I believe this is the question that everyone is asking themselves. Health care cost are so high, yet the benefits of having health insurance doesn't seem to add up to what we pay. Where is all this money going? Who is really benefiting from all of this? Is it the money hungry insurance companies or is the money really being allocated accordingly. Many may argue that it is the growing population of the elderly that is effecting the system. However I believe that this is just an excuse used to justify the fact that the system itself needs a complete makeover.
Taking a look at the structure itself of the health care system, it is so confusing. There are so many exceptions and guidelines as to who receives what service. It almost seems as if I would like to have an illness in order to be considered for many of the programs provided by the system. What happens to those individuals who are considered to some degree perfectly healthy, and do not receive health care benefits from their employer and can not afford basic health care? We complain about individuals using the ER as a form of "basic" health care, when a lot of those emergency visits could have been prevented have they had access to regular Dr. visits. It seems that we are paying way too much into a system, that is being very selective as to who receives care, and in the end we are spending more money on emergency care that could have been prevented.
Wednesday, September 10, 2008
Why so expensive?
Ara’s blog brought up some interesting ideas on ageing populations and advances in medical technology as reasons for the rising cost of health care. Yet, I am skeptical about this because if we take Japan as an example, it has the largest burden of elderly people in the world and is amongst the top in medical technology, but their health care costs are not nearly as high as that of the U.S.
Yahaira’s comments on the lack of transparency in the U.S. health care system were interesting because I think a lot of things go on behind the scenes between insurance companies, providers and even the government that most of us do not get to see or understand. I am still new to the workings of the U.S. health care system, but in my mind if we are paying a disproportionally higher amount for health care than we should be (looking at the trends in the economy) and we are not seeing an equivalent improvement in the quality of service we receive, then somebody must be getting the benefit along the way. The most obvious answer to me is the giant, powerful, rich insurance companies that we see around us every day.
Listening to Dr. Stevens describe the U.S health care system last week was eye opening and mind boggling to say the least. It was almost impossible to make sense of all of the components within the system and the hundreds of exceptions and qualifications needed to receive treatment. In the end, it just demonstrated to me how inefficient and unnecessarily complicated the whole system is….all so that a few players along the way can collect all the money in this big game. If the health care system was truly for the purpose of providing health, I am confident that it would look a lot simpler and would definitely cost us less.
Yahaira’s comments on the lack of transparency in the U.S. health care system were interesting because I think a lot of things go on behind the scenes between insurance companies, providers and even the government that most of us do not get to see or understand. I am still new to the workings of the U.S. health care system, but in my mind if we are paying a disproportionally higher amount for health care than we should be (looking at the trends in the economy) and we are not seeing an equivalent improvement in the quality of service we receive, then somebody must be getting the benefit along the way. The most obvious answer to me is the giant, powerful, rich insurance companies that we see around us every day.
Listening to Dr. Stevens describe the U.S health care system last week was eye opening and mind boggling to say the least. It was almost impossible to make sense of all of the components within the system and the hundreds of exceptions and qualifications needed to receive treatment. In the end, it just demonstrated to me how inefficient and unnecessarily complicated the whole system is….all so that a few players along the way can collect all the money in this big game. If the health care system was truly for the purpose of providing health, I am confident that it would look a lot simpler and would definitely cost us less.
Rising Health Care Costs + Yasmin Khan
Administrative costs and excessive profits are without a doubt a leading cause in the rising cost of healthcare in the US. It is a known fact the US spends more on health care than any other countries spends, without providing more services than other countries do. So where is the money going?
Some try to justify this difference in many ways. According to the article, “It’s the Prices Stupid: Why the United States is So Different From Other Countires”, one explanation for higher hospital costs is that all the components of providing hospital care in the US – health care workers’ salaries, medical equipment, pharmaceuticals and other supplies – are more expensive than in other countries. Second, it claims that the average US hospital stay could be more intensive than in other countries. Third, is the inefficiency of the health care system compared to other countries. This point eludes to the fact that the US payment system is highly complex and fragmented; greatly contributing to high administrative costs.
While one blogger made the point to adopt a health care system similar to Canada’s to cut costs, one criticism of Canada is that their health care system delivers fewer highly sophisticated procedures than does the US system; with the US conducting four times as many angioplasties per capita and twice the number of kidney dialysis. Although medical necessity is questionable, are we willing to cut down on our highly sophisticated procedures and expertise to cut costs?
Japan’s health care system is definitely one to be admired; being among the least expensive health care systems and providing high levels of CT and MRI scanners. They are able to provide highly sophisticated care at a low cost, making our high costs even harder to justify.
Medicine is a highly specialized profession and if insurance companies continue to pay low fee for services, medical providers are forced to raise those fees. If we continue to allow health care to be driven by the free market, we cannot expect to have an efficient and affordable health care system seen in countries like Canada or Japan.
I think the issue that needs to be raised is accountability. Insurance companies need to be held accountable for their actions what they are doing behind the scenes, similar to the greater need for transparency brought up by Yahaira.
Some try to justify this difference in many ways. According to the article, “It’s the Prices Stupid: Why the United States is So Different From Other Countires”, one explanation for higher hospital costs is that all the components of providing hospital care in the US – health care workers’ salaries, medical equipment, pharmaceuticals and other supplies – are more expensive than in other countries. Second, it claims that the average US hospital stay could be more intensive than in other countries. Third, is the inefficiency of the health care system compared to other countries. This point eludes to the fact that the US payment system is highly complex and fragmented; greatly contributing to high administrative costs.
