NPR broadcast “GOP Launches Bid To Repeal Health Care Law” http://www.npr.org/2011/01/19/133018188/gop-launches-bid-to-repeal-health-care-law on Jan 19th.

This is one of the illustrations provided to show how the PPACA (“Obamacare”) will help Americans:

“Among them was Ed Burke of Palm Harbor, Fla., who has hemophilia. His medication alone can run $18,000 a week. That’s pushing a million dollars a year. Burke, who was profiled by NPR last fall, has wrestled over the years with lifetime caps on various insurance policies he’d have on the job.

‘Once you have reached your lifetime cap, you would be forced to pay the rest of your health care out of pocket or to change jobs and sometimes even careers in order to have health benefits and a new cap,’ he testified.

But Burke told the Democratic lawmakers he no longer has to worry, thanks to the new law.

‘Our new patient’s rights prohibit insurance companies from having such caps, and even removed annual limits so that any insured American can receive all the care they need without fear,’he said.”

There are no free lunches

Many Americans share the fantasy that if the government or health insurer pays for a service, the service is free. That is absolutely not the case. Mr. Burke’s $1,000,000 per year cost is simply (and painfully) shifted to the rest of us as either higher taxes or higher premiums. Nothing is free . . . there is always a financial or opportunity cost.

There are no cost savings . . . only cost shifting.

And in this case, the hemophilia treatment is shifted to you . . . leaving you with less income for food, education, clothing, housing . . . whatever.

It’s absolutely o.k. if you don’t mind helping Mr. Burke pay for his treatment . . . just don’t blindly say it’s o.k. with the dangerously false assumption that since the government or health insurer is picking up the tab, the service is “free”. It’s a trade-off . . . Mr. Burke gains while you lose.

Well maybe

It is certainly an acronym that has stupefied Congress and embodied the “kick-the-can-down-the-road” approach. Generically, a sustainable growth rate (SGR) is used in finance to determine the extent of growth possible before a firm is inclined to increase debt. A bipartisan Congress and White House included SGR in the Balanced Budget Act of 1997 to stem the rising cost of Medicare (Part B) payments to physicians. The idea was to recalibrate Part B Medicare payments on an annual basis consistent with an established formula.

“The statute specifies a formula to calculate the SGR based on our estimate of the change in each of four factors. The four factors for calculating the SGR are as follows:

(1) The estimated percentage change in fees for physicians’ services.

(2) The estimated percentage change in the average number of Medicare fee-for-service beneficiaries.

(3) The estimated 10-year average annual percentage change in real gross domestic product (GDP) per capita.

(4) The estimated percentage change in expenditures due to changes in law or regulations.”

http://www.cms.gov/SustainableGRatesConFact/Downloads/sgr2010p.pdf

Overall, not a bad idea.

Unfortunately, as with so many legislated initiatives, execution of the plan has not approached its intent. Compliance with SGR would have resulted in annual reductions in Medicare payments to physicians annually for the past decade. Instead, each year Congress deferred reductions, and physician payments were increased.

But wait a minute!

Congress passed the original legislation in 1997, and now they are violating their own commitment. All of these reversals . . . from reduction to increase . . . have resulted in a very large aggregate deficit. The can kicked down the road for years has morphed into a large barrel.

In 2010, Congress informed physicians that payments would decrease a whopping 30% by January 2011. But that’s ok; Congress again reversed its position and delayed any cuts for at least another month and maybe another year.

Why?

Powerful lobbyists including the American Medical Association want the SGR replaced by some other, more realistic metric. Not really a quantifiable metric; instead, a greater focus on preventive and chronic care management, better health care decision making, better incentives for patients, and more competition among health plans.

http://www.ama-assn.org/ama1/pub/upload/mm/399/nac_strategies.pdf

All that sounds reasonable, though the AMA plan does little to stem the cost of health care. Their ideas simply shift the responsibility to patients and insurers.

The problem is that we spend too much on health care. The only method for bringing the rate of increase in health care costs in line with the rate of inflation is through rationing; consistent with the venerable economic realities of scarcity and trade-offs.

