Do This To Fix Health Care And Our Budget

Lawmakers and officials now seem serious about ballooning health care costs, but they're still not addressing the root issues.  They are unaware (or choose to ignore) that the major problem is of overpriced care, not excessive or even wasteful care.

This is actually good news per my previous post, as the fixes for price distortions are relatively straightforward and painless.  That is, except for special industry interests who have bought and wielded a lot of influence.  But they may finally be trumped by public angst, and by other players that benefit from reforms and can compensate lawmakers to do the right thing (more on that in a subsequent post).

So what exactly should be done?  Here's the recipe, in two parts.  The first and major part lowers prices by correcting the scarcities as well as the lack of competition and innovation that have caused US health care to be over twice as expensive as in Europe.  The second part is common sense steps to reduce waste and foolish splurging of resources for minimal benefit.

Here's the road map to lowering prices while increasing availability of resources to expand coverage:

• Increase the supply of doctors as I detailed in my Sept. 11, 2010 post.  This involves expanding medical schools and setting up new ones, both of which allow entry directly from high school with applicants meeting core requirements through AP classes.  Increase the number and support for residencies, while eliminating those caps imposed by doctor dominated bodies like the ACGME and the RRCs whose members benefit from scarcities.  There are over 40% more doctors in Europe on average than in the US.  A change in policy will start increasing domestic supply of doctors after about 10 years, so it is important to import doctors in the mean time, per my June 27, 2010 post.  This should ideally be orchestrated at the federal level, but failing that the states can make changes in licensing requirements on their own. 

• Leverage telemedicine, especially with qualified foreign doctors who can be allowed to treat US patients, as described in my April 30, 2010 post.  This will add to patients' convenience while removing the need for a significant chunk of US doctor office visits and costly readings by US diagnostic radiologists.  Apart from direct savings from payments to foreign providers that are a fraction of US rates, this will expand the availability of US physicians and lower prices here as well. 

• Allow and encourage more hospitals to be set up, particularly those managed by reputed foreign chains, per my June 8, 2010 post.  Cost effective innovations and practices from abroad can really help, in addition to the necessity of competition.  US hospitals should never have been allowed by anti-trust authorities to consolidate as they did since the early 1990's. That has allowed them to jack up prices as there are few alternatives for payers and patients, and 90% of even metropolitan areas in the US now face low or no competition among hospitals.

•  Encourage and allow medical travel abroad as described in my May 13, 2010 post.  The facilities and support infrastructures for this are largely in place so the benefits kick in much faster than through other measures.  Apart from direct cost savings that can be up to 90% for a destination country like India, this again diverts some demand for US hospitals and doctors.  That reduces some of the market power and scarcity premium in pricing in the US, and allows for lower rates here.  If HHS / CMS takes the lead on medical travel for major, "standard" surgeries this will enable private insurers to follow suit while considerably reducing their own legal exposure.  That's because if they strictly follow or exceed the same protocols as the government, juries are far less likely to find against them when there are adverse outcomes.  (These are inevitable when large numbers of patients are involved, even if the complication and mortality rates in world class foreign hospitals are lower than in the US.)

While I have stressed addressing doctor scarcity above there are also current and looming shortages of other types of health care workers like nurses and physical therapists.  These have a much smaller impact on health costs, but should also be addressed through expansion of training facilities and enhanced intake.  We may need even more nurses to take over some tasks presently performed by physicians, including locally helping patients who "see" their doctors through telemedicine.

Here's the second part, the ways to reduce inefficiencies and wasteful practices that receive more media coverage and commentary by pundits:

•  Allow drug importation and for Medicare to directly negotiate prices of drugs that it pays for.  There's no valid reason to protect a system where US prices are twice as high as anywhere else.

• Use comparative effectiveness research to guide treatment, particularly when paid for with public funds.  Factor in cost effectiveness as is explicitly done by the NHS in UK.  Substitute fee-for-service with capitation or global payment.  Counter Palin type "death panels" misinformation and encourage sensible end of life planning.  Some sensible cuts by states like New York and by Washington should be adopted by others.

• Enact tort reforms, limit debilitating lawsuits by having more efficient forms of legal redress, impose malpractice caps and lighten needless regulatory or work rules burden on providers. (About the last, some onerous work rules may for example stem from union agreements that only lightly benefit health workers but severely throttle hospital operations.) The actual impact of legal exposure is likely less than what Republicans and providers claim, but Democrats conceding on this may enable broader bipartisan agreement.