While one blogger made the point to adopt a health care system similar to Canada’s to cut costs, one criticism of Canada is that their health care system delivers fewer highly sophisticated procedures than does the US system; with the US conducting four times as many angioplasties per capita and twice the number of kidney dialysis. Although medical necessity is questionable, are we willing to cut down on our highly sophisticated procedures and expertise to cut costs?
Japan’s health care system is definitely one to be admired; being among the least expensive health care systems and providing high levels of CT and MRI scanners. They are able to provide highly sophisticated care at a low cost, making our high costs even harder to justify.
Medicine is a highly specialized profession and if insurance companies continue to pay low fee for services, medical providers are forced to raise those fees. If we continue to allow health care to be driven by the free market, we cannot expect to have an efficient and affordable health care system seen in countries like Canada or Japan.
I think the issue that needs to be raised is accountability. Insurance companies need to be held accountable for their actions what they are doing behind the scenes, similar to the greater need for transparency brought up by Yahaira.
Supply and Demand
While it would seem that rising administrative costs is a key factor to the rising cost of health care, especially considering the disparity b/w the US and Canada's administrative expenditures as quoted by the NEJOM in 2003, I would imagine that there are other contributors to the soaring costs that we are currently experiencing. Setting caps on what medical offices and imaging facilities can bill for specific procedures may be a solution. Supply and demand, with its associated competition has, historically been a good mediator of incremental costs. The question is, why hasn't this been effective in the healthcare industry?
Other means to lower healthcare costs include the usual suspects: utilizing efficient EMR systems, developing efficient machinery for diagnostic imaging, for example to increase volume of patients, hence lowering costs, consumer education regarding preventative maintenance therapy.
With regards to excessive profits, according to consumer reports, the 6 largest private insurance companies profited by more than 11 billion dollars in 2006 (http://www.consumerreports.org/cro/health-fitness/health-care/health-insurance-9-07/premiums-and-profits/0709_health_profit_1.htm). Quite a large number. Depending on the state, insurers keep 15 to 25% of their premiums collected for administrative costs, marketing, and profits. By this margin, the California mandate capping these costs at 15% is on the low end of the spectrum. Whether or not this is a good thing is a tough call for me. One would imagine, that in the free market, private insurance companies would strive to lower their administrative and marketing costs on their own, driven by the goal to increase profit margins. Thus, it seems strange that gov't legislation would have to step in to control this. Furthermore, I worry that legislation may force private health insurance companies out of the state, thereby decreasing competition in the market which may lead to higher premiums for the consumer.
Other means to lower healthcare costs include the usual suspects: utilizing efficient EMR systems, developing efficient machinery for diagnostic imaging, for example to increase volume of patients, hence lowering costs, consumer education regarding preventative maintenance therapy.
With regards to excessive profits, according to consumer reports, the 6 largest private insurance companies profited by more than 11 billion dollars in 2006 (http://www.consumerreports.org/cro/health-fitness/health-care/health-insurance-9-07/premiums-and-profits/0709_health_profit_1.htm). Quite a large number. Depending on the state, insurers keep 15 to 25% of their premiums collected for administrative costs, marketing, and profits. By this margin, the California mandate capping these costs at 15% is on the low end of the spectrum. Whether or not this is a good thing is a tough call for me. One would imagine, that in the free market, private insurance companies would strive to lower their administrative and marketing costs on their own, driven by the goal to increase profit margins. Thus, it seems strange that gov't legislation would have to step in to control this. Furthermore, I worry that legislation may force private health insurance companies out of the state, thereby decreasing competition in the market which may lead to higher premiums for the consumer.
First of all, I am confused as to what kind of costs will be reduced with this type of legislation. Sure, they tell us that "administrative" costs will be reduced but they do not say specifically what these costs are. No one will be able to make a detailed list that shows which costs will be reduced, and I am sure that is the point of this legislation. The public will not really know which costs will be reduced until they get a bill on their mail telling them that some procedure will not be covered by their insurance as a consequence of cuts in administrative costs. There are many problems with this type of events and one of them is that we forget that we are dealing with people's health and well-being. All legislation should focus on the needs of the people. I would argue that we would not need any cuts, if the billions of dollars that go to medical services would be spent to benefit the U.S. population as a whole. In reality, most of the money benefits only a few people who are in position of power. I believe that some of the changes that need to be made would involve getting health insurance representatives and medical doctors together and come up with a protocol that ensures that the public will receive the best care possible. I used to ask myself why is health services focused on money instead of people's well being, but thanks to the lecture from last week I understood that the American health system was founded on the belief that medicine consists of rich people that want to charge too much for their obscure knowledge. Sadly, we have been able to evolve in many ways as a society but that ancient mentality has not changed. Until this mentality continues to be instilled in individuals' mentalities, we will not see any changes in our health system and people's health will continue to suffer.
