How Should Americans' Health Care be Paid For?

[FinanceDude]

I think the reason a majority of this poll voted for the choice of the tax-funded govt controlled plan is this board is skewed by being composed of retired early folks negotiating the slippery slope of covering health care from XYZ year until Medicare...........

[samclem]

Quote:

Originally Posted by Independent So retention by private insurers (using the $92 billion) is only 3.9% of our total expenditures or 0.6% of GDP. I'm think we've got some other big issues with health care costs besides private insurers.

Looking at the profits of private insurers, the admin cost of govt insurance (both the govt costs and the costs these plans force onto medical care providers) and "retention" by private insurers is potentially useful, but we should be careful not to miss other, far bigger "costs" that this approach misses. Any fee-for-service approach has the potential to drive costs higher because providers will have reason to order more services (tests, procedures, etc). And, if the patient has no/little inducement to shop for a better price (or it's impractical because the fees charged by provides are so opaque), then one important "braking" mechanism is eliminated. An insurance company might have rock-bottom margins, but if every patient with a sprained ankle gets a $500 MRI, three office visits with an MD, and 10 weeks of physical therapy, then we're probably not doing a lot to control medical costs.

Of course, with "capitated" plans (where the health care providers receive a fixed fee per patient per year), the inducements are just the opposite--providers/insurers have incentives to skimp on care to make more money.

Both payment models need checks. Either payment model can work within a market-based construct, which should reduce overall costs and improve quality.

[Independent]

Sam - This all makes sense to me until I get to your last sentence. What do you mean by "market-based construct"?

[Texas Proud]

Sam,

One of the problems is that healthcare is not based on, as Sam puts it, a 'market based construct'...

To be market based, it means that we have to be able to comparison shop... the current system is so far removed from this that getting there would be harder than passing the Obama bill...

And, how many of us really will comparison shop if we are not the ones paying for the service? My copay is $50... it does not matter where I go or how much they charge... it is $50... so NO comparison shopping for me on price... If I thought the service was bad, I would change...

Then there is the issue of going different places for different procedures.... once you choose a doctor, most people try and go back to that doc for everything... so they can be cheap until they get a lot of patients and then raise the price... heck, my sister's doc just did that... even though she is on Medicare, he charges $1,000 per year to be one of his exclusive patients... I think he limits his to 120 or so patients... but that is over $1 mill before he does a thing... (my sister declined to stay with him)...

Until we have to pay for everything (like food and housing), and prices become clear, then we will be in the same situation we are today....

Right now, all of this is talking about who pays for the service... very little about changing the system...

[FinanceDude]

Quote:

Originally Posted by Texas Proud Sam, One of the problems is that healthcare is not based on, as Sam puts it, a 'market based construct'... To be market based, it means that we have to be able to comparison shop... the current system is so far removed from this that getting there would be harder than passing the Obama bill... And, how many of us really will comparison shop if we are not the ones paying for the service? My copay is $50... it does not matter where I go or how much they charge... it is $50... so NO comparison shopping for me on price... If I thought the service was bad, I would change... Then there is the issue of going different places for different procedures.... once you choose a doctor, most people try and go back to that doc for everything... so they can be cheap until they get a lot of patients and then raise the price... heck, my sister's doc just did that... even though she is on Medicare, he charges $1,000 per year to be one of his exclusive patients... I think he limits his to 120 or so patients... but that is over $1 mill before he does a thing... (my sister declined to stay with him)... Until we have to pay for everything (like food and housing), and prices become clear, then we will be in the same situation we are today.... Right now, all of this is talking about who pays for the service... very little about changing the system...

Agree 100%........

[samclem]

Quote:

Originally Posted by Independent Sam - This all makes sense to me until I get to your last sentence. What do you mean by "market-based construct"?

I had in mind the type of things we associate with a competitive marketplace: Price transparency, many sellers, an incentive for buyers to seek lower prices, an incentive for sellers to attract buyers with better value (better service, lower prices), solid information for consumers regarding the relative quality of the services provided by various sellers, etc.

This is tougher to accomplish with health care than with toasters, air travel, or automobiles, especially if we want to accomplish social goals (universal coverage, etc) instead of just having people buy services that meet their individual needs through a lightly regulated marketplace. But we can get there, and there's plenty of incentive to try.

