Content copyright . radical prescription. All rights reserved.
Radical Prescription
RADICAL PRESCRIPTION
RADICAL PRESCRIPTION
Restructuring the cost basis of American healthcare
Martin Meyer Weiss MD
MEDFORD BOOKS
Copyright 2010 by Martin Meyer Weiss
All rights reserved. Except as permitted under the United States Copyright Act
of 1976, no part of this publication may be reproduced or distributed in any
form or by any means, except by a reviewer who wishes to quote passages in
connection with a review written for inclusion in a magazine, newspaper,
broadcast or electronic journal.
ISBN: 978-0-692-00408-1
MEDFORD BOOKS
for Kay
TABLE OF CONTENTS
INTRODUCTION
CHAPTER 1 LABOR
Physicians
Non-physicians
CHAPTER 2 THE COST OF TORT-BASED MEDICINE
CHAPTER 3 BUSINESS
Insurance
Managed Care
Administrative Costs
Employer-based vs. Individual Policies
The Uninsured
State Lines
Contentious Coverage
Rescission
Usual and Customary Charges
Non-payment of Claims
Pre-existing Illness
Commandeering of Care
Summary of Corporate Health Insurance
Nonprofits
Hospitals in General
The Pharmaceutical Industry
CHAPTER 4 GOVERNMENT
Medicare
Medicaid
Overpayment and Fraud
The Structural Problem with Health Care Insurance in America
CHAPTER 5 MANDATES
Government Mandates
Quality Improvement
Preventive Medicine
Clinical Practice Guidelines and Quality Improvement Measures
Clinical Reminders
Pay for Performance
Peer Review
The National Practitioner Data Bank
Summary of Quality Improvement Measures
Computerized (Electronic) Medical Records
Continuing Medical Education
The Economic Benefits of Improving the Quality of Care
Lobbying
CHAPTER 6 THE RIGHT TO HEALTH CARE
CHAPTER 7 HEALTH CARE DELIVERY
Single Payer
Government Subsidized Health Insurance
Mandated Health Insurance
CHAPTER 8 CONTROLLING MEDICARE COSTS
CHAPTER 9 PROPOSALS
Reality check
Conclusion
NOTES
INTRODUCTION
There are two schools of thought on this nation’s health care dilemma. One
asserts that the primary issue is the 47 million uninsured.1 It holds that were
all Americans covered under a single-payer system, the greater part of the
problem would be well on the way to a solution. The other asserts that the
uninsured are but a symptom of a far more critical underlying problem. That
pathology is the steep and accelerating cost of health care. Were it not for
that exorbitant cost, health insurance would be affordable to virtually all, and
fair value would be received for the premiums paid.
These positions should not be mutually exclusive, but for all practical
purposes, they have become so. Each is firmly identified with a political party:
the former with Democrats, the latter with Republicans. This is unfortunate.
It ossifies policy positions and thwarts a fully developed critical analysis.
The Obama Health Care initiative (Patient Protection and Affordable Care
Act) was passed by Congress on March 21, 2010. It is the most important bill
Congress has enacted since Medicare was passed in 1965. However, even if the
Congressional Budget Office’s optimistic projection on the legislation proves to
be correct, the bill will not significantly reduce healthcare costs.2 The
legislation fails to identify the crux of the problem. The core issue is cost,
not coverage. I trust progressives will be open to viewing the issue using a
different paradigm. There is little theoretical or long term political
advantage in continued, unswerving loyalty to a defective analysis.
The expenditures are massive. Health care spending in the U.S. now exceeds
$2.5 trillion annually ($8,196 per person), 17.3 % of the GDP (gross domestic
product). 3 The Congressional Budget Office predicts that by the year 2025,
the U.S. will be spending 25% of its GDP on health care.4 In 1960, it was only
4.7% of the GDP. 4 The cost of health care is devouring our economy.
