Sunday, May 27, 2007

Four Myths About US Healthcare

Nazi propagandist Joseph Goebbels (1897-1945) famously said that a lie repeated often enough becomes the truth.

Healthcare myths are often nurtured by industry players benefiting from them, though some are helped by our predispositions. For example, people comparing items tend to think that the higher priced one is better.

Here are the four biggest myths about US healthcare:

Myth: A major reason for high US hospital prices is cross-subsidy for the uninsured, non-paying patients.

Reality: Only 8% of hospital patients are uninsured and some charges are recovered from even this group. Hospital figures of 12% of un-recovered dues are based on the vastly inflated “list” prices that they bill uninsured patients.

Myth: The extra revenues from the high prices that drug companies charge US patients are ploughed back into research that leads to new, vital and innovative treatments.

Reality: Little of that extra money goes into truly innovative (as opposed to "me too") drugs. And to maximize their returns, drug companies on average spend over 30% of their revenues on marketing (even more so in the US), versus 13% for R&D. (See more in the first post and an incisive article by two Harvard academics.)

Myth: You get what you pay for. Pricey US healthcare is the best in the world.

Reality: Some “five star” foreign hospitals provide better quality in terms of outcomes (lower mortality and complication rates) and patient experience, at a fraction of US prices. Many of them are JCI accredited, with US/UK trained doctors. (See more in an earlier post.)

Myth: US healthcare provides a malpractice safety net / jackpot if things go wrong.

Reality: As many as 95% of US medical negligence cases including 90% of deaths from negligence do not result in a claim, often because the victim and their families don’t know or can’t prove that negligence occurred. Of cases that ARE filed, two thirds fail to secure any compensation. So the malpractice game is like a lottery with less than 3% of the payments going into prize money. And even the lucky winners have to fight an average of five years to collect their proceeds.

Monday, May 21, 2007

Texas: Party Now, P(r)ay Later

In a first for any state, Texas is about to scuttle rules drawn up by the Governmental Accounting Standards Board. These rules (GASB 45) require governments to disclose the cost of healthcare they have promised to their employees, so that their future expenses are kept in line with expected revenues. Texan politicians want to continue spending now, without worrying about a financial crunch after their time. Their colleagues in other states may also like this easy way out.

GASB 45 would force the state governments to curb wasteful expenses and irresponsible promises, and also have healthcare delivered more cheaply and efficiently to former and current employees. I have personally seen the effect of this newly imposed accountability.

Several state governments faced with budgetary pressures have started exploring innovations like voluntary medical tourism. In this the patients covered by state health insurance who need major surgery are offered incentives to receive treatment abroad in pre-approved hospitals that match or exceed US quality of care. This can dramatically cut costs for the state while being welcomed by patients who receive a portion of the savings. But special interests including local hospitals obviously do not like this, and the states are likely to overcome political opposition only in a budgetary "feet to the fire" situation. GASB 45 exposes a budgetary gap of $50B for Texas alone, and about $1.4 trillion for all 50 states.

But why not simply kill the messenger, GASB 45, so that the looming shortfall doesn't need to be planned for? The Texas Governor and legislators seem set on this course, ably assisted by Texas Controller Susan Combs who is also trying to get other states to join. The New York Times story today quotes how these “Politicians don’t want to deal with the problem ... state lawmakers were betting that by the time rising health care costs became unmanageable, they would no longer be in office and could not be held accountable."

Friday, May 18, 2007

Surgical Warranty Or Gimmicry?

Remember the Firestone tire defects of the late 1990s and 2000 that caused Ford Explorer SUVs to be involved in several accidents and deaths? How much would it matter if compensation for any accident and injury also included the free replacement of the defective tires?

Using this analogy I was initially underwhelmed by the Provencare offering of Geisinger Hospitals Group of Philadelphia that featured in a May 17 story in the New York Times . Geisinger offers a "90 day warranty" on some surgeries that it performs, promising not to bill insurers if extra procedures or care results from any complications.

If negligence on the hospital's part causes complications, the cost of follow-up surgery would pale in comparison to malpractice claims, and in any case I'd expect such care to be offered for free by any hospital to stave off a lawsuit. The 40 point checklist of care that Geisinger introduced is also not a new concept. And they've only introduced the system so far for one type of procedure - heart by-passes.

On more reflection and a little research though, there are good things to be said for the Geisinger initiative. At least they're starting to do what all US hospitals should have been practicing all along - offering a flat rate for standard procedures, and hopefully having a more transparent and simplified pricing system.

I'm amazed how hard it is for patients to get the "real" pricing information - even average or ballpark - out of US hospitals when many good foreign hospitals including those serving medical tourists will readily provide a "tariff list" that details the package and individual costs that patients will need to pay. US hospital bills come piecemeal even for a single procedure. Apart from this being an offshoot of a chaotic and complex billing system I also suspect that hospitals don't want the total charges to be easily known, as they're so high in absolute terms as well as compared to hospitals abroad.

