
    Medicare has been consistently paying physicians less since it came up with the SGR formula (late 1990s) that said that if total Medicare spending on physicians increased by more than X% (based on SGR formula which is tied to economic growth) Medicare would cut fees the next year.
    All of this grew out of the effort to balance the budget.
    Since that law was passed, Medicare actually cut fees in only one year (and all hell broke loose). But by and large it has refused to raise fees in many areas.
    So many doctors found Medicare fees frozen while their expenses rose.
    Meanwhile, in 2000, the private insurance industry gave up on managing care–and decided to approve many more treatments. And unlike Medicare, they weren’t freezing fees. They followed Medicare’s fee schedule, but typically adding 5% to 15%.
    This is why Medicare now pays for most services than private insurance. .
    Meanwhile, most doctors have been making up for frozen fees on volume—“doing more” –more tests, more treatments.. Thus the total amount that Medicare pays docs has been continuing to rise, year after year, faster than either GDP or workers’ wages have been growing.
    .
    And yes, I suspect that the fact that Medicare pays less has chilled some of the enthusiasm for a government run single-payer system.
    But that really wasn’t the intent . The reason to try to bring down growth in spending on physicians is because Medicare truly is running out of money. With growth of Medicare spending running 6% to 7% a year we truly cannot afford to keep up.
    You’re right that overtreatment has to do with excess capacity– more doctors and more hospital beds leads to more treatment. This has nothing to do with how poor the region is. The Dartmouth numbers are all adjusted for differences in local prices, race and the underlying health of the population.
    And I agree we need to re-think the relationship between the healthcare system and public health.
    The good news is that Obama’’s stimulus bill doubled funding for Community Health Centers—an additional $2 billion in funding. Thanks for the info on the community clinic in Boston.
    I’ll use it.
    Finally, yes, we need a huge paradigm shift—actually more than one paradigm shift—see my response to Robert. This is why it will take time, and as you say, many, many skirmishes. I think Gawande is right—it has to be done in stages. Anyone who pretends that what we need to do is simple is heading for disaster. If we pretend reform is simple, we’ll create something that will implode in about two years—and true reform will be delayed by another 10 or 20 years.

24. Rossi, Pat S., ,Barry, Pat S., Kevin, Don,
    Thank you all. This has been an excellent thread, from beginning to end.
    (I don’t mean to suggest I’m closing the conversation–but we will have part 2 where we can come back to some of these issues.
    J Rossi–
    Responding to your most recent comment:
    I think you are entirely right that 10% pay hike is not going to make primary care attractive.
    And there is a huge disconnect between the people who talk about how health care reform will provide more preventive care and more chronic disesase management in medical homes.
    Who, exactly, do they think is going to staff these medical homes?
    It is, as you say,not just money, it’s lifestle.
    Who wants to work in a primary care practice that is now supposed to become a medical home and answer patients calls and e-mails 24/7??
    Who wants to treat Medicare patients who are seeing an average of 5 or 6 specialists, and can’t remember the names of
    the medications they are taking, and become quite angry because they’ve been sitting in your waiting room for 45 minutes. (Meanwhile, the specialists don’t return your phone calls).
    We need to change the way we train primary care physicains, and we need to
    change the way they deliver care.
    Dr. Christine Cassel, head of the American Board of Internal Medicine, tells me that most primary care docs are trained “in the basement of an academic medical center, where they have no support, no records, nothing.” Often these residents are working in a basement clinic where they see patients on Medicaid and uninsured patients. Upstairs, there is another clinic where the doctors who teach in the medical school see insured patients.
    By contrast, Cassel tells me that residents who train at a place like Kaiser or Mayo have a much better experience.
    Academic medical centers need to look at those models.
    More importantly, health care reform needs to provide financial incentives for primary care doctors to work in large collaborative groups with other specialists– multi-specialty centers of various kinds.
    That way, the primary care docs get support form the specialists. They are all looking at one chart–
    they all know what everyone else is doing.
    Moreover, primary care docs in these large groups can work regular hours.
    Often there are teams of
    nurse practioners taking phone calls or e-mails off-hours. (Here I’m thinking of what they’re doing at the Group Health Co-operative in the state of Washington.
    And primary care docs don’t have to worry about affording Health IT, or setting it up, or billing, all of the back office stuff is done for them and the large centers enjoy economies of scale.
    This, I think, has to be the future of primary care, if we want to attract students to the speciality.
    We also need to pay them more– redistributing dollars up and down the physician income ladder And we need more programs for loan forgiveness if
    a student agrees to practice where he is needed (Obama has already upped funding for this.)
    P.S.– I just saw your earlier comment. I agree that small practices cannot become medical homes–too many demands.