The Value of Life
I do agree that administrative costs/excessive profits for health care providers and insurers are primary reasons for the rising cost of health care; one just needs to observe the salaries of physicians, the costs to become insured, the costs of medicine, etc. to know that people are being screwed when it comes to the costs of health care. However, I believe that there are other contributing factors involved. Most importantly, we as a people need to take some of the responsibility for these costs. The answer to the high costs of health care are inherent in the value our very being.
“But what do you think would happen if you reached down and took away his health? A human would do anything to save his life. There's no pain like your own. People will do anything to stay alive.” This is a very telling quote that I found from the book of Job. It happens to be from a conversation that “God and the Devil” were having. Ironically, I think Satan pretty much sums up the underlying reason for excessive health care costs. People will give up everything they have in order to have good health in hopes of trying to prolong their lives.
I believe providers/insurers in the
Tuesday, September 9, 2008
Increasing Health care costs!!
Health care costs have been rising in the U.S. due to many reasons, which include administrative costs as well as excessive profits. From the Frontline documentary, the U.S. spends the greatest percentage of health care costs on administration services. In contrast, we see countries like Taiwan only spending about 2.2% of their health care cost on administration. A great deal of how they reduced administrations costs was by implementing an electronic system for medical records for each citizen, making it easy to access medical records and prescription history for medical professionals—thus saving time and money. It is staggering how much inefficiency in the administration of health care can lead to increased costs. In addition, excessive profits are also one of the primary reasons why health care costs are rising. CEOs and other executives of hospitals, pharmaceutical companies, and insurance companies are making enormous profit off of health care services. However, there are other factors that contribute to the rising cost of health care. To start off, the fact that the U.S. is a developed country, has a very minimal threat of infectious disease, and a higher rate of chronic disease is one of the main reasons why health care costs are rising. Heart disease, cancer, diabetes—are diseases that require a great deal of health care services, medical technology, medication, and hospitalization. If the population of the U.S. is more affected with these and other types of chronic disease, the overall average cost of care per person would be higher compared to a person in a developing country, where basic sanitation would get rid of a particular disease. In addition, the baby boomers are now at the age where chronic disease is at a staggering high—thus, a larger percentage of the population is suffering from a chronic disease. An article I read on California Healthline stated “According to Mercer, the average deductible for a single person between 2003 to 2007 increased from $250 to $400 and from $1,000 to $1,500 for a family for the same period.” The high steep slope of this increase is staggering, and with gas prices this high and the economy in trouble, the cost of health care is not going to be decreasing anytime soon unless there is a major health care reform change. Some things that can reduce health care costs are preventive care services. With chronic disease being the number one health care cost, more preventive care will decrease chronic disease rates, thus decrease the amount spent on controlling these types of diseases.
The bottom line is that health insurers have a bottom line; they are businesses like any other and the main focus in business is to have the highest profit possible. Many businesses “hide” some profit through titles like “administrative expenses”. That being said, it is very likely that many of our health insurance companies are making more of a profit than is necessary to sufficiently operate the company. So with the current sliding economy and rising inflation rates, it is quite possible that these “costs” are contributing to the rise in health care costs. In other words, costs are rising in order to maintain the same level of ultimate profit that insurance companies desire.
Although SB 1440 is a step in the right direction for California’s health care reform, it is not flawless. Unfortunately, the bill does not address the issue of actual healthcare premiums. Although restricting admin costs and excessive profits may help redistribute some of the profits, it will not guarantee that the premiums will be capped.
In order to truly save money for employers as well as the insured, health care reformers should consider some of the following:
- The absence of strong preventative care is leading to an extremely large number of chronic disease cases, such as complications from obesity, that will result in astounding costs in healthcare within the next 20 years.
- The current infrastructure is not capable of managing the exponentially rising costs that are resulting from simple lifestyle choices that could be radically reduced with better education and preventative medicine. Issues such as poor nutrition, lack of physical activity, and a focus on image perfection instead of overall wellness are only some of the contributing factors to our society’s deteriorating health.
- Our nation is increasingly dependent on pharmaceuticals to solve minor health issues that may be solved with non-invasive care and/or prevention. This dependence has created a very lucrative industry that is consequently increasing the costs of healthcare.
- The development of new technologies for medicine has been tremendous for the advances of diagnostic tools and better treatment of very severe diseases. However, these technologies are outrageously expensive to research, develop, utilize, and maintain, which all lead to the increased costs of healthcare.
The above are only a few of the many reasons healthcare costs continue to increase. These are the types of problems that healthcare reformers must address to truly drive down costs. So, even though SB 1440 will help ensure that insurance companies continue to spend adequate amounts of money on the insured, it will not address the true issues of increased healthcare costs that must be controlled for the future wellness of the state.
Mo'Money, Mo' Problems
Ha ha, where is Ashton Kutcher!? that must be a joke; please someone tell me that I am getting punk’d while writing this blog. I can’t believe that we are reading and accepting these things. Similar to Ramon said in his posting, CEOs are getting paid, but not to the point where the patient’s costs are compensating for it. To me, it seems like rising costs are becoming an aftereffect of being the most allocated in healthcare [reference to pg. 33 table 2.1 in Comparative Health Policy] and in my opinion, the least efficient.
