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Monday, July 2, 2018

"Overcharged?" Paying for health care

The publisher (CATO Institute), at the request of one of the authors, graciously gave me a pre-pub comp copy to study and review. The book is to be released on July 3rd.

"Why is the American health care system so dysfunctional and expensive? Why does the EpiPen, containing $1 worth of medicine, cost $600? Why do hospitalized patients receive bills laden with inflated and surprise charges that come out of the blue from out-of-network providers, or that demand payment for services that weren't delivered? Why is more than $1 trillion―one out of every three dollars that passes through the system―lost to fraud, wasted on services that don't help patients, or misspent? What are the causes of spiraling costs, mediocre quality, and limited access?

Overcharged details how the answers to these questions are connected and reveals a system that performs as if it had been designed to spend as much money as it can, and to be as confusing and unfriendly as possible, with no accountability. Overcharged then exhaustively details real reforms―showing how health care can become more efficient and pro-consumer when it is subjected to the competitive forces that apply to the rest of the economy, and will only get better and cheaper when consumers exert pressure from below."
It's a serious (if partisan) book, deserving of serious study and critical analysis. A bargain at $7.99 Kindle price. I find in it much to both agree with and to be skeptical of.

I recently underwent a coronary angiogram px, dx preparatory to my upcoming SAVR px (open heart aortic valve replacement surgery). My "chargemaster" invoice and EoB statement numbers:
Cardiology:  $31,004.00
Laboratory:  $$615.84
Med/Surg Supplies & Devices:  $4,624.00
Pharmacy:  $1,391.20
Total:  $37,635.04
Medicare paid $2,667,29 (it's considered a Medicare Part-B outpatient encounter), my residual balance owed was $1,209.44, for a total paid of $3,876.73. Roughly 10.3% of the (BS) "retail."

I was there for about 4 hours, so, roughly a grand an hour, for all of that technology and expertise.

Did I "overpay" to comfortingly learn from my cardiologist that I "have the arteries of an 18 year old?"


Sometime in the next couple of months, a highly respected and experienced local cardiac surgeon and his team will sedate and anesthetize me, render me deeply unconscious, emplace a breathing tube in my throat, slice open my chest, spread out my rib cage, stop my heartbeat, put me on a heart-lung machine, cut my heart open, remove my seriously stenotic aortic valve, replace it with a sutured-in prosthetic (pig or bovine tissue) valve, close the heart back up and re-start it, close my chest back up, and send me off to Recovery.

One hopes.

The Healthcare Bluebook pegs the current "fair price" for the SAVR px in my area at about $90k.


Back to Overcharged. Per Covey, I "begin with the end in mind."
For the last half century, the chief object of American health policy has been to ensure that consumers pay the smallest possible fraction of the cost of medical care at the point at which treatments are delivered. Obamacare, the State Children’s Health Insurance Program, Medicare, Medicaid, the U.S. Veterans Health Administration (VHA), and tax-advantaged private insurance arrangements— along with the long list of coverage mandates that go with them— all reduce direct financial responsibility for medical services to a minimum. As explained in Chapter 15, the evil genius of third-party payment is that it encourages consumption and drives up costs by making medical services cheap for patients at the point of sale.

The public officials, insurers, and health care providers who benefit from all this spending defend third-party payment arrangements by arguing that health care is too complicated and too expensive for consumers to manage on their own, and by contending that people who are directly responsible for health care costs will use medical services less often than they should. Better that government bureaucrats spend tax dollars and that private insurers spend premium dollars, they argue, than that consumers pay for medical services themselves. They don’t want consumers to consider the possibility that market mechanisms might remediate excessive costs and complications as successfully in health care as they have in other sectors. This is to be expected. Widespread reliance on third-party payment arrangements benefits insurers and health care providers, so they want nothing to interfere with it…

…An abundance of evidence, including everything from peer-reviewed academic studies of the impact of Medicare and tax breaks on costs to news reports about surprise bills, retail outlets, and frauds, makes it clear that the politicized third-party payment system is the main culprit. Instead of expanding the reach of that system, as Obamacare did, we should face facts and start paying for health care the same way we pay for everything else. When hundreds of millions of people spend their own money on health care, they will behave differently, and health care providers will too. Consumers will look for services that offer better value for the dollar, and doctors, hospitals, drug companies, and other medical outlets will try to provide them. Prices will fall and both the availability and the quality of medical treatments will improve.

