"Spend More, Get Less? The Health Care 'Conundrum'"

[Coach]

In a posting in FIRE and Money dixonge mentioned an article in The New Yorker about medical care costs. I had recently heard an interview with the author on NPR's Fresh Air that got me interested enough to read the article. The article makes an interesting health care cost comparision between El Paso and McAllen, Texas. Medicare spends twice as much per patient in McAllen as it does in El Paso, with indications that care in in El Paso is at least as good as it is in McAllen.

And the article says, "Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina—all of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicare’s problems (indeed, almost all the federal government’s budget problems for the next fifty years) would be solved."

The article also talks about some interesting work the medical community in Grand Junction, Colorado has done to improve care and reduce costs.

Here's a link to The New Yorker article.

Coach

[ERD50]

I did hear most of that interview on NPR. I agree, fascinating stuff. IIRC, the doctors themselves were surprised that all their extras were not showing results (although they admit that some was to reduce liability concerns).

I hope we can learn from this info. I don't understand why insurance cos are not all over this - are they not really interested in cost reductions, do they feel they can just pass the costs on to the consumer? Doesn't make sense to me, they could sell more ins if it was cheaper.

So many people label the ins cos as "greedy" - then why aren't they working to get more for less? Doesn't add up for me.

-ERD50

[Martha]

There is quite a bit written in various journals on this issue. I have posted in the past links to several such articles. Rich and Meadbh who are interested in evidenced based medicine would know more than the rest of us.

ERD, insurance company executives can be greedy, look at United Health Care as an example. Profits can be unseemly high. But controlling what are best practices is not an easy thing for an insurance company to do, both politically and practically. As it is, they do some things, like removing certain drugs from their formularies when there are cheaper alternatives.

[Gone4Good]

Quote:

Originally Posted by ERD50 So many people label the ins cos as "greedy" - then why aren't they working to get more for less? Doesn't add up for me.

The insurance companies do push back. They try to lower the dollar amount they will cover for a specific procedure ("reasonable and customary"). They try not to cover other procedures. But at the end of the day, the insurance companies don't consume health care, people do. And the way our system is set up now many of those people don't pay much for it out of their own pocket so they just consume whatever their doctor says to without regard for cost. Insurance companies increase premiums to cover all the excess care. And employers reduce wages to pay for the higher insurance premiums. Ultimately the customer pays for his care, he just doesn't pay for it directly . . . and that is a huge part of the problem.

If you read the New Yorker article you might have noticed that Medicare spent more per person in McAllen, TX than the town's per capita income.

[lets-retire]

I always get a laugh when I hear/read "reasonable and customary" when applied to health care costs. If the insurance companies only pay what is "reasonable and customary", does that mean those without insurance pay unreasonable and unusual fees for health care. If that is the case then it sounds remarkably like price gouging to me.

[Independent]

Quote:

Originally Posted by . . . Yrs to Go The insurance companies do push back. They try to lower the dollar amount they will cover for a specific procedure ("reasonable and customary"). They try not to cover other procedures. But at the end of the day, the insurance companies don't consume health care, people do. And the way our system is set up now many of those people don't pay much for it out of their own pocket so they just consume whatever their doctor says to without regard for cost. Insurance companies increase premiums to cover all the excess care. And employers reduce wages to pay for the higher insurance premiums. Ultimately the customer pays for his care, he just doesn't pay for it directly . . . and that is a huge part of the problem. If you read the New Yorker article you might have noticed that Medicare spent more per person in McAllen, TX than the town's per capita income.

This says it. Most Americans believe that "somebody else" is paying for their medical care -- either the insurance company, their employer, or the gov't. So, since it isn't their money, they want to do anything the doctor recommends. If the insurance company pushes too hard, it will find itself dealing with a complaint to the state insurance commissioner.

The "stimulus" bill included money for researching most effective practices. Some people where strongly against it because it might lead to the gov't deciding not to pay for some things. IMO, we won't make sustained progress on medical expenses until lots of people can see the cost in their own budget.

