Akshata Malhotra's List: Healthcare Costs

• Steven Brill started his cover story in this week's Time magazine with a simple health-policy question: "Why exactly are the bills so high?"

   

  His article is essentially a 26,000-word answer, the longest story that the magazine has ever run by a single author. It's worth reading in full, but if you're looking for a quick summary, the article seemed to me to boil down to one sentence: The American health-care system does not use rate-setting.

  • US system doesn't use rate setting
• What sets our really expensive health-care system apart from most others isn't necessarily the fact it's not single-payer or universal. It's that the federal government does not regulate the prices that health-care providers can charge.

  • Federal government does not regulate prices that healthcare providers can charge
• The national government exerts direct operational control over a large proportion of total health care expenditures, through a range of mechanisms, including caps on hospital revenue and national contracts with salaried physicians. The Ministry of Finance has been able to persuade the national government to agree to relatively small increases in the health care budget because the system has performed well, with a very high level of public satisfaction.

  • How Israel has maintained costs in healthcare sector
• Germany uses rate-setting, and its health-care costs grew, on average, 2.0 percent annually in the 2000s. France sets rates, as does Switzerland. All three countries have seen slower cost growth than the United States -- although it's worth noting that the United States actually saw slower growth in the 2000s than the OECD average.

  • Germany
• Maryland has succeeded in controlling costs for about four decades now. It is the only state that sets rates for hospitals, with the state government deciding what every Maryland hospital can charge for a given procedure..
• There could certainly other factors at play: As Brill points out, for example, the American health-care system encourages higher spending by paying doctors a fee for every service they provide. Still, Americans actually go to the doctor less than residents of other countries
• In a way, the success of rate-setting makes simple sense: When the government has the final say on how much a medical procedure costs, it's not that hard to hold down the price.

5 more annotations...

• A new study from The Commonwealth Fund found that American adults are far more likely than those in 10 other high-income countries to go without health care due to cost, or to have trouble paying their medical bills.  The study also found more Americans complaining of hassles over health insurance disputes and paperwork. The survey of 11 high-income countries found that 37 percent of U.S. adults went without recommended care, did not see a doctor when sick or did not fill prescriptions because of the cost, compared with as few as 4 to 6 percent of adults in the United Kingdom and Sweden. Nearly one-quarter (23 percent) of American adults also either had serious trouble paying medical bills or were unable to pay them, compared to less than 13 percent in France (which had the next-highest rate), and 6 percent or fewer of those in the United Kingdom, Sweden and Norway, according to the survey.

  • Costs of Healthcare, its effects

• Wal-Mart has permanently changed the self-insuring employer benefits landscape with its decision to add top destination hospitals around the US to its employee health benefits plan.
   
  

   

   Should any of Wal-Mart's 1.1 employees need heart or spinal surgery, they'll be getting it at one of six leading health systems that regularly treat destination patients from every country in the world, including the Cleveland Clinic and the Mayo Clinic. The employee-patient pays no copay or deductibles, and travel costs for both the employee-patient and a traveling companion are also covered.
  
• It's a trend many major employers are embracing - including PepesiCo, Boeing, and Lowe's. Some companies are offering to send patients abroad.
   
   
  • The New Yorker’s article “Club Med” which posits the allure of medical travel as the solution to out-of-control US healthcare costs: “The logic of free trade in medicine is becoming harder to resist.” 
   
  • The New York Times reports on two different hip replacement patients traveling to Europe (one to Germany, one to Belgium) 
   
  • No less than Harvard Business Review and Forbes name medical tourism as a “mega-trend” that will transform the way Americans seek and pay for healthcare. 
   
  • The internet is full of patient testimonials for hip replacement like this one, this one, and this one – three different US patients choosing a private hospital in Mexico, flying in and out of San Diego International.
   
  • Outside Magazine, with its readership of adventure athletes and travelers, featured medical tourism in its Have Injury, Will Travel storyNovember 2013 issue, pointing out various nations have earned a reputation for mastering certain procedures, from cosmetic surgery and dentistry in Mexico or Brazil, to heart surgery in India, to orthopedic surgery for sports injuries in Southeast Asia and Eastern Europe.
• Of course the mystery of healthcare pricing is no accident, but, as Bernstein confirms,  the result of a long chain of middle men - basically, all the major players  -  including drug companies, purchasing organizations and distributors, insurers, and more - striking such a plethora of confidential deals so that the end result is not just a wildly inflated price to the patient, but one that is totally obscure to the participants themselves, who know only their portion of an otherwise obscure profit tier dictating an ultimately unknowable price.  