How much larger does that SGR barrel need to grow before we can no longer kick it further down the road, and Congress will no longer be able to shirk their fiscal responsibilities?

I would support funding a spine transplant for each of our 535 House and Senate members. That is likely the most effective use of health care dollars in decades!

Your thoughts?

ICD-10?

How can such an innocuous term have such an ominous impact on health care delivery in the U.S.? ICDs are simply the diagnosis codes that identify what ails you when you visit your physician or hospital. The World Health Organization, Canada, and many European countries adopted ICD-10s years ago and they continue to deliver health care.

So, what’s our problem?

Regardless of your opinion of health care delivery in the U.S., there is consensus that our system is fragmented; replete with hundreds of divergent public and private payers. Most other countries have single-payer or few-payer systems, making major and complex conversions more easily attainable. Further, those countries where government is the primary source of health care payment can use tax dollars to finance expensive conversions. And, the ICD-9 to ICD-10 conversion will be very, very expensive.

According to,

http://library.ahima.org/xpedio/groups/public/documents/ahima/bok3_005526.hcsp?dDocName=bok3_005526

“The implementation of ICD-10-CA/CCI in an electronic environment [in Canada was] a major commitment of time, energy, and resources and, an ongoing process.

“Productivity levels following the implementation of the classifications were impacted. The specific time line to return to pre-ICD-10-CA and CCI productivity levels varied from one institution to another but averaged six months overall. Health record professionals were tasked with learning new classifications, new software, and a new abstract. “

Everything that physicians, hospitals, coders, and insurers know about ICD-9s is obliterated by ICD-10s. It is akin to changing your language from English to French with the flip of a switch . . . in this case, at midnight on September 30, 2013.

OK, so what does all of this mean?

According to: http://www.aafp.org/online/en/home/publications/news/news-now/practice-management/20081029icd10.html

“The impact on physicians’ cash flow could be dramatic. ‘My fear is that on Oct. 1, 2011, no one’s going to get paid and probably won’t for the first six months after implementation of ICD-10,’ said Grider. ‘If you’re not paid for six months, how do you keep your practice running?’ she asked.”

“Deborah Grider is credentialed as a certified coder though the AAPC and the American Health Information Management Association. She serves as president of the National Advisory Board of the AAPC.”

Notice that she refers to “Oct. 1, 2011” . . . the implementation of ICD-10s has been delayed twice. The new carved-in-granite-date is October 1, 2013.

What’s the big deal?

According to http://www.aapc.com/ICD-10/

“ICD-10 implementation will radically change the way coding is currently done; the code-set will grow from its current 17,000 codes to more than 141,000, and the format is new with seven alpha-numeric codes instead of five numeric digits. “

17,000 to 141,000 codes!

So much for simplifying our delivery of health care. According to, http://www.aapc.com/ICD-10/icd-10.aspx “The change to ICD-10-CM for diagnostic code reporting across all of health care — and the implementation of ICD-10-PCS (Procedural Coding System) for inpatient procedural reporting for hospitals and payers — will be the most challenging transition since the inception of coding. The number of diagnostic codes under ICD-10-CM will swell from 13,500 to 69,000. For inpatient procedures, the number jumps from 4,000 codes to 71,000 codes.”

As if we needed another challenge.

There are two major elements to converting from ICD-9 to ICD-10. The first is internal; the enormous task of retraining everyone . . . teaching them this new ICD-10 language, and converting EMRs and electronic billing systems to the new ICD system. Let’s assume that all medical practices and hospitals are perfectly efficient and proficient at getting their respective houses in order . . . and that’s one huge assumption. The second element is external. This is a fantastic opportunity for commercial payers (United, Cigna, Aetna . . . ) to bog down the system with excuses . . . to slow payment to physicians and hospitals.

The intermediate result

Profit margins are already paper-thin for the majority of primary care physicians. ICD-10s will be the proverbial straw that breaks the back. I anticipate a mass exodus of physicians from small- or medium- sized practices to mega-groups (hundreds of physicians) or hospital networks. And, many physicians will simply go bankrupt.