It’s what like most parents try to teach their kids about spending: get best bang for your buck or at least be a smart spender. Efficient ways to run a health care system may be more of an art, maybe that’s why U.S. is so horrible. Too many government officials are not diversified enough to know what a good deal is anymore. I mean it’s hard to know that 20 dollars Calvin Kline jeans are a good deal when you are spoiled on wearing 200 dollars Calvin Kline suits. To not to digress, money can be saved in the long run, key word: long run, in preventive measures. Going to have to spend a little money in order to save a lot more because lifestyle change is what America needs. Only way to achieve that is by having the government and employers force that along by creating initiatives and benefits for patients. For example, free apple iPod shuffle for those patients who
regularly visits the doctors twice a year along with being up to date with vaccinations and lab work.*Speaking of iPod shuffle, here is the song of the blog: Mo’Money, Mo’Problems – Notorious BIG feat. Puff Daddy and Mase [p.s. the gentlemen in the picture is not Notorious BIG, Puff Daddy, or Mase; just a man with money and probably some problems since he allow his photo to be own by Creative Commons]
*patients must maintain this lifestyle for 4 years, in order to receive iPod shuffle.
Where's the money going?
After reading "It's the prices, stupid...other countries" by Anderson and Co., I was curious as to where the extra money spent, U.S. per capita spending more than double the OECD average, was going. My first thought: how much do the CEOs of key players in the health industry (insurance, biotech and hospital companies ) make? Well, here's a little taste (from http://www.forbes.com/lists/2008/12/lead_bestbosses08_CEO-Compensation-Health-Care-Equipment-Services_9CompTotDisp.html ):
Overall Rank (all industries)/Name/Company/Compensation in millions per year/5-year/Age/Efficiency
53 H Edward Hanway Cigna 30.16 120.51 44.4 56 162
75 David B Snow Jr Medco Health 21.76 36.29 19.0 53 NA
78 Dale B Wolf Coventry Health Care 20.86 61.91 9.1 52 NA
86 Michael B McCallister Humana 20.06 60.64 22.7 55 36
98 George Paz Express Scripts 18.37 26.85 16.8 53 NA
108 Jay M Gellert Health Net 16.65 47.39 26.1 54 157
199 Ronald A Williams Aetna 8.88 NA 10.2 59 NA
I would imagine that these CEOs wouldn't be making so much if the companies were in financial distress...so, to address the prompt, I do agree that administrative costs and excessive profits are contributors to the rising costs of health care, but are not the only reasons for rising costs. We now live in an era where the leading causes of death are due to chronic diseases, such as cancer and heart disease. Patients now have more treatment options than ever before thanks to vast advancements in medical technology, cutting edge treatments and innovative prescription drugs. As a result, our society has become reliant on procedures, treatments and technology. Our physicians upgrade their practices with new technology continually to attract more patients and increase their revenues, resulting in a positive feedback loop, reinforcing overutilization and passive, rather than active and preventive, health behaviors.
I believe the first step to slowing the growth of health care spending is to invest in public health efforts. An analysis written by Trust for America's Health (TFAH) provides financial justification for investment in preventive public health efforts. The report states a return of investment of $5.60 for every $1 spent on proven community-based programs in tobacco, nutrition, physical activity - a savings of $16 billion annually over five years. The rest of the report can be found here: http://healthyamericans.org/reports/prevention08/.
If we can encourage people to become more aware, more interested and more proactive with their own health, we will move towards a more efficient health care system WITH a healthier population.
Overall Rank (all industries)/Name/Company/Compensation in millions per year/5-year/Age/Efficiency
53 H Edward Hanway Cigna 30.16 120.51 44.4 56 162
75 David B Snow Jr Medco Health 21.76 36.29 19.0 53 NA
78 Dale B Wolf Coventry Health Care 20.86 61.91 9.1 52 NA
86 Michael B McCallister Humana 20.06 60.64 22.7 55 36
98 George Paz Express Scripts 18.37 26.85 16.8 53 NA
108 Jay M Gellert Health Net 16.65 47.39 26.1 54 157
199 Ronald A Williams Aetna 8.88 NA 10.2 59 NA
I would imagine that these CEOs wouldn't be making so much if the companies were in financial distress...so, to address the prompt, I do agree that administrative costs and excessive profits are contributors to the rising costs of health care, but are not the only reasons for rising costs. We now live in an era where the leading causes of death are due to chronic diseases, such as cancer and heart disease. Patients now have more treatment options than ever before thanks to vast advancements in medical technology, cutting edge treatments and innovative prescription drugs. As a result, our society has become reliant on procedures, treatments and technology. Our physicians upgrade their practices with new technology continually to attract more patients and increase their revenues, resulting in a positive feedback loop, reinforcing overutilization and passive, rather than active and preventive, health behaviors.
I believe the first step to slowing the growth of health care spending is to invest in public health efforts. An analysis written by Trust for America's Health (TFAH) provides financial justification for investment in preventive public health efforts. The report states a return of investment of $5.60 for every $1 spent on proven community-based programs in tobacco, nutrition, physical activity - a savings of $16 billion annually over five years. The rest of the report can be found here: http://healthyamericans.org/reports/prevention08/.
If we can encourage people to become more aware, more interested and more proactive with their own health, we will move towards a more efficient health care system WITH a healthier population.