[ERD50]

Quote:

Originally Posted by . . . Yrs to Go And the way our system is set up now many of those people don't pay much for it out of their own pocket so they just consume whatever their doctor says to without regard for cost. Insurance companies increase premiums to cover all the excess care. And employers reduce wages to pay for the higher insurance premiums. Ultimately the customer pays for his care, he just doesn't pay for it directly . . . and that is a huge part of the problem.

I guess that must be it - just disconnected enough that it breaks the cause/effect relationship. Still seems like it would work back eventually, but as has been pointed out, there are risks to cutting back too.

Broken system, but based on the way other bills I've read are structured, I really, really fear that the govt will make it worse, not better

A real shame, because I actually think we are in need of some govt oversight in this area , along the lines of what samclem has defined - everyone required to have ins, the ins cos required to take all applicants, taxpayers pay for those who can't - because there really is no other way to cover everyone, and no other way for the ins cos to not pick and choose and provide reasonable cost coverage to 'existing condition' people.

-ERD50

[Martha]

Quote:

Originally Posted by Independent This says it. Most Americans believe that "somebody else" is paying for their medical care -- either the insurance company, their employer, or the gov't. So, since it isn't their money, they want to do anything the doctor recommends. If the insurance company pushes too hard, it will find itself dealing with a complaint to the state insurance commissioner. The "stimulus" bill included money for researching most effective practices. Some people where strongly against it because it might lead to the gov't deciding not to pay for some things. IMO, we won't make sustained progress on medical expenses until lots of people can see the cost in their own budget.

But when health care is the most expensive often we are not in a position to make a judgment or even care about cost. For example, note this post today in another thread:

Quote:

Originally Posted by SecondCor521 Sure, and when you're the dad waiting for 15 minutes with a nurse in the maternity room next to the emergency ER that's not even the worst thing. In fact, I'm very money-oriented and at that point the money was the last thing on my mind. 2Cor521

We should be entitled to rely on experts to help us determine the best course. Shopping is not so easy for things like health care and legal services.

[Independent]

Quote:

Originally Posted by Martha But when health care is the most expensive often we are not in a position to make a judgment or even care about cost. For example, note this post today in another thread: We should be entitled to rely on experts to help us determine the best course. Shopping is not so easy for things like health care and legal services.

You are correct, this is why we need to see the cost of care in advance. For example, if everyone bought health insurance on an individual, non-subsidized basis, we'd see the cost when we are healthy enough to think about what kinds of things might control the cost. There could be a constituency for doing the research to determine cost-effective treatment programs.

But I don't want to suggest the "answer" is private insurance. We could also see the cost if all gov't programs were funded by a single, visible health care tax. IMO, that would at least get a lot of people thinking about the size of the problem. Note that only 1/4 the taxpayer portion of Medicare shows up in our paychecks as a visible tax. The other 3/4 is hidden (the so-call "employer share" and FIT). So people consistently underestimate how expensive Medicare really is.

I'm not saying "don't listen to the experts". But the stories about dramatic differences in costs which appear unrelated to differences in outcomes make me think that the "experts" aren't using the scientific tools that we expect experts to use, and it appears that most of the people paying their salaries don't really care.

[Gone4Good]

Quote:

Originally Posted by lets-retire If the insurance companies only pay what is "reasonable and customary", does that mean those without insurance pay unreasonable and unusual fees for health care.

Yes.

And not just those without insurance. The patient is stuck with the bill for anything the insurance company deems unreasonable.

[Gone4Good]

Quote:

Originally Posted by Martha But when health care is the most expensive often we are not in a position to make a judgment or even care about cost. For example, note this post today in another thread:

This is absolutely true. And it is one of the reasons a pure free market system will never work in health care. Nobody having a heart attack is in any position to haggle over price.