The eventual result

Forget about personalized health care. I have a modicum of faith that larger medical groups and electronic records have potential for improving quality, though the delivery will be increasingly less patient-centered. Sure, there will be a move toward concierge medical services, but that is only for the well-heeled. The rest of us will simply be corralled as we queue up for services by anonymous medical providers.

Your thoughts?

Most of what we discuss with health care reform is based on shifting cost between health care stakeholders . . . more cost to patients, less cost to the government, less payment to physicians and hospitals and so on.

Here are a couple of suggestions that save cost rather than just playing the cost shifting shell game.

Just stay home . . .

As a society, we visit physicians much too often. More than 2/3 of our encounters with our family physicians should be avoided.

Various studies agree that up to 70% of all visits to clinics and emergency rooms are unnecessary. “An unnecessary visit is a visit for symptoms that are self-limiting in nature; with time, these symptoms disappear. On the other hand, some individuals do not seek care at the appropriate time.” Granted it’s important to seek care when appropriate. However, one of my pediatric clients processes appointment requests from families who anticipate their child might become ill because of some suspected (dubious?) exposure to a pathogen. Or, consider how often individuals insist on antibiotics for simple (viral) colds. Antibiotics fight bacteria not virus. Hydration and rest at home is a much better cure.

The CDC reports (http://www.cdc.gov/nchs/fastats/ervisits.htm), “Visits to primary care physicians—general practice, family medicine, internal medicine and pediatric physicians—accounted for nearly half of the 967.3 million doctor visits in the United States during 2004.”

Potential savings: 50% of 900 million visits at $100/visit = $45 billion. 70% (who should have stayed home) = about $32 billion in potential savings.

Call it quits when it’s time to go . . .

According to the U.S. Agency for Healthcare Research and Quality (http://www.ahrq.gov/news/nn/nn042507.htm) “Totaling both VA and Medicare benefits, elderly veterans incurred an average of $43,795 in the final year of life, 40% more than an average Medicare beneficiary accrued during the final year of life. Costs for elderly veterans started increasing rapidly in the final year of life and accelerated sharply during the final 90 days of life. Most of the cost increase near the end of life was for acute hospital services; acute hospital care accounted for 44% and 60% in year 2 and year 1 before death, respectively, and 78% in the final 30 days of life.”

Other government agencies report, “[e]stimates show that about 27% of Medicare’s annual $327 billion budget goes to care for patients in their final year of life.” (http://www.hsrd.research.va.gov/research/abstracts/IIR_02-189.htm and http://www.medicaring.org/whitepaper/)

Potential savings: 27% of $327 = $88 billion.

Conclusion:

Considering only these two broad (overly simplistic some would argue!) measures could reduce our annual health care spending by $120 billion or about 5% of our total health care bill.

Just imagine how much more we could save by a more comprehensive investigation and a dollop of common sense!

Your thoughts?

The U.K.-based Nuffield Trust published “Clinically Integrated Systems: The Next Step in English Health Reform” in 2007. Make no mistake; the British Health System suffers from the same challenges as health systems in all other industrialized nations, including the U.S. Populations are aging, pharmaceutical and mechanical technologies continue to emerge, and patient expectations continue to increase. All of these contribute to more of everything including more cost.

The Nuffield report (authored by Chris Ham – University of Birmingham England) emphasizes market-based cooperation and competition. Competition helps diminish waiting (queue) times and collaboration promotes seamless patient care. “[T]he increasing prevalence of chronic disease, and the need to improve the quality of specialist services like stroke care, will require not only closer collaboration between providers but also clinical integration between primary and secondary care, and the development of clinical networks.”

Does this promote a single payer system? U.K. Health Ministers emphasize “more choice”, “stronger voice for patients”, “greater diversity of providers, with more freedom to innovate and improve services”. Innovation and quality? Those do not exist under any monopoly or monopsony. Instead, the invisible hand forces of free markets motivate innovation . . . motivate quality.

The report points to the examples in the U.S. for direction. “Evidence from outside the UK indicates that integrated delivery systems such as the Veterans Health Administration and Kaiser Permanente achieve good outcomes for people with chronic disease.” The British Health System . . . often placed on a pedestal by U.S. Congressional Democrats . . . cites one government-based and one private-based model in the U.S. as exemplars.