•  Electronic health records.  Wellness and preventive programs.  Smoking cessation.  Obesity control and healthy living.  Atul Gawande's Checklist Manifesto.  Other innovations in practice of medicine.  Yes, yes, yes.  And motherhood and apple pie.  By all means do all this, as supplemental to - not instead of - other necessary measures.

What about single payer, or a "Medicare for all" type of program?  This can avoid the inefficiencies of private insurers offering a complex array of plans and needing to make a profit.  They, in the words of Joseph Stiglitz also spend a lot of resources in marketing, administration, and in figuring out how to cover people who don't need much treatment, and to keep out those who do.  Single payer is particularly helpful in countering the market power of providers in a situation of scarcity or lack of competition.

Conversely, an expanded provider supply through actions as in the first part above can make private insurance more viable, as in the Netherlands or a parallel system as in Germany.  Such a system could be allowed to co-exist in the US with a basic public plan, with choices of more lavish private plans.  Those opting for them can be helped with payments through risk category based government vouchers or credits that equal offsetting average savings in public funds. 

Overall, steps of both types should be pursued in tandem but those enhancing provider supply and lowering prices at part one above offer easier and bigger savings as well as service improvements.  For quick results turning to international trade in health services is essential, as I'll elaborate in a later post.

Moreover, this supply side approach that enhances competition should be more acceptable (in theory at least) to Republicans who control the House and vigorously oppose the single payer route.  Given political will, these changes in health care are administratively quite easy to implement, and help solve the budgetary crisis far better than other more widely bandied options.

Better US Health Care At Half The Cost

The main problem with US health care is its high cost.  A surprisingly unmentioned fact is that this "high cost"  is actually due to exorbitant pricing, as compared to all other countries.  Why is this important?

It's because correcting these prices is the quick and painless way for Americans to address the health crisis and achieve universal coverage.  It is the closest to having our cake and eating it too.  We can achieve universal coverage, hold the line on spending or even reduce it, avoid additional taxes, and all without trade-offs on the quality or the amount of care.

Yet this approach is suppressed and ignored.  It is anathema to the health providers and middlemen (like PBMs) who benefit from the current system.  They and their "experts" instead plant the false notion that our care is so costly because we're getting much more of it than elsewhere.  They imply that Americans utilize more resources in getting more treatment, more time with providers or in hospitals, more or better medication, and more diagnostic and imaging tests.

Only the last about imaging tests is true, with very limited effect, as the OECD health data shows, and Americans actually lag behind their first world counterparts in the other parameters.  True, Americans average 92 MRIs and 230 CAT scans per 1000 population annually, as against the OECD median of 37 MRIs and 119 CAT scans.  But that translates to less than 3% of extra costs even at inflated US prices.  These and any other "excesses" are more than offset by Americans seeing their doctors 40% less often and being in hospitals 20% less than the OECD median.

So what's behind US prices being over twice as high as in Europe, and 5 - 10 times higher than in the top Asian hospitals popular with medical tourists?  It is mainly tightly restricted supply, limited competition (as I've written earlier about doctors and  in regard to hospitals) and a system that simply lets providers get away with it.  An example of the last: unlike other countries the US bars its federal agency (HHS or Medicare) from directly negotiating drug prices for publicly funded patients, so these are double those in Europe.

Provider groups use their financial leverage and lobbying to sustain the current price regimen, while dodging adverse public scrutiny.  Some interesting aspects are:

• Doctors and hospitals vehemently protest impending Medicare rate cuts under SGR.  But they'll carefully avoid any comparisons with other countries.  That's because Medicare rates on which they claim to lose money are actually far higher (even after cuts) than prices anywhere abroad.   
• The lure of industry largess and fear of career suicide seems enough to stop health care experts and academics from discussing or publishing work on US health pricing. The bulk of academic endowments, research grants and other funds flow from provider organizations.  Moreover, the editorial boards and review committees of health journals are dominated by doctors who can blacklist authors of inconvenient articles exposing their industry. 

• The experts' reticence results in wider ignorance and misconceptions in the public.  The popular media looks to research and analysis in respected publications for answers to the health crisis.  Their own journalists haven't realized that pricing alone plays a much bigger role in health costs than all the other reasons trotted out by the experts as Op-Ed writers or talking heads on TV. 

•  Even the HHS / Medicare does not compile and publicize data that exposes the pricing anomalies and actual doctor earnings, that can justify the government's case for SGR cuts.  This is less surprising once you realize that HHS / CMS employees have a symbiotic relationship with the health industry players.  They are aware of the revolving door and subsequent lucrative employment opportunities if they oblige the industry.  Ex-CMS Administrator Thomas Scully is an example.  The current CMS chief Dr. Donald Berwick is an excellent choice, but he too has to tread cautiously as a recess appointee in a precarious position with many GOP foes.