    It can happen, I think in large multi-specialty centers and very large, well-run community clnics.
    But only once we have figured out inexpensive, uncomplicated, clinician-friendly Health IT.
    We need a federal panel making recommendations. IT vendors are pushing stuff that is needlessly complicated and expensive.
    Pat S.
    On fraud, you make a very good point when you write that
    “Actual fraud among physicians, hospitals, and other providers is very low, partly because the potential penalty of being excluded from Medicare is much more severe for them than for corporate entities that can just dissolve and reconstitute themselves under other guises.”
    And yes, private insurers largey ignore fraud–just passng the cost along in the form of higher premiums. It’s harder for Medicare to do that. It requires legislation.
    But Medicare really should spend more on fraud investigation- part of the waste in Medicare is fraud–device-makers paying kickbacks to doctors to use the most expensive devices, etc. Though if Medicare began using comparative-effetiveness information it could put a stop to that by refusing to pay for devices that are no more effective, just more expensive.
    You are also correct that when it comes to large corporations that self-insure: Barry’s numbers “do not reflect additional costs incurred by the self insured companies themselves — including the underwriting they have to do to create appropriate set aside funds — just the charges by the insurance companies for their part of the project. More importantly, they do not reflect the other half of overhead for insurance: the costs for providers in processing claims. Claim filing with Medicare typically runs 2 to 3% of billing, while claim filing with private insurers runs 10 to 15% of billing, and is not affected by self insured status.”
    And I agree with both you and Barry. Medicaid should be folded into Medicare.
    It would be both more efficient and more equitable.
    Pat S– and everything you say in your next comment, responding to Anne, on the difference between what private insurers pay and what Medicare pays is true.
    One big advantage of a public-sector plan is that it would be big enough to stand up to those hospital groups that have been gouging insurers . .
    At the same time a public sector plan (and private insurers) could decide to pay a large hospital more for certain procedures if it was, in fact, a Center of Excellence in that area, delivering higher qualty, more efficient care with fewer errors. (Patient co-papys might be lower if they traveled ot a Center of Excellence–we would still save money.)
    Barry–
    Ken Thorpe’s article about administrative costs written in the ealry 1990s is outdated. . . You need a more recent source.
    The urban institute report that I point to in the post doesn’t go into self-insured companies, but does a very nice job of explaining the difference between private sector and public sector insurance.
    See http://www.urban.org/UploadedPDF/411762_public_insurance.pdf
    Finally, Medicaid attracts much more fraud than Medicare because some doctors who take Medicaid are sleazy incompetent doctors who cannot attract other patients. Some also bribe their very poor patients to participate in the fraud–pretending they received treatment they never received.
    Pat S.– Regading your reply to Barry: Yes, Medicare adn Medicaid are
    very different programs.
    As I explained above, Medicaid attracts more fraud, and is generally less efficient. Having Medicaid run by the states was a terrible idea. It happened only because Southern Congressmen wanted state control of
    healthcare for the poor (mainly black) population, so that they could make sure they didn’t get into white hospitals (and received only subpar care.)
    Conservatives also insisted on state control of SCHIP–which is why poor kids in Florida who qualify just sit on waiting lists. Thanks, Jed.
    And finally, of course, Medicare patients receive more care because they are older.
    Kevin–
    Yes, I agree that if you lower fees for doctors in areas where they over-treat, many would simply crank up volume, (especially if they have younger doctors working for themm.) and overtreat more.
    A few years ago I met a young radiologist working for a raidologist in his 50s. He gave her a quote of how many tests she had to read each day. She said she didn’t have time to eat lunch. . . her eyes would get tired, and you can imagine the results . .
    We need to find another way to address the regional differences problem. . .
    Don–
    The waste and fraud in Medicare is about equal to the waste and fraud in teh system as a whole.
    Fee-for-servcie drives overtreatment and fraud (intentonal overtreatment)
    Also adminsitrative costs are a percentage of total dollars that the insurer (or Medicare) takes in. (This has nothing to do with how much iti spends per beneficiary)
    Medicare spends about 5 % of the money it has on administrative costs, private insurers spend about 15%–sometimes as much as 20%. See this excellent Urban Institue report: http://www.urban.org/UploadedPDF/411762_public_insurance.pdf
    Pat S.
    Medicare’s administrative costs are closer to 5% See http://www.urban.org/UploadedPDF/411762_public_insurance.pdf
    But you make a good point, a PROVIDER’s administrative costs are higher when dealing with a private insurers than when dealing with Medicare–at least now.
    If we had a public-sector alterantive (Or Medicare for all for everyone) people are talking about requiring patietns to go through a gatekeeper and get a referral for the 100 most popular procedures.
    This is what they often have to do under private insurance.