The report summarizes that, “The thought this prompts is whether it might be preferable to develop a number of competing integrated Kaiser-like systems, as a more effective way of generating change and improvement”.

As my blog nears the anniversary of its first year, discovery of the Nuffield report supports what I’ve been posting all along:

• The Federal government should provide for the health of the public, not the individual. Services should include herd immunity vaccinations, and perinatal care and education. This requires a transition from fragmented system of public payers (Medicare, Medicaid, TriCare, VA, IHS, . . . ) we have now to a single payor (e.g. cradle-to-grave Medicare with limited scope of services). Echoes of Ted Kennedy’s 1971 proposed “Health Security Act” with the exception that Kennedy’s Bill included a cradle-to-grave, comprehensive, single payer system.

• All other care should be provided by the private sector, where insurer and provider are under one roof . . . where the insurer is motivated to charge the lowest premiums for the highest quality services, and the provider is equally motivated to provide the highest quality services to assure the highest profit margins. Sounds like Kaiser to me!

My next blog can save tens of billions of dollars . . . just stay home!

Your thoughts?

Another round of IDS’

Integrated health care delivery systems (IDS). . . Clinically Integrated Systems . . . Accountable Care Organizations . . . regardless of the lexicon, the objectives are shared. And, “shared” is the operative term here. The current motivation is for electronic medical records to use a common language (HL-7) and link to a common clearinghouse (health information exchanges). This important initiative requires a decade or two before the gelling of a reasonably effective network. Oh yes, there will continue to be those who perceive violations of privacy and breaches of security . . . that an individual’s risky life style choices will be exposed to the world or that a chronic ailment will marginalize our social and professional opportunities. In contrast, most of us will hopefully embrace an accessible pipeline to our health information; one that minimizes duplication of effort, inefficient processes, and the gremlin-infused lost medical record.

That’s only half the story

Integrating clinical information is only half the equation. Yes, there may be cost savings in the long run, though “bending the curve” . . . I despise that phrase . . . will never be achieved through cost-savings measures. Arguably, 1/3 of our health care bill is spent on administration and inefficiencies.

Here’s the math

That’s about $800 billion in 2010. Increases in health care costs are wildly variable year to year; let’s choose a reasonable nominal annual increase of 8%. And, let’s make the impossible assumption that administrative costs and inefficiencies drop to $0. Now, let’s do the math: $2.5 trillion less $800 billion equals $1.7 trillion. Compounding $1.7 trillion at an annual rate of 8% brings us back to a $2.5 trillion health care bill by 2016. Restated: Completely eliminating waste and administrative costs will have only a short term impact on our health care bill.

The rest of the story

The other half of the equation must involve another dimension of integration . . . the integration of medical provider and insurer. The Kaiser system is a good example.

Kaiser Permanente is comprised of Kaiser Foundation Health Plans (nonprofit, public-benefit corporations), Kaiser Foundation Hospitals (a nonprofit, public-benefit corporation), and the Permanente Medical Groups (for-profit professional organizations).

Kaiser offers insurance and uses the proceeds from insurance premiums to provide care to its subscribers. Kaiser generates revenue from premiums, and pays expenses for health care services and administrative overhead . . . all from the same pot. Kaiser has dual incentives: provide (at least the perception) of quality care AND remain financially solvent. Premiums must remain at market rates; and services, ideally, are neither over- nor under- utilized. It is in Kaiser’s best interest to provide the correct type and amount of care. Kaiser is already a clinically integrated system linking its hospitals and clinics. Health records for Kaiser patients are accessible at any point of entry.

My next posting provides an illustration of how one national system envisions the Kaiser model.

Your thoughts?

Think of our national health care budget as a steel drum that contains a fixed and finite amount of water. Let’s say this inflexible drum holds 50 gallons of water. All the water is supplied by us . . . from the taxes, premiums, and out-of-pocket cash we pay. It is not possible to consume any more than the 50 gallons of water from this steel drum even if our thirst is greater than 50 gallons. The only way we can drink more than 50 gallons is to find a second steel drum or a larger steel drum, by contributing more in taxes, more in premiums, more for out-of-pocket expenses.