Law makers can easily take measures to correct pricing anomalies in a relatively short time, and apart from all the economic benefits, this should go down well with voters.  But they are either bankrolled by the provider groups, or fear funding of election bids against them if they overly annoy providers.  So their inaction and silence extends to both sides of the aisle, though more so by Republicans who have closer industry ties.

In fact, cynical politicians can go the opposite way if their actions remain beneath the public radar, and the ill effects are only felt long after they are gone.  In his Jan. 19 WSJ Op-Ed the CEO of NY Presbyterian Hospital describes a bipartisan panel proposing a $60B cut through 2020 of Medicare funds to train new doctors.  It's like meeting grain shortages by eating the seed for future harvests:  worsening doctor scarcity, further raising prices for their services, and increasing overall costs and patient misery. 

Is pricing the only problem leading to higher US health care costs?  Obviously not.  We have the usual causes widely discussed in the media.  The waste and duplication in the private health insurance industry. The distortions in provider incentives under the fee for service system.  Malpractice laws and defensive medicine.  Lack of proper end of life planning (Sarah Palin's "Death Panels") and public funding guidelines about treatment of patients with terminal illness.  Inadequate research and dissemination of information on comparative effectiveness (including the cost) of treatments and consequently deficient policies.  Cost of care fully borne by third parties that removes the patient's incentive to look at costs.  Insurance and Medicare fraud, and so on.

But the savings potential from addressing these other causes is dwarfed by that from correcting prices.  The latter is the richer, low hanging fruit in terms of administrative ease and voter acceptance.  Consider this: effective steps to bring health care prices down so that they are "just" 30% higher than in Europe will reduce the annual US expenditure of $2.5 trillion by $1 trillion, half of it in public funding.  Other reforms can of course result in further savings and improve the quality of care.

Key measures that were shot down by Republicans and some Blue Dogs (or not even pushed in a misguided attempt to "compromise") could have had an indirect but strong bearing on prices.  A single payer ("Medicare for All") system would have concentrated buying power into a single governmental entity that could dictate more reasonable prices even in the face of provider scarcity.  That's in addition to it streamlining payments, improving efficiency and effectively increasing doctor / provider supply by freeing up their time spent chasing payments and instead devoting more of it on patients.  That's how countries like Singapore, Japan, Taiwan and even UK are doing well with fewer providers. A strong public option would have also helped (though not quite as much) for similar reasons.

But too many Americans swallowed the propaganda that this "socialized medicine" would limit their choices and worsen their care - never mind that most seniors love their Medicare.  Where do we go from here?

We face the reality now of Republicans controlling the House, having expanded ability to filibuster in the Senate, and trying to limit a government role, including by undermining "Obamacare." Recognizing the central role of high prices and the core causes behind it can enable us to skin the cat another way - finding solutions palatable to the Republican supply side and free market ideology.  

These steps involve expanding provider capacity, allowing more competition including free trade in health services, reducing unneeded regulation and (for limited benefit) reforming malpractice laws.  Taken together they may work just as well or better than just a focus on single payer, and save a lot of money for taxpayers and businesses.  More on these in my next post.

-----------------------------------

(Footnote: As in my March 1, 2010 post, I've pointed to the Obama administration's failure to publish data on true doctor earnings and hospital payments per procedure. Now the HHS is a year behind the rest of OECD in reporting even basic health data statistics as above.  This hadn't happened even in the "Heck of a job, Brownie" days of  G.W. Bush.  It underscores how the government apart from policy making also needs to pay attention to routine administrative efficiency. 

When the Bad Guys Win

It's an unjust world.  The Democrats got pummeled in the mid-term elections, partly because of the Affordable Care Act passed over a strong and united Republican opposition.  The Act benefits a vast majority of Americans yet more than half dislike it, and even now are evenly divided about repealing it.

The Republicans' criticism is mainly on three counts, of which the first is misplaced given the rationale and experience of other countries, and the other two are a consequence of their own obstructionism.  These three are:

(a) The expanded role of government.  Every other advanced country has an even more pronounced public payer model, with much lower costs, and better outcomes on average than the US in OECD tracked measures like life expectancy and infant mortality.  Even (sane) capitalists recognize that some functions like defense, police and fire fighting are better performed by a public agency.  Why should anyone blindly assume that health care coverage does not fall into this category?  Or that the job is most efficiently performed by profit maximizing private insurers needing a 25% overhead on top of payouts to providers for meeting their own administrative costs and earnings goals?  Now a WSJ story on Nov. 16 describes how China's successful "State Capitalism" is upsetting the adage of the supremacy of market competition in a broader economic context.