It would be a relatively simple issue if we, as a society, were paying for
these expenditures out of our past wealth or our present income. We are not.
We are financing our current health care through the burdening of the next
generation. If one includes Medicare and
Social Security obligations, the federal government’s unfunded liabilities are
$455,000 per U.S. household. 5
Considering that Medicare has an unfunded liability six times that of the
Social Security,6 health care financing is a considerably greater problem than
that of the failing Social Security system. 7 And, according to the New York
Times, the projected Medicare and Medicaid deficits “(are) the equivalent of
adding at least $900 billion to the deficit every single year, in perpetuity. It
makes the cost of the 2008 bailouts (A.I.G, Fannie Mae, Freddie Mac) look like a
rounding error.” 8 Expenditures on health care in the U.S. far exceed the
means of a nation with a declining industrial base.
In this report, the reasons for the high cost of health care in the U.S.
are critically analyzed. Conventional wisdom holds that “the primary driver of
health-care cost increases is technological progress.” 9 While technological
developments have increased the costs of health care, the assertion that they
are the “primary driver” is without substantiating evidence and is false.
Several radical but cogent proposals to reduce health care costs---all bluntly
stated and politically naïve, are offered. If implemented, however, they should
work. The focus of this treatise is primarily on reducing costs. The issue of
cost is decoupled from that of expansion of coverage to the uninsured, and from
the issue of improving the quality of care. These latter issues are not
unimportant; they are addressed in this book. In a strict fiscal sense,
however, they are secondary.
If health care is looked on as a war on disease, then this report is
written not as if by a theoretical systems analyst back at the Pentagon, but
from the vantage point of boots on the ground. That may be a disadvantage. Not
seeing the forest for the trees is an overworked adage, and it could be
applicable here. Nonetheless, the perspective offered here has not been given an
airing, 10 and the time may be ripe for something other than a regurgitation of
stale proposals and platitudes.
They are all that have been offered thus far. The Obama Administration, in
its health care legislation, has focused on expansion of coverage to the
uninsured. From the left, the talking points are “single payer” and “universal
health insurance”. From the right, it is “health savings accounts.” All are off
the mark; they are largely irrelevant in slowing the rise in health care
expenditures. It is a reflection of the intellectual bankruptcy of both sides
of the political spectrum that they continue to proffer these purported
cure-alls.
It is a moral bankruptcy as well. Some wonk, somewhere, in each party, must
realize that their “solutions” are fundamentally incapable of containing the
accelerating expansion of the nation’s health-care budget. Yet they are silent.
The health-care system has been labeled as inefficient. That’s an
oversimplification. It’s remarkably efficient for the very few who have netted
hundreds of millions of dollars. In a macroeconomic sense, health care is just
another industry. The notion that CEOs and top management in health care, when
handed the opportunity to make “a killing” would, by mere dint of their
position, place responsibilities to shareholders and patients over their own
interests is quaint. The agenda of some in health care management may not be
that different from management in the financial services industry.11
Another widespread criticism of American medicine is that it is “based on
treating illness, and not on promoting wellness.”12 Treating illnesses, of
course, promotes wellness, but what the critics really are saying is that if our
nation’s priority were on preventive medicine, much, if not most, of those
illnesses would no longer be present, and the treatments would therefore be
unnecessary. This is nonsense, but it is a philosophy pervasive throughout much
of academia and the media. There are significant benefits, of course, that can
be realized with preventive medicine. Early detection of asymptomatic disease
is certainly valuable. But cholesterol screening, blood pressure measurements,
colonoscopies, pap smears, mammograms, etc., are standard medical practice and
their savings already are built into the system. Moreover, the impact of some
of these interventions is less than commonly realized. For instance, women who
have mammograms every one to two years have a 16% to 19% lower death rate from
breast cancer.13 That’s an impressive figure; but clearly, even if every woman
in the country had yearly mammograms, the great majority of breast cancer deaths
still would not be prevented. Rather than “preventive medicine,” a more accurate
term for such medical practice would be “proactive medicine”–looking for disease
before it becomes symptomatic.