Harry Reid proposes that his Senate bill for health reform will “cut the deficit by $130 billion, extend coverage to more than 94% of Americans and insure 31 million more of the uninsured”

(http://reid.senate.gov/newsroom/111809_healthcare.cfm ).

And, just how will this happen?

I speculate that Senator Reid intends to at least maintain quality at its present state. So, diminishing the deficit (that’s the amount the government overdraws its accounts on an annual basis) while insuring tens of millions of additional individuals must result in one or more of the following:

1. Increase taxes considerably (refer to my posting Squeezing more blood from the proverbial turnip! July 16th, 2009)

2. Decrease payment to hospitals, physicians, and other health care providers (refer to my postings Physician Compensation October 6th, 2009 and Beware of Disruptive Reform June 9th, 2009)

3. Ration patient care (refer to my postings Budget Neutral = Rationing July 27th, 2009 and Rationing health care delivery . . . so, what’s new? July 1st, 2009)

Oh yes

There is talk about increasing efficiencies with the implementation of Electronic Health Records and Health Information Exchanges (refer to my posting Responsible spending? HITECH Electronic Medical/Health Records (EMR/EHR) Sunday, April 26th, 2009).

And, there’s some opportunity to reduce fraud even though the tens of billions of suspected fraud pale in comparison to the hundreds of billions of extra dollars necessary to insure 30+ million individuals.

In the end, however, there is only so much water in the steel barrel

We are beginning to hear about rationing via Sebelius’ U.S. Preventive Services Task Force, a government panel recommending a reduction in the utilization of mammograms.

And, a few Republicans are offering the alternative of a government safety net for essential health services. This gives individuals the prerogative to buy more coverage to hedge the cost of non-essential medical interventions (refer to my postings More and less Medicare . . . Monday, June 8th, 2009 and Who pays? Tuesday, June 2nd, 2009).

We need to reform our health care delivery system . . . the current system is unsustainable . . . this is fact.

We cannot reform our system as proposed by the nonsensical bills recently passed by the House and just this week approved for discussion by the Senate . . . this is also fact.

We can only hope that midterm elections will quash whatever feeble proposals are currently on the table.

Hopefully, the market will respond with reasonable solutions . . . that’s the way it’s intended to be.

You thoughts?

Book smart . . . not street smart

The venerable Princeton University health care economist, Uwe Reinhardt, recently commented on NPR (http://www.npr.org/templates/story/story.php?storyId=113971873) that price discrimination and adverse selection are two important drivers of inequitable health care costs. Dr. Reinhardt is a brilliant scholar though, I bristle at the premise of his left-leaning proposals for health care reform.

He suggests that the U.S. adopt a social insurance system, similar to the health care delivery systems of Germany, Japan, Belgium, France and others. Dr. Reinhardt’s interview also addressed the incongruence between our individual beliefs and our individual actions.

Essentially (and based on the seminal work of Ajzen and Fishbein), each of us believes in an egalitarian approach to health care where finite resources are allocated fairly to all. However, when the need for health care is close to home . . . involving us personally . . . we react by demanding it all, demanding it now, and demanding it free. Damn the realities of finite resources, scarcity, and egalitarian allocation. That’s for everyone else . . . not for me and mine. (A genuine case of the chronic disease: moral hazard . . . another inescapable economic concept.)

Dr. Reinhardt responded to this dilemma by proclaiming that we are 300+ million “children” in the U.S. who need strong leadership to direct us from this morass.

Oh my! There are so many arguments to contrast.

1. Price discrimination is common in a market economy. It occurs when the exact same service or product is sold for different amounts to different buyers. For example,

a. The passenger sitting next to you on a plane, train, bus, or at a concert or sporting event likely paid a lower or higher amount for her ticket than you paid for yours.

b. Purchasers of large quantities typically pay less per unit than purchases of smaller quantities.