(b) The mandate for obtaining or providing health insurance, especially for employers who otherwise pay a fee.  This mandate for employers and individuals would have been unnecessary if we had a tax funded single payer system.  This "single payer" term is widely misunderstood, and  Howard Dean and Congressman Anthony Wiener wisely used the term "Medicare for All" which Americans grasp much better.  But they didn't get enough air time to get their message through, and Obama never picked up on their cue.  

"Single payer" does not necessarily preclude private insurers - they are allowed to operate in West Europe, but less than 15% of the population opts for them.  So US insurers were right in fearing they'd be cut to a third of their size if something like that happened here.  Their opposition and disinformation aided by their largely Republican allies ensured the timid Obama administration didn't even try for single payer.  Then mandating coverage for all became the only way to viably force private insurers to accept those with pre-existing conditions.  Americans largely fail to understand the connection, and hence Republicans have been able to beat Democrats over the head about these unpopular mandates.

(c) Reforms hardly address the high cost of health care.  This again is ironical since it is Republicans who have strenuously opposed most measures to bring health care prices down, like single payer or even a strong public option, or Medicare directly negotiating drug or device prices.  In their own time they turned a blind eye to provider shortages and increasing hospital market power through consolidations.  They are right though, to raise the issue of tort or malpractice reforms, even as Democrats argue this is not a big factor.

Overall, the wrongful obstruction and opposition by cynical Republican lawmakers of much needed health care reforms has been rewarded by victories at the hustings.  I prefer the endings in typical Bollywood films where the villains get their just desserts and the good guys win out.

Special interests aside there are actually effective ways to drastically cut down health costs while maintaining quality, achieving universal coverage and keeping most Americans happy.  More on that in my next post.

Easy Domestic Fixes For Doctor Shortages

Doctor shortages typically occur in poor countries that lack the resources to train physicians, or to sustain enough of them to provide proper care.  Only in the US is there a wholly different reason - their supply is tightly controlled in several ways by private doctor dominated bodies with cross-memberships.

The medical schools numbers and overall capacity is controlled by the AAMC (Association of American Medical Colleges) and the LCME (Liaison Committee on Medical Education).  LCME members are appointed in equal parts by the AAMC and the AMA.  In the 1980s and 1990s they allowed only one medical school to be added, though now they've belatedly allowed an 18% increase over the current 131 schools.  It still isn't enough.

They discourage applicants another way.  In all other countries students typically enter medical school straight after high school.  But the US medical schools require a college degree, even if it's in something as unrelated to future medical practice as art history or Slavic languages.  This needlessly adds a crushing expense and burden of four extra years of college, thus taking at least 11 years post high school in the US to become a doctor, as opposed to seven elsewhere.  It also means four less years in these doctors' medical career.

Still, a lack of medical school graduates can be made up by foreign medical graduates who comprise over a fourth of US doctors (Table 108 of NCHS (CDC/HHS) Health publication, 2009).  A much worse restriction on supply is the national cap on medical residencies imposed by the ACGME and the RRCs (again, private doctor bodies). You can't practice in the US without such residency.

Then there was an amazing coup in freezing doctor supply through the passage by a Republican / Gingrich controlled Congress of the Balanced Budget Act of 1997.  Sneaked into this 537 page long Act are sections 4621 and 4623 that froze the future number of medical residents to 1996 levels, for whom Medicare had long paid almost the entire cost of training and salaries. The Medicare direct and indirect payment to hospitals for each of the roughly 100,000 residents, amount to $10 billion a year.  The freeze "saved" incremental payments of $1 billion or so, but resultant scarcities of doctors in subsequent years enabled excess fees hundreds of times greater.  This is like "saving" by denying a patient cheap medicines now, leading to hospitalization costing a hundredfold more.

As a result of these freezes on residents in the Act the doctor trade associations could now sit back and escape adverse notice.  Henceforth this restrictive legislation under the guise of savings would do the job for them by blocking the much needed doctor expansion.  Notably, the provisions capped the number of residents, rather than the total sum of money for payments, which remained very high per resident, averaging over $100K per year.  Why does this matter?

Because it prevents the HHS from obvious solutions like spreading the same pot of money over more residents, thereby increasing doctor supply at no extra cost.  For example, reducing Medicare payment from $100K annually per resident to $75K would allow a 33% increase of funded residencies with the same resources.  There will be plenty of takers.  Residents are eagerly sought by hospitals since they form a vital part of the operations. At an annual salary of $50K, they are remarkably cheap and underpaid.

