Health care spending: A 21st century gold rush
Posted Feb. 14, 2013, at 11:38 a.m.
Winston Churchill once remarked, “Americans will always do the right thing, once they’ve exhausted all alternatives.” His observation, at least the second half of it, is proving itself as we continue to struggle with our health care system, especially its out-of-control costs that are crippling the budgets of businesses and government alike.
There is a lot of money in our health care system, and no enforceable budget. That leads to carelessness when it comes to spending that money.
What are some of the reasons health care costs continue to rise? Here are a few examples.
For at least the past 40 years, I’ve heard colleagues say, “We’d better get our fees and charges up now, because next year they’re really going to crack down on us.” It has never happened, yet. The problem is intensifying as outpatient “providers” have morphed from being real people into being corporations.
The Los Angeles Times reported on a case where a teacher’s group health plan was billed $87,500 by an “out of network” provider for a knee procedure that normally costs $3,000. Her health plan was willing to pay it. Outraged, the teacher ratted on the orthopedic surgicenter to California’s attorney general. After the press got involved, the charge was “reduced” to only $15,000. Not a bad pricing strategy, from the surgicenter’s point of view.
The New York Times reported an incident where a student who needed emergency gallbladder surgery ended up with a couple of “out-of-network” surgeons through no fault of his own. He was billed $60,000. His insurance company was willing to pay only $2,000. He was left to deal with the rest of the bill on his own.
There are many more examples. Privately insured patients are not the only ones affected. Governors around the country are continuing to struggle with how to pay for their Medicaid programs. In Oregon, Democratic Gov. John Kitzhaber is trying to find ways to impose a fixed budget on Oregon’s Medicaid program without adversely affecting Medicaid beneficiaries. But, he acknowledges, disciplining Medicaid alone will not do the job. He hopes his approach will be adopted by most other health insurance programs.
In Maine, Republican Gov. Paul LePage is struggling not only with how to keep up with burgeoning current Medicaid costs, but also how to pay the state’s almost $500 million past-due Medicaid debt to hospitals. He has proposed lowering liquor prices to boost sales, and mortgaging Maine’s future liquor revenues to secure bonds to pay the debt. His Republican colleagues in the Legislature have described this idea as “creative.”
One of the central features of Obamacare is the creation of “health insurance exchanges,” or online marketplaces. But the law has recognized that many people will need help making the right choices. So it has created an army of “navigators” to help them. A recent Washington Post story points out that a huge number of such experts will be necessary (California alone plans to certify 21,000 of them). Their cost will be reflected in higher health insurance premiums and has sparked opposition from insurance brokers who view them as competition. That will be an expensive fight, without increasing the amount going to actual health care by a single dollar.
The following is an extremely enlightening article about the origins of "managed care", a concept that is giving so many people so much heartburn. The article is pretty accurate, with one glaring exception that is explained in my note that follows it.
-SPC
Managed cost, mismanaged care
By Meade Klingensmith
Remapping Debate, Feb. 13, 2013
Dr. Molly Droge is the chair of the subcommittee on access to care at the American Academy of Pediatrics. Growing up in West Texas, she lived next door to an old general practice doctor. She didn’t know him well, but, as she told Remapping Debate, “I did know his reputation in the town, and I knew what his patients thought of him.” He was known for doing everything he could to help his patients, and would often do it without any payment at all. “He got a bowl of tomatoes in the summer, or he got two chickens for whatever care that he had provided someone,” Dr. Droge said. “There was a trust there. And that’s the way I thought doctors acted.”
When Dr. Droge entered pediatric practice in the early 1980s, she joined a managed care organization in Dallas run by Cigna HealthCare and was surprised at how different it was from what she had imagined medicine to be. She found the managed care organization was “all about maximizing profit.” She had difficulty getting necessary referrals for patients. She was forced to try several different medications on patients before she would be allowed to administer the one she knew to be best from the outset, because the best medication wasn’t part of Cigna HealthCare’s list of approved drugs. “Physicians really had to work to make sure that our patients got the care that they needed. It was not a given,” she said.
Dr. Droge’s story is hardly unique. On the contrary, from interviews with health care experts and doctors, as well as in Remapping Debate’s own research into the history of managed care, it appears that the defining feature of the managed care era is a profound rhetorical and practical shift — politically and among health care advocates, observers, providers, and insurers — away from a focus on quality of care and towards an obsession with cost control.
How did this happen? Health care experts suggested the existence of two powerful forces working in tandem. First was the birth and development of the market-based, for-profit health insurance industry, built on the back of what was once a progressive model for how to maximize quality of care: the prepaid group practice, which was later adapted into “managed care.” Second was the spread of an ideology that subordinated quality concerns to cost control while asserting that both could be achieved — an ideology that held particular sway among the New Democrats of the 1990s.
Tracing these two forces requires starting at the origins of managed care: the prepaid group practices that appeared on the West Coast of the United States as early as 1929.
