MaxedOutMama
Monday, September 21, 2009
They Have Not The Common Touch
This post actually is about information in systems, most particularly in political and economic systems. However, I'm going to get there a long way around because I am not sure most people understand the relevance without examples.
So first, we have Dana Milbank's hilarious contemplation of Michelle Obama's yen for organic food (hat tip The Macho Response):
I read Milbank's article and I thought "The Trianon". It lies outside the scope of this post to discuss the political and economic events that led up to the French revolution, but it included unsuccessful wars and losses of foreign possessions, a government that was tipping into bankruptcy, multiple wheat crop failures, and a ruling class that had gradually split away from the military leaders. The society pancaked when the original hold-them-close strategy of the French royal house finally buckled from the disconnect.
Marie Antoinette's hameau and her habit of occasionally milking cows that had been specially groomed in stables that had been specially cleaned, in a villlage with real peasants which had been specially built, with an artificial watercourse which had been created by diverting water for miles (diverting water from working farms) were just a symbol of the gradual loss of understanding between the people and the royal family. She was used as a rallying cry because it was such an effective way to illustrate the real problem. I am not sure that most people can understand how bitterly offensive the upper middle class, the middle class and the peasantry would have found her behavior, but the milk falling into those royal receptacles was even pricier than $20 arugula. Marie Antoinette found a way to alienate absolutely every group in French society of that time, and although she was not bright, she seems to have been personally a somewhat generous individual. This makes her accomplishment even more notable.
If you are interested, the French text of Madame de la Tour du Pin's memoirs is available on Gutenberg (part 1, part 2). This is one of the most fascinating things I have ever read. There is an English translation, but it is out of print and very hard to find, plus it is under copyright. Her observations about the interactions between court, clergy and the military fascinated me.
Anyway, leaving the guillotines for the moment, let us take a big leap forward in time to our present day, and contemplate two WaPo articles about health care reform.
The first is about the Mayo clinic, and it critically analyzes the assertion in President Obama's health care speech that the Mayo model can deliver cost savings. Now although the title claims that the jury is still out, it is only out in Washington. The bottom line is that the Mayo clinic does not serve anywhere near a representative slice of the US population:
So perhaps now my readers can begin to understand why my reaction to Obama's speech was so bad. Either he is appallingly ignorant of the facts, or his plan is to strip funding from medical services for the poor and the elderly. The proposal in Obama's speech was to pay more to hospitals like Mayo that have good stats but may have created those stats by not providing services to the poor and the elderly. Is it right that a hospital like Olmstead with 29% of its patients on Medicaid should get paid less to care for those with the more severe problems, whereas Mayo would be paid more to pay for a clientele that has already been sorted to be in the upper socio-economic group?
Anyone who holds traditional democratic values and who understands what is being proposed ought to be just as upset as I am.
Whether Michelle Obama truly believes that the poor will be rushing to the Vermont Avenue organic farmer's market for their double food stamps and whether Barack Obama really desires to defund the medical system for the elderly and poor is a big question. "Dumb or dastardly?" is how I frame it to myself.
Dumb can be fixed, but only if the circle of advisors is changed. It doesn't help matters that President Obama is talking about a recovery when the recovery is increasingly jeopardized. (See this Calculated Risk post, and read on to CR's explanation of how consumer spending and business investment is correlated. I had earlier referred to the same relationship at the end of this post, but CR always has great graphs.) The best, most optimistic picture I can frame to myself is of an administration that has a severe reality disconnect but its heart in the right place. Oh, I want to believe, but this double food stamp stuff for $20 lb arugula is taxing my powers of belief.
This leads me to the second WaPo article discussing the average employee's confusion over what the employee is really paying for health care. The observation is true. The numbers are good - 80 million or so on Medicaid plus Medicare, and about 160 million with private insurance. However there are some gaping holes in the the article, because the high concentration of employment in small-to mid-sized employers is wreaking havoc on the private insurance market.
The primary factors driving the need for health care reform are:
Just as wacky funny money mortgage lending destroyed price signals and information within the system to produce a seemingly sudden collapse, destroying information in any system will produce sudden collapses.
Since the economic efficacy of insurance involves large pools of people paying average group cost rates, this destroys the fundamentals of the insurance system. Instead of creating a situation in which the maximum number of people can afford to pay the average cost of health care in the form of insurance, we are creating a situation in which it is formidably difficult to figure out what the average cost of treatment is, absolutely impossible to develop strategies to lower the average cost of treatment, and completely impossible for individuals or smaller groups to control their costs. Thus, since have stripped all the real cost information out of the system, insurance groups are competing on the basis of who they can exclude and their ability to negotiate rates with providers. And that is how a person like Mark who is not sick at all (see his comment on the prior post) finds himself shifted into a high risk pool. He is making a rational decision not to participate in that pool, because he is not a high-risk individual. Now when insurance becomes a logistically bad arrangement for a healthy, wealthy person like Mark, it should be obvious that we have a broken system.
So what broke the system?
Costs of treatment have to take into account the cost structures of the hospitals in the areas in which individuals who are insured live. But hospitals no longer bill by treatment, but by negotiated group rate. Hospitals only survive by taking the cost of providing services and allocating different costs for the same services to different groups.
Of course this leaves the uninsured or small-group insured individual in the worst situation, because they will not be paying any average cost of care at all to receive insurance. Instead, the only benefit such small groups or individuals receive from insurance are the negotiated rates.
The fact that size of negotiator has become the primary driver of costs provided to a particular group of insured persons has created a drive toward regional insurance monopolies, which are not a good way to induce economic competition.
The reason why group negotiating power has become the controlling factor for insurance companies is that the government insurance does not pay for the cost of care, especially in hospitals. If you doubt this, you need to read up on Medicare's DRG system, and also look up DRG rates. Here is the 2006 HHS summary for short patient stays by state. Take CA as an example. Medicare reimbursed CA hospital 9.1 billion for 45.8 billion worth of covered charges. You don't make that up by raising the cost of the parking. Medicaid pays less. At a minimum, each hospital has four sets of prices. One is top secret, and only they know. That is the actual cost of providing the service. Then there are Medicare/Medicaid prices, then negotiated insurance prices (which usually vary by insurer), then the price to the uninsured. On average, the price to the uninsured patient will be at least 5 times what Medicare will pay for the same service.
Thus, the cost a patient pays (or an insurer pays on behalf of the patient) at a particular hospital is mostly a function of the patient mix AND NOT THE PER PATIENT COST AT THE HOSPITAL. Consider two examples of a hospital providing services for pneumonia:
Hospital M:
Medicaid is paying about .8K. Medicare is paying about 2K. Medicare plus is 3K. If the hospital treats 1,000 patients annually, the cost of care is 5,000,000 or 5 million dollars, which is 5,000K
So which hospital is more efficient at delivering medical care? From an out-of-pocket patient's or a private insurer's point of view, Hospital M is far more efficient. Because they spend more, patients on the whole have better outcomes. The out of pocket cost paid by either a patient or insurer is lower. Thus you choose Hospital M whenever you can if you are one of these groups.