Hospitals pay nothing for them presently, and will readily pay them $25K if the other $75K ($25K towards salaries and $50K for training and tuition) comes from Medicare.  Reducing Medicare payments per resident may also encourage privately funded or self-funded residencies, which will then face a less steep differential than the current $100K.  But as I said HHS hasn't been allowed this option even though it can dramatically expand doctor supply at no extra cost.

All this has created long standing shortages, with the US having only two thirds of the average doctor density in other developed countries.  This strikingly impacts the price and availability of services.  US doctors earn well over twice as much as their first world counterparts, both in absolute terms and relative to the average incomes in their respective countries.  It is one of the top three contributors to the inflated price of US health care, right up there with hospitals and providers saddled by inefficiencies, over-regulation and legal exposure, and a dysfunctional, complex private insurance system.

Not surprisingly, doctor groups and their experts dispute such nexus between doctor scarcities and inflated provider costs and earnings.  Their counter-arguments are flawed as described in my June 27 post.  There I also stressed the need to import doctors to address shortages, for at least the next ten years.  This is the lead time for any policy changes on domestic supply to have an impact.

But over the longer term these coveted and high paying physician positions can and should be filled by Americans.  The good news is that the solutions need little or no funding, are administratively straightforward and easy to put in place.  The biggest obstacle may be the opposition and fierce lobbying by doctors' bodies.  However, an enlightened administration and lawmakers should be able to do the right thing.  Especially if they are prodded by the increased (and overdue) public awareness of the issues involved, and the potential to add good American jobs.  Besides, if we have new laws that let in foreign doctors to ease shortages, doctor groups may no longer see any benefit from restricting domestic supply, and drop their opposition to such changes.

Here are the fixes that will make it easier and cheaper for talented Americans to pursue medical careers without compromising quality, and eventually internally meet all our doctor requirements:

1)  Medical schools should drop the college graduation requirement and like in all other countries, allow in high school graduates.  The core subject requirements can be met through prescribed AP courses in high schools, with the MCAT typically taken around the same time as the SAT.  The four years of time and resources for college education that is saved can instead be applied to residency training and the actual practice of medicine.

2) The expansion of medical schools and setting up of new ones should not be constrained by the AAMC and LCME with an eye to future demand for doctors.  They should only concern themselves with determining whether such institutions meet the appropriate academic and quality standards.  If the AAMC and LCME refuse to go along the government can replace them with other bodies that it sets up for control over establishing, expanding and accrediting medical schools.

3)  All residency caps imposed by the ACGME and the RRCs should be eliminated.  These bodies should only set professional standards and test procedures, and assess candidates, not determine the quantity of intake.  Like in other professions and disciplines, let the free market prevail. Teaching hospitals can determine how many residencies they want to offer keeping in mind their needs as well as the demand by candidates looking to their own future career prospects.  Of course, almost all residencies presently are wholly supported through public funding, although this shouldn't necessarily continue to be the case.  So residencies will still be constrained by the availability of such funds.  But the decisions on such funding (and consequent availability of residencies) will be made by committees of public representatives looking to ensure adequate future supply.  Not by private doctor bodies whose members benefit from scarcities.

4) The government should be prepared to counter resistance to (3) above, since the ACGME and the RRCs as private bodies may insist on capping residencies as they've been doing so far.  But they derive their power from the government recognizing them as the authority for assigning and filling residency positions.  If they do not cooperate, the government can set up other bodies to implement these functions, either in place of, or in parallel to, the ACGME and the RRCs.

5)  The ill-advised provisions of the Balanced Budget Act of 1997 that restrict the number of residencies should be repealed.  The funding for residencies by Congress will still be needed as it was before 1997, through normal appropriations.  The HHS can seek such funding based on projections of future need for doctors, estimated by an appropriate body of unbiased experts, while erring on the side of oversupply.

6) Doctor fears of future unemployment can be assuaged by guaranteeing their employment by public agencies, so long as they are qualified and competent.  Their minimum salary can be set at a decent, say, $150,000 - $200,000 annually depending on experience and specialty, and they can be employed in public clinics and the like.  Such salaried doctors patterned on UK's NHS will be cheap by US standards and save Medicare and Medicaid money if patients go to them instead of other doctors.  At the same time these salaried doctors will not be spending time chasing insurance payments or running a practice and consequently enjoy a better work-life balance.  Under such a public employment guarantee scheme, doctors will likely be less opposed to the other changes proposed here.