Regardless, in financial terms, even if penetration of the above
interventions were to encompass 100% of the population, the savings would be
modest at best. As for many of the remaining screening modalities, their
benefits are limited and exaggerated.
The other arm of preventive medicine, beyond that of screening, is
lifestyle modification, such as good nutrition, supplements and healthy living.
This philosophy asserts that:
“If we want to make affordable health care available to the 45 million
Americans who do not have health insurance, we need to address the fundamental
causes of health and illness, and provide incentives for healthy ways of living
rather than reimbursing only drugs and surgery. Heart disease, diabetes,
prostate cancer, breast cancer and obesity account for 75% of health care costs,
and yet these are largely preventable and even reversible by changing diet and
lifestyle.” 14
That statement misleading, and to a significant extent, false.15
Granted, science shows that a healthy lifestyle can extend one’s lifespan by
nearly a decade.16 But short of prohibiting alcohol, banning tobacco and
taxing red meat etc., we have likely reached the public health limits of the
benefits of lifestyle modification. The current mandate, compelling doctors to
document lifestyle education into the medical record, is largely an exercise in
futility. And for what its worth, chronic disease generally is not prevented by
lifestyle modification; it is delayed. 17 The two (prevention and delay) are
not synonymous. The diseases, and the expenses, arrive approximately ten years
later.
The “prevention” position further claims that “doctors (profit) from repeat
visits. There is no financial incentive to keep patients healthy.” 12
That statement refers to the fee-for-service model, as opposed to pre-paid
health plans, and implies that for financial reasons doctors, as a rule, let
their patients become sick. There certainly are corrupt doctors, but those who
would keep their patients sick for profit are few and far between. The purely
mercenary tend to go to Wall Street, not medical school.
Experts tell us the American health-care system is in desperate need of
“quality improvement.” This report takes the opposite view. The “quality
improvement” movement is making the situation worse.
The positions taken here run contrary to the prevailing conventional
wisdom. Among the topics given a fresh perspective are medical education,
malpractice and defensive medicine, the insurance industry and managed care,
the pharmaceutical industry, single-payer systems (Medicare and Medicaid, the
Veterans Administration, the Canadian health plan), lobbying and mandates.
This book attempts a straightforward, simplified approach, breaking down
the issue of health-care costs into their component parts: labor, business,
government and mandates. Physicians, although we imagine ourselves to be above
the fray, are just labor.
CHAPTER 1 LABOR
Reducing Labor Costs
Superficially, the most obvious way to decrease the cost of health care in
America would be to reduce the labor costs of delivering that care. While the
net savings of such a policy are not as great as might first be imagined, there
would be a reduction in costs, and the strategy could be implemented without any
significant compromise in quality of care.
1. Physicians
The average annual income of American physicians is $274,000 for
specialists and $173,000 for generalists (internists and family physicians).1
Some specialists make more, not because their specialty is particularly arduous,
but because their specialty board has artificially limited the number in that
specialty by restricting slots for residency training. Dermatology is one such
example in which the average income for the specialists is $390,000.2
Government should be pressed to open up the field.
Regardless, a justification for the high income of physicians is the length
of education,3 typically requiring four years of college, four years of medical
school, and then three to eight years of further hospital training (residency
and fellowship). While there is a modest income during training, there is none
for the eight years of college and medical school. Graduates of state medical
schools have an average medical school debt of $120,000.4 Independent of
market forces, it is not unreasonable, then, for doctors to expect a six-figure
income upon finishing their training.
This upward pressure on physician income can be mitigated. The four years
of undergraduate (college) work do not significantly enhance professional
competence. Future medical students should be offered the opportunity to enter
medical school directly out of high school, as is the standard practice in
Europe. In return, upon finishing their training, they should work in
underserved populations at a modest government salary for three years. The
program could be called the Medical Corps.