But from the administrative/total cost point of view, Hospital O is far more efficient. To control total costs, you need to get rid of Hospital M entirely, which of course you cannot do. It's a free society. Of course, if everyone is enrolled in the same medical service, Hospital M's seeming advantage is eliminated overnight, and its doctors, administrators and patients are abruptly going to get an unpleasant wake-up call. So are its patients, who have been used to a higher standard of care than they will now be receiving.
If you will contemplate this example, which is pretty close to reality, you'll understand why Mayo is ferociously lobbying against the public insurance option.
Moving back to Hospital M, because I do not want to be sued, why would Hospital M be agitating for higher payments from Medicare based on its (spurious) cost advantage? Aren't they in the driver's seat? Well, Hospital M's budget includes funds for some pretty high-powered actuaries, and Hospital M is well aware that on average, most treatment goes to older patients, and on average, the mix of patients it sees will inevitably shift toward higher percentages of Medicare patients in the years to come. This is a massive threat to Hospital M's finances. In fairness to Hospital M, we should point out that their better care and the lower patient load per doctor/nurse allows them to provide other services to the community and the nation, which Hospital O's spartan existence does not permit. So Hospital M is quite concerned about the following:
Over the next decade the number of individuals who will move onto Medicare vastly exceeds the number of individuals who will exit Medicare. The median householder age in this country is now 49. As of the 2007 ACS, 10.9% of the population was aged 55 to 64, 6.4% of the population was aged 65 to 74, and 6.1% of the population was 75 and over. Assume that all of the older persons die (although they won't), and just take the two younger cohorts. As of 2007 the retired Medicare population was 12.5% of the total population. In 2017, you'd expect over 16.5% of the population to be retired onto Medicare (allowing for some early deaths). And it is the ratios that matter. There is another group of people on Medicare - the disabled. As the center of population ages, the disability rate rises quite dramatically. Thus the Medicare portion (disabled plus retired) is likely to go over 17% of the total population.
To understand the implications for the medical system, you have to realize that older/disabled persons consume a much higher proportion of medical services than their proportion in the population. Thus below cost Medicare reimbursements will rapidly drive up the individual cost for service on the rest of the population. Compare the cost sharing for Hospital O and M to see how that might work out.
Adding more people to Medicaid is not helping. Although children have overall low medical costs, many of the SCHIP recipients added most recently were shifted from private insurance to government insurance. So the net load of total costs the private and uninsured population is carrying has escalated and will continue to escalate.
Further, private insurance provided through employers must go up proportionally to age of the insured population plus percent of costs picked up by private insurance from those insured in government programs, and as the ratio of the employed/total population drops, things are going to get very frightening very fast:
The recessions induce distortion, but if you look at the interims, we have been on a downward slope since 1999 or so. Mind you, most households with the householders under 75 STILL have one working person in them, and almost half of the income of such households derives from wages, salaries, and proceeds from self-employment.
Therefore any chittering about raising the retirement age is as dumb as $20 arugula with double food stamps and expecting that building 90,000 Mayo Clinics around the country is going to cut your medical costs.
In fairness to the Dems, at least they are trying to discuss reform. After his election, President Bush threw everything he had into trying to address this problem, and the Republicans in Congress wouldn't touch it. There is a reason why we now have a Democratically-controlled Congress, and it is a good reason. The results are not thrilling, but I personally don't think the Republicans would be willing to discuss the problem if they were in power at this time. In part, that might be due to Pelosi's drivel about mythical trust funds, but in part it was due to idiocy.
This post is awfully long already, but I have much more to discuss. It will have to be tomorrow, I suppose. One of the topics I want to address is the economic efficacy of insurance and what type of growth impact it can have.
So first, we have Dana Milbank's hilarious contemplation of Michelle Obama's yen for organic food (hat tip The Macho Response):
Obama, in her brief speech to the vendors and patrons, handled the affordability issue by pointing out that people who pay with food stamps would get double the coupon value at the market. Even then, though, it's hard to imagine somebody using food stamps to buy what the market offered: $19 bison steak from Gunpowder Bison, organic dandelion greens for $12 per pound from Blueberry Hill Vegetables, the Piedmont Reserve cheese from Everson Dairy at $29 a pound. Rounding out the potential shopping cart: $4 for a piece of "walnut dacquoise" from the Praline Bakery, $9 for a jumbo crab cake at Chris's Marketplace, $8 for a loaf of cranberry-walnut bread and $32 for a bolt of yarn.I am pretty sure the people leaving work would find the inconvenience of stopped traffic outweighed any potential joy gained from organic arugula at $20 a pound. I am also thinking I owe the NY Times reporter an apology for his worries over pricey lettuce. Sir, I apologize.
The first lady said the market would particularly appeal to federal employees in nearby buildings to "pick up some good stuff for dinner." Yet even they might think twice about spending $3 for a pint of potatoes when potatoes are on sale for 40 cents a pound at Giant. They could get nearly five dozen eggs at Giant for the $5 Obama spent for her dozen.
I read Milbank's article and I thought "The Trianon". It lies outside the scope of this post to discuss the political and economic events that led up to the French revolution, but it included unsuccessful wars and losses of foreign possessions, a government that was tipping into bankruptcy, multiple wheat crop failures, and a ruling class that had gradually split away from the military leaders. The society pancaked when the original hold-them-close strategy of the French royal house finally buckled from the disconnect.
Marie Antoinette's hameau and her habit of occasionally milking cows that had been specially groomed in stables that had been specially cleaned, in a villlage with real peasants which had been specially built, with an artificial watercourse which had been created by diverting water for miles (diverting water from working farms) were just a symbol of the gradual loss of understanding between the people and the royal family. She was used as a rallying cry because it was such an effective way to illustrate the real problem. I am not sure that most people can understand how bitterly offensive the upper middle class, the middle class and the peasantry would have found her behavior, but the milk falling into those royal receptacles was even pricier than $20 arugula. Marie Antoinette found a way to alienate absolutely every group in French society of that time, and although she was not bright, she seems to have been personally a somewhat generous individual. This makes her accomplishment even more notable.
If you are interested, the French text of Madame de la Tour du Pin's memoirs is available on Gutenberg (part 1, part 2). This is one of the most fascinating things I have ever read. There is an English translation, but it is out of print and very hard to find, plus it is under copyright. Her observations about the interactions between court, clergy and the military fascinated me.
Anyway, leaving the guillotines for the moment, let us take a big leap forward in time to our present day, and contemplate two WaPo articles about health care reform.