Dr. Reinhardt contends that the cost of health care should be the same for everyone, regardless of whether a mega-insurer is negotiating for mega-services with a hospital or if an uninsured individual is negotiating with a hospital for a one-time medical intervention.

His solution is good for the uninsured individual who will pay less for services and not so good for those insured who will pay more for premiums to offset the loss incurred by providing cheaper services to the uninsured individual.

2. Adverse selection involves allocating risk among individuals of different populations. So, a firm with older employees likely utilizes health care services to a greater extent than a firm with younger employees. The group with older employees may pay more for group health premiums than an employer with younger employees. Dr. Reinhardt suggests that all consumers should pay the same for health premiums. That’s good for older employees who would pay lower premiums and not so good for younger employees who would pay higher premiums.

Hmmm . . . tradeoffs, another one of those pesky, albeit invariable, economic concepts.

3. 300 million children in need of responsible, political leadership! And, Dr. Reinhardt resides in what utopia? I resent his claim that we are less capable than our elected officials to determine our respective fates. And, when did our elected officials provide unadulterated, objective legislation. Instead, our laws are influenced by the few to control the many.

This reminds me of a suggestion made by Jay Leno during one of his recent monologues: Politicians should be required to present like racecar drivers, where sponsors are clearly displayed on clothing and vehicles.

Back to my health care plan for my next posting.

Your thoughts?

Sports Illustrated reports annual compensation for Tiger Woods at $127 million, Phil Mickelson at $62 million, LeBron James and Floyd Mayweather at $40 million, and 46 other athletes at more than $15 million. (http://sportsillustrated.cnn.com/more/specials/fortunate50/2008/index.html# )

Forbes reports annual compensation for Oprah Winfrey at $275 million, Steven Spielberg at $150 million, Madonna at $110 million, Beyonce Knowles at $87 million, Bruce Springsteen at $70 million, Will Smith at $45 million, and Angelina Jolie at $27 million. (http://www.forbes.com/2009/06/03/forbes-100-celebrity-09-jolie-oprah-madonna_land.html )

Yes, they all entertain us.

And yes, they are all highly talented at what they do best. However, are their skills really 100 times or 1,000 times more valuable than your surgeon or internist? Well, there is Dr. Phil at $80 million though, he’s not a physician.

Highly paid physicians earn in the $0.5 million range. That group includes sub-specialists such as cardiovascular surgeons, neurosurgeons, orthopedic surgeons, and interventional radiologists. Internists, family practice physicians, and pediatricians are paid at the low end of the physician scale at about $165,000 annually.

This is the prize after four years of undergraduate study typically in one of the “hard” sciences, ranking toward the top of the class, four years of medical school, two years of residency, and a multi-year fellowship for medical specialties. They are rewarded with a graduation present of $250,000 +/- in student loans. Let’s not forget the rigors of running a medical office and the constant threat of malpractice vultures lurking overhead just waiting to swoop if the physician is not able to fix a patient’s decades of poor lifestyle choices.

Too bad these best and brightest didn’t spend more time learning how to throw a ball, hit a ball, hit another athlete, or have a thespian nature.

So, what’s the fuss?

Unfortunately for physicians, there’s another side to this story. All industrialized nations are challenged with slowing the growth of health care costs because all industrialized nations must contend with aging populations, advances in mechanical and pharmaceutical technologies, and ever-increasing patient expectations.

These challenges are magnified in the U.S. where (and you’ve heard all this before) we spend 17% of our GDP on health care . . . $2.6 trillion this year! “In 2007, the total spending for health care accounted for 16% of the country’s GDP, the highest share among the OECD and almost double the OECD average. On a per capita basis also the U.S. spent the highest with a total of $7,290 which is two-and-half times the OECD average . . . Employer-sponsored health insurance premiums have nearly doubled since 2000, a rate three times faster than wages. In 2008, the average premium for a family plan purchased through an employer was $12,680, nearly the annual earnings of a full-time minimum wage job.” (http://topforeignstocks.com/2009/07/03/a-comparison-of-us-health-care-spending-with-other-oecd-countries/ )

By the way, OECD, an acronym for The Organisation for Economic and Co-operation and Development, issues reports on the thirty largest global economies.