Back to the story in the NYT, from the reported figures it looks that Geisinger would charge a total of about $37,000 for a "warrantied" heart bypass. If true, that's a bargain as the discounted or negotiated insurer rate without any such warranty averages almost twice as high for a typical US hospital. Geisinger's heart surgery outcomes and statistical information also looks very favorable compared to peer US hospitals.

So in the end I'll set aside my initial skepticism of this being just hype, assume the facts are correctly reported, and cautiously applaud the initiative at Geisinger as a precursor for better practices.

Tuesday, May 15, 2007

To Your Poor (And Costly) Health

I see myself like Larry Birkhead emerging from that Bermuda courtroom after DNA test results on Anna Nicole Smith's daughter are confirmed and saying, "I hate to say I told you so, but..."

Except that the tidings here are glum, and elicit groans, not cheers. I'm talking about the "breaking news" from Reuters that the US pays the most (twice as much) for receiving the worst healthcare among the group of peer countries. The study is by the Commonwealth Fund that compares the US with Australia, Britain, Canada and Germany (wonder why they left out France that is rated the best in many studies.)

The Birkhead analogy is that I've been saying and writing about this for over two years, and my last update comparing the US to all the other (OECD) first world countries is here:

Going beyond this Commonwealth study I listed and quantified the contributions of the seven underlying causes for high US costs. Either way the broad insight is that if we can "just" copy the policies and health systems of these countries we can slash our annual healthcare bill by half without compromising quality. Imagine what the resultant trillion dollar savings can be used for. Controlling the deficit, making our businesses more competitive internationally, more resources to support our troops, giving out more no-bid contracts to Halliburton, launching wars against Iran and North Korea... (okay, okay, I'm just kidding about the later ones - sort of.)

Then of course there are the additional implications for my favorite subject - medical tourism. I wonder how long the mainstream Americans will continue buying the line of the US hospitals, "You get what you pay for."

Monday, May 14, 2007

Restoring Health By Shedding Health Benefits

Wal-Mart's CEO H. Lee Scott said last year that GM is no longer an automotive company, but a benefits company that sells cars to fund those benefits.

Now distressed carmaker Chrysler is being sold and the prospective new owners hope that UAW concessions on health benefits restore the company's health.

You may have heard that health and other benefits to retirees and current staff place an extra $2000 burden per car for the Detroit Big Three as compared to their Japanese competitors. The WSJ article describes this another way - as a $30 per hour advantage that Toyota has over US makers that may increase to $45 per hour if the present arrangements continue.

Since a large chunk of these costs comes from healthcare, it strengthens the case for reforms like bringing healthcare costs down and also having healthcare for all (including workers) paid through public funds with all employers required to chip in.

But there's also a specific proposal in the current discussions for the UAW to be given a lumpsum of billions of dollars and then be required to manage the health benefits for its own members. Such a step should be welcomed. Direct responsibility will make the unions more supportive of innovative measures that can drastically reduce healthcare costs, especially if they maintain or improve quality.

We can talk about these steps subsequently. The point is, it will be good to see strong consumer groups pushing for healthcare reforms instead of just having key industry players resisting them.

Friday, May 11, 2007

Misdiagnosis And Cure For Florida Doctor Shortages

There's this joke about the researcher who taught a flea to jump when he said "Jump." He proceeded to remove the flea's legs one by one and ordered it to jump. The flea did so every time till all six legs were removed and then it did not jump. So the researcher concluded that when a flea loses all its legs it goes deaf.

Now relate this to a chain email that I received a couple of days back:

"A recent Physician Census by the Palm Beach County Medical Society confirms that the patient access to care crisis in Florida will worsen as the shortage of physicians reaches dangerous levels. In Florida, like many states across the country, patients can't get the care they need when they need it. Medical lawsuit abuse is forcing good doctors to flee the state, cut back on vital services, or leave medicine altogether. This update to the study shows that the shortage of neurosurgeons is even worse than indicated in the original Physician Census.
Palm Beach County currently has serious shortages of neurosurgeons, general surgeons, and family physicians. The Physician Census confirms that the patient access to care crisis will only get worse and that by 2011:

  • Only 70 general surgeons will service an estimated population of over 1.4 million—a number that falls far short of the 208 needed for adequate patient care;
  • Just 194 general and family physicians—not even close to the 373 needed—will be active in the county;
  • Only seven neurosurgeons will treat emergency patients while 20 will be needed to meet demand;
  • Physician shortages of 33% or more will exist among seven essential specialties, including obstetrics and gynecology, thoracic surgery and radiation oncology.