The first is about the Mayo clinic, and it critically analyzes the assertion in President Obama's health care speech that the Mayo model can deliver cost savings. Now although the title claims that the jury is still out, it is only out in Washington. The bottom line is that the Mayo clinic does not serve anywhere near a representative slice of the US population:
"It's not [Mayo's] model. It's their patients and money. If you have the money, you can attract good staff, good doctors, good nurses," said Richard A. Cooper, a professor of medicine at the University of Pennsylvania. "You are going to force hospitals to find ways to avoid taking care of poor people just because they are going to be penalized because poor people cost more."It's a long article, but the bottom line is that Mayo's efficiencies are gained from keeping their share of Medicaid patients extraordinarily low,
...
Cooper and others note that Mayo's other facilities, in Jacksonville, Fla., and Phoenix, have total spending rates that are roughly proportional to those in other hospitals in those areas. And across the Upper Midwest, per-patient spending is low, including at centers where doctors are not on salaries.
Even in Rochester, a city of 85,000, Mayo serves a higher-income echelon than the town's other hospital, Olmsted Medical Center. Just 5 percent of Mayo's hospital patients receive Medicaid, an exceptionally low figure, compared with 29 percent at Olmsted, where officials say they do more to help people in the community apply for Medicaid.and for limiting their services to Medicare patients. Mayo doesn't accept Medicare patients from outside the state unless they agree to pay more than Medicare for services. So they are not serving the old and the poor in proportion to the US population, although they do provide excellent medical care to those they do serve. Mayo has a large referral clientele, and it also has a big group of foreign patients. It would be rare indeed to find a hospital that didn't have better outcomes and cheaper services if the hospital's clientele were hugely shifted toward the young and the wealthy.
So perhaps now my readers can begin to understand why my reaction to Obama's speech was so bad. Either he is appallingly ignorant of the facts, or his plan is to strip funding from medical services for the poor and the elderly. The proposal in Obama's speech was to pay more to hospitals like Mayo that have good stats but may have created those stats by not providing services to the poor and the elderly. Is it right that a hospital like Olmstead with 29% of its patients on Medicaid should get paid less to care for those with the more severe problems, whereas Mayo would be paid more to pay for a clientele that has already been sorted to be in the upper socio-economic group?
Anyone who holds traditional democratic values and who understands what is being proposed ought to be just as upset as I am.
Whether Michelle Obama truly believes that the poor will be rushing to the Vermont Avenue organic farmer's market for their double food stamps and whether Barack Obama really desires to defund the medical system for the elderly and poor is a big question. "Dumb or dastardly?" is how I frame it to myself.
Dumb can be fixed, but only if the circle of advisors is changed. It doesn't help matters that President Obama is talking about a recovery when the recovery is increasingly jeopardized. (See this Calculated Risk post, and read on to CR's explanation of how consumer spending and business investment is correlated. I had earlier referred to the same relationship at the end of this post, but CR always has great graphs.) The best, most optimistic picture I can frame to myself is of an administration that has a severe reality disconnect but its heart in the right place. Oh, I want to believe, but this double food stamp stuff for $20 lb arugula is taxing my powers of belief.
This leads me to the second WaPo article discussing the average employee's confusion over what the employee is really paying for health care. The observation is true. The numbers are good - 80 million or so on Medicaid plus Medicare, and about 160 million with private insurance. However there are some gaping holes in the the article, because the high concentration of employment in small-to mid-sized employers is wreaking havoc on the private insurance market.
The primary factors driving the need for health care reform are:
- An ever-increasing percentage of the US population on government insurance plans that do not reimburse anywhere near the full cost of providing services, which
- Shifts ever more costs onto the privately insured group, and which
- Drops the economic return of insurance to many relatively well-off or higher-cost individuals without access to true group ratings, which
- Is causing the overall insurance participation rates to drop.
Just as wacky funny money mortgage lending destroyed price signals and information within the system to produce a seemingly sudden collapse, destroying information in any system will produce sudden collapses.
Since the economic efficacy of insurance involves large pools of people paying average group cost rates, this destroys the fundamentals of the insurance system. Instead of creating a situation in which the maximum number of people can afford to pay the average cost of health care in the form of insurance, we are creating a situation in which it is formidably difficult to figure out what the average cost of treatment is, absolutely impossible to develop strategies to lower the average cost of treatment, and completely impossible for individuals or smaller groups to control their costs. Thus, since have stripped all the real cost information out of the system, insurance groups are competing on the basis of who they can exclude and their ability to negotiate rates with providers. And that is how a person like Mark who is not sick at all (see his comment on the prior post) finds himself shifted into a high risk pool. He is making a rational decision not to participate in that pool, because he is not a high-risk individual. Now when insurance becomes a logistically bad arrangement for a healthy, wealthy person like Mark, it should be obvious that we have a broken system.
So what broke the system?
Costs of treatment have to take into account the cost structures of the hospitals in the areas in which individuals who are insured live. But hospitals no longer bill by treatment, but by negotiated group rate. Hospitals only survive by taking the cost of providing services and allocating different costs for the same services to different groups.
Of course this leaves the uninsured or small-group insured individual in the worst situation, because they will not be paying any average cost of care at all to receive insurance. Instead, the only benefit such small groups or individuals receive from insurance are the negotiated rates.
The fact that size of negotiator has become the primary driver of costs provided to a particular group of insured persons has created a drive toward regional insurance monopolies, which are not a good way to induce economic competition.
The reason why group negotiating power has become the controlling factor for insurance companies is that the government insurance does not pay for the cost of care, especially in hospitals. If you doubt this, you need to read up on Medicare's DRG system, and also look up DRG rates. Here is the 2006 HHS summary for short patient stays by state. Take CA as an example. Medicare reimbursed CA hospital 9.1 billion for 45.8 billion worth of covered charges. You don't make that up by raising the cost of the parking. Medicaid pays less. At a minimum, each hospital has four sets of prices. One is top secret, and only they know. That is the actual cost of providing the service. Then there are Medicare/Medicaid prices, then negotiated insurance prices (which usually vary by insurer), then the price to the uninsured. On average, the price to the uninsured patient will be at least 5 times what Medicare will pay for the same service.
Thus, the cost a patient pays (or an insurer pays on behalf of the patient) at a particular hospital is mostly a function of the patient mix AND NOT THE PER PATIENT COST AT THE HOSPITAL. Consider two examples of a hospital providing services for pneumonia:
Hospital M:
- 5% of its patients are Medicaid.
- 10% of its patients are Medicare.
- 15% of its patients are Medicare but have agreed to pay over Medicare rates.
- 45% of patients are privately insured.
- 35% of the patients are paying out of pocket.
Medicaid is paying about .8K. Medicare is paying about 2K. Medicare plus is 3K. If the hospital treats 1,000 patients annually, the cost of care is 5,000,000 or 5 million dollars, which is 5,000K
- Medicaid: 50 patients, total reimbursement $800 X 50 = 40K, percent of treatment cost 0.8%
- Medicare: 100 patients, total reimbursement $2,000 X 100 = 200K, percent of treatment costs 4%
- Medicare plus: 150 patients, total reimbursement $3,000 X 150 = 450K, percent of treatment costs 9% (now we are up to 30% of the patients, but we have only received 13.8% of the cost of treatment!)