    IT reduces unncessary treatments, but it does increase paperwork for providers.
    If we are going to have Medicare for all (either for part of the population or for everyone under Single Payer) the only way we can afford it is by eliminating waste, which means keeping a closer eye on what doctors and hospitals are doing, requiring more proof that a patients actually meets a particular profile that makes her “high risk” and so a candidate for a mammogram even though she is under 40.
    If we are going to use comparative effectivenses researach to make sure that the right patient is getting the right treatment at the right time, (customized medicine to the patient’s medical profile, rather than just giving everyone the expensive new test or procuedre, whehther or not they will benefit, the way we do now), this will
    require the providers do more paperwork.
    Doctors in Germany complain about the amount of paperwork they do. (The Germans run a pretty tight ship when it comes to healthcare–but outcomes are very good, the system, like the trains, runs prety smoothly, and they do it for a lot less per patient than we do.)
    This is one thing the single-payer folks never talk about: running an affordinable, sustainable, high quality
    health care system will require a lot more oversight. No more laissez faire chaos.
    We can’t afford it if we are going to insure everyone. And laissez faire chaos is not quality healthcare– patients are hurt.
    Pat S., Barry and Don–
    I agree that we don’t want a public sector plan to depend on deficit spending (or issuing debt). Obama has already made it clear that it won’t.
    I’m the “someone” who brought up the voucher idea again (though maybe someone else did too.)
    I do think it is a brilliant way to establish a level playing field (and to insure a single-tier healthcare system.)
    Barry– we don’t need to test the voucher system to let the market decide the price.
    The market is neither efficient nor rational (as the current meltdown demonstrates.)
    Recently I heard Uwe Reinhardt point out that economics professors throughout the nation are now forced to rewrite the lecture notes that they have been using for years.
    How can they possible stand up in front of a group of 18-year-olds and talk about an efficient market, or the how the market always rights itself??
    Read Emanuel’s book.
    He and Fuchs (a brilliant health care economist) assume coverage that is better than what 80% of employers now offer.
    In terms of payment to providers, they all receive the same payment–except if a doctor or hospital winds up witih a sicker pool of patients, the government adjusts for the higher risk and pays them more
    As I recall, all doctors and hosptials have to accept the voucher.
    Yes, we will have to constantly refine risk adjustment–that’s a given.
    And I’d also take a look at “any willing provider” laws, though it’s a complicated issue.
    We don’t want insurers excluding providers because they spend too much time with their patients.
    I think we want a board of phsycians that is part of the regional health exchange deciding whether a doctor or hospital shoudl be excluded because they are not providing goog Value care (value equals quality divided by cost.) And there shoudl be a fairly broad definition of value. We don’t want to exclude a doctor because he is 60 years old and moves more deliberately than a 40-year-old. We don’t want to pay for volue; we want to pay for effective care.
    Finally, in terms of making sure insurers get a fair shake: The ultimate goal of healthcare reform is to make sure patients get high quality affordable care. Period.
    Health care refrom is not in the business of making sure that we save the private insurance industry.
    If private insurers cannot add enough value to make up for their higher exectuive salaries, profits to shareholders, often false advertising adn often corrupt lobbying– Too Bad.
    Health care is too important –and too expensive– to keep paying a middle-man who pays execs ridiculously high salaries, and over-spends on advertising and bribes for Congressmen.
    To compete, the insurance industry may have to clean up its act:
    no exec salaries over, say, $300,000 or $400,000(and this would mean lower salaries for a great many execs, not just CEOs–substantial savings) They also may need to take a closer look at our advertising dollars–are we spending them in a rational way? How about lobbying? (Under the Obama administration, it may get harder to buy-a-Congressman. And what exactly are insurer going to lobby for? If the insurance industry is tightly regulated– guaranteed issue, community rating, no dumping a customer when he gets sick– there’s not that much left for them to pay Congressmen for . . )
    Bottom line: I suspsect that the best non-profit insurers will have no trouble competing with a public sector plan. I have my doubts about for-profit insurers.
    For years, many of them have made their money by
    underwriting (cherrying picking, avoiding the sick.)
    I very much doubt that many know how to make money any other way.
    Certainy, this is what shareholders think–look at where the insurance stocks are now.
    I’m surprised that anyone still owns them.
    Even if you thought McCain might win, he had made it clear that he, too, would take away the windfall bonus for Medicare
    Advantage insurers, and that was all that was keeping the industry going . .
    Watch the industry for early retirements, huge bonuses as rats leave a sinking ship.
    Their only hope is if
    Congress excludes a public-sector plan and lets insuers set prices and decide what to cover.
    If we are going to be subsidizing the system with tax dollars (and we have to) I just don’t think that Peter Orszag–or CBO–is going to let that happen.