Dr. Jose Arrascue, President of the Palm Beach County Medical Society, cites medical lawsuit abuse as the reason for the bleak outlook for Palm Beach County patients. He says, “too many good doctors view this as a hostile market, with high malpractice premiums [and] no protection from lawsuits.” Most simply decide to practice elsewhere.
With forty-two states now considered to be "in crisis," "verging on crisis," or "experiencing serious problems," Florida patients aren’t alone. And there’s no time to waste. We must work together to fix our nation’s broken medical liability system. Please take a moment to

pass this information along to your friends, family, neighbors and colleagues and ask them to stand with us to protect each and every patient’s access to quality medical care and stop medical lawsuit abuse once and for all.

Thank you for your continued support.

Doctors for Medical Liability Reform317 Massachusetts Ave., N.E.Suite 100Washington, DC 20002
Phone: 1-877-9REFORM "

Ironically, this email itself mentions the fact that "Florida is not alone" but "one of the forty two states" that faces doctor shortages. In other words, the root of the problem is a NATIONAL shortage of doctors who therefore have the luxury of picking the place where they want to work. The genesis of this is the artificially constrained pipeline and supply of doctors that I've mentioned in my blog yesterday. Malpractice caps and other tort reforms are certainly necessary but they at most shift the doctor scarcity from one place to another without solving the underlying problem.

Now consider the fact that excellent and highly experienced foreign doctors would swarm into Florida with or without malpractice reforms if only they are allowed to practice here without the bottleneck start-at-the-bottom residency requirement. Fear of importing incompetent or undertrained doctors or those with degrees from dubious institutions? How about allowing in medical graduates only from world class and reputed foreign institutions AND requiring them to pass a rigorous set of Board exams before being licensed?

Such a measure will truly "Protect Patients Now" (the website name of the body behind the email campaign) but expect the physician lobbies to vehemently oppose this. Not surprisingly, they instead push the wrong conclusion, like in the flea joke. Meanwhile, Florida has already enacted some tort reforms. For those still interested at this point here's an article that provides some details in a balanced perspective while questioning the assertions of widespread doctor flight from Florida:

Thursday, May 10, 2007

Doctor Shortages - A Few Benefit At The Expense Of Many

The current doctor shortage is artificially created but very real in the hardships it imposes on patients and payers.

The only group that benefits from this scarcity are doctors themselves for obvious reasons. But now even some (though few) of the doctors talk of expanding the pipeline.

The case being made out is for Medicare and Medicaid to massively increase the allocations so as to expand the pool of residents. That will of course be money well spent, helping patients and saving money in the long term. But even this may not be necessary.

Most hospitals value their residents. Anyone who has been to a hospital (or even watched shows like Grey's Anatomy or ER) can see how much of the work and care is handled by medical residents. They are after all skilled (particularly past the first year of residency) and cheap labor drawing $40-$50K a year for working 80 hour weeks. Some of those hours may go into classroom-like training or learning by watching, but most of them directly and considerably benefit the hospital.

So why not allow hospitals who want extra residents (outside of caps imposed by the ACGME or RRCs) without subsidies from Medicare to simply take them on? Many experienced foreign doctors also can be brought in this way, who can more than earn their keep as residents from day one. Then there are US medical students who are currently excluded from residency (or residency in their preferred specialization) because of the caps on such residencies. They may be required to pay their way or forgo a part or all of their stipends to the extent that hospitals consider them worth taking in without receiving subsidies. Or they may be required to execute a bond that commits them to work for a certain period at that hospital after graduating, or else to refund their cost of training. Whatever the arrangement I predict there will be no dearth of deserving takers for such offers.

Ignoring any special interests that benefit from the shortage and launching a concerted effort to vastly expand the physician supply should be a top priority for the government.

Wednesday, May 9, 2007

Failed Treatment - Drug Resistant Prices

The Drug Industry can break out the champagne - and continue realizing the payoffs on their purchased support in Congress and the Bush Administration. The industry makes an extra $100 billion annually by overcharging for drugs in the US compared to average European or first world prices. A mere one percent of this set aside for lobbying, influence buying and contributions provides a billion dollar war chest to stymie reforms.

On May 7th, the Senate finally allowed the long overdue cheaper drug imports into the US, but only with a rider that made the whole enactment fruitless.

This rider is the requirement that the Secretary of Health (HHS) certify that the imported drugs are safe, which of course he won't do (at least when he is part of the Bush Administration.) This safety provision is an obvious excuse since many drugs are imported into the US by drug manufacturers under FDA oversight with no such certification requirement. See for example this long-standing refutation:

Disallowing cheaper imports complements the other element that allows higher drug prices in the US - the government neither able nor willing to directly negotiate the prices of drugs that it pays for. The official logic for that policy is even more absurd (i.e., that negotiations are tantamount to price controls) and deserves a separate discussion.

After 2008 a Democratic President and a filibuster-proof Democrat controlled Senate / Congress may finally manage to bring down drug prices. But don't count out the possibility of the drug industry using its largesse to buy enough Democratic support to preserve the status quo. Jack Abramoff (who bought off lawmakers for years) is gone, but not the culture and system that enabled him to thrive.