- Private insurance: 450 patients, average payment 6K, total reimbursement 2,700K, percent of treatment costs 54%.
- Leftover cost has to be paid by the out of pocket group. 5,000K - 3390K = 1,610K/350 = 4.6k per patient, percent of treatment cost is 32%. Actually what you do is charge about 6-7K, because you aren't going to collect it all from many of these people. It depends on your mix. Actually, what you do is charge your rich patients a different fee, but we don't talk about that.
- 25% of its patients are on Medicaid
- 45% of its patients are on Medicare
- 10% of its patients are privately insured
- 20% of its patients are uninsured.
- Medicaid, 250 patients, total reimbursement $800 X 250 = 200K, percent of treatment cost 6.6%
- Medicare, 450 patients, total reimbursement $2,000 X 450 = 900K, percent of treatment cost 30%.
- Privately insured, 100 patients, total reimbursement $6,500 X 100 = 650K, percent of treatment cost 21.6%
- Uninsured, 200 patients who have to pick up the balance of 1,250K. Per person cost is 6.25K - considerably more than Hospital M's cost, because of the patient mix. Because the per person cost is higher, any patient who can choose and who will pay tries to go to Hospital M. Therefore, your uninsured population will pay at much lower rates than Hospital M's. You probably have to charge about 25K for a 3K service to get your money.
So which hospital is more efficient at delivering medical care? From an out-of-pocket patient's or a private insurer's point of view, Hospital M is far more efficient. Because they spend more, patients on the whole have better outcomes. The out of pocket cost paid by either a patient or insurer is lower. Thus you choose Hospital M whenever you can if you are one of these groups.
But from the administrative/total cost point of view, Hospital O is far more efficient. To control total costs, you need to get rid of Hospital M entirely, which of course you cannot do. It's a free society. Of course, if everyone is enrolled in the same medical service, Hospital M's seeming advantage is eliminated overnight, and its doctors, administrators and patients are abruptly going to get an unpleasant wake-up call. So are its patients, who have been used to a higher standard of care than they will now be receiving.
If you will contemplate this example, which is pretty close to reality, you'll understand why Mayo is ferociously lobbying against the public insurance option.
Moving back to Hospital M, because I do not want to be sued, why would Hospital M be agitating for higher payments from Medicare based on its (spurious) cost advantage? Aren't they in the driver's seat? Well, Hospital M's budget includes funds for some pretty high-powered actuaries, and Hospital M is well aware that on average, most treatment goes to older patients, and on average, the mix of patients it sees will inevitably shift toward higher percentages of Medicare patients in the years to come. This is a massive threat to Hospital M's finances. In fairness to Hospital M, we should point out that their better care and the lower patient load per doctor/nurse allows them to provide other services to the community and the nation, which Hospital O's spartan existence does not permit. So Hospital M is quite concerned about the following:
Over the next decade the number of individuals who will move onto Medicare vastly exceeds the number of individuals who will exit Medicare. The median householder age in this country is now 49. As of the 2007 ACS, 10.9% of the population was aged 55 to 64, 6.4% of the population was aged 65 to 74, and 6.1% of the population was 75 and over. Assume that all of the older persons die (although they won't), and just take the two younger cohorts. As of 2007 the retired Medicare population was 12.5% of the total population. In 2017, you'd expect over 16.5% of the population to be retired onto Medicare (allowing for some early deaths). And it is the ratios that matter. There is another group of people on Medicare - the disabled. As the center of population ages, the disability rate rises quite dramatically. Thus the Medicare portion (disabled plus retired) is likely to go over 17% of the total population.
To understand the implications for the medical system, you have to realize that older/disabled persons consume a much higher proportion of medical services than their proportion in the population. Thus below cost Medicare reimbursements will rapidly drive up the individual cost for service on the rest of the population. Compare the cost sharing for Hospital O and M to see how that might work out.
Adding more people to Medicaid is not helping. Although children have overall low medical costs, many of the SCHIP recipients added most recently were shifted from private insurance to government insurance. So the net load of total costs the private and uninsured population is carrying has escalated and will continue to escalate.
Further, private insurance provided through employers must go up proportionally to age of the insured population plus percent of costs picked up by private insurance from those insured in government programs, and as the ratio of the employed/total population drops, things are going to get very frightening very fast:
The recessions induce distortion, but if you look at the interims, we have been on a downward slope since 1999 or so. Mind you, most households with the householders under 75 STILL have one working person in them, and almost half of the income of such households derives from wages, salaries, and proceeds from self-employment.
Therefore any chittering about raising the retirement age is as dumb as $20 arugula with double food stamps and expecting that building 90,000 Mayo Clinics around the country is going to cut your medical costs.
In fairness to the Dems, at least they are trying to discuss reform. After his election, President Bush threw everything he had into trying to address this problem, and the Republicans in Congress wouldn't touch it. There is a reason why we now have a Democratically-controlled Congress, and it is a good reason. The results are not thrilling, but I personally don't think the Republicans would be willing to discuss the problem if they were in power at this time. In part, that might be due to Pelosi's drivel about mythical trust funds, but in part it was due to idiocy.
This post is awfully long already, but I have much more to discuss. It will have to be tomorrow, I suppose. One of the topics I want to address is the economic efficacy of insurance and what type of growth impact it can have.
Comments:
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This post is awfully long already, but I have much more to discuss.
It strikes me is that hospital O faces the same situation as a sub-prime lender. They both slam into the vicious cycle that their rate structure starts inducing default. You charge someone $25,000 for an X-ray and bone-set, you can be pretty sure 1 in 3 ain't gonna pay. Charging $35,000 to cover that one that ain't paying may then result in two that ain't paying.
It is fitting. We're all sub-prime now.
It strikes me is that hospital O faces the same situation as a sub-prime lender. They both slam into the vicious cycle that their rate structure starts inducing default. You charge someone $25,000 for an X-ray and bone-set, you can be pretty sure 1 in 3 ain't gonna pay. Charging $35,000 to cover that one that ain't paying may then result in two that ain't paying.
It is fitting. We're all sub-prime now.
# posted by 
: 2:26 PM
: 2:26 PM
Dumb can be fixed, but only if the circle of advisors is changed.
"Ah, if only the Czar knew of this."
Some corner of my brain is desperately attempting to hold onto the "earnest, but ill-informed" hypothesis. I'm not sure it matters.
Let's face it--President Obama was raised on Marxism (according to his own bio). His college years and formative professional years were largely spent with some variety of radical leftist mentor or another.
Perhaps he's gotten beyond that. Perhaps he has moderated as he gained age and wealth. But he still calls himself a "community organizer" with all it implies. The man's entire life has trained him not to reality-test his core beliefs, except perhaps against public-opinion polls. Well-meaning or not, that's going to get people killed.
Perhaps the appropriate quote is: Apres moi, le deluge.
"Ah, if only the Czar knew of this."