25. Maggie,
    I read the Urban Institute paper that you linked to. Their figures on administrative costs are very similar to those cited by Ken Thorpe in his early 1990’s Health Affairs paper. My reading of it confirms that the gap between Medicare administrative costs (properly accounted for) and private insurer’s costs for large groups is considerably smaller than single payer advocates suggest it is.
    Their paper also noted that private insurers pay hospitals 120% of costs on average vs. 96% of costs paid by Medicare or a 25% premium. I find it hard to believe that a public insurer’s ability to negotiate with, say, Partners in Boston will be any more successful than BCBS of MA which, by the way, has a very high market share in Massachusetts. Insurers recognize that their product is becoming increasingly unaffordable, especially for small employers, so they have more than enough incentive to not only negotiate rates as hard as they can but do everything possible to mitigate fraud as well.
    I also think there is lots of potential for insurers to experiment with narrower networks that would exclude the most expensive providers like Partners. For employers who offer employees more than one choice of health plans and if they adopt a defined contribution approach to determine how much they will pay, employees who choose the less costly narrow network option would capture the full savings in premium. Structured that way, I think it could gain traction. Moreover, smaller employers who currently cannot afford health insurance for their employees might be able to afford a narrower network product.
    By the way, I have read Dr. Emanuel’s book and I’ve heard him talk about (via TV) his healthcare reform proposal in a speech sponsored by the California Healthcare Foundation.
    Finally, on the subject of salaried doctors, I recently learned from a friend that her brother is a salaried neurosurgeon for a well known hospital in a high spending region. He is pressured by the powers that be at the hospital to perform as many operations as possible to maximize revenue. While he pushes back against doing operations that he doesn’t think are medically necessary, the pressure is constantly there and it can adversely affect his bonus if he doesn’t drive enough revenue. So, while the culture at Mayo and a few other places may be consistent with what you and I might consider ideal, the salaried model per se does not guarantee that unnecessary care will be minimized, especially when we’re talking about expensive (and lucrative) surgical procedures.

26. Maggie, I wish I could share your enthusiasm about the vision of primary care in large multi-specialty groups, but a lot of us have been down that road, and it wasn’t that great. I worked at Kaiser (a cousin of Group Health) in California from 1989 to 1995. It sucked. We PCPs were at the bottom of the totem pole, paid pretty well but overworked and dis-empowered, outnumbered by the sub-specialists. The PCPs quit in droves. Now maybe things are better there, and maybe things are better at other groups, but I have my doubts. So primary care docs are on the two horns of the dilemma-independent but overworked and underpaid, or chafing under the yoke of the sub-specialists. I have had to make a choice, but, crucially, med students don’t. The can sidestep the whole problem.
    Now I’ve been wrong before, but I think the long-term solution lies not so much in multi-specialty groups. Med students will quickly pick up on the downside of that practice configuration. The solution lies in doubling our salaries.
    The feminization of primary care is a wild card here. Women in medicine are generally more tolerant of lack of power and low salaries, but less tolerant of overwork, so that might be the future in primary care. On the other hand, my wife is also a family doc, and she’s no happier about the state of primary care than I am!

27. First, although the Urban Institute paper (very interesting paper, btw) does indicate that the administrative overhead for Medicare is a bit higher (5%) than is often estimated, it also reports that the overhead for large self-insured programs is higher than some reports (11%.) In both cases I suspect it is due to counting expenses that are often excluded, including the costs the self-insured companies generate to run their part of the self-insured program in addition to the insurance company charges.
    Interestingly, the relationship remains the same: the cheapest private insurance programs have about twice the overhead expense that Medicare has.
    Second, it is a mistake to think that the difference between provider overhead for dealing with Medicare and provider overhead for dealing with private insurance is due or even related to pre-approval costs. The cost of pre-approval is not included in the “cost of collections” calculations that are being discussed. Pre-approval is a seperate issue, and does add even more to overhead, but cost of collections refers to cost of — well — collecting fees after services have been performed. Pre-approval is necessary for collections for some services in some systems, but the process of pre-approval is done and gone before the billing is begun, and in fact before the service is given. Costs involved tend to be reported, somewhat wrongly, as clinical service expenses.
    In regard to pre-approval, I think the electronic medical record, if implemented correctly, could make pre-approval much more streamlined. Rather than calling on the phone — the typical technique today — an EMR program with suitable ability to link to other systems could link directly to insurers, both public and private, and document appropriate criteria for use of various treatments, tests, and procedures. Properly programed, this could be accomplished without actual human intervention, with the indications for a procedure or treatment noted in the EMR at the provider end and the approval coming automatically if the findings match the pre-approval criteria.