But emergent care is only one part of the cost problem. And applying comparative effectiveness policies can help control costs in these areas where market forces are unavailable. But everywhere else, the consumer should see, and feel, the cost of their care. Nobody except the truly destitute should have the first dollar of their care paid for by someone else. Nobody should be able to pay a $10 co-pay and then step up to an all-you-can eat buffet of expensive medical procedures. That is a recipe for over consumption if I ever saw one.

[lets-retire]

This is what interests me. The people are complaining that the price of health care is too high, but they won't do anything to curb their own use of the system. All that seems to come to mind to the masses is to complain to the government and demand they provide relief. That makes no sense to me. You over consume the resource and then complain that the industry is charging too much. I see simple economics at play here.

The number one killer in this country (at least it was on the last report I read) is heart disease. How many people do anything to stay in shape, by vigorous exercise and stepping away from the table?

[Independent]

It's more or less a Tragedy of the Commons situation. We've got a communal resource (insurance or tax dollars for medical care) that gets over used because individual and joint gains/costs don't align. The value of an MRI today on my sore knee far exceeds the additional premium I will pay because of that one MRI.

[eridanus]

The article addresses the "skin in the game" argument. The last three sentences:

"When it comes to making care better and cheaper, changing who pays the doctor [whether government, individuals, or insurance companies] will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen."

I.e., doctors in McAllen get paid more for more tests.

[Htown Harry]

Quote:

Originally Posted by Independent The "stimulus" bill included money for researching most effective practices. Some people where strongly against it because it might lead to the gov't deciding not to pay for some things.

This week's Barron's has an article on this topic, digging into some of the expected studies and identifying some of the Big Pharma and medical supply outfits whose products might be subject to some scrutiny. I found it very interesting. It caused the light bulb go on about one of the ways that the "reducing costs" part of the conundrum might be addressed - insisting that alternative treatments "compete" against one another more directly.

Marshalling Evidence for What Makes Sense in Health Care - Barrons.com Unfortunately, the full article won't be available online to non-subscribers for several weeks . It's on page 19 of the July 6 issue if you want to read it for free at the newsstand pick up a copy or take a look at the library.

Some of the potential comparisons that are under consideration by the feds (or that were otherwise mentioned in the article):

• expensive tests for staph germs at hospitals vs. best practices in cleanliness
• Prostate surgery with a $1.3 million robot vs. radiation
• exercise as an osteoporosis treatment
• off-label prescribing of antipsychotic drugs (one of Medicare's top 10 Part B expenditures)
• drugs vs. stents in heart disease treatment
• $1500/yr. drug vs. aspirin for preventing stroke re-occurrence

A few quotes:

Comparative-effectiveness research has been all too rare. Companies that sponsor most research on new treatments tend to avoid study designs that would compare their product to products already marketed by rivals. The government research will try to plug holes that aren't typically addressed by industry-sponsored treatment studies...

Quote from a journal author: "The goal of randomized efficacy trials is often to prove that a treatment is superior to a placebo..."

Most industry input was predictable...The biotech industry's main trade group warned of the shortcomings of comparative-effectiveness studies..."imposing rigid practice guidelines can interfere with the ability of providers to deliver the most appropriate care for each patient."

If your really interested (wonk alert!), here's links to the week-old govt. reports the author analyzed:

Initial National Priorities for Comparative Effectiveness Research
Initial National Priorities for Comparative Effectiveness Research - Institute of Medicine

Report to the President and the Congress on Comparative Effectiveness Research
http://www.hhs.gov/recovery/programs...rannualrpt.pdf

[haha]

Quote:

Originally Posted by Htown Harry Marshalling Evidence for What Makes Sense in Health Care - Barrons.com Unfortunately, the full article won't be available online to non-subscribers for several weeks . It's on page 19 of the July 6 issue if you want to read it for free at the newsstand pick up a copy or take a look at the library. Some of the potential comparisons that are under consideration by the feds (or that were otherwise mentioned in the article): off-label prescribing of antipsychotic drugs (one of Medicare's top 10 Part B expenditures)

This one I do not understand, as Medicare Part B does not concern itself with drugs.

