Monday, November 14, 2011

Silence Of The Lambs, And Of The Wolves

Most Americans know by now that we spend more on health care than any other country.  They just don't know why, even when they think they do, with good reason.  Health experts, industry players, politicians and a gullible media imply that our higher costs are a result of more or even excessive care, treatment and tests.

Actually, as I said on June 17, Americans receive less health care than in peer economies, but at "actual prices" that are 2 - 3 times higher.  The "list price" differential is even greater.  That's why as against an OECD median of $3,487, Americans incurred health expenditures of $7,960 despite being hospitalized 20% less and seeing their doctors 40% less often.  This gap outweighs services like MRIs and CT scans that Americans receive 2-3 times as much as OECD medians, as they comprise under 2% of overall costs.

The price differentials between US and other countries are stark in a 2009 International Federation of Health Plans (IFHP) report (p.3). Compare for example the range of US "insurer negotiated" and Medicare fees with standard fees in the highly rated French and the Dutch systems:
  • CT scan abdomen. France:$248; Netherlands:$258; US:$750 - $1,600; Medicare:$400
  • MRI scan. France:$436; Netherlands:$567; US:$1200 - $1500; Medicare:$500
  • Routine doctor visit. France:$31; Netherlands:$32; US:$59 - $151; Medicare:$72
  • Hospital cost per day. France:$1,050; Netherlands:$502; US:$3,181 - 12,708; Medicare:$2,200
  • Hip replacement.  France:$8,200; Netherlands:$7,600; US:$32,093 - $67,983; Medicare:$17,500
If Americans receive exactly the same health care services as they do now, but at West European prices, then our health spending per capita will be less than that of West Europeans.  As a percentage of GDP we'd spend only 8% compared to our actual 17.4% in 2009.  Imagine what this would do to our economy and well being.

Our yawning budget deficits would become massive surpluses.  (Or in an alternative Democratic utopia, we could have "Medicare for all" for free, i.e., everyone's health care paid fully out of public funds without adding to federal and state budgets.)  Our workforce will become internationally more competitive, boosting overall job growth. The tax policy gridlock in Congress will end as we won't need more revenues, nor painful spending cuts elsewhere. 

Moreover as I said on March 28, the steps needed to fix our egregiously high prices are administratively simple.  The essence is to:
  • Address shortages and resultant market power of providers by massively increasing the availability and choice of hospitals and doctors.
  • Use trade in health services (allow in top foreign doctors and hospitals, medical travel, etc.) to jumpstart competition and innovation, getting results in 1 – 3 years instead of in a decade or more.
Yet far from any of this happening, we hardly even hear of pricing being at the root of our health care woes.  That's because lowering prices is against the interests of the health care industry.  So their propaganda machine and experts in the media shift public attention to controlling costs not by charging less, but by doing with less (which is sometimes laudable but misses the main point.)  Examples of their proposed solutions are wellness and preventive health, avoiding unproved costlier treatments, end of life planning ("death panels"), and premium support where patients as payers self-ration care.

It's like foreign cars being banned, allowing Ford to price its Focus at $50K here when a Toyota Camry or Honda Accord costs $25K abroad. When US car buyers are unduly burdened by this, then Ford instead of lowering prices advises customers to need fewer cars by car pooling and using mass transportation.

I categorize those who should but don't mention or fix health care prices as either lambs or wolves depending on their intent and awareness of the problem.  Among the lambs are (a) a naive media that relies only on health experts to identify issues without realizing they have interests linked to the industry, (b) payers including employers and patients who should be collectively pushing for price reductions but are misled or side-tracked into less impactful solutions, and (c) the American public whose votes and involvement could pressure lawmakers and leaders to do the right thing.

The wolves are mainly health industry organizations and their experts who deliberately suppress the fact of over-pricing and draw attention and debate away from it to other aspects with less impact on their interests. They can also (generally implicitly) intimidate experts and academics that depend on industry largesse for funding and career advancement from fully speaking out.

For example, in their 2003 article "It's The Prices Stupid" some academics point to much higher US prices and in a 2005 follow up article they expose as untrue two common industry excuses for this, i.e.,  less rationing of services in the US, and excess malpractice litigation or defensive medicine costs.  But that's where their nerve gives out.  There is no follow up article on what then IS actually behind these high prices, and ways to correct this.  More recently on November 25 a PBS discussion again points to prices as the root of high US costs, but the expert surprisingly cites quantity of care (wasteful or unneeded services) when asked for causes of this.