High costs and profits are no doubt a reason for rising costs of health care. Since more of our money is going to insurance companies and doctor's offices, we have to believe that someone is seeing the profits. Last week in class, we talked about how hard the founding fathers of medical schools and the health care industry in the US struggled to distinguish themselves from the rest of society. Today, this remains true. Not everyone can be a neurologist or cardiologist, and so just like any other industry, we are paying for their expertise. Therefore, it makes sense that these kind of people see the profit.
On the flip side, if we begin to see similarities to Taiwan 2.2% of cost going to administrative cost, will we also begin to see the troubles that Taiwan is seeing in staying afloat. Watching the frontline piece, we learned how Taiwanese and Japanese hospitals are borrowing money to stay open. Do we owe our hospital success to these high administrative costs. Will we also see a a decline in the "luxury" of our hospital rooms. Are Americans really willing to give up this comfort to see a drop in prices?
An article in the New England Journal of Medicine, Costs of Health Care Administration in the United States and Canada (http://content.nejm.org/cgi/content/short/349/8/768) points out how adopting a Canadian-style health care system could save us money.
From the article:
But then again, you ask yourself are Americans ready for a complete change in healthcare?
On the flip side, if we begin to see similarities to Taiwan 2.2% of cost going to administrative cost, will we also begin to see the troubles that Taiwan is seeing in staying afloat. Watching the frontline piece, we learned how Taiwanese and Japanese hospitals are borrowing money to stay open. Do we owe our hospital success to these high administrative costs. Will we also see a a decline in the "luxury" of our hospital rooms. Are Americans really willing to give up this comfort to see a drop in prices?
An article in the New England Journal of Medicine, Costs of Health Care Administration in the United States and Canada (http://content.nejm.org/cgi/content/short/349/8/768) points out how adopting a Canadian-style health care system could save us money.
From the article:
"Results In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada's national health insurance program had overhead of 1.3 percent; the overhead among Canada's private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers' administrative costs were far lower in Canada.
Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996. (Both nations' figures exclude insurance-industry personnel.)
Conclusions The gap between U.S. and Canadian spending on health care administration has grown to $752 per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system."But then again, you ask yourself are Americans ready for a complete change in healthcare?
Monday, September 8, 2008
Patient-Consumers and Their Nebulous Understanding of Health Care
High costs and profits undoubtedly have driven up the cost of health care. According to Kaiseredu.org, administrative costs account for 7% of the total U.S. health care spending (http://www.kaiseredu.org/topics_im.asp?imID=1&parentID=61&id=358) —though I believe a much higher percentage was quoted on the Frontline piece. In any case, it is no secret—particularly to us in this class—that health care costs are rising. Thus, it seems reasonable to think that those in the health care business are also seeing greater profits, since health care in this country operates in a free market. But why, then, do health care costs continue to rise at a seemingly unregulated rate? Should the forces of supply and demand not control health care costs as they would in any other industry?
I argue that health care is unlike any other industry. The high skill set and the specialized knowledge that go into health care delivery are possessed by few and are beyond the comprehension of all others; those “in the know” essentially make up an exclusive club. This characteristic of the health care industry makes it inherently un-transparent. Consider this: if the average Joe knows little about what makes up his medical bills, what sort of cost accountability can he expect from his health insurance company and health providers? The average Joe—only knowing that he spoke with his doctor, gave samples for and received lab results, laid still in a big clanking machine (MRI), etc—wouldn’t even know where to begin in questioning why his medical bills are so high. All he can do is concede and consent to pay what he’s been billed—as is the case with most people in this country, if they can afford to do so.
The lack of transparency in the health care system was touched on in article in yesterday's LA Times. It cites insurers' underpayments, or negotiated (lower) prices for services, as a main reason for the rising cost of medical care (http://www.latimes.com/business/la-fi-lazarus7-2008sep07,0,5859110.column). As part of a vicious cycle, insurance companies pay providers too little and, in turn, providers increase the cost of their services. Such things happen without the knowledge of health care recipients. Thus, the lack of transparency in the health care industry is really system-wide, not limited just to health care delivery and the billing of individual patients.
Clearly, not everyone can be doctors, pharmacists, etc.; so not everyone can be completely knowledgeable of all the details of the health care services they receive and what exactly they’re paying for in their medical and health insurance bills. However, there must be a way—on the part of both providers and insurance companies—to make the health care industry more transparent. In our present system, doing so would give health care consumers better understanding of what they’re actually purchasing, thus making health care more like a commodity in a free market, with costs responsive to not only supply, but also the demand of the informed consumer.
I argue that health care is unlike any other industry. The high skill set and the specialized knowledge that go into health care delivery are possessed by few and are beyond the comprehension of all others; those “in the know” essentially make up an exclusive club. This characteristic of the health care industry makes it inherently un-transparent. Consider this: if the average Joe knows little about what makes up his medical bills, what sort of cost accountability can he expect from his health insurance company and health providers? The average Joe—only knowing that he spoke with his doctor, gave samples for and received lab results, laid still in a big clanking machine (MRI), etc—wouldn’t even know where to begin in questioning why his medical bills are so high. All he can do is concede and consent to pay what he’s been billed—as is the case with most people in this country, if they can afford to do so.