Many health care providers won’t like this new world in which they must compete for business. They benefit from existing arrangements, which pay them whatever they ask and send them more dollars year after year. We should stop indulging them, and we should stop listening to their apologists and lobbyists too. Markets do a good job of supplying food, clothing, housing, transportation, and other essentials. They can help us meet our needs for medical treatments.

One of the most wonderful things about markets is that they automatically reward sellers who treat consumers well and automatically punish those who don’t. Both the carrot and the stick are important. For American health care to improve, providers that deliver high-quality services at reasonable prices must be rewarded and inferior providers must fail. There must be turnover and opportunities for new entrants. A near-death experience made the American automobile industry more efficient and pro-consumer, and decades later, innovators like Tesla are still forcing existing manufacturers to do better by deploying new technologies and business models. If and when the businesses that operate in the American health care sector are subjected to intense competition, they will respond the same way. And if they don’t, they will fall by the wayside and new businesses will emerge that will offer Americans cheaper and better health care.

Change won’t come easily. Old-line health care companies have rigged the game in their favor. They benefit from a guaranteed flow of dollars and massive subsidies. They control market entry. And they have convinced the American public that they should not have to operate like other businesses…

Charles Silver & David A. Hyman. Overcharged: Why Americans Pay Too Much for Health Care (Kindle Locations 7253-7295). CATO Institute.
That is the crux of their argument.

Which begins thus:
The problems with America’s health care system are many and varied. That’s why there is no general guide to all of them. Instead, there are thousands of books and articles about specific difficulties, such as the mistreatment of prostate cancer in men, the politics of health care reform, outrageous hospital charges, or fraud in the prescription drug business.

Although many of these writings are excellent, they fail to convey a sense of the whole. An intelligent person wants to know, at the most general level, why our health care system is so dysfunctional. What are the root causes of spiraling costs, mediocre quality, and limited access? Why is more than $ 1 trillion— one out of every three dollars that passes through the system— lost to fraud, wasted on services that don’t help patients, or otherwise misspent? Why do hospitalized patients receive bills that are laden with inflated charges, that come out of the blue from out-of-network providers, or that demand payment for services that weren’t delivered? Why does the EpiPen, an old technology that contains $ 1 worth of medicine, cost $ 600? Do questions like these require separate answers? Or are the answers connected? Are there core drivers of the health care system’s many pathologies?

We believe that an array of the American health care system’s most important shortcomings stem from a few root causes. We also think that it is important to lay these fundamental drivers bare for everyone to see...
[ibid, Kindle Locations 43-53]
 Between these bounds lie 22 chapters fully laying out their argument and supporting evidence. to wit:
The United States is “the most expensive place in the world to get sick.” 1 Why? One big reason is that providers routinely game the payment system. Drug companies are experts at this. Chapter 1 describes how they first gain strangleholds on supply. Chapter 2 describes how they then charge whatever they want, knowing the payment system imposes no restraint on prices. Chapter 3 shows that shady conduct occurs at every point in the drug distribution chain and often involves the willing participation of pharmacists and physicians who profit by exploiting existing payment arrangements. It is easy to see why spending on prescription drugs, new and old, has gone through the roof.

Doctors game the payment system too. As Chapters 4 and 5 show, they deliver an ocean of services that patients don’t need, such as excessive numbers of stents and cesarean deliveries. Chapter 6 describes how doctors regularly perform treatments that haven’t been proven to work, many of which are found to be ineffective or harmful when they are finally studied with care.

Chapter 7 explains how public officials get in on the action. In return for sizable campaign contributions from health care providers and their lobbyists, they let the flow of cash into the health care sector continue and look for ways to increase it. When the campaign contributions are large enough, elected officials even go to bat for corrupt providers who face fraud investigations.