Some corner of my brain is desperately attempting to hold onto the "earnest, but ill-informed" hypothesis. I'm not sure it matters.
Let's face it--President Obama was raised on Marxism (according to his own bio). His college years and formative professional years were largely spent with some variety of radical leftist mentor or another.
Perhaps he's gotten beyond that. Perhaps he has moderated as he gained age and wealth. But he still calls himself a "community organizer" with all it implies. The man's entire life has trained him not to reality-test his core beliefs, except perhaps against public-opinion polls. Well-meaning or not, that's going to get people killed.
Perhaps the appropriate quote is: Apres moi, le deluge.
AllanF - you pegged it. Just as there is a level of credit risk that increases in interest rates can't cover, there is a level of non-insurance (or below cost government insurance) in the system that will force private costs so high that more and more people exit the insurance system.
But whatever we do, we can't throw the old folks and the poor people out on the sidewalk (although already many Medicaid patients do essentially get sidewalk-discharged).
This is why I think the GOP is missing the mark. Until you address the problem of cost-shifting, you can't make the market work. Staggering through the stuff I have done for the Dems has been enough of a strain that I haven't kept up with any Republican proposals, so I may have missed something.
Without fixing that basic problem, you are not going to have a market solution. It's not possible.
But whatever we do, we can't throw the old folks and the poor people out on the sidewalk (although already many Medicaid patients do essentially get sidewalk-discharged).
This is why I think the GOP is missing the mark. Until you address the problem of cost-shifting, you can't make the market work. Staggering through the stuff I have done for the Dems has been enough of a strain that I haven't kept up with any Republican proposals, so I may have missed something.
Without fixing that basic problem, you are not going to have a market solution. It's not possible.
Neil - I want to believe too, and I suppose I should admit that my political worldview took a major punch in the solar plexus when I watched the health care speech to Congress.
What's most straining my credulity is that Michelle Obama worked for the University of Chicago Hospitals, and so I would think she would understand more of this.
She doesn't seem to have had much in the way of operational exposure according to Wiki's job titles for her, so maybe not.
Nonetheless, they are both bright, educated people, and I can't imagine not imbibing some of the info. I also can't imagine that she doesn't have opinions and that they don't talk about this.
What's most straining my credulity is that Michelle Obama worked for the University of Chicago Hospitals, and so I would think she would understand more of this.
She doesn't seem to have had much in the way of operational exposure according to Wiki's job titles for her, so maybe not.
Nonetheless, they are both bright, educated people, and I can't imagine not imbibing some of the info. I also can't imagine that she doesn't have opinions and that they don't talk about this.
I am humbled with your ability to review and comment on complicated issues.
The point about the Democrats discussing a difficult topic I think is excellent, and one both sides of the discussion should appreciate. Perhaps that is our gift here. G-d knows we need one.
The point about the Democrats discussing a difficult topic I think is excellent, and one both sides of the discussion should appreciate. Perhaps that is our gift here. G-d knows we need one.
Puts the public option in perspective, doesn't it? It's all about making the private insurance/ininsured costs so high that the system collapses.
CF - IMO, at least we are sneaking up to the problem whereas before we were fleeing from it. Since there is only one US medical system, the maxim "I don't have to run faster than the bear, I just have to run faster than you" was not applicable, although the GOP appeared to be applying it.
Therefore, so far, the Democrats have quite an edge on this issue for me. However, they'll lose that edge if they try to snuff out debate and do another stimulus bill type deal.
Real reform takes negotiation and assessment.
Therefore, so far, the Democrats have quite an edge on this issue for me. However, they'll lose that edge if they try to snuff out debate and do another stimulus bill type deal.
Real reform takes negotiation and assessment.
John - well, the "public option" won't really be different than insurance companies if it is not subsidized and if it negotiates on the same basis as private insurance carriers. It might be a good thing if it defused the confusion in the public mind. A lot of people believe that Medicare is "efficient" because Medicare controls the prices Medicare is charged. Really what that means is that private insurance pays for Medicare.
But how can that work? The reason private insurance is tending toward regional monopolies is precisely due to negotiating power. How can a public option that is supposed to cover only 5% of the population possibly negotiate for equivalent rates?
That is the reason the Senate proposals are steering away from a public option. It's either huge, or it's useless, or it's subsidized by law (preferential price treatment) or by taxpayer dollars.
But how can that work? The reason private insurance is tending toward regional monopolies is precisely due to negotiating power. How can a public option that is supposed to cover only 5% of the population possibly negotiate for equivalent rates?
That is the reason the Senate proposals are steering away from a public option. It's either huge, or it's useless, or it's subsidized by law (preferential price treatment) or by taxpayer dollars.
Mom,the obama's are Apparatchiks and as part of our protected political class CAN NOT understand the points you are trying to make,it is a cognitive failure (dissonance?) that allows them to live the way they do.As far as Mrs Obama's ties to the U of C hospitals i read somewhere that the position was created for her as a way to funnel $ to their family.Arugula makes a decent ground cover in some parts of california,but why would anyone want to eat it?
# posted by : 7:38 PM
: 7:38 PM
"And that is how a person like Mark who is not sick at all (see his comment on the prior post) finds himself shifted into a high risk pool. He is making a rational decision not to participate in that pool, because he is not a high-risk individual. Now when insurance becomes a logistically bad arrangement for a healthy, wealthy person like Mark, it should be obvious that we have a broken system."
I'd like to think I'm making a rational decision, but I'd really like the VERY HIGH deductible coverage even though it would have cost me $261 a month. I'm too stubborn to pay $1000 a month for even worse coverage, especially since I have no medical conditions requiring treatment.
Heck, I'd easily pay $100 a month to have health insurance that made me pay EVERYTHING out of pocket. How crazy is that? At least I would only have to pay the negotiated rates if I had to go to the hospital. As it stands now though, by having to self-insure I have basically painted a giant red target on myself.
That said, it would take a $24k hospital (roughly the cost of my one day gall bladder surgery if memory serves had I not had insurance) event every other year to justify my "high risk" $1000 premiums, and even then I'd owe a lot out of pocket. I'm therefore gambling I won't have a million dollar condition. However, even if I did the insurance company would be putting a crack team of professionals on my case to see if there was a way to deny my claims. Of that I am quite certain.
By the way, my word verification was "andst". So close! I'm actually feeling angst, lol. Sigh.
I'd like to think I'm making a rational decision, but I'd really like the VERY HIGH deductible coverage even though it would have cost me $261 a month. I'm too stubborn to pay $1000 a month for even worse coverage, especially since I have no medical conditions requiring treatment.
Heck, I'd easily pay $100 a month to have health insurance that made me pay EVERYTHING out of pocket. How crazy is that? At least I would only have to pay the negotiated rates if I had to go to the hospital. As it stands now though, by having to self-insure I have basically painted a giant red target on myself.