Not only would this proposal cost little to implement and relatively little
to operate, it also would provide doctors for many of the uninsured.5
Organized medicine likely would oppose this proposal, equating a lowered barrier
of entry into the profession with a drop in prestige. A more potent opposition
would come from academia, which, for want of a better phrase, would lose market
share.
A further advantage of this proposal is that it would allow future
physicians, particularly female physicians, the option of not having to put
their lives on hold during a critical period. One can get married and have
children while working. For all practical purposes, one cannot while still a
student. This would also allow a greater number of economically disadvantaged
minority students to enter medicine.6 The same principle should apply to other
health care professions as well.
The average physician income overall is $203,000 (before taxes, after
malpractice insurance).7 The percentage of the health-care dollar spent on
physicians’ services in the U.S. is put at 22.9 %.8 , 9
Many believe that lofty physician incomes are responsible for the high cost
of medical care.
This presumption is incorrect.
There are 800,000 physicians in the U.S.10 In 2003, the average physician
income was $203,000,1 or a total of $164.4 billion annually. The total health
spending for that year was $1.7 trillion.11
This figure represents not the above cited 22.9%, but just 9.67% of total
health-care expenditures ($164 billion out of $1.7 trillion in 2003).
Physician income takes up far less of the health-care dollar than has been
assumed by policy makers and the general public.
Moreover, from 1995 to 2003, physicians’ incomes, in inflation-adjusted
dollars, fell 7%.1 If that trend has continued, the disparity between the
percentage of the health-care dollar that is believed to go to doctors, and the
percentage that actually does, is likely even greater.
Doctors’ incomes are not a major component of the health care problem, and
here is why: the cost of employee health coverage rose just 5% in 200812 , and
the percentage change in total health-care expenditures in 2007 was a similar
5%.13 As physicians’ incomes make up 9.67% of total health care expenditures,
even if every American physician’s income was permanently reduced to the average
salary of Egypt’s doctors, $63 per month,14 we would be back at the same level
of health care expenditures we are at today, $2.5 trillion, within just two
years. (This calculation overestimates the length of time it would take the
savings in physician expenses to evaporate, as the average growth in health
expenditures between 2000 and 2007 was 7.5%).15 The rate of increase in health
care costs would then continue to accelerate, unabated.
The problem, and this generally is not appreciated, is not the cost of
labor, but labor waste. Non-productive labor, such as labor whose primary
purpose is legalistic or mandated, is likely the largest single health-care
expenditure in this country.
2. Non-physicians
A simple way to reduce health care costs is to allow non-physicians to
perform services currently rendered only by doctors. For example, pharmacists
could prescribe medications for common conditions such as hypertension,
diabetes, and high cholesterol, as is done in England.16
Also, trained technicians could perform specialized, expensive procedures, such
as colonoscopies. These currently are carried out only by gastroenterologists.
17 In the U.S., it takes 10 years of post-college schooling and training to be
allowed to perform colonoscopies. Medicare pays a gastroenterologist $450 for
this 30-minute procedure.18 (By comparison, Medicare pays an internist or
family physician $103 for a 30-minute primary-care visit).18 Furthermore,
ultrasound technicians, with the proper additional training, could be allowed to
interpret the examinations they perform instead of requiring that a doctor read
them.
A similar program could be extended to dentistry. More than 100 million
people in this country lack dental insurance. 27% of children and 29% of
adults have untreated cavities. In some Western European nations, trained
technicians--dental therapists--drill and fill cavities.19 Implementation of
such a system here could provide cost-effective care to those who could not
otherwise afford it.
Parochial self-interest may be at play not only with some doctors and
dentists, but nurses as well. The California Nurses Association filed suit in
California to mandate that only nurses or other medical professionals be allowed
to administer insulin to diabetic children in schools. More than 30 states
allow trained teachers and aides to administer the injections. The court ruled
in favor of the nurses, despite there being only one school nurse per 2,200
students in California.