  • Why are the prices so high?
• The net result is so ludicrous that Bernstein notes that "even participants cannot say what the simplest component of care actually costs, let alone what it should cost" -

  • Important Insight
• Patients Want Price Transparency
   As the NY Times $2.7 Trillion Medical Bill story made clear, patients want to be able to compare their healthcare options.   
   
   Of the ~1500 readers who left comments on the story, the great majority were consistently indicated that  clarity on pricing before being billed for medical services is essential for better patient decision-making and even receiving more/better care.   

  • Why transparency is important

3 more annotations...

• Healthcare is unique, however, because rarely can the customer turn down the option of additional care. Among other things, if you’ve broken your hip there’s an obvious reason you can’t pass on whatever surgery or follow-up care such an injury requires.

• And what about the fact that the US spends more on medical research than any other country by a wide margin? The problem is that this innovation comes at a high price, and it’s a model that will prove unsustainable in the long run as other countries out-compete us at a lower cost.

   

• There was Fred Abrahams, 77, a skier who had surgery on both ankles for arthritis — one in New York for more than $200,000 and one in New Hampshire for less than $40,000. There was Matthew Landman, 41, billed more than $100,000 for antivenin administered in an E.R. after a small rattlesnake bite.
• There are plenty of interesting ideas being floated to help repair the system, many of which are being used in other countries, where health care spending is often about half of that in the United States. For example, we could strictly regulate prices or preset payment levels, as is currently done for hospital stays under Medicare, the national insurance program for people over 65, or at least establish fair price corridors for procedures and drugs. We could require hospitals and doctors to provide price lists and upfront estimates to allow consumers to make better choices. We could stop paying doctors and hospitals for each service they performed and instead compensate them with a fixed monthly fee for taking care of each patient. We could even make medical school free or far cheaper and then require service afterward
• All other developed countries rely on a large degree of direct government intervention, negotiation or rate-setting to achieve lower-priced medical treatment for all citizens. That is not politically acceptable here.

1 more annotation...

• Kira Milas has no idea who called 911, summoning an ambulance filled with emergency medical technicians. Ms. Milas, 23, was working as a swim instructor for the summer and had swum into the side of the pool, breaking three teeth.

• haken, she accepted the ambulance ride to Scripps Memorial Hospital in La Jolla, Calif. The paramedics applied a neck brace as a precaution.

   A week later she received a bill for the 15-minute trip: $1,772.42. Though her employer’s workers’ compensation will cover the bill, she still was stunned at the charge. “We only drove nine miles and it was a non-life-threatening injury,” she said in a phone interview. “I needed absolutely no emergency treatment.”
• Thirty years ago ambulance rides were generally provided free of charge, underwritten by taxpayers as a municipal service or provided by volunteers. Today, like the rest of the health care system in the United States, most ambulance services operate as businesses and contribute to America’s escalating medical bills.
• Although ambulances are often requested by a bystander or summoned by 911 dispatchers, they are almost always billed to the patient involved. And the charges, as well as insurance coverage, range widely, from zero to tens of thousands of dollars.
• “There’s a saying that if you’ve seen one emergency medical system, you’ve seen one emergency medical system — no two are alike,” said Dr. Robert E. O’Connor,

• This fall, Joanne Freedman went to an urgent care center near her home in New York City with a bad headache and a fever. The doctor recommended she go to a hospital for further evaluation and offered to call an ambulance.

   “I could have walked, but I’m feeling crummy so I think, ' OK, why not?’ ” she recalled.

4 more annotations...

• In just six categories of waste -- overtreatment, failures of care coordination, failures in execution of care processes, administrative complexity, pricing failures, and fraud and abuse -- the sum of the lowest available estimates exceeds 20 percent of total health care expenditures," say the authors. "The actual total may be far greater. The savings potentially achievable from systematic, comprehensive and cooperative pursuit of even a fractional reduction in waste are far higher than from more direct and blunter cuts in care and coverage."
  
• • delivery-of-care failures resulted in an estimated cost of between $102 billion and $154 billion,
   
  • care-coordination failures accounted for $25 to $45 billion in wasteful spending,
   
  • overtreatment represented between $158 and $226 billion,
   
  • administrative complexity resulted in wasteful spending of between $107 and $339 billion,
• • pricing failures cost the United States between $84 and $178 billion, and
   
  • fraud and abuse contributed between $82 billion and $272 billion in wasteful spending.
• "If the United States is to reconstruct a health care industry that is both affordable and relentlessly focused on meeting the needs of every single patient and family, waste reduction (that is, the removal of nonvalue-added practices in all their forms) is the best strategy by far," the authors write.

2 more annotations...