Origins of managed care
http://www.pnhp.org/print/news/2013/february/managed-cost-mismanaged-care
Remapping Debate, Feb. 13, 2013
Dr. Molly Droge is the chair of the subcommittee on access to care at the American Academy of Pediatrics. Growing up in West Texas, she lived next door to an old general practice doctor. She didn’t know him well, but, as she told Remapping Debate, “I did know his reputation in the town, and I knew what his patients thought of him.” He was known for doing everything he could to help his patients, and would often do it without any payment at all. “He got a bowl of tomatoes in the summer, or he got two chickens for whatever care that he had provided someone,” Dr. Droge said. “There was a trust there. And that’s the way I thought doctors acted.”
When Dr. Droge entered pediatric practice in the early 1980s, she joined a managed care organization in Dallas run by Cigna HealthCare and was surprised at how different it was from what she had imagined medicine to be. She found the managed care organization was “all about maximizing profit.” She had difficulty getting necessary referrals for patients. She was forced to try several different medications on patients before she would be allowed to administer the one she knew to be best from the outset, because the best medication wasn’t part of Cigna HealthCare’s list of approved drugs. “Physicians really had to work to make sure that our patients got the care that they needed. It was not a given,” she said.
Dr. Droge’s story is hardly unique. On the contrary, from interviews with health care experts and doctors, as well as in Remapping Debate’s own research into the history of managed care, it appears that the defining feature of the managed care era is a profound rhetorical and practical shift — politically and among health care advocates, observers, providers, and insurers — away from a focus on quality of care and towards an obsession with cost control.
How did this happen? Health care experts suggested the existence of two powerful forces working in tandem. First was the birth and development of the market-based, for-profit health insurance industry, built on the back of what was once a progressive model for how to maximize quality of care: the prepaid group practice, which was later adapted into “managed care.” Second was the spread of an ideology that subordinated quality concerns to cost control while asserting that both could be achieved — an ideology that held particular sway among the New Democrats of the 1990s.
Tracing these two forces requires starting at the origins of managed care: the prepaid group practices that appeared on the West Coast of the United States as early as 1929.
Origins of managed care
http://www.pnhp.org/print/news/2013/february/managed-cost-mismanaged-care
SPC's Comment on the preceding article:
All in all this piece is pretty accurate - with one big exception. I know that congressional healthcare leaders did not view (at least in 1971) HMOs and national health insurance as an either-or proposition. Kennedy viewed a national network of non-profit , tightly defined HMOs to be a complement to a single-payer national health insurance program. And no matter what Nixon may or may not have been taped saying, other leaders in the administration (such as Robert Finch, Lew Butler and Elliott RIchardson - Finch's successor as HEW Secretary) also viewed reform of the delivery system (HMOs) as a complement to, not a substitute for, reform of the healthcare financing system (NHI).
Kennedy and Nixon were certainly political rivals and had little use for each other, but on this point Kennedy and the Nixon administration agreed. Work on NHI continued into 1974, even after the HMO Act of 1973 passed and was signed into law. It was finally killed in the House Ways and Means Committee in 1974, due primarily to pressure from the insurance industry and the usual fear of "socialized medicine" by the AMA, but also apathy from a weakened and finally absent Nixon Administration, an ambivalent and then resistant labor movement, disinterest by the public, and, finally, Fannie Fox.
For more detail, see http://www.huffingtonpost.com/2009/08/26/when-kennedy-nearly-achie_n_269935.html.)
Center for Economic and Policy Research 1611 Connecticut Ave, NW Suite 400 Washington, DC 20009 tel: 202-293-5380 fax: 202-588-1356 www.cepr.net
Reducing Waste with an Efficient
Medicare Prescription Drug Benefit
BY DEAN BAKER*
When Congress was debating the Medicare drug benefit in 2003, there were many who advocated that Medicare provide the benefit as part of the traditional hospital insurance program. This was expected to save money both due to lower administrative costs and also as result of Medicare’s ability to use its market power to directly negotiate lower prices with the pharmaceutical industry. The plan that was passed instead required beneficiaries to purchase insurance from private insurers who would be subsidized by the government.
http://www.cepr.net/documents/publications/medicare-drug-2012-12.pdf
5:00 AM PST, February 13, 2013
Consumers are getting their first glimpse at what health insurance will look like in California as the state prepares to implement the federal healthcare law.
On Wednesday, state officials will spell out the details on policies available next year to people buying their own coverage. In January 2014, most Americans will be required to have health insurance or face a penalty.
Federal law established four broad plans of coverage — Platinum, Gold, Silver and Bronze — whose benefits vary based on the level of out-of-pocket expenses that consumers are required to pay. A Platinum plan, the most expensive, would require policyholders to pay about 10% of the cost of care, while the Bronze plan, the least expensive, pegs the patient share at 40%.
Document: Details of California's healthcare plans
Now for the first time, California is laying out the specific co-pays and deductibles that many policyholders will face when going to see a doctor, get a lab test or visit an emergency room.