According to Uwe Rheinhardt, et al, “physicians’ incomes are much higher in the United States than they are in other OECD countries. In 1996, the most recent year for which data are available for multiple countries, the average U.S. physician income was $199,000. The comparable OECD median physician income was $70,324. The ratio of the average income of U.S. physicians to average employee compensation for the United States as a whole was about 5.5. Germany’s was the next highest, at only 3.4; Canada, 3.2; Australia, 2.2; Switzerland, 2.1; France, 1.9; Sweden, 1.5; and the United Kingdom, 1.4.” (http://content.healthaffairs.org/cgi/content/full/21/3/169?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&fulltext=cross-national+comparison&andorexactfulltext=and&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT)

The American College of Healthcare Executives (www.ache.org) “Key Industry Facts: 2009” reports that in 2007, physician compensation consumed a bit over 20% of our total health care expenditures. Hospital care consumed about 31%, dental and ancillary health about 13%, pharmaceuticals about 10%, nursing home care about 6%, and government and private insurance administrative costs about 7%.

I may have written myself into the proverbial corner!?

Assuming the 1996 ratios presented by Rheinhardt, et al remain valid today, adjusting U.S. physician compensation to the OECD average would save $310 billion per year (using ACHE’s 2007 values), reducing our health care bill by 14% from about $2.6 trillion to $2.25 trillion in 2009.

$2.25 trillion by paying physicians only 1/3 of their current earnings!

O.K., please disregard this posting. I cannot be an advocate for further discouraging our best and brightest from considering medicine as their life work, and for further motivating our practicing physicians to leave their practices.

Your thoughts?

The Committee for Economic Development (CED) convened an impressive panel of health care policy experts citing the works of Alain Enthoven, Victor Fuchs, Stephen Shortell, Elliott Fisher, Joseph Newhouse, J.D. Kleinke, Uwe Reinhardt, and other scholars with the intent to offer an alternative to the predominant employer-based health insurance system. CED “is an independent research and policy organization of over 200 business leaders and educators”.

The CED claims to be “non-partisan and non-political” though, I contend, the organization tends to lean toward market-driven solutions. In the best case, the CED is non-partisan and non-political and its market-based solution is the best approach. In a less-than-best case, the CED is partisan and their proclamation of a market-based model is self-serving.

The CED’s 100+ page “Quality, Affordable Health Care for All” is an interesting read. I agree with most of the attributes of its plan with a few exceptions. The report’s statement “. . . of what a health insurance system is supposed to be: financing care of the sick” (p. 43) is dangerously misleading. A more accurate statement is “health insurance, as with any insurance, hedges risk. Commercial (aka private) health insurance is a tri-partite civil contract between insurer and insured, and between insurer and provider. Health insurance plans are contracts with both specific and nebulous provisions. All parties (insurer, insured, provider) agree upon these provisions. Insurers generate revenue and, if their actuaries are accurate, profits. Providers generate revenue because of their patient care, and patients receive care consistent with the contract’s provisions. It should be a rather simple arrangement that is made difficult by two unique challenges: insurers design contracts deliberately ambiguous to justify claim denials. They hold the cash and they are financial giants. Insurers are adept at the attrition and exhaustion model. It is common for small provider groups to terminate appeal processes and write-off uncollected fees simply because scant profit margins on physician fees cannot justify the administrative cost of collection.

Now for a passage from the CED report that I found compelling, also on page 43. “Unusual complexity. Health insurance contracts – their language and the underlying technology – are extremely complex. There are too many possible future events. Few consumers really understand their health insurance policies or actually read them. Even the ‘simplified’ presentations of employee benefit packages usually take 40 to 50 lines just to describe the services covered or excluded, the limitations, and the co-payments or coinsurance rates. Medical care is even more complex. It generally takes seven or eight years of post-graduate education and training to be considered a qualified physician, plus continuing education thereafter. Although some people can become sufficiently informed to contribute to strategic choices in particular cases, the vast majority must rely on the advice of their doctors, which makes them less than equal participants in a competitive market.”

Your thoughts?