That said, it would take a $24k hospital (roughly the cost of my one day gall bladder surgery if memory serves had I not had insurance) event every other year to justify my "high risk" $1000 premiums, and even then I'd owe a lot out of pocket. I'm therefore gambling I won't have a million dollar condition. However, even if I did the insurance company would be putting a crack team of professionals on my case to see if there was a way to deny my claims. Of that I am quite certain.
By the way, my word verification was "andst". So close! I'm actually feeling angst, lol. Sigh.
Tom Stone,
"Mom,the obama's are Apparatchiks and as part of our protected political class CAN NOT understand the points you are trying to make,it is a cognitive failure (dissonance?) that allows them to live the way they do."
Amusing anecdote... I posted a link to "cognitive dissonance" in the comment section of my blog recently. There seems to be a lot of that going around. My use was in response to a witty comment by one of my regulars.
He was speaking of debt and how we're held hostage. He called it the "Stock-Home Syndrome". Very clever!
"Mom,the obama's are Apparatchiks and as part of our protected political class CAN NOT understand the points you are trying to make,it is a cognitive failure (dissonance?) that allows them to live the way they do."
Amusing anecdote... I posted a link to "cognitive dissonance" in the comment section of my blog recently. There seems to be a lot of that going around. My use was in response to a witty comment by one of my regulars.
He was speaking of debt and how we're held hostage. He called it the "Stock-Home Syndrome". Very clever!
Mark,I was not trying to be amusing,but to understand.It led me to recall my short 2 years in the music industry and to wonder how much Obama's rather superficial resemblance to Tiger Woods affected the decision to "fast-track" his career.The "Right" demographic is crucial to marketing in that business as it is in politics.So we have the "Milli Vanilli" president.Joy.Oh,and I am "High Risk" due to a mosquito bite and a drunk driver and find that it simplifies my health care decisions.Regular exercise,good diet,and if duct tape won't fix it,TS.
# posted by : 5:57 AM
: 5:57 AM
"At least I would only have to pay the negotiated rates"
Yeah, I have one of those ridiculous catastrophic plans. One of my motivations was to make sure I wouldn't have to pay the "rack" rates.
No pre-existings, two adults 35 & 36 and two kids 2 & 5, and we pay $415/month for a $10k annual deductible. The saving grace (if you can call it that) is we have a rider that lowers the deductible to $100 in case of an accident. I forget the exact details, but lowering the deductible to something like $2500 cost an extra $5000/yr. I figured it is worth crossing my fingers for a few years and banking the premium savings for years when we actually do have high costs.
Yeah, I have one of those ridiculous catastrophic plans. One of my motivations was to make sure I wouldn't have to pay the "rack" rates.
No pre-existings, two adults 35 & 36 and two kids 2 & 5, and we pay $415/month for a $10k annual deductible. The saving grace (if you can call it that) is we have a rider that lowers the deductible to $100 in case of an accident. I forget the exact details, but lowering the deductible to something like $2500 cost an extra $5000/yr. I figured it is worth crossing my fingers for a few years and banking the premium savings for years when we actually do have high costs.
# posted by : 7:24 AM
: 7:24 AM
AllanF,
"I forget the exact details, but lowering the deductible to something like $2500 cost an extra $5000/yr."
Amazing, isn't it?
Costs $5000 for you to lower your deducible by $7500? In order to make that math a good deal, you've pretty much got to have hospital stay already written on your calendar.
"I forget the exact details, but lowering the deductible to something like $2500 cost an extra $5000/yr."
Amazing, isn't it?
Costs $5000 for you to lower your deducible by $7500? In order to make that math a good deal, you've pretty much got to have hospital stay already written on your calendar.
Until you address the problem of cost-shifting, you can't make the market work.
That is precisely WHY the Republicans won't talk about it. To talk about it properly requires analysis of the kind you did which 97% of human beings have no patience for. That kind of argument versus "Make the rich pay for it" will lose in opinion polls EVERY time. The only practical political choices are to either promise things that can't be delivered or to keep one's mouth shut.
That is precisely WHY the Republicans won't talk about it. To talk about it properly requires analysis of the kind you did which 97% of human beings have no patience for. That kind of argument versus "Make the rich pay for it" will lose in opinion polls EVERY time. The only practical political choices are to either promise things that can't be delivered or to keep one's mouth shut.
# posted by : 10:20 AM
: 10:20 AM
Allan - you're describing what I designate "fake" insurance, and as you say, some of those policies really exist purely for the sake of not being charged the uninsured rate, but instead the negotiated group rate.
It sounds like at least your plan will pay out if you have say 50K in bills. Some of the worst fake policies have both a high deductible and low cap (I recently saw a woman on DU who had a cap under 20K). I think she paid out 10K a year before she got anything back. Obviously the only benefit was for lower charges.
Needless to say, a lot of people are dropping insurance if this is the best deal they can get.
One of the easiest fixes would be to require all hospitals bill uninsured and insured the same rates.
Because so many people are in situations like this, I truly wonder whether a fine will be enough to get people to buy coverage. The numbers I have seen in the Congressional proposals are wildly off. If you are going to guarantee more benefits and make insurance companies accept all comers, obviously premiums are going to rise sharply for many people and businesses now insured.
I am not being political about this, and I do give the Dems major credit for being willing to sit down and deal with the problem. However, given the structural problem, how can private insurance costs be reduced if Medicare and Medicaid coverage rates continue to rise in proportion to the privately insured population?
It sounds like at least your plan will pay out if you have say 50K in bills. Some of the worst fake policies have both a high deductible and low cap (I recently saw a woman on DU who had a cap under 20K). I think she paid out 10K a year before she got anything back. Obviously the only benefit was for lower charges.
Needless to say, a lot of people are dropping insurance if this is the best deal they can get.
One of the easiest fixes would be to require all hospitals bill uninsured and insured the same rates.
Because so many people are in situations like this, I truly wonder whether a fine will be enough to get people to buy coverage. The numbers I have seen in the Congressional proposals are wildly off. If you are going to guarantee more benefits and make insurance companies accept all comers, obviously premiums are going to rise sharply for many people and businesses now insured.
I am not being political about this, and I do give the Dems major credit for being willing to sit down and deal with the problem. However, given the structural problem, how can private insurance costs be reduced if Medicare and Medicaid coverage rates continue to rise in proportion to the privately insured population?
What's most straining my credulity is that Michelle Obama worked for the University of Chicago Hospitals, and so I would think she would understand more of this.
She worked as a LAWYER, not as an accountant.
One of my sisters works in legal at a south Chicago hospital, my best friend works on billing projects in IT at UofC Hospital, and another sister works at Harvard U. Hospitals. (And I have 2 more siblings in health care profssions.)
I can assure you that the lawyers at a hospital are the least likely in the entire organization to understand things like socioeconomic mixture of patients - if anything they are they one group predisposed to complete DENIAL that such a topic is even valid. Even when the lawyers DO understand the topic, they will NEVER EVER publicly admit that patients of different socioeconomic means are treated differently by the organization - it would invite lawsuits.