    BTW, good article on overuse of diagnositic imaging in the NYTimes today.

28. Barry and Pat S. and J.Rossi
    Barry and Pat S.:
    On administrative costs–
    Single payer advocates often conflate the cost of the administrative work that providers must do (including in order to get pre-approval)
    with the private insurer’s administrative costs to say that private insurance costs “30 percent more in administrative costs.”
    PNHP has been doing this for years.
    One thing that the single payers do not talk about is the fact that under healthcare reform (whether single payer or a hybrid system)a dministrative costs will rise.
    Virtually everyone seems to agree that “reform” means reducing waste. This means, among other things, using comparative effectiveness reserach to hike co-pays (and probably lower fees)for procedures adn products that are less effective for most patients.
    At the same time, Medicare (or Medicare for all) is likely to use the research only to create “guidelines” (not rules) for doctors. And it also will spell out exceptions–
    To get approval for these exceptions (so that the doctor is paid the higher fee and the patient pays teh lower co-pay,) the doctor would have to send in evidence showing why this patient fits the profile for an exclusion.
    In general,if healthcare refom is going to mean higher qualtiy care, there will be significantly higher administrative costs: paying doctors and hospitals “bundled payments” for instance.
    So administrative costs under a single-payer or hybrid sysem will be significantly higher than Medicare’s current very low administrative costs.
    That said, total administrative costs are not the big problem with our health care system.
    The big problem is healthcare inflation of 6% to 9% a year.
    What’s driving that inflation? Administative costs are not spiraling.
    The levitating cost and rising use of advanced medical technolgies is driving inflation. We are using more expensive technology (without knowing whether it is better) and we are “doing more” to patients–more tests, more treatmentss.
    J. Rossi–
    I wouldn’t hold my breath waiting for anyone to double salaries for primary care physicians–not as we move into a very
    long recession/depression.
    But I think we may get a lot of med-school loan forgiveness for primary care docs willing to work in areas where they are needed, and this would be very good.
    On working in a large mutli-specialty system: you worked at Kaiser a long time ago. Much has changed under Halverson.
    It’s also a very big system–Kaiser in Northern California is different from Kaiser in Southern California.
    I’ve talked to primary care docs at Kaiser who are very happy. (And no doubt there are some that are not. But these days, turnover at Kaiser (doctors leaving) is very low.
    And very recently, I’ve talked to a number of primary care docs at the Group Health Collective in the state of Washington (formerly called Peugot Sound sp?)
    They are doing some very intresting things–I wrote about it here: https://healthbeatblog.com/2008/12/-insurers-expand-primary-care-an-argument-for-obamas-plan.html
    When it comes to the medical home and lifestyle issues, I think that many descriptions of the medical home ask too much of the primary care doctor.
    For instance, the notion that patients should be able to e-mail or phone at 3 a.m. . . .
    In an emergency, yes, but they may not get the doctor they know. And if it really is an emergency, they probably should be headed for a hospital or a clinic that is open off-hours.
    A large organization might well have an off-hours number and people checking e-mails to see if any need to be answered immediately.
    Finally, I agree that in any large group, there is no doubt a tendency for many sub-specialists to lord it over family docs . . .
    Here what we need is a huge shift in the way we educate docs. Today,we continue to train them for the old, broken competitive system–even while we try to begin to build a collaborative system.
    People like Dartmouth’s Jack Wennberg have begun talking and writing about this.
    We have to reform medical education too. Docs should be trained in teams.
    And any time that a med student/resident is heard making a remark which suggests that his specialty is superior (including “jokes”) or shows a lack of respect for another specialty–
    any doctor or nurse that over hears him should put him down FIRMLY.
    Some people suggest that med schools should require a course in professoinalism–that would include collegiality.
    At the very least, there should be signs throughout med schools: MEDICINE IS A TEAM SPORT.
    Even when interviewing applicants for admission to med schools, the point should be made: “Are you a team player?” Can you give some examples of how you have collaborated with a team? “Are you usually the leader of the team?” (“Yes” is not the right answer.)

29. Maggie, I won’t hold my breath about the salaries if you don’t hold your breath about collaborative medical education and eradicating putdowns. I can tell you have been talking and listening to the “thought leaders” in medicine. I’ve been listening to their spin for 20 years. Always remember, most of these people are paid to be optimistic, not realistic.The most likely scenario is for continued deterioration of our HC system for primary care.

30. I’m not quite clear on what you are saying here, Maggie. I understand that you are annoyed at single payer advocates sucking up a lot of bandwidth on another thread, but provider costs of collection are real expenses, and there is a significant real difference between costs incurred in billing Medicare and in billing private payers — a difference of as much as 3 to 5 times as much cost. Granted, that is in fact small compared to the overuse of ineffective or even dangerous medical procedures, treatments, and tests. But every little bit helps. The fifty billion or so a year that could be saved here is not huge, but “a billion here, a billion there, and pretty soon you’re talking about real money.”
