Posted on 12/07/2015 10:43:23 AM PST by Kaslin
As I explained in last week's column, the U.S. health care system is an unsustainable mess: One dollar of every five worth of economic activity is spent on someone's medical care; Medical costs are growing twice as fast as incomes; Medical prices are rising at three times the rate of consumer inflation. The Affordable Care Act was supposed to fix those problems and make health care "affordable." However, the method used required everyone to purchase overpriced health insurance. That's like throwing gasoline on a fire hoping to smother it. As a health economist, it's hard to imagine a policy agenda that could be any more damaging to the health care system -- or less effective.
Obamacare enrollees with cost-sharing subsidies bear little consequence when they are wasteful and little benefit when they are prudent. Once their deductibles are met, Obamacare bans any limits on the services patients consume. Neither does it do anything to mitigate the perverse incentives for providers to squander resources. For example, medical providers have few financial incentives to control costs and keep beneficiaries out of the hospital -- especially if the provider is a hospital. These problems could be improved with better incentives and better plan design in virtually all programs, whether Medicare, Medicaid or private insurance.
A dozen years ago health reformers promoted Health Savings Accounts (HSAs) coupled with high-deductible plans. A fair criticism of HSAs is that hospitalized patients have long since exceeded their deductibles. Moreover, critically-ill patients are unlikely to forgo a potentially beneficial medical service merely because they bear a portion of the marginal cost. Much more needs to be done.
Our health care system could be dramatically improved, but it must involve more efficient care for our sickest patients. Consider this: about 5 percent of patients spend nearly half of all health care dollars, while the sickest 1 percent consume nearly one-quarter of health care expenditures. These figures suggest there are more opportunities to reduce health care spending by carefully managing the sickest 5 percent instead of wasting our efforts on the 80 percent who are relatively healthy. Thus, health reform requires improving incentives that positively affect the sickest patients.
Increasingly, controlling costs means keeping people out of hospitals, where nearly one-third of health care spending occurs. Health reform must focus on reducing hospital spending on beneficiaries in poor health. It can only do so by better managing their chronic conditions.
To sufficiently slow medical spending, policymakers must allow plan designs that create price sensitivity among patients long after they have met their deductibles. To reduce health spending from the supply side, policymakers must allow insurers to promote competition among providers. In addition, plans and providers must be rewarded when they implement cost-saving programs that provide high-quality care at a lower cost.
A few health plans are experimenting with a concept known as reference pricing, designed to boost price sensitivity for high-cost procedures. Reference pricing is an arrangement where enrollees face unlimited cost-sharing for all costs of a treatment or a procedure above a stated reference price set by the health plan. It is generally set close to an average or median price readily available in the market. Because enrollees are very sensitive to marginal costs above the reference price, providers have an incentive to price their services close to the reference price to avoid losing business.
More needs to be done to help enrollees ascertain the price of medical services when shopping for medical care. A recent study confirmed high-deductible plans lower spending but not because patients shop for lower prices. High cost-sharing merely causes people to skip care. Although skipping unnecessary care is a good idea, forgoing beneficial care is not. Patients who comparison shop and negotiate for services provide better price signals to the market than ones who suffer through a condition until they improve on their own. Without interacting with potential customers, medical providers won’t have a clue they lost a sale due to high prices.
There are other methods that plans could use to raise quality and reduce costs. Enrollees' cost-sharing could be reduced in return for working closely with a plan’s care coordinator. Patients who first call their medical home to inquire about medical tests, prescription drugs could be rewarded. Some health plans are hiring firms -- such as Vitals and Compass Professional Health Services -- to assist enrollees and provide price transparency tools. Exchange plans are increasingly relying on narrow networks, where providers have negotiated lower prices.
Reforming our dysfunctional health care system requires more than high deductibles and HSAs. We must consider where the money is spent: on high-cost patients. Increasingly, slowing the growth in health care spending must focus on improving the care for patients in poor health. Health reform must also include improving end-of-life counseling and hospice care.
bfl
do I need a sarcasm tag? :-)
You're exactly right. "Major Medical", back in the 70s, made a lot of sense. Still does, especially when combined with concierge medical practices where you pay a monthly fee for a "membership" and get all of your basic work (earaches, sore throats, physicals) taken care of. The docs do referrals out-of-practice for the major stuff - trauma, surgery, and so on.
I suspect that's what we'll arrive back at - mostly - if the market is allowed to work. If the gov't keeps futzing with it, who knows where we'll end up.
The patient and insurer (or a drug maker/medical center) should always have skin in the game.
High-deductible plans should be replaced by declining percentage co-insurance.
You might put up $X to get a lower premium.
Your first $X of care might be 50/50 insurer/patient, the next $X 75/25, the next $2X 90/10, then 95/5, with interest at 3% and credit extended by the providers for total annual amounts greater than $5X.