Systems of any kind never get created well if even one lawyer is in the design meetings.
She worked as a LAWYER, not as an accountant.
One of my sisters works in legal at a south Chicago hospital, my best friend works on billing projects in IT at UofC Hospital, and another sister works at Harvard U. Hospitals. (And I have 2 more siblings in health care profssions.)
I can assure you that the lawyers at a hospital are the least likely in the entire organization to understand things like socioeconomic mixture of patients - if anything they are they one group predisposed to complete DENIAL that such a topic is even valid. Even when the lawyers DO understand the topic, they will NEVER EVER publicly admit that patients of different socioeconomic means are treated differently by the organization - it would invite lawsuits.
Systems of any kind never get created well if even one lawyer is in the design meetings.
# posted by : 10:37 AM
: 10:37 AM
One of the easiest fixes would be to require all hospitals bill uninsured and insured the same rates.
If it would actually fix anything the hospitals would already do it.
A hospital's biggest problem is not getting reimbursed, and those problems are biggest in the uninsured and in the government-insured classes. The uninsured not paying is a risk in any repair business. Hospitals have it even worse because the uninsured are not only a higher risk of not paying, they are also a higher risk of suing for damages.
If it would actually fix anything the hospitals would already do it.
A hospital's biggest problem is not getting reimbursed, and those problems are biggest in the uninsured and in the government-insured classes. The uninsured not paying is a risk in any repair business. Hospitals have it even worse because the uninsured are not only a higher risk of not paying, they are also a higher risk of suing for damages.
# posted by : 10:57 AM
: 10:57 AM
I've heard of the very low capped plans, but never saw one when I was shopping. My plan has a $3M lifetime cap and there is no co-pay after the deductible is met. In retrospect, I think I should have went with a 10% co-pay and bet that I could convince the hospital to waive my portion if it ever came to that.
Anyway, I would call my plan self-insurance with re-insurance (but I have pedantic tendencies). And actually saying that out loud to 95% of people would be greeted with blank stares. I do wonder every month if the plan is worth having. I rationalize that it will always get me in the door when the doc's ask if I'm insured, and I figure I'm not being flagrantly ripped-off by the rack rates.
BTW, the insurance co pushed really hard for me to pay for a lifetime increase to $8M. I think it was "just" an extra $25/month. Um, yeah as if. This ain't life insurance, I can't believe they actually have takers on that one. After the third emphatic no, they've since stopped the telemarketing.
Anyway, I would call my plan self-insurance with re-insurance (but I have pedantic tendencies). And actually saying that out loud to 95% of people would be greeted with blank stares. I do wonder every month if the plan is worth having. I rationalize that it will always get me in the door when the doc's ask if I'm insured, and I figure I'm not being flagrantly ripped-off by the rack rates.
BTW, the insurance co pushed really hard for me to pay for a lifetime increase to $8M. I think it was "just" an extra $25/month. Um, yeah as if. This ain't life insurance, I can't believe they actually have takers on that one. After the third emphatic no, they've since stopped the telemarketing.
# posted by : 11:54 AM
: 11:54 AM
Charles - well, of course the basic fix is for the government insurance plans to stop underpaying so much.
And the real problem for the hospitals is that they are mandated to treat by law if a person is dangerously ill, and they are mandated by law to be underpaid for a good quotient of their patients, plus they get sued for everything.
No, if you are going to reform, you have to really reform. The current proposals won't work because they don't really reform.
And the real problem for the hospitals is that they are mandated to treat by law if a person is dangerously ill, and they are mandated by law to be underpaid for a good quotient of their patients, plus they get sued for everything.
No, if you are going to reform, you have to really reform. The current proposals won't work because they don't really reform.
MOM - I don't give the Republicans any credit here, but you are much easier on the Democrats than I would be.
There's only one good thing to come out of this. I have thought for a long time that the only thing that would do any good at all for the health-care industry is if most people have to start paying for their own health care out of money that they at least have an ownership stake in. Kind of like, I don't know... what do you call it... a market?
I've never been able to bring the idea up without being laughed at, or worse. All of a sudden now, even died-in-the-wool Democrats of my acquaintance are not just willing to listen, but are advancing the idea themselves. I guess being forced to stare into the abyss is having an effect.
Unfortunately, that's the one point that the Democrats in Congress (and our President) do not consider to be negotiable. The government must gain or at least retain control over our health-care spending.
There's only one good thing to come out of this. I have thought for a long time that the only thing that would do any good at all for the health-care industry is if most people have to start paying for their own health care out of money that they at least have an ownership stake in. Kind of like, I don't know... what do you call it... a market?
I've never been able to bring the idea up without being laughed at, or worse. All of a sudden now, even died-in-the-wool Democrats of my acquaintance are not just willing to listen, but are advancing the idea themselves. I guess being forced to stare into the abyss is having an effect.
Unfortunately, that's the one point that the Democrats in Congress (and our President) do not consider to be negotiable. The government must gain or at least retain control over our health-care spending.
Neil - have I REALLY been easy on the Democrats? I think I am making a lot of fair criticisms that must sting unbearably to many dedicated and deeply decent Democrats.
In a way, I think they've shot themselves in the foot. Their leadership has lied and misrepresented the situation in the recent past (when Bush was trying to build momentum for some reform). Now they are fighting both their previous misrepresentations and the real problem.
I think Charles is wrong and that most people can understand the issues if the issues are discussed fairly. I also notice that there is much more coverage popping up in the media on the topic.
I stick to my position that the Republicans just screamed and ran like girls. They could have sat down and discussed the underlying problems, and then they'd be in a much better position now. But no, they were afraid to touch it.
The bottom line is that for Americans to have any hope that this problem would be addressed, they had to elect Democrats. They did. If Americans really hate what Democrats come up with, they'll holler, tea bag, and turn around and vote the GOP or some third party back in.
I am not psychologically able to vow eternal fidelity to one party or another, but I will say that if a Congressional party refuses to take up a genuinely urgent issue, that Congressional party should not be surprised when they lose control.
In a way, I think they've shot themselves in the foot. Their leadership has lied and misrepresented the situation in the recent past (when Bush was trying to build momentum for some reform). Now they are fighting both their previous misrepresentations and the real problem.
I think Charles is wrong and that most people can understand the issues if the issues are discussed fairly. I also notice that there is much more coverage popping up in the media on the topic.
I stick to my position that the Republicans just screamed and ran like girls. They could have sat down and discussed the underlying problems, and then they'd be in a much better position now. But no, they were afraid to touch it.
The bottom line is that for Americans to have any hope that this problem would be addressed, they had to elect Democrats. They did. If Americans really hate what Democrats come up with, they'll holler, tea bag, and turn around and vote the GOP or some third party back in.
I am not psychologically able to vow eternal fidelity to one party or another, but I will say that if a Congressional party refuses to take up a genuinely urgent issue, that Congressional party should not be surprised when they lose control.