Nationwide, President Obama's Affordable Care Act requires insurers to cover certain services, such as maternity care and prescription drugs, and they must accept all applicants regardless of preexisting medical conditions. But the federal law allows states to go beyond those minimum standards and set stricter rules.
State officials said they took this extra step to help Californians get the best deal when they shop for insurance. Consumers will be able to buy these policies through Covered California, the state-run marketplace for health insurance.
"For the first time, all Californians will be able to make an apples-to-apples comparison of their health plan choices in 2014," said Peter Lee, executive director of Covered California. "Today's health insurance market is a shell game where insurers are trying to avoid paying for expensive care and consumers don't know what's covered or not covered."
Consumer advocates applauded California's move. But some healthcare experts warned that policyholders will still have to navigate a lot of jargon. And the ultimate cost of this coverage won't be known until the state negotiates rates with health insurers later this year.
http://www.latimes.com/business/la-fi-health-exchange-benefits-20130213,0,6269819,print.story
BY DEAN BAKER*
When Congress was debating the Medicare drug benefit in 2003, there were many who advocated that Medicare provide the benefit as part of the traditional hospital insurance program. This was expected to save money both due to lower administrative costs and also as result of Medicare’s ability to use its market power to directly negotiate lower prices with the pharmaceutical industry. The plan that was passed instead required beneficiaries to purchase insurance from private insurers who would be subsidized by the government.
http://www.cepr.net/documents/publications/medicare-drug-2012-12.pdf
California reveals details of health-law insurance plans
The state will lay out the specific co-pays and deductibles that many policyholders will face under the federal healthcare law.
By Chad Terhune, Los Angeles Times5:00 AM PST, February 13, 2013
Consumers are getting their first glimpse at what health insurance will look like in California as the state prepares to implement the federal healthcare law.
On Wednesday, state officials will spell out the details on policies available next year to people buying their own coverage. In January 2014, most Americans will be required to have health insurance or face a penalty.
Federal law established four broad plans of coverage — Platinum, Gold, Silver and Bronze — whose benefits vary based on the level of out-of-pocket expenses that consumers are required to pay. A Platinum plan, the most expensive, would require policyholders to pay about 10% of the cost of care, while the Bronze plan, the least expensive, pegs the patient share at 40%.
Document: Details of California's healthcare plans
Now for the first time, California is laying out the specific co-pays and deductibles that many policyholders will face when going to see a doctor, get a lab test or visit an emergency room.
Nationwide, President Obama's Affordable Care Act requires insurers to cover certain services, such as maternity care and prescription drugs, and they must accept all applicants regardless of preexisting medical conditions. But the federal law allows states to go beyond those minimum standards and set stricter rules.
State officials said they took this extra step to help Californians get the best deal when they shop for insurance. Consumers will be able to buy these policies through Covered California, the state-run marketplace for health insurance.
"For the first time, all Californians will be able to make an apples-to-apples comparison of their health plan choices in 2014," said Peter Lee, executive director of Covered California. "Today's health insurance market is a shell game where insurers are trying to avoid paying for expensive care and consumers don't know what's covered or not covered."
Consumer advocates applauded California's move. But some healthcare experts warned that policyholders will still have to navigate a lot of jargon. And the ultimate cost of this coverage won't be known until the state negotiates rates with health insurers later this year.
http://www.latimes.com/business/la-fi-health-exchange-benefits-20130213,0,6269819,print.story
Wednesday, February 13, 2013
Non-Profit Hospital Executive Salaries Continue to Defy Gravity and Logic
The old saying is that nothing is certain except death and taxes. In health care, the other near certainty seems to be that compensation for health care leaders is big and always getting bigger.
Over the past few weeks several reports about the compensation of top executives of US non-profit hospitals and hospital systems have appeared. So it is time to do our latest round-up of incessantly buoyant hospital executive compensation, and argumentative hot air that seems to fuel it. I will first summarize the latest cases in alphabetical order by state, and then examine some common justifications for the seemingly anti gravitational nature of executive compensation in this part of health care.
Arizona
On AZCentral.com was an article about the CEO of a single relatively small public hospital system:
That may not seem like a lot of money as executive compensation goes, but consider the context:
Over the past few weeks several reports about the compensation of top executives of US non-profit hospitals and hospital systems have appeared. So it is time to do our latest round-up of incessantly buoyant hospital executive compensation, and argumentative hot air that seems to fuel it. I will first summarize the latest cases in alphabetical order by state, and then examine some common justifications for the seemingly anti gravitational nature of executive compensation in this part of health care.
Arizona
On AZCentral.com was an article about the CEO of a single relatively small public hospital system:
The leaders of Maricopa County’s public health-care system agreed to raise chief executive Betsey Bayless’ pay by 33 percent, bringing her salary to $500,000.
That may not seem like a lot of money as executive compensation goes, but consider the context:
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