[samclem]

Quote:

Originally Posted by Texas Proud And, how many of us really will comparison shop if we are not the ones paying for the service? My copay is $50... it does not matter where I go or how much they charge... it is $50... so NO comparison shopping for me on price... If I thought the service was bad, I would change...

Yep. I agree. Things would be different if you 1) paid a percentage rather than a fixed co-pay, 2) Had easy access to the fees charged by various providers for the same service 3) Had easy access to information on the quality of the service provided by various sellers (customer reviews/satisfaction ratings, info on number of procedures performed annually by that provider, past or pending legal/professional certification actions against the provider, etc.

Quote:

Originally Posted by Texas Proud even though she is on Medicare, he charges $1,000 per year to be one of his exclusive patients... I think he limits his to 120 or so patients... but that is over $1 mill before he does a thing

Is that some of that funny "healthcare cost math" we see so often?

Quote:

Originally Posted by Texas Proud Until we have to pay for everything (like food and housing), and prices become clear, then we will be in the same situation we are today....

I don't think the consumer necessarily has to pay the entire bill to have a strong incentive to shop around. Medical care is expensive, and even a 20% stake would be more than enough to get me to search for lower prices on big-ticket items if it were made possible to get the needed information easily.

Quote:

Originally Posted by Texas Proud Right now, all of this is talking about who pays for the service... very little about changing the system...

But determining who pays and how they do it is key to reducing costs and even to getting universal access at a price we can afford (individually and as a nation). We've got to set up a system that lowers costs as a result of consumer pressure, because doing it the other way (price caps from above) is certain to produce scarcity.

As a practical matter, it's probably most important to facilitate consumer choice/competition between medical insurers/HMOs, and let these companies figure out how to improve efficiencies in care delivery. The government has an important role to play in facilitating this competition.

[Independent]

Sam - I'd like to have some of the information you're talking about. I've thought it would be good to have providers post their rates, say for procedures that generate least 80% of their revenue. I would want the numbers in a searchable database so I can quickly compare providers. I know they discount rates for various insurers, so that adds a complication.

Then add number of each procedure done (both per year and lifetime for doctors?), board certifications, and anything on license actions. But that leaves out a lot of important quality information.

Note that neither of these will happen without the government getting involved and forcing providers to provide the information. Lots of "free market" fans won't like that.

But people won't use this unless they've got skin in the game. In fact, they might just pick the most expensive provider on the theory that must be the best.

So then you have to make sure that everyone has high deductibles and coinsurance rates. How high? My wife's "routine" breast cancer treatments cost close to $100k in one year. How many people can handle meaningful coinsurance on that kind of bill? This requires more government involvement, and now the government is telling individuals they can't buy insurance that they want, good luck with that.

But this still doesn't impact much of our problem. If I go to the doctor with a pain and he/she recommends an MRI, how do I know if that's really cost effective advice? It seems that one of the biggest variables in medical cost is how quickly doctors order additional tests and procedures in situations where there's no hard and fast rule. Have you read this: McAllen, Texas and the high cost of health care : The New Yorker ? I don't have a market solution for that.

[samclem]

Quote:

Originally Posted by Independent But this still doesn't impact much of our problem. If I go to the doctor with a pain and he/she recommends an MRI, how do I know if that's really cost effective advice? It seems that one of the biggest variables in medical cost is how quickly doctors order additional tests and procedures in situations where there's no hard and fast rule. Have you read this: McAllen, Texas and the high cost of health care : The New Yorker ? I don't have a market solution for that.

Luckily, the market does have a solution for the McAllen situation.

The docs in McAllen are ordering all these extra services for Medicaid patients because there's no effective oversight of what they are doing. A very interesting study was released just last month looking at McAllen, and guess what: Medical costs for McAllen residents using private insurance were actually lower than in nearby El Paso.

From a report about this follow-up study:

Quote:

For the under-65 population insured by Blue Cross, total spending per-member-year in McAllen, Texas, was 7 percent lower than in El Paso, Texas. By contrast, Atul Gawande’s 2009 New Yorker article, which used data from the Dartmouth Atlas of Health Care on variations in Medicare spending, showed that per capita spending in McAllen was 86 percent higher than in El Paso. Although the new study cannot explain definitively why variations in health care spending drop off dramatically under private coverage, the authors suggest that mechanisms for utilization review and management used by private insurers could play a prominent role. “For a number of reasons, insurers generally are reluctant to intrude on medical decision-making,” says lead study author Franzini. “But the fact that these utilization management mechanisms exist may prompt some physicians who might otherwise overuse certain services to exercise more restraint.”