7) Finally, Americans can be quite naive and vulnerable to propaganda by special interests, as shown by public opinion against the March 2010 health reforms and even more so, the failed 1993 reforms.  So the government will need to stay on top and ahead on the message.

Can Superbugs Doom Medical Travel?

Domestic providers can gleefully celebrate.  the UK journal Lancet Infectious Diseases on August 11 has raised the alarm of antibiotic resistant bacteria being spread across the world by patients receiving medical treatment in India and Pakistan.  The article specifically voiced concerns about medical travel.  Mainstream media like the WSJ on August 12 have picked up the refrain. 

This has created an uproar in India, with political leaders crying foul and the Indian health establishment downplaying the report.  Ulterior motives and underhanded means have been ascribed to the drug company Wyeth (now part of Pfizer) that sponsored the study, and to western providers who tend to undermine medical travel.  Even a  lead author of this article, India based Kartheyan Kumarasamy who also published an earlier alert in March, said the warnings had been overblown.

"It's all hype and not as bad as it sounds," he said, adding "The conclusion that the bacteria was transmitted from India is hypothetical. Unless we analyze samples from across the globe to trace its origin, we can only speculate."  The LA Times on August 13 quoted US experts who called the threat overblown, and the NY Times on August 11 similarly had them "put it in perspective."

Professor Jagdish Bhagwati and I have conferred after his contact on this with policy makers in India as well as some American protectionists who regularly spar with him on trade issues.  Here are our views on four key aspects of this story:

Is the study exaggerating the dangers, and should the Western medical experts be trusted to give unbiased opinions?  Sadly, it will likely be several months or even years before the validity of the concerns raised by the study are strongly established one way or the other.  We should certainly listen to Western experts but be aware that medical travel is a threat and unwelcome competition for many Western providers.

They do not have a good track record of honest assessment.  Many have exploited patient anxieties over medical travel by playing up, distorting or even inventing risks of substandard care, lack of recourse if anything goes wrong, dying in a strange land, etc. For example, in my June 11, 2009 post I described how the NY times Op-Ed on medical travel by three US doctors was biased and misleading, while seemingly objective.

Another factor that should give their audience pause: Many of these experts are warning, not just against medical travel to India, but against medical travel abroad, period.  In sum, all these views should be carefully weighed against facts, potential conflicts of interest or industry allegiances, and counter-arguments.

Will this affect the flow and growth of medical tourism to India?  Many medical travelers and policy makers may subscribe to "When in doubt, don't."  So some impact on the patient traffic to India seems inevitable, even if fears (after a long time, to the point above) are ultimately found to be misplaced or highly exaggerated.  The world isn't always fair.  But the damage can be considerably mitigated and result in net benefits for Indians if effective and prompt action is taken by the health authorities and hospitals.  This brings us to the next question.

What corrective steps should be taken in India?  Antibiotic overuse and abuse is an endemic problem here, perhaps more so than in the West.  This is largely behind the creation of superbugs.  The current spotlight should jolt the Indian authorities into cleaning house and raising awareness among the general population of providers and patients.  It can become a case of the small medical travel tail wagging the large Indian health care dog, to everyone's benefit.

Indian health authorities can also join Western efforts to encourage and facilitate development of more new drugs to combat gram negative bacteria like the NDM-1 superbug.  Though two existing drugs are presently effective it is vital to have more in the pipeline.  Many experts have also stressed the need for the tracking, collection and transparency of data on outbreaks of drug resistant bacteria in hospitals and the general populace.

Tens of thousands of medical travelers from the West have been treated in India in the past year.  Indian health authorities can coordinate efforts to reach these former patients and offer free testing for pathogens in their home countries.  This will allow treatment and reassure against the risk of spread of superbugs in those countries, while building a database that guides further policy and actions.  This will involve some costs and the home countries are likely to agree to bear part or most of them.  Managed properly, this is certainly money well spent. 

The findings, whatever they are, should be widely shared and made public.  Honesty and transparency is likely the best policy that will build confidence and credibility over the long term.  Even more importantly, it's the right thing to do. 

Tertiary care hospitals popular with medical travelers can take effective steps like: a) Further strengthening or emphasizing infection control practices (though the top ones already have infection and complication rates that are far lower than in the US overall), b) Sharing verifiable statistics and practices with patients and health agencies, and c) Keeping and treating medical travelers separately (and perhaps by country of origin) from the Indian patients.  This isolation could be decried as discrimination or special treatment reserved for more privileged medical travelers if not handled properly.  But it can be truthfully positioned as an infection control measure, and a two way street that also protects Indian patients from pathogens (like MRSA) possibly carried by foreigners.