Ha

[Htown Harry]

Quote:

Originally Posted by haha This one I do not understand, as Medicare Part B does not concern itself with drugs. Ha

I checked, and I quoted this correctly.

After some googling to see if the article might have had a typo, I came to find out that Part B can cover certain meds if administered in a medical care institution. A few more links and I came across this nugget in a newsletter written by a law firm that gives advise to nursing homes:

Holland & Knight - White Collar Defense Alert - April 15, 2009 - Nursing Homes: Where Will Federal Law Enforcement Focus its Attention in 2009? Are You Prepared?
Nursing Home Residents Aged 65 or Older Who Received Antipsychotic Drugs

The [HHS Department] OIG will review the extent to which nursing home residents aged 65 or older received selected antipsychotic drugs in the absence of conditions approved by the Food and Drug Administration (FDA). The Social Security Act requires SNFs to respect certain rights of patients, including the right to be free from chemical restraints administered for discipline or convenience. The regulations define safeguards to protect nursing home residents from being prescribed unnecessary drugs. The OIG will examine Medicare Part D and Part B program reimbursements for selected antipsychotic drugs received by elderly nursing home residents and the extent to which these drugs were prescribed and paid for in accordance with federal regulations.

Putting two and two together, it would appear that the feds suspect that some nursing home operators / doctors are running up the bill to Uncle Sam by diagnosing that grandma needs some dope to make it through the day at Happy Acres.

Here's a story about one of the antipsychotic drugs mentioned in the article: Eli Lilly Owes $1.4B Over "Off Label" Use - CBS News

Thank you, Ha, for keeping me on my toes. You're my favorite proofreader.

[Martha]

Thanks Harry, good information. I think that it is perfectly fine for the government not to pay for things that don't work. Like chiropractic for headaches. I think that it is also fine not to pay for treatments when there is another treatment that works as well or better but is cheaper. But we do have to keep in mind individual differences where a costlier and generally less effective treatment is nevertheless the best treatment for a particular person. Provided that the evidence shows that may be the case.

[FinanceDude]

Quote:

Originally Posted by Martha Thanks Harry, good information. I think that it is perfectly fine for the government not to pay for things that don't work. Like chiropractic for headaches. I think that it is also fine not to pay for treatments when there is another treatment that works as well or better but is cheaper. But we do have to keep in mind individual differences where a costlier and generally less effective treatment is nevertheless the best treatment for a particular person. Provided that the evidence shows that may be the case.

Is it ok to pay for the back surgeon when it is estimated 50% of all back surgeries are unnecessary? If I were the insurer or the govt, I would rather pay for 15 visits to a chiropractor at $40 a shot and have it not work than $50,000 for a back surgery and have it not work........

[haha]

Quote:

Originally Posted by Htown Harry I checked, and I quoted this correctly. After some googling to see if the article might have had a typo, I came to find out that Part B can cover certain meds if administered in a medical care institution. A few more links and I came across this nugget in a newsletter written by a law firm that gives advise to nursing homes: Holland & Knight - White Collar Defense Alert - April 15, 2009 - Nursing Homes: Where Will Federal Law Enforcement Focus its Attention in 2009? Are You Prepared? Nursing Home Residents Aged 65 or Older Who Received Antipsychotic Drugs The [HHS Department] OIG will review the extent to which nursing home residents aged 65 or older received selected antipsychotic drugs in the absence of conditions approved by the Food and Drug Administration (FDA). The Social Security Act requires SNFs to respect certain rights of patients, including the right to be free from chemical restraints administered for discipline or convenience. The regulations define safeguards to protect nursing home residents from being prescribed unnecessary drugs. The OIG will examine Medicare Part D and Part B program reimbursements for selected antipsychotic drugs received by elderly nursing home residents and the extent to which these drugs were prescribed and paid for in accordance with federal regulations.

Good job Harry. I had never heard of this.

Ha