 Somewhere between the lambs and the wolves are the lawmakers, the insurers and the public health department (HHS and its CMS) who are well aware of the price issue but don't raise it.  Lawmakers are beholden to the health industry or wary of antagonizing it, especially in a absence of any countervailing public pressure or awareness.  Many insurers are members of the IFHP that compares international prices, and as payer representatives would be interested in lower prices by providers. But they live in glass houses and are afraid to publicise high prices as the industry can retaliate by pointing to inefficiencies of private insurance as one contributor to higher prices.

The HHS being mute on prices is not that surprising considering a revolving door relationship and the way government departments identify with the industry they deal with.  They have little incentive to push reforms that slash their own budget, and consequent perceived importance of their empire.  In that sense a failure to grasp the obvious role of prices and exert external pressure on HHS is the lapse of the US Treasury Department and the President's Council of Economic Advisers.  (Some will argue the buck stops at the desk of the President.)  Of course they are merely continuing the tradition of several past administrations that have ignored the over-pricing issue over the last 2 - 3 decades.  But with the health care cost crisis and the budget impasse coming to a head their need to act is more compelling.

Meanwhile, the silence and inaction on health pricing is imposing a horrendous and unnecessary burden on the US economy, its global competitiveness and its people. 



  

4 comments:

Anonymous said...

Sandip,

Once again, you don't address the root of the problem. The problem is governmental systems and their lack of accountability. The cost of the Medicare procedures you mentioned are low but the fraud rate is extremely high. The little red-white and blue card is nothing but an open credit card for any doctor or hospital.

The same with the blue and white Medicaid card.

The answer is to work with a privatized system. Private insurance companies are accountable to managements who are accountable to shareholders.

The answer to the Medi-Medi crisis all over the country is to put them in HMO managed care plans. Problem will disappear overnight.

Let me give you an example of this lady I just met. She's a little sweet black lady who doesn't speak much English. She got her Medicare card when she was 65 and didn't sign up for a plan. One day she went in for a little pain in her mouth. She said she was hospitalized for 3 days with every test run on her. Her bill was over $28,000. She was released with no findings. Now she's on an HMO plan and they wouldn't dare try anything like that on her because the ins company would just pay them capitation.

The problem in this country is that the poor have better health plans then the working stiff. They have Medicaid which allows them to see multiple doctors getting third, fourth and fifth opinions. The working stiff is put on an HMO and only allowed to see his primary doctor on a Medicare advantage plan.

So the solution by CMS is to hammer down rates. They haven't addressed the root of the problem, which is they don't have a system of really giving care to those that need it.

Sandip Madan said...

Excessive billing through fraud or over-treatment should of course be addressed, and there are a variety of suggested solutions, including capitation. But it has nothing to do with excessive pricing - a much bigger contributor to overall US costs - which desperately needs to be curbed, which is the main point of my post.

Harpreet Datt said...

I hurt myself in Morocco last week while on a vacation. My insurance company sub-contracts to Blue Cross World, whose employees were unable to deal with the problem because of an inability to speak in French (??? worldwide department and no French speaking nurses?) and thus took 2 days to sed a letter of guarantee to the clinic treating me. The letter was prepared incorrectly and I was discharged after paying my bill on a credit card (less than $1000 for two nights at the clinic, medications to stabilize me to travel back to the States). I had to make all travel arrangements with a dislocated tailbone myself.

Meanwhile another patient from Germany got his insurance to fax all the paperwork, including coordinating his transport back to Germany for his fractured leg.
The focus of US healthcare (if you can even call it that) is not about taking care of the immediate problem at hand, but the attendant paperwork. This mindset compounds the inability of health insurance professionals to think rationally about treatment.

Sandip Madan said...

Sorry to hear about your Morocco travails. Those dissing Medicare should take note - US private insurance isn't all it's cracked up to be.

In the case of my daughter's relatively simple knee surgery a few years back, dealing with her insurer Chickering (an Aetna subsidiary) was a bureaucratic nightmare that took 8 months to resolve.