The lack of transparency in the health care system was touched on in article in yesterday's LA Times. It cites insurers' underpayments, or negotiated (lower) prices for services, as a main reason for the rising cost of medical care (http://www.latimes.com/business/la-fi-lazarus7-2008sep07,0,5859110.column). As part of a vicious cycle, insurance companies pay providers too little and, in turn, providers increase the cost of their services. Such things happen without the knowledge of health care recipients. Thus, the lack of transparency in the health care industry is really system-wide, not limited just to health care delivery and the billing of individual patients.
Clearly, not everyone can be doctors, pharmacists, etc.; so not everyone can be completely knowledgeable of all the details of the health care services they receive and what exactly they’re paying for in their medical and health insurance bills. However, there must be a way—on the part of both providers and insurance companies—to make the health care industry more transparent. In our present system, doing so would give health care consumers better understanding of what they’re actually purchasing, thus making health care more like a commodity in a free market, with costs responsive to not only supply, but also the demand of the informed consumer.
Disease perception+Invasive treatment+Triangle relationship
The bill requires the insurers to maintain 85% or more loss ratio seems to be a good idea at the first glance. However, this idealistic proposal without the consideration of American medical reality simply won't fly high. It will fail once this is put into the litmus test. First, American perceive health care as "disease combat" and rarely entertain the thought of preventive medicine or self care. This is just in the stage of opening up the mind and not yet mobilize into actual practice. Once the perception is shifted, it takes the commitment to build up a preventive care routine which is NOT registered in general American psyche yet. The preventive care or lifestyle make-over is a foreign concept in America until recent years. In general, Americans give too much power to medical providers. That might be translated into giving too much money to medical authority. First and foremost, this deep seated belief is challenged and in the process of being transformed. No wonder the medical community is uneasy of new trend and the public is lost. Because the old is gone and the new is not in place yet. The root of high cost and low performance is embedded in the metaphysical level regarding US health care system. We can not measure it scientifically but many are aware of its power now.
More invasive treatment per person in US than other nations: America is famous for its most advanced medical technology. There is nothing wrong in applying it to save lives. But under the current pay schedules, providers compete shares of the pie from larger fees. In US, medicare spend out proportionally in the last six months care for dying elderly than other necessary medical procedures. We need to discern that these invasive treatments are necessary or not, some of them are not applied in the adequate setting and drive the cost skyrocket. To provide the invasive and costly procedures to the dying patient without proper cause is debatable. Do the patients truly receive the benefit is questionable. Meanwhile, the health care cost is rising.
Then there is this triangle relationship between patients and care: Americans are conditioned to believe that gatekeepers are necessary entity. Without "middleman", some feel insecure. We as human beings do have the instinct of seeking the necessary remedy for our dis-eased condition. Do we need a middleman to keep us more healthy? Not so. I have lived in US for decades and encountered numerous primary care physicians ranging from OK to incompetent or worse biased. Mathematically speaking a straight line is the most economic way to solution. Why do we complicate ourselves with triangle approach? Quite a lot of middlemen get the kickback from referrals. One referral to the preferred specialist means more financial gains or favors. The gatekeepers become gatetakers. Sometimes, in the worse scenarios, the patients are deprived of their best cares because of their gatetakers. The unspoken code and hidden costs contribute to the higher specialist fees. In conclusion, administrative cost and margins of profit do deserve our attention. They need to be kept low and functioning. However, the insurers also need to make the healthy profit without greediness to keep the system going. Control of administrative cost and profit alone does not adequately address the high care cost and poor performance.
More invasive treatment per person in US than other nations: America is famous for its most advanced medical technology. There is nothing wrong in applying it to save lives. But under the current pay schedules, providers compete shares of the pie from larger fees. In US, medicare spend out proportionally in the last six months care for dying elderly than other necessary medical procedures. We need to discern that these invasive treatments are necessary or not, some of them are not applied in the adequate setting and drive the cost skyrocket. To provide the invasive and costly procedures to the dying patient without proper cause is debatable. Do the patients truly receive the benefit is questionable. Meanwhile, the health care cost is rising.
Then there is this triangle relationship between patients and care: Americans are conditioned to believe that gatekeepers are necessary entity. Without "middleman", some feel insecure. We as human beings do have the instinct of seeking the necessary remedy for our dis-eased condition. Do we need a middleman to keep us more healthy? Not so. I have lived in US for decades and encountered numerous primary care physicians ranging from OK to incompetent or worse biased. Mathematically speaking a straight line is the most economic way to solution. Why do we complicate ourselves with triangle approach? Quite a lot of middlemen get the kickback from referrals. One referral to the preferred specialist means more financial gains or favors. The gatekeepers become gatetakers. Sometimes, in the worse scenarios, the patients are deprived of their best cares because of their gatetakers. The unspoken code and hidden costs contribute to the higher specialist fees. In conclusion, administrative cost and margins of profit do deserve our attention. They need to be kept low and functioning. However, the insurers also need to make the healthy profit without greediness to keep the system going. Control of administrative cost and profit alone does not adequately address the high care cost and poor performance.
Show me the money!
I have very mixed feelings when it comes to this article. On one hand it might be a very good idea to limit the overhead of private insurers (assuming of course that the lower health care cost will be passed to the consumer). On the other hand shouldn’t a health care company want to reduce its overhead as a natural course of business rather than being forced to do so by government legislation? I think the bill does well by allowing certain costs to be moved into the cost of health rather than administration which allows it not to be taxed, I think that is wise to include that in the bill.