Some hospitals and doctors aren’t satisfied with excess payments for garden-variety overuse and unnecessary care, and they turn to a life of crime— or at least abuse. Chapter 8 explains how hospitals “upcode” treatments, invent secondary conditions that patients don’t have, and concoct phony bills. Chapter 9 shows how hospitals also conspire with doctors to maximize their revenues by capturing differences in payments based on the site of service, tacking on absurd charges, and gouging patients who are uninsured or treated by out-of-network physicians at their facilities. Chapter 10 describes how hospices, nursing homes, and home health care services play similar games and frequently charge for services that were never delivered.

Chapter 11 shows how some doctors operate pill mills that supply the street with dangerous drugs— likely contributing to the rising death toll from overuse of prescription narcotics. Ambulance companies and durable medical equipment suppliers cheat the system regularly too, as do domestic and international criminal gangs. As Chapter 12 explains, there are far too many malefactors for the police to catch. For every one police put away, two more pop up. That is why the same types of fraud succeed again and again and again.

Chapter 13 explains that the quality of health care is often dangerously low because the payment system pays providers regardless of how well or poorly their patients fare. In fact, it often doles out more money to providers when patients experience complications than when they get well. Chapter 14 explains how incumbent health care providers have stifled competition so successfully that the government has to pay them extra to improve. In other industries, competition forces existing business to bear the costs of improving their products.

Although there have been repeated attempts to address these problems, all have failed because they have not changed the core incentives driving the system. We address that problem in Part 2...
[ibid, Kindle Locations 542-570]
And so on.

I found this interesting:
Academic research on health care, of which there is an enormous amount, presented other challenges. In a book of this type, which is intended to provide a coherent, high-level account of the entire health care system for a general audience of intelligent readers, we can discuss only general themes and the leading works that develop them. And we cannot go into even those works in much detail. We therefore strove to set out the basic insights and most important findings, and to do not much more than that. Readers who want to read the literature in greater depth are welcome to begin their journey by using the many citations we provide. [ibid, Kindle Locations 95-100]
Candidate Trump: "You're going to have such great health care, at a tiny fraction of the cost, and it's going to be so easy."

President Trump: "Who knew health care could be so complicated?"

I am reminded of a number of other health care policy writings I've studied across the years,
beginning with my 1994 grad school "argument analysis and evaluation" semester paper of the JAMA Single Payer proposal article (pdf). More on that paper here.

More stuff:

Ugliest book cover "art" ever. See this post.


And, multiple cites of Einer Elhauge -- the "Allocating health care morally" guy (pdf).
Health law policy suffers from an identifiable pathology. The pathology is not that it employs four different paradigms for how decisions to allocate resources should be made: the market paradigm, the professional paradigm, the moral paradigm, and the political paradigm. The pathology is that, rather than coordinate these decisionmaking paradigms, health law policy employs them inconsistently, such that the combination operates at cross-purposes. 

This inconsistency results in part because, intellectually, health care law borrows haphazardly from other fields of law, each of which has its own internally coherent conceptual logic, but which in combination results in an incoherent legal framework and perverse incentive structures. In other words, health care law has not-at least not yet-established itself to be a field of law with its own coherent conceptual logic, as opposed to a collection of issues and cases from other legal fields connected only by the happenstance that they all involve patients and health care providers. 

In other part, the pathology results because the various scholarly disciplines focus excessively on their favorite paradigms. Scholars operating in the disciplines of economics, medicine, political science, and philosophy each tend to assume that their discipline offers a privileged perspective. This leads them either to press their favored paradigm too far or to conceptualize policy issues solely in terms of what their paradigm can and cannot solve.
Instead, health law policy issues should be conceived in terms of comparative paradigm analysis. Such analysis focuses on the strengths and weaknesses of the various decisionmaking paradigms, determining which is relatively better suited to resolving various decisions, and then assigning each paradigm to the roles for which it is best suited. It is from this comparative perspective that this Article analyzes the promise and limits of the moral paradigm for allocating health care resources…
I have more cites, but those are enough for these purposes. Again, a macro-level health econ policy SME I'm not. My relative expertise, as I've noted before, is principally limited to domains such as InfoTech, workflow/process QI (big-time Lean advocate), and HIPAA.