    I do not think this is intrinsic to the differences between the programs. It is partly due to the use of tape to tape billing transmission, and partly due to faster processing and payment, but in large part it is due to the adherence to strict rules. Medicare does not argue back and forth about what it will pay for. It sets standards and requires compliance. Despite what some insurance advocates here have suggested, Medicare does refuse payment for a lot of things. For example, all sorts of imaging procedures have been classified as unproven or ineffective in certain settings, and Medicare will not pay for them.
    As the insurance advocates have noted, private insurance companies and HMO’s are poorly positioned, because of competition, to introduce and enforce cost control guidelines. You cannot afford to be known as the HMO that will not allow MR for early back pain, since if your competition will pay for it, you will lose market share. Medicare and other federal programs have to take the lead on this, because only they have the market power position.
    I have questions that increased use of practice guidelines need to be associated with increased costs. That, I think, is a left over from the HMO wars of the 80’s and 90’s, when efforts to cut costs were associated with significant increases in administrative costs.
    In the era of the EMR, I think that use of the EMR to make guidelines available to providers, to suggest conformance with guidelines, and to document conformance to payers will make operation of practice guidelines and following payment rules much more simple and less costly. A provider should know before the patient leaves the office whether they are in compliance with guidelines for payment for procedures, treatments, or tests, and should be able to transmit billing data electronically and be approved automatically if compliance is documented.
    An example: research demonstrates that patients with uncomplicated high blood pressure and no contraindications to the drugs should be treated first with diuretic therapy. If this guideline were followed, it could save $25 to 50 billion a year. The cost of programming this guideline into the EMR and requiring that the guideline be followed for payment would be about $25,000 in programming. The program could also allow for entry of contraindications, and then automatically offer and accept alternative therapy.
    The cost of the compliance systems that characterized 80’s and 90’s medicine is replaced by a few keystrokes on your office computer.

31. Pat S.–
    What I am trying to explain is that, under health reform, Medicare plans to begin “arguing back and forth about what it will cover–how much it will pay, and how much the co-pay will be.
    It will no longer cover angioplasties for every patient simply because a doctor says he needs one.
    Using comparative effectiveness reserach, a federal board is gong to begin setting guidlines for which patients will actually benefit from angioplasty.
    We know havd good evidence showing that stable heart patients derive little benefit. Angina is reduced–but it comes back. There are more effective ways to treat angina.
    So Medicare is likely to jack up co-pays and reduce fees for angioplasties unless the patient fits a particular medical profile which suggests that he is one of the ones who will benefit.
    Doctors will be required to file paper-work showing how the patient fits the profile–if he wants to be paid the full fee, and the patient wants the lower co-pay.
    Your diuretic example is a very easy one. The bulk of our healthcare dollars are spent on much more ambiguous cases that will not be solved with “a keystroke.” (As for EMRs simplifying things– talk to some doctors who have invested in EMRs and the state of the art . . . We have a long ways to go in refining and adapting the technology . . .)
    Medicine is still an infant science–riddled with ambiguity. See Dr. Atul Gawande’s excellent book: Complications: A Surgeon’s Notes On An Imperfect Science.”
    Most patients don’t like to think about this, but as Gawande points out, the fact is that “Medicine is an enterprise of constantly changing knowledge, uncertain information, fallible individuals . . .the core predicament of Medicine, its uncertainty is the thing that makes being a patient so wrenching, being a doctor so difficult, and being part of a society that pays the bills so vexing . . . .with all that we know nowadays about people and diseaes and how to diagnose and treat them, it can be hard to . . . grasp how deeply the uncertaitly runs.”
    Guidelines will require interprtation–which may often lead to “back and forth.” And, as in the UK, where NICE issues guidleines based on medical evidence, they are constantly revised.
    In medicine, very little is cut and dried.
    My point is this: if we are going to have universal coverage, everyone realizes that we are going to have to begin to “manage care.” (Thouogh we won’t use that phrase.)
    This is why the administration is putting money into comparative effectiveness reserach, and the IT that will provide a better data-base showing us what works and what doesn’t for particular patients.
    The big problem driving healthcare inflation is that we use advanced medical techologies (which includes drugs, surgical procedures and tests) on a broad swathe of patients while only a few benefit.
    Managing care means zeroing in on who will benefit–and using financial carrots and sticks to discourage treating other patients.
    People writing about Medicare reform have already pointed out that because Medicare will be trying to lift the quality of care and reduce the cost by reducing overtreatment, Medicare’s own administrative costs will be higher than they are now and provider’s costs also will be higher.