MOM, it's true you've been critical of the Democrats. I guess I just don't give either party any credit here at all--the Democrats will start the conversation, sure, but the answer is always more of the same thing that got us in this position. They'll never propose anything that actually changes the equation--it's the source of their power, and the only way they know.
The Republicans, as you say, are pansies. They've never been able to bring themselves to fully articulate an alternative to the tottering New Deal state.
The end result is bound to be fiscal collapse, of one kind or another. Unless somebody steps up to the plate. I like the social safety net as much as the next guy, but the system we've got was set up to work with a fecund, industrializing, exporting nation. It's pretty easy to argue that the welfare state played a part in reversing the conditions it relied upon. We need something different now.
The Republicans, as you say, are pansies. They've never been able to bring themselves to fully articulate an alternative to the tottering New Deal state.
The end result is bound to be fiscal collapse, of one kind or another. Unless somebody steps up to the plate. I like the social safety net as much as the next guy, but the system we've got was set up to work with a fecund, industrializing, exporting nation. It's pretty easy to argue that the welfare state played a part in reversing the conditions it relied upon. We need something different now.
This is a really good post.
A few points to add.
1. Before Medicare and Medicaid became law, healthcare was run like a business. Drs and hospitals had known prices often posted in the office. There were almost no for-profit hospitals. Most were run by churches and counties and depended on taxes or charitable donations to take up the slack. Most people paid hospital bills on a payment plan. Few hospitals did elective procedures for the elderly. (Knee, hip replacements, etc.) I remember about five years after Medicare was instituted, the hospitals were all expanding because their beds were now full of old folks getting procedures they had been unable to afford before.
2. Between the late 1970s and the late 1980s things changed as far as hospital costs were concerned. In 1984 I had a surgery and was in the hospital for four days after the surgery. Total cost - Dr. $700 Anesthiologist $250 Hospital $1500.
My copay was 20% or $450. In 1991 I had arthroscopic surgery to remove my gall bladder. I was in the hospital overnight. This time the charges were - Dr. $1000 Anesthiologist $450 Hospital $10,000! My copay was 20% or $2290.
I challenged the hospital bill and was told by the hospital that they had to charge so much because they were required to provide pro bono medical care for so many people. They had to make it up on their insurance patients. This hospital was in a city that had a high rate of murder, violence, and drug usage. They treated several gun shot wounds, stabbings, drug overdoses, etc. every night. I managed to get $1000 dollars knocked off my copay to the hospital, but that was when I first noticed that medical costs were rising and some very unusual things were being done to increase the bill. For instance: My wife had a simple in-office procedure to remove three sub-dural fatty tumors. The Dr. used one surgical kit to remove all three tumors and the procedure was done in a normal examining room. The hospital charged for three surgical kits and for an "operating room." The Drs. bill was $250. The hospital charged $180x3 or $$540 for surgical kits and $800 for the "operating room." We managed to bargain that one down to $580 to the hospital. I could go on, but it has become clear to me that hospitals are engaged in a process of padding the bill so they can pay for all the pro bono/Medicare/Medicaid work they do. As a result, no patient is privy to what they charge and what their real costs are. You can only protect yourself by asking in advance closely examining the bills. When you are paying some some percentage out of pocket, you are more likely to do this.
3. You are so right about cost shifting. My Dr. loses money every time he sees me, but I have been with him for some time so he keeps me on. However, he's not taking any more Medicare patients in his practice. We live in an active adult community and there are two people here who have been unable to get a regular Dr. because none in this area are taking more Medicare patients.
Since Medicare is going broke, raising the payments to Drs. and hospitals is not an option. Raising Medicare taxes is not an option. If there is, in fact, $500 billion in fraud and waste in Medicare, then that might be a good p[alce to start. Medicare does not spend a dime on trying to stop the fraud. I have a nephew who is a fraud investigator for private health insurance companies. It is amazing how much fraud he uncovers. It seems to me it would be a good idea to pursue this avenue as one issue of healthcare reform.
The other no-brainer for me is medical tort reform.
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A few points to add.
1. Before Medicare and Medicaid became law, healthcare was run like a business. Drs and hospitals had known prices often posted in the office. There were almost no for-profit hospitals. Most were run by churches and counties and depended on taxes or charitable donations to take up the slack. Most people paid hospital bills on a payment plan. Few hospitals did elective procedures for the elderly. (Knee, hip replacements, etc.) I remember about five years after Medicare was instituted, the hospitals were all expanding because their beds were now full of old folks getting procedures they had been unable to afford before.
2. Between the late 1970s and the late 1980s things changed as far as hospital costs were concerned. In 1984 I had a surgery and was in the hospital for four days after the surgery. Total cost - Dr. $700 Anesthiologist $250 Hospital $1500.
My copay was 20% or $450. In 1991 I had arthroscopic surgery to remove my gall bladder. I was in the hospital overnight. This time the charges were - Dr. $1000 Anesthiologist $450 Hospital $10,000! My copay was 20% or $2290.
I challenged the hospital bill and was told by the hospital that they had to charge so much because they were required to provide pro bono medical care for so many people. They had to make it up on their insurance patients. This hospital was in a city that had a high rate of murder, violence, and drug usage. They treated several gun shot wounds, stabbings, drug overdoses, etc. every night. I managed to get $1000 dollars knocked off my copay to the hospital, but that was when I first noticed that medical costs were rising and some very unusual things were being done to increase the bill. For instance: My wife had a simple in-office procedure to remove three sub-dural fatty tumors. The Dr. used one surgical kit to remove all three tumors and the procedure was done in a normal examining room. The hospital charged for three surgical kits and for an "operating room." The Drs. bill was $250. The hospital charged $180x3 or $$540 for surgical kits and $800 for the "operating room." We managed to bargain that one down to $580 to the hospital. I could go on, but it has become clear to me that hospitals are engaged in a process of padding the bill so they can pay for all the pro bono/Medicare/Medicaid work they do. As a result, no patient is privy to what they charge and what their real costs are. You can only protect yourself by asking in advance closely examining the bills. When you are paying some some percentage out of pocket, you are more likely to do this.
3. You are so right about cost shifting. My Dr. loses money every time he sees me, but I have been with him for some time so he keeps me on. However, he's not taking any more Medicare patients in his practice. We live in an active adult community and there are two people here who have been unable to get a regular Dr. because none in this area are taking more Medicare patients.
Since Medicare is going broke, raising the payments to Drs. and hospitals is not an option. Raising Medicare taxes is not an option. If there is, in fact, $500 billion in fraud and waste in Medicare, then that might be a good p[alce to start. Medicare does not spend a dime on trying to stop the fraud. I have a nephew who is a fraud investigator for private health insurance companies. It is amazing how much fraud he uncovers. It seems to me it would be a good idea to pursue this avenue as one issue of healthcare reform.
The other no-brainer for me is medical tort reform.
# posted by : 1:38 PM
: 1:38 PM << Home