So, a question for those crowing about Medicare's low administrative costs: Is it a bargain if this low amount of oversight causes a huge increase in unneeded medical care?

As you stated earlier:

Quote:

. . . So retention by private insurers (using the $92 billion) is only 3.9% of our total expenditures or 0.6% of GDP. I'm think we've got some other big issues with health care costs besides private insurers.

[M Paquette]

Quote:

Originally Posted by samclem Luckily, the market does have a solution for the McAllen situation. The docs in McAllen are ordering all these extra services for Medicaid patients because there's no effective oversight of what they are doing. A very interesting study was released just last month looking at McAllen, and guess what: Medical costs for McAllen residents using private insurance were actually lower than in nearby El Paso. From a report about this follow-up study: So, a question for those crowing about Medicare's low administrative costs: Is it a bargain if this low amount of oversight causes a huge increase in unneeded medical care?

I suspect what this means is that selected groups of people have discovered ways to systematically game a system. I would not be in the least bit surprised to find that these firms also contribute to lobbies fighting to reduce government interference in their businesses; specifically, the lobbyists working to block the creation of the OIG Medicare Inspector and Auditor positions.

There are a few auditors, and they've caught some of the more egregious violations such as using expired or terminated meds for Medicare Part D orders, or blatantly filing false claims. The real trick is to figure out just what one can get away with and justify as a valid procedure, test, or medically necessary device.

[haha]

Quote:

Originally Posted by samclem Luckily, the market does have a solution for the McAllen situation. The docs in McAllen are ordering all these extra services for Medicaid patients because there's no effective oversight of what they are doing. A very interesting study was released just last month looking at McAllen, and guess what: Medical costs for McAllen residents using private insurance were actually lower than in nearby El Paso.

I guess 800 miles is nearby, but it would put me well into California and it would feel like a trip.

Ha

[samclem]

Quote:

Originally Posted by haha I guess 800 miles is nearby, but it would put me well into California and it would feel like a trip. Ha

Hey, it's in the same state, how far away can it really be? We're not talking about a big state like Alaska.

[Independent]

Quote:

Originally Posted by samclem Luckily, the market does have a solution for the McAllen situation. The docs in McAllen are ordering all these extra services for Medicaid patients because there's no effective oversight of what they are doing. A very interesting study was released just last month looking at McAllen, and guess what: Medical costs for McAllen residents using private insurance were actually lower than in nearby El Paso. From a report about this follow-up study: So, a question for those crowing about Medicare's low administrative costs: Is it a bargain if this low amount of oversight causes a huge increase in unneeded medical care? As you stated earlier:

This is interesting stuff, especially because it suggests something we can do within the scope of our current system.

It seems to me that this is a great deal different from your earlier post

Quote:

I had in mind the type of things we associate with a competitive marketplace: Price transparency, many sellers, an incentive for buyers to seek lower prices, an incentive for sellers to attract buyers with better value (better service, lower prices), solid information for consumers regarding the relative quality of the services provided by various sellers, etc.

Texas Blue Cross didn't use any of these to get its better results, just one big insurer that puts a lid on treatments that it believes are excessive. So Medicare should be able to do the same thing. The question is why not?

I've thought that one of our bigger problems with Medicare is that politicians work so hard to hide the cost. We have a 1.45% employee tax, a 1.45% "employer" tax, and an equal amount from income taxes. The average voter probably thinks that his 1.45% pays for Medicare, but in fact it's only 1/4 of the total tax support. If we quadrupled the visible tax we might find that voters would support things that keep Medicare costs down. (That's one type of transparency.)

This also raises another question. Compared to other countries, how do our over-age-65 costs (virtually all Medicare and Medicaid) compare, and how do our under-age-65 costs compare (virtually all private health insurance or direct pay). I don't know the answer, but it might be interesting. Is all the higher use in the US tied to Medicare/Medicaid, or is a lot of it still paid for by private insurers?