We rightfully expect (and get) continuous improvements in health care / bio-med technology. We know dispositively that scientific process QI methods such as Lean continue to bear significant fruit (notwithstanding being confined within a chaotic health care economic environment). Were we to apply such methodical "customer-value-add" thinking to the administrative / financial side, what might we accomplish? Is the only way to get there removal of payor intermediaries?
Defining "customers" is a significant sand-in-the-gears obstacle, I know. So many "stakeholders" (as the authors and numerous others point out) beyond patients, many of them with inordinate incumbent market clout -- abetted by (margin-correlated) opacity and barriers to entry.
  • I have long irascibly asserted that "no amount of calling 3rd-party (mostly for-profit) intermediated, dubious value-add pre-payment plans 'insurance' will make them so." These authors give that assertion a good confirmatory airing. Insurance is properly a risk-vetted hedge against catastrophic loss. It maked me crazy that so many don't get this.;
  • I have abiding skepticism that the (conflated phrase) "free markets" comprise a uniformly beneficent way to structure socioeconomics. For one thing, let's not confuse "private markets" with "free markets." All human activity gets regulated one way or another. On this point, Google "Gresham's Dynamic." Anyone still recall the 2008 financial crash? Central to the argument here is that assertion here is that the health care space is "just another consumer market" and will function optimally without "government meddling." I have serious skepticism that a direct-cash-pay price for my upcoming heart surgery would be materially less than the ~$90k Bluebook "fair price" any time soon -- and all I have at this point is "soon.";
  • Also in that regard, the authors recommend that people might "finance" big-ticket acute care encounters beyond their cash-on-hand means (such as, e.g., say, my pending SAVR px -- though I actually, luckily could pay for it OoP). What could possibly go wrong there? As someone who did a lengthy stint in subprime risk management, I have some views on that idea. (apropos, not too long ago, at WinterTech, some VCs were speaking of indeed looking at opportunities in the private "medical financing space.");
  • The authors tout the potential of "medical tourism." Interesting. I seriously looked at going to Germany or Switzerland to pay cash for a "TAVR" px rather than the open-heart valve job I've decided on; 
  • Two dozen cites regarding "EHRs," almost all of them negative (largely re: "Meaningful Use" so despised by "conservatives");
  • "Singapore" as an exemplar? Seriously? Dunno; never been there. Neither have I been to Scandinavia (often cited as universal coverage successes), in fairness;
  • Really didn't care much for the "intergenerational 'warfare' / reverse Robin Hood" assertions. Is a "commonwealth" really only legitimate within the confines of short-term transactionalism?
  • When did it become a "conservative" idea to simply give people "vouchers" via which to buy private market health care? (Or, "school choice," etc?). Central to the CATO Liturgy is that "subsidies distort markets." And, yeah, lots of truth there broadly. The "benefit" of my home mortgage deductability has to be (invisibly) baked into the house's "market value." It has to really be a net wash;
  • But, tangentially related to the foregoing point, the writers cite the comparative examples of Social Security vs, Medicare. I'm am now a Social Security and Medicare bene. I get a fixed SS amount each month, and it's up to me to decide how to spend it. Overcharged posits that Medicare should be no different. Any problems there? 'eh?
I find the authors' assessment of the core dysfunctions of our "fragmented" health care "system" rather spot-on (a lot of it is not exactly news to me; see my other book cites, and prior postings). Nonetheless, I have to have concerns about the broad ("equal access") viability of their proposed "market solutions." But, I'm still burrowed deep in the book -- which I heartily recommend, irrespective of your policy positions. More as this Grasshopper learns more.

I'd love to have reactions from my pal, medical economist J.D. Kleinke on this stuff.