Credit on drug amounts greater than $2X would be supplied by the drug seller(s), with no insurance coverage and subject to PPACA style maximum annual out-of-pockets.
Basically that $100,000/year cancer drug would cost you $5,000/year out-of-pocket. And your drug maker would want you to live 20 years for each year of treatment to get its $100,000/year of treatment. Cancer drugs would get a lot better fast.
Trump’s plan to lower state lines will increase competition driving insurance premiums down. It will also lead to diversification of policies.
Until you get the government out of Medicare, it is still going to screw up medicine.
A new comprehensive plan needs to be devised to help folks save, avoid insurance outlays, and create wealth.
People should continue on with private policies into retirement.
The government needs to get the hell out, and stay out, of medicine.
How to achieve it? Simple: All medical insurance payments may only be made directly to the beneficiary who is covered by the policy. No direct payments to any intermediary. They must present an actual itemized bill for every fee and service and be paid by the patient.
But of course nobody wants to really solve the root issue, which is why all talk of "reform" is just window dressing.
Yep, I always thought medicine shouldn’t work muck differently from getting your car worked on.
You go in, pay the charge to get an estimate. Get what work done you want. Even call other shops to price same work if you’re not sure of the pricing.
I don’t think we’ll be able to pick up our own parts at wal mart anytime soon, but I’m always checking the shelves for prostates just in case.
“Until you get the government out of Medicare, it is still going to screw up medicine.”
Traditional Medicare works fairly well in most of the USA, at least for the patients.
Medicare does need to lower hospitalization and drug costs.
We need smaller and more competitive hospitals. Basically, each operating room and nursing ward needs to be a competitive business unit.
The problem with Medicare isn’t the services provided, it’s the government’s control over medicine because it has fingers in the pie.
Get those fingers out of the pie. The government shouldn’t be able to dictate to hospitals what their policies are by using Medicare funds to blackmail them.
As to your comments on sole units having to be profitable on their own, you should be aware that every procedure in hospitals are studied to see how their costs relate to other procedures.
Physicians are watched to see whose procedures impact the bottom line the most.
Don’t get the idea that units in hospitals are just part of some big number and they haven’t broken them down.
They have. They know what medication, linen, nursing, power, and every other factor are costing.
Each unit is evaluated with other units and other hospitals by comparison.
Just had a physical checkup.
Dr was speaking well of what some companies are doing, creating a direct annual-fee contractual relationship with a doctors group, no insurance middle man. Big expenses are covered by a catastrophic plan.
Price transparency:
Most German patients have never seen a medical bill until fairly recently. They may now be charged 10 Euros every three month quarter in which they get care.
Britain’s NHS is still free at the point-of-service.
Basically, insurers should be legally empowered to set proper pricing, both for premiums and providers (drugs, hospital care, office visit) payments, subject to legal system review.
Let us say your significant other is very, very sick. You’ve been told that person needs a drug that will be charged at $84,000/year, that will keep your significant other alive for at least one more year. What will you do?
“The government shouldn’t be able to dictate to hospitals what their policies are by using Medicare funds to blackmail them.”
Hospitals can drop out of Medicare by giving the federal government six-months notice.
What Medicare policies are a problem, specifically?
As for the EMTALA, federal law could be changed so fair (Medicare amount) payment for a provider could be taken from the patient’s (or his/her parents’) Social Security account(s).
State garnishment laws could be waived for EMTALA care fair (Medicare) amount payment collection. In Florida, low-income parents can’t have their income garnished.
They should have instead of looking at Canada looked at Germany.
Brian, no offense, but you’re missing the point.
The federal government uses Medicare Dollars to blackmail hospital on other issues unrelated to Medicare.
You will do ‘X’ or no longer be able to service Medicare patients and be reimbursed by the federal government.
Some hospitals have told the federal government to go pound sand. Other hospitals in are in areas where they would have to close their doors rather than service Medicare patients.
We talking things like:
New demands for documentation
Adherence to certain new government requirements
Provide Women’s services (abortions) (not sure this one applies, only used as an example)
Providing services to certain percentages of indigent care
Here’s the issue. Once you establish that procedure X is $21,000 and procedure Y is $32,000....then you start to ask about drug X ($16 ea) and drug Y ($29) for the same treatment plan. Then you start to ask why you have so many heavily overweight people with serious health conditions and why you can’t force them to lose sixty pounds. Then you ask why you have these 700 guys in a 50,000 population community who are alcoholics and have serious liver/kidney damage? Why should the community sponsor the 700 guys or help them with their health issues?
Thats the thing about....if it gets treated as a real capitalist venture....then you want to lessen cost and impact. You start to ask why high-sugar drinks like Coke are still allowed and why high-tar/nicotine smokes are allowed.
I’d guess ‘off the shelve’ would be OK as long as it’s not made in China..........
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.