Should and will this story significantly damp medical travel in general?   Certainly not.  While India is logically a premier medical travel destination because of high quality and low cost of care, it is by no means the only one.  Medical travelers having misgivings about India can look to other destinations like Malaysia, Singapore or even Turkey as alternatives with many good JCI accredited facilities.  They are likely not as cheap as India but still offer enormous cost savings and offsetting advantages of better amenities and visitor friendly infrastructure outside of the hospitals and hotels.

So even in the worst case scenario, while the numbers may change slightly, our overall case for medical travel laid out in my May 13 post remains as strong and compelling as ever.

Costly Nelson Eye On Free Trade

In 1801 Horatio Nelson put a telescope to his blind eye to disregard signals to retreat from a naval battle.  His valor resulted in a crucial victory over the French fleet.  But the US turning a Nelson eye on solutions through free trade in health services is an act of cowardice and cynicism.

The "W" Bushies are also guilty of such neglect after the benefits of trade grew with the proliferation of world class medical facilities abroad, and the advent of the internet and better communications.  But the failure of Obama's team is more poignant when new laws covering the uninsured add to overall costs, as well as to the scarcity (and resultant leverage) of domestic providers.   

On trade in health services, Prof. Bhagwati and I in mid-2008 highlighted promising approaches and reiterated these in my December 2009 post. Four subsequent posts have elaborated on each category (or mode) and quantified potential savings.  The overall picture is compelling.

Highly qualified foreign doctors who have cleared the required US medical board exams can remotely consult through video-conference with a nurse at hand to assist with the patient, if necessary.  Diagnostic radiology does not even need direct patient contact.  This type of telemedicine can easily replace a fourth of primary care visits and diagnostic radiology readings, as well as a tenth of specialist visits, and all at a fifth of the cost.  This will not only help meet the crisis of additional demand due to health reforms and an aging populace, but also save $16B in 2006 terms.  This translates to $267B of savings over the next 10 years, $133B in public funds.  Even the states can authorize telemedicine within their areas, if the federal government doesn't act.

 In medical travel, US patients go to reputed hospitals abroad for major surgeries and medical procedures, often performed by US or UK trained doctors, at a fraction of the cost.  The movement can receive a huge fillip if lawmakers and the leadership reduce legal exposure through legislation, create protocols and procedures to select and qualify foreign hospitals, and identify procedures to be covered.  They should also send publicly funded patients and lay down the incentives for such patients to volunteer, so that private insurers can follow suit and get legal cover.  There are some 30 major procedures costing $300B in 2007 terms that are suitable for medical travel.  Assuming a fourth of these are off-shored the savings are $57B annually in 2007, which comes to $950B over the next 10 years, half of this in public funds.

The third way of trading in health services is to allow and encourage foreign entities to set up hospitals here.  This will allow under-served areas to be covered and introduce greater competition in MSAs, 90% of which face highly concentrated markets for hospitals.  But most importantly, this will bring badly needed reverse innovation to the egregiously expensive and inefficient US hospital system.  Policy changes needed include easing the process and shortening the time line for approval, creating standard guidelines and norms for facilitating this, and doing away with state regulations holding up such hospital creation.  The resultant savings due to competitive pressures and forced changes bringing US costs halfway down to European levels (or "just" 1.5 times instead of being twice as high) are $175B in 2007.  This comes to $2.73 trillion over the next 10 years, with $1.36 trillion of this in public funds.

The final piece is allowing highly qualified foreign doctors trained in one of the pre-approved list of accredited foreign institutions to practice in the US, without going through a US residency.  Other conditions can be imposed on them, like requiring them to clear the required US board exams, or tying their visas to practicing in designated under-served areas.  This will immediately boost doctor supply and should be undertaken in parallel with expanding the domestic pipeline that will start having an impact in 10 years. The US has 2.4 doctors per 1000 people compared to the OECD average of 3.4.  Boosting this US ratio from 2.4 to 3.0 will require 200,000 additional doctors, but this increased number will ensure better access by patients, as well as reduce the scarcity related prices for doctor services.  If these prices go down by 23.5% to the Medicare rates dictated by the (never implemented) SGR formula that are still generous by European standards, then the savings are $79B in 2007.  That is $1.26 trillion over the next 10 years, with $630B of this in public funds.