    The same would be true of “Medicare for all” under single payer.
    Finally, as you note, administrative costs account for a relatively small share of total cost.
    Yet single-payer advocates focus on them because they insist on pretending that private insurers are the single major problem in the system.
    Get rid of them, and healthcare will be affordable.
    This just isn’t true. But most single-payer advocates do not want to admit that if we want to cover everyone, we must get value for our dollars–which means that sometimes, you’ll be told “no”–you don’t need this.
    Most single-payer advocates are people who hate HMOs because they said “no” to some treatments. In fact, sometimes the HMOs were right, sometimes they were wrong.
    Too many single-payer advocates believe that if we just get the insurers out of the picture, everyone can have everything that they and their doctor decide that they want–and that because we will be so Saving SO MUCH by reducing administrative costs, it will all be affordable.
    This is what drives me nuts.
    (A doctor and I held one of those town meetings that Daxchle called for and a number of single-payer advocate came. The first one said: “What I want is to go the doctor I want, the hospital I want, get the care I want, and never see a bill.”
    Single-payer propaganda had convinced him this was not only doable, but his “right.”
    J. Rossi–
    No I haven’t gotten most of my information from
    the “thought leaders” in medicine.
    I do know some of them, but the vast majority of doctors I know are working docs: general surgeons, ER docs, hospitalist, famimly doctors, primary care specialists, oncologists, palliative care specialists .. . . I talked to countless docs practicing medicine at Kaiser, in private practice, at Mayo and elsewhere . . .
    Medicine is changing. Younger doctors, and particularly women doctors, are far more comfortable working in groups, collaboating rather than competing. This is a big change from how most older (say over 50, mainly male)doctors practiced.
    And in the Northwest, where we have more multi-specialty clinics, medicine has always been more collaborative.
    This is, I think, the future, in part because the overhead (real esate, need for IT) is making small practices prohibitively expensive.

32. “In medicine, very little is cut and dried.”
    Actually, the point of most of the things we could do to cut waste in medical care is that research demonstrates that they ARE cut and dried.
    Back pain patients without motor deficits or bowel or bladder problems do just as well without surgery and MRI as they do with. A good history and physical will reveal that the majority of of patients don’t need those interventions.
    Coronary artery disease patients not having either MI in progress or unstable angina do as well or better with medical treatment alone as with angioplasty, stent placement, or bypass. The definitions of these parameters are very clear cut.
    Headache patients who have no neurologic symptoms other than pain do not benefit from CT or MRI.
    CT colonography and CT coronary artiograms are not accurate enough to depend on, and for now should not be part of routine work ups.
    Breast MRI is useful in only a few well defined special circumstances. Otherwise, it causes more negative biopsies and some mastectomies without increasing numbers of early cancers detected.
    Use of “checklist” approaches drastically lowers medical errors and complications in many settings.
    I already talked about the results of research about the treatment of high blood pressure.
    Many cancer chemotherapies are proven to be of minimal or no effectiveness, despite high cost and high complication rates.
    These are a few examples of “cut and dried” results in medicine. Each of them would save between $30 billion and $100 billion a year if they were followed on a general basis. Each of them could be built into a good EMR system so that the criteria would occur as a keystroke result. Together they could save as much as $500 billion a year.
    There are other similar cut and dried applications. With more good comparative research, there would be many more.
    I do not argue that there are not many aspects of medicine that are complicated and uncertain and much less amenable to cut and dried approaches. The point of practice standards and efficacy studies is to pick the low hanging fruit.
    BTW — I agree that the single payer groups have attracted a lot of people who believe in a very simplistic approach to solving health care problems. They ignore the fact that the main strength of single payer, well regulated social insurance programs, and government owned medical systems is their ability to make the kind of choices I talk about above. That is where a lot of their savings come from. Systems in other countries all have significantly lower administrative costs than we do, but as you have said, that is not where they get their main advantage. The main advantage comes from more rational practice of medicine, particularly in areas that are “cut and dried.”

33. Pat S.
    I agree with much of whqt you say in many of your comments.
    But on this subject, you really need to read Dr, Atul Gawande’s book “Complications” . . .
    plus many articles in medical journals about the uncertainties of medicine..
    The truth is that things can SEEM cut and dried if you look at what is best for 80 percent of all patients– (and ignore the fact that medical knowledge about what we “know” changes constantly. For example, for years, we though we knew what “caused” ulcers.
    We were completely wrong.
    When trying to provide the best care for individual patients–“the right care, for the right patient, at the right time” things become much, much more complicated.
    For one, every human body is unqiue. Bodies are not Toyotas. And there is so much that we do not know about why some things work and others don’t–or do only part of the time. . .