Do poor people have a right to health care?
NY Times Editorial Board

The 16 Kentuckians who recently won a lawsuit challenging the legality of Medicaid work requirements include a law student with a rare heart condition, a mortician with diabetes, a mother of four with congenital hip dysplasia and a housekeeper with rheumatoid arthritis. It’s a mixed bunch, united by two grim facts: They live at or below the federal poverty level, and they’re caught in the cross hairs of a debate over what society owes its neediest members.

Their lawsuit argued that insisting that people work a certain number of hours a month in order to receive Medicaid benefits, like other requirements the state was planning to demand, is illegal because it runs counter to Medicaid’s purpose — to ensure that low-income people have access to decent care. The lawsuit also contended that such requirements would imperil the plaintiffs’ health by depriving them of the only medical insurance they could afford. The new rules, which would have stripped recipients of their benefits if they failed to meet monthly hours-worked quotas and strict reporting standards, were simply oblivious to the realities of low-wage living in Kentucky, and America in general…

…the latest salvo in a protracted national reckoning over Medicaid, a program that has been in place for more than half a century and now insures one in five Americans, or roughly 74 million people. In January, the federal government announced that it would reverse decades of precedent and allow states to tie Medicaid coverage to work requirements. The move is part of a wider conservative-led campaign to restrict the number of people who benefit from social safety-net programs. It also reflects persistent national ambivalence over the question of whether health care is a human right or an earned privilege — and, if the latter, how “earned” should be defined…

…the basic ideological argument for work requirements — that people should earn their government benefits — collapses under scrutiny. Numerous analyses have indicated that a clear majority of Medicaid recipients who can work already do work. Of the 9.8 million working-age Medicaid recipients who are not employed, the vast majority have physical limitations or provide full-time care to young or elderly family members; just 588,000 of them are able to hold jobs but are currently unemployed, according to a 2017 report. And most of those are actively looking for work…

…it would seem that the Trump administration’s push to enact work requirements is aimed not at improving health, or even at cutting costs — there are more effective ways to do both — but rather at stigmatizing Medicaid, a program that has become less maligned in recent years, as more Americans have become insured under it. In one 2017 poll, 74 percent of respondents said they had a favorable view of Medicaid.

But while most Americans agree that poor people should have health insurance, they also believe that people of all income levels should earn their benefits — the same poll from last year found that 70 percent of respondents supported Medicaid work requirements. That paradox, of increasing support for Medicaid amid lingering suspicion toward Medicaid recipients, underscores persistent questions about how Americans view those in need…
"[O]ne peculiarity of our present climate is that we care much more about our rights than about our 'good'."  -- Simon Blackburn, Being Good

And, a chronic difficulty lies in determining where the two are not mutually exclusive, no?


From STATnews: "As Atul Gawande steps into a risky health CEO role, here are five challenges he faces."

Notes many of the same issues as Overcharged.
Modern Healthcare, July 11th:
Is private equity helping or hurting healthcare?
By Harry Gamble  | July 10, 2018

Some view third-party investment in physician practices as a vital trend that offers economies of scale that make healthcare more efficient. Others believe it fosters monopoly control while driving up prices. But nearly everyone agrees that further consolidation within the U.S. healthcare market is coming.

The Chicago-based American Medical Association is in the midst of a yearlong effort to quantify the impact that venture capitalists, private equity firms and other outside entities have on the way doctors treat their patients. The study rolls on as the number of physicians who work for themselves continues to shrink. According to a report by Accenture, the share of U.S doctors in independent practice has plummeted to 33 percent in 2016 from 57 percent in 2000.

"The days of Marcus Welby are behind us," said Anthony LoSasso, professor of health policy and administration at the University of Illinois at Chicago's School of Public Health. "The uncertainty over healthcare policy in Washington is probably driving the integrated healthcare delivery systems and large hospitals to bulk up almost as a counterweight to the uncertainty they face. They know that if you are bigger, you are in a better position to survive whatever may come your way.”…

More to come...

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