Therefore apart from the vital increase in access to badly needed services by US patients, the total savings from all four modes of trade are estimated at $5.2 trillion over the next 10 years.  Nearly half of this or $2.6 trillion will be in public funds.  To get some perspective, compare this with the $1 trillion projected added cost of the health reforms bill that created such a firestorm among Republicans.  Had they faced the trade option squarely (requiring them to face down their health industry lobbies which is why they didn't, of course) we'd have saved substantially even after the passage of health reforms.

There is hope yet.  Dr. Donald Berwick's appointment as Director of CMS (during Congressional recess, over Republican objections) is a positive development.  He has studied and talked extensively about the merits of foreign health systems, including Britain's.  If he can look not just at these systems, but to them for solutions (and carry the political will of the Obama team with him) then a lot of these desirable measures can become reality.

Trade of course is not the only answer.  Several unrelated domestic policy initiatives can make a huge difference (more on these later.)  But its potential and benefits are so large that Obama and the lawmakers should urgently look at it - with their good eye for a change - and act accordingly.

Medical Billing Tricks From Up Close

I had of course read accounts like the $75 to $129 hospital charges for a box of tissues. But even somewhat less eggregious billing tricks make you sit up when they affect immediate family. Yesterday I heard of two such instances from my father and brother who live in the (California) Bay Area.

Story 1: My father has been getting hormone suppressing injections of Lupron at Stanford Hospital to treat prostate cancer. A dose of about 22.5mg given every three months was being billed to Medicare for about $1,800. This price is somewhat on the high side considering that it is freely available online in the US for about $1,250. And in India a generic version made by the reputed Wockhardt company has been sold since 2002 for about $140 for the monthly 7.5mg dose, or $420 for three months. So we were surprised to learn that the price of this injection has been almost tripled to $4,800 for the three month dose.

Medicare paid almost the entire amount billed, so my father was hardly affected. But like him enough of my father's urologist's patients noticed these dramatically increased charges to Medicare to enquire about them. This doctor is excellent, and he called the hospital administrative point person to find out what was going on. He was advised "not to worry about it" as this "was a management decision." In other words, the hospital simply jacked up the rates and hit pay dirt, including with Medicare and the taxpayer's money.

Story 2: My brother told me his wife Deanne's car was rear-ended at high speed by a teen-age driver. Her Audi S4's rear as well front scrunched like an accordian (since the impact caused her car to hit the one in front of her) but did its job in protecting her. She heeded the advice of the paramedics called to the scene and was taken to El Camino Hospital to ensure there weren't internal or whiplash injuries. A doctor examined her and ordered a blood test to ensure she wasn't pregnant since X-Rays can harm a fetus. (I thought a simple pregnancy kit can do the job but never mind.) Deanne then had a couple of X-rays taken which didn't show anything abnormal, and was out within an hour of having first entered the emergency room.

The hospital bill for this was $5,000 though they received "only" $1,500 at the discounted insurance rates. The surprising part was the cost of the blood test. The same hospital has in the past ordered these at the adjoining Quest Diagnostics lab which bills $220 and receives a payment of $110 for these services. But this time the attending doctor ordered the test to be done in the hospital's own diagnostic lab. They billed over $1,000 - the amount a hapless uninsured or self-paying patient would have had to pay for this simple test, though Deanne's insurer paid at the "in-network" rate of $110.

Why should the hospital lab charge such exorbitant amounts, that ambushed uninsured or "out of network" payers would be fully on the hook for? Even the negotiated rate of $110 is quite high. In contrast, my in-laws in Pune, India pay only $30 for a far more extensive blood and urine routine. This even includes two home visits by the technician (since my in-laws are largely bed-ridden) to collect samples while fasting and then eating something.

Both of these stories show how providers can and do game the system. Patients and payers have a very limited set of hospitals in the vicinity, and these keep pricing opaque while raising rates at will. Reforms and regulations should put an end to such price gouging, and Medicare as a major payer should be allowed to directly negotiate drug prices. Yet the opponents of reform mislabel the present system as a "free market" and the recent medical overhaul will do little to check such practices. The budgetary crisis and pressures from the crushing health care burden will hopefully allow follow on measures that change the situation.

The first case of Lupron over-pricing also points to administrative lapses by Medicare. I'd have expected their payment systems to automatically flag claims where prices were so high relative to drug costs, rose suddenly or were out of whack with those from other institutions. That's even if Stanford Hospital had tried to disguise its moves through some clever upcoding to beat detection software. Donald Berwick has now been appointed Director of CMS and Obama has been in office for almost a year and a half. So such weaknesses should be fixed quickly - you can't keep blaming these on your preceding Bush's team forever.