    Please read Gawande’s book. It is very well-written and extremely intelligent; you’ll like it.

34. I have read both “Complications” and “Better,” and am a great admirer of Gawande.
    This is actually fairly funny because I almost cited Gawande and his article “The Checklist” to you in discussing times when medicine is cut and dried. I am certain that Gawande would be the first to tell you that there are quite a few situations in medicine where it is absolutely clear what the right course is if you have done the right work in terms of history, physical, and tests, and know the status of research. That is fortunate, otherwise we physicians would be in a hell of a mess.
    In fact, American doctors (and I am an American doctor) often seem to like to try to make medicine seem a lot more arcane than it is sometimes, although certainly there are times when it is very arcane. It is this unfortunate insistance by a lot of us that there are no clear rules that is at the root of both the inferior performance of US medicine compared with other countries and the much greater cost.
    There are a lot of times when it is crystal clear what should be done. That is why nurse practitioners and PA’s sometimes can outperform physicians in some settings: they are trained to follow the rules, while some doctors believe the rules don’t apply to them.

35. Pat S.–
    I’m glad you like Gawande too.
    But I’ve talked ot him; he, more than anywone, understands that checklists are just one mall part of improving care by reducing errors in certain circumstances.
    They don’t address the question of waste.
    See Elliot Fisher’s piece in the most recent NEJM.
    He makes it very clear tha tmost of the overtreatment that defines the difference between the way medicine is practriced in Manhattan and the much more conservative practice of medicine in Minnesota (where outcomes are often better) occurs in “the GRAY areas of medicine.
    These GRAY areas are the many ambiguous aeas Gawande talks about where “there are no right answers” and “nothing is cut and dried.”
    The new Fisher piece emphaiszes that virtually all of the difference between physicain practice in high-spenidng areas and physician practice in low-spending occurs occur in what he calls “GRAY areas.”
    I’ll be writing about this NEJM article very soon in part 2 of this Commonwealth Fund report.

36. I am not arguning that checklists alone will save enough to bail out medical care. Like a lot of things, they are one small brick in the wall, but they do save quite a bit of money. Although he does not emphasize it, the checklist for central line installation saved 10’s of millions of dollars in care for unnecessary complications just at Johns Hopkins. Practicing techniques that prevent errors and complications does prevent waste.
    The way to save the large sums we need to save is by adding together a large number of smaller sums. Again, checklists, appropriate care for back pain, coronary disease, headache, hypertension, savings from decreasing provider costs for collection, elimination of diagnostic imaging studies that are not necessary, etc. can add up to hundreds of billions per year.
    Arguments about gray ares are a big way to push back against these savings. The question of “gray areas” is difficult for Americans to wrap their heads around. For example, on the one hand, it could be argued that a very small number of back pain patients eventually require surgery after a trial of conservative therapy, and use that to suggest that it is consequently appropriate to do MRI’s and contemplate surgery on all back patients. On the other hand, the research says that almost all patients without motor nerve findings will not need surgery. If we are going to make health care effectiveness work as a way of saving money, we have to side with the Europeans and say that we will give everyone a 6 month trial of conservative therapy before MR or surgery, and only treat the very small number of people who fail that approach. That would save us $70 billion a year and would prevent a certain number of complications of surgery that would also occur if surgery were used more widely.
    There is a saying that “common things occur commonly.” There is a second rule that the treatment of common things is usually well understood. That does not mean it succeeds 100% of the time, but that it usually succeeds, and that if it fails, the marks of failure are also well understood as are the approach to the next appropriate step.
    I suggest that the next time you get a chance to talk with Atul Gawande, you ask him specifically if he thinks it is appropriate to think of the role of angioplasty and bypass in stable angina, the role of surgery in back pain without motor findings, the appropriate drugs for initiating hypertensive therapy, and so on are
    gray areas. I would be shocked if he said yes.
    It is the insistance of US health care that everything is a gray area that has opened us up to the extensive use of ineffective and even dangerous procedures and treatments, and has caused our health system to be both less effective and much more expensive. The Europeans, and good US centers that you like to cite, get where they are by following the scientific evidence without being dissuaded by minimal gray areas at the margins of the problems. Their philosophy is “just do it,” and if it doesn’t work in a very small number of cases, try something else after an appropriate trial of the proven approach. If we talk ourselves out of that — or let drug companies, medical suppliers, some high income specialists, and their allied researchers talk us out of it — we are doomed to relive the mistakes — and costs — of the past.
    Look at the post at the top of the blog today, and think about how the idea that there are gray area arguments about the areas we want to save money on would protect the position of the high cost providers in NYC and would attack the approach of Mayo, Kaiser, and others.

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