I did mention last week that I think we can drive down health care costs quite significantly if we do stream line the administrative costs. For example I see no reason why we should not enjoy the amazing 2.2% of cost going to administrative duties which Taiwan enjoys. It would be very easy and cost effective for companies such as well point to institute the health card which they have in Taiwan which stores all medical and billing information. This would be a brilliant way to drive down costs.
By the way this is all assuming that the profits will translate to the consumer which in my opinion needs to be mandated in this bill as well. What I don’t want to see is the oil company model where lower crude oil prices mostly translate into richer executives.
I also wanted to comment on some items I read in the other postings. Claire mentioned eliminating “gatekeepers” as way to reduce costs but I think that gatekeepers are in place to reduce cost because they cut down the time specialists need to be consulted and their time costs the health care system a lot more money. If I m not mistaken that is a way the National Health Service in the UK keeps lowers costs. I agree with Luke in so far as we need to make the records electronic to drive down costs and he is right with his idea on medical equipment again. We can take another lesson from Japan who managed to motivate companies like Toshiba to accommodate its low health care costs by making machines (MRI) which could operate at a much lower cost. The example was an MRI going down in cost from about 1200$ to about 99$ which is staggering.
Regarding the solution to driving down health care sotst I believe the biggest portion lies in cutting down administrative costs however there are other things which could be done as well. Luke’s article had some interesting ideas on how to drive down health care costs and I agree with some and not with others. I am not sure that HMO competition drives down prices because at this point Im sure there is an element of price fixation as well as HMO’s knowing that you need them more than they need you. Since this is mostly true with those who insure themselves privately I think a major way to drive down costs for the consumer is to have the government negotiate on your behalf. In other words between employers and the government every American citizen should be covered at a better price (Obama’s plan).
I did mention last week that I think we can drive down health care costs quite significantly if we do stream line the administrative costs. For example I see no reason why we should not enjoy the amazing 2.2% of cost going to administrative duties which Taiwan enjoys. It would be very easy and cost effective for companies such as well point to institute the health card which they have in Taiwan which stores all medical and billing information. This would be a brilliant way to drive down costs.
By the way this is all assuming that the profits will translate to the consumer which in my opinion needs to be mandated in this bill as well. What I don’t want to see is the oil company model where lower crude oil prices mostly translate into richer executives.
I also wanted to comment on some items I read in the other postings. Claire mentioned eliminating “gatekeepers” as way to reduce costs but I think that gatekeepers are in place to reduce cost because they cut down the time specialists need to be consulted and their time costs the health care system a lot more money. If I m not mistaken that is a way the National Health Service in the UK keeps lowers costs. I agree with Luke in so far as we need to make the records electronic to drive down costs and he is right with his idea on medical equipment again. We can take another lesson from Japan who managed to motivate companies like Toshiba to accommodate its low health care costs by making machines (MRI) which could operate at a much lower cost. The example was an MRI going down in cost from about 1200$ to about 99$ which is staggering.
Regarding the solution to driving down health care sotst I believe the biggest portion lies in cutting down administrative costs however there are other things which could be done as well. Luke’s article had some interesting ideas on how to drive down health care costs and I agree with some and not with others. I am not sure that HMO competition drives down prices because at this point Im sure there is an element of price fixation as well as HMO’s knowing that you need them more than they need you. Since this is mostly true with those who insure themselves privately I think a major way to drive down costs for the consumer is to have the government negotiate on your behalf. In other words between employers and the government every American citizen should be covered at a better price (Obama’s plan).
Sunday, September 7, 2008
Risk Perceptions + Costs
Ara’s blog for September 10 (week 3):
That is an indisputable notion which bares few exceptions. In fact, the article illustrates a federal restriction on economic freedoms. Yes, it’s back to public health law 101. In the post-New Deal era, the Courts began to place more emphasis on social and economic equity. And consequently, it led to a permissive judicial approach to public health regulations, irrespective of its effects on commercial and business affairs. But, getting back to the question posted. I’d like to take the perspective of the root causes of the administrative costs; or at least a rational assumptive perspective to display an underlying contributor for such high health care costs.
Why have high administrative costs? Perhaps for quality and data assurance and management.
If so, then, why should there be a high emphasis on such a measure? Perhaps to ensure less medical liability and thereby curbing the number of lawsuits brought forth against health professionals.
If so, then, why is there such a high rate of legal action against the medical community? Perhaps due to the high demand of the health care consumer.
Lastly, if so, then, why does the health consumer demand so much? Risk perception.
Solution: enhanced public health education and investment in preventative care and public health system infrastructure.
a) Rule of thumb: people will act heuristically, on the spot, without considering the risks
b) Prominence: people will pay attention to what is most commonly spoken
c) There is distrust of the public in the health institutions/experts
d) Fixed decision: once people make up their mind, it’s hard to change
e) Math: people think dramatically rather than quantitatively
Having taken a look at the possible consumer contributions toward high health care costs, let’s consider the contributions made by health care providers. As we all know, health consumers are always “on the tip of their toes” to seek out any legal action for varying proportions of medical mishaps. And this is enough reason for health care providers to over-utilize diagnostic tools and therapeutic measures. And despite the assumption of risk upheld by the health care consumer as well as their contributory negligence acted upon through the unhealthy risky behaviors, the health care provider is under obligation to conform to a standard of conduct to protect the public against risk of harm. It’s an ironic duality.