[ERD50]

Quote:

Originally Posted by M Paquette ... I would not be in the least bit surprised to find that these firms also contribute to lobbies fighting to reduce government interference in their businesses; specifically, the lobbyists working to block the creation of the OIG Medicare Inspector and Auditor positions.

I guess I may need to re-read the Constitution, but I was unaware that lobbyists had the authority to either create or block the creation of those positions. I thought that authority was ultimately with Congress.

I can imagine this conversation from my career days: "Gee Boss, I recommended the purchase of the equipment from Vendor B, because he offered me a bunch of personal goodies. So blame him for my action. It wan't my fault. Bad vendor."

-ERD50

[Texas Proud]

Quote:

Originally Posted by ERD50 I guess I may need to re-read the Constitution, but I was unaware that lobbyists had the authority to either create or block the creation of those positions. I thought that authority was ultimately with Congress. I can imagine this conversation from my career days: "Gee Boss, I recommended the purchase of the equipment from Vendor B, because he offered me a bunch of personal goodies. So blame him for my action. It wan't my fault. Bad vendor." -ERD50

The quote you gave stated they were working to block... not that they could block... different things...

[GregLee]

Quote:

Originally Posted by samclem So, a question for those crowing about Medicare's low administrative costs: Is it a bargain if this low amount of oversight causes a huge increase in unneeded medical care?

How do you reach the conclusion there is "a huge increase in unneeded medical care", or any increase at all, in McAllen or anywhere else? The article on McAllen says there is much poverty, obesity, poor diet in the area, which could lead to increased need for medical care. And even if there were an increase in unneeded care, and even if it were caused by lack of oversight, then low administrative costs might very well still make it a bargain. (The author of the New Yorker article infers that the increased care in McAllen is unneeded from a comparison of costs with a neighboring county with similar demographics, but this is obviously a non sequitur.)

[ERD50]

Quote:

Originally Posted by Texas Proud The quote you gave stated they were working to block... not that they could block... different things...

OK, so if their 'working to block' does not lead to 'blocking', it is irrelevant, no? Let them 'work' all they want, makes no difference.

-ERD50

[donheff]

Quote:

Originally Posted by Independent This is interesting stuff, especially because it suggests something we can do within the scope of our current system... Texas Blue Cross didn't use any of these to get its better results, just one big insurer that puts a lid on treatments that it believes are excessive. So Medicare should be able to do the same thing. The question is why not?

Eventually rational rationing will be needed to curtail costs whether it is imposed by the provider(s) or chosen by customers with co-pays. In the meantime, it would be demonized as "death panels" by people who are opposed to any change. Little do they acknowledge that the death panels already exist and are staffed by insurance company bureaucrats.

[M Paquette]

Quote:

Originally Posted by ERD50 I guess I may need to re-read the Constitution, but I was unaware that lobbyists had the authority to either create or block the creation of those positions. I thought that authority was ultimately with Congress.

It's remarkably simple, actually. The 'authority' is with Congress, as the designated sock puppets.

"So, Congressman, you like doze big checks we keeps writing youse? You wanna keep getting doze checks? Here's what ya gotta do..."

Try tracking down the actual authors of legislation. No, not the sponsoring Congressman. The person who came up with the text of the bills, or who 'consult' on the language and content. It's remarkably entertaining.

Observing the details of the legislative process isn't like watching sausage being made. It's like watching sausage being made by Fat Tony's enforcement squad. You never know just who is in each delicious bite...

[samclem]

Quote:

Originally Posted by GregLee How do you reach the conclusion there is "a huge increase in unneeded medical care", or any increase at all, in McAllen or anywhere else? The article on McAllen says there is much poverty, obesity, poor diet in the area, which could lead to increased need for medical care. And even if there were an increase in unneeded care, and even if it were caused by lack of oversight, then low administrative costs might very well still make it a bargain. (The author of the New Yorker article infers that the increased care in McAllen is unneeded from a comparison of costs with a neighboring county with similar demographics, but this is obviously a non sequitur.)

The New Yorker article indicated, as you said, that demographics in McAllen were similar to the nearby counties. The Medicare costs in McAllen were much higher. There was no indication of a difference in health outcomes. The author's interviews with the docs in McAllen indicated they believe they are ordering lots of possibly needless care and tests. I'm just going by what is in the article. So, what's your explanation for the higher costs in McAllen?