These are significant underlying determinants behind the motivations in consumer judgment as well as the provision of services by health care providers. There will inevitably be an overestimation of the small risks, and underestimation of the larger risks. So the objective would try to have better risk communication by either more education in risk analysis or to establish stronger trust between the public and health agencies. It goes unsaid, both tasks are difficult.
Saturday, September 6, 2008
possible determinents to cost of health care and suggestions
In order to answer the question of why the cost of health care is high in US, we need to examine a few factors that might be contributing to health care costs.
According to the book "Comparative Health Policy," there are three major components that are considered growing problems: Ageing populations, Medical technology, and rising public expectations and demands. As widely know, elderly population is increasing and the expenditure of medical care and hospital use significantly increases. Even for the cost of drugs increased from $500 to $250,000 within ten years for a patient going through chemotherapy. Lastly, public is expecting more medical intervention with reliance on newer technology. Relying on technology translate the cost of specialists. What these identified major problems tell us is that there are more demand on medical care and new technologies by all ages , and thus the cost will go up with the demand. Take gasoline for example, the price of gasoline has risen up to above $4.00 from $2.00 per gallon within about one year. Though there are alternative transportation, the service is not sufficent to cover for people who commute between cities and people who live in suburban. Even with high cost of gasoline, majority of population need it to drive to survive.
The medical care cost is the same. Public is spending more money on drugs and technology for survival purpose; even if it meant for extra weeks of living.
The major question captivate public is the solution to this rising cost of medical care and hance health care. We can reduce administrative cost by eliminating paperwork and "gatekeepers." But, we still have to solve the majority of cost to buy insurance, visit doctors, emergency service and cost to see specialists. For solutions, we need to conduct more research on various contributers to health cost and looking into other part health care systems that are working. We should also find strategies to negociate with health care providers possible ways to reduce cost.
According to the book "Comparative Health Policy," there are three major components that are considered growing problems: Ageing populations, Medical technology, and rising public expectations and demands. As widely know, elderly population is increasing and the expenditure of medical care and hospital use significantly increases. Even for the cost of drugs increased from $500 to $250,000 within ten years for a patient going through chemotherapy. Lastly, public is expecting more medical intervention with reliance on newer technology. Relying on technology translate the cost of specialists. What these identified major problems tell us is that there are more demand on medical care and new technologies by all ages , and thus the cost will go up with the demand. Take gasoline for example, the price of gasoline has risen up to above $4.00 from $2.00 per gallon within about one year. Though there are alternative transportation, the service is not sufficent to cover for people who commute between cities and people who live in suburban. Even with high cost of gasoline, majority of population need it to drive to survive.
The medical care cost is the same. Public is spending more money on drugs and technology for survival purpose; even if it meant for extra weeks of living.
The major question captivate public is the solution to this rising cost of medical care and hance health care. We can reduce administrative cost by eliminating paperwork and "gatekeepers." But, we still have to solve the majority of cost to buy insurance, visit doctors, emergency service and cost to see specialists. For solutions, we need to conduct more research on various contributers to health cost and looking into other part health care systems that are working. We should also find strategies to negociate with health care providers possible ways to reduce cost.
Friday, September 5, 2008
Saving Money/Reducing Costs
Hello All,
I would generally agree that the most blatant reason for the rising cost of health care would be “administrative costs and excessive profits”. While I don’t know specifics on the actual profit margins for insurance companies I can comment first-hand on the contribution of inefficient administration to costs.
I am currently in the process of assisting an Urgent Care Center in adopting a purely electronic medical records system using software from a company called Allscripts. Observing their transition, it has become incredibly apparent just how much inefficiency can cost. Due to inadequate documentation and record-keeping, a backlog in billing resulted in a loss of tens of thousands of dollars in funding. This of course does not include the added cost of hiring additional employees to fix the documentation (multiple times as it was re-done incorrectly a number of times) and re-bill. In this particular situation the cost is not transferred to the patients, yet even as a very small operation (only 17 patients per day) you can see that the amount of money wasted is staggering. Were this to happen at a full-scale hospital, or a similar situation internally at a major insurance company, I imagine this cost would be added into company “overhead” and eventually find it’s way into patient premiums. The benefits of this electronic medical record program highlight where employers can easily save the most money: internal efficiency, whether it be through safeguarding proper documentation, reducing mistakes, etc.
In searching for alternative methods for reducing cost, one of the best examples is the abundant information in the same PBS videos we viewed for last week’s blog entry. Just these 5 countries provide ideas such as negotiating price control/fixing, manufacturing inexpensive medical technology/machines, eliminating the middlemen or “gatekeepers”, and many others.
Not surprisingly, competition appears to be the major method that is most popular in the U.S. for its ability to reduce costs and save money. The Agency for Healthcare Research and Quality notes that simply having multiple HMOs in a single market saves patients money through price competition. Also, employers who allow employees a choice of health plans from several different insurance providers has been shown to encourage competition among these providers. I found this and much more in a great discussion of the proven benefits of price competition and other methods that showed more mixed results on the Department of Health and Human Services’ website: http://www.ahrq.gov/research/costsria/
Thanks!
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