“I’d love to have a nurse at every school, but the idea that nurses are the
only ones that can help diabetic kids manage their health is ridiculous,” one
father said. “It’s not rocket science.” 20
The insulin pump of that father’s child, Elizabeth, malfunctioned during
school hours and the kindergartner felt shaky. There was no nurse on campus, so
the child was sent to wait outside for her mother on an extremely hot day.
“Her mom saw a group of kids in a circle and our daughter unconscious on
the ground,” the father said. Elizabeth is now home schooled. The parents are
afraid to risk sending her back to public school.20
CHAPTER 2 THE COST OF TORT-BASED MEDICINE
Tort-based (defensive) medicine is that healthcare whose purpose is not
primarily the welfare of the patient, but rather the protection of the physician
against potential lawsuits. The care is expended on legal, not medical
principles.
We cannot examine defensive medicine without first discussing, and taking
measure of, the reality of medical malpractice.
Malpractice certainly is an important issue. The media–-including the New
York Times, Washington Post and CNN---have reported that medical mistakes kill
more Americans every six months than the number of Americans that died in the
entire course of the Vietnam War, and are the fifth-leading cause of death in
this country.1 These assertions are based on a report from the influential
Institute of Medicine, a division of the prestigious National Academy of
Sciences, which claims that medical errors are responsible for between 44,000
and 98,000 deaths in U.S. hospitals per year.2
The Institute’s report, in this author’s opinion, is the academic
equivalent of yellow journalism, but we will proceed as if it were accurate. 3
The threat of legal liability is considered by some to be critical to
ensuring patient safety.4 From that not unreasonable premise, a potent
malpractice tort system is necessary, not only to compensate victims, but to
maintain some sort of financial deterrent to the incidence of malpractice.
The system, however, in its adjudication, is less than perfect. In a
review of malpractice litigation, 16% of malpractice cases were not associated
with any errors of medical practice, yet were won by the plaintiff, with an
average award of just over $313,000.5 Conversely, in 27% of malpractice cases
where error did cause injury, the plaintiffs lost, and received no award.5
Regardless of who wins, the average time between injury and resolution of
the claim is five years. During this protracted waiting period, the victim is
without economic support, and all parties are subjected to a lengthy bout of
uncertainty.
The incidence, overall, of an unjust result is 43%.5 Common sense and
decency would argue that it is the malpractice victim denied compensation that
is the more important of the two discordant results. These individuals and
their families bear an unjust economic burden. However, it is that 16% of
decisions against innocent physicians, not the 27% that unjustly went against
the malpractice victim that drive up health care costs.
The goal of this report is to reduce those costs, not expand justice, so
the former will be our focus. The cost of health-care labor is certainly
impacted by malpractice issues. The 800,000 physicians in active practice in the
U.S. pay, on average, premiums of $27,500 per year for malpractice coverage.6
This amounts to $19.25 billion per year.7
A report from McKinsey & Company, the management consulting firm, states
that the U.S. malpractice system “is only a small contributor to the higher cost
of health care in the United States.” 8 That report, however, fails to take into
account “defensive medicine.” A typical example of this practice is the
unnecessary MRI. More than one-third of 1,600 physicians (36%) admitted that
they would order an MRI that not was not warranted if a patient with low back
pain requested it.9
Why this is so is succinctly described in a letter published in the New
York Times:
“This ordering occurs because doctors are being rated on customer
satisfaction as a surrogate for quality of care, and because of fear of
malpractice suits. A doctor can’t be certain that a given patient with back
pain who insists on a magnetic resonance imaging doesn’t have cancer causing his
pain, even if the odds are one in a million. When that turns out to be true
after a doctor refuses to order the test, expert witnesses will explain to a
jury that the test ought to have been done, and how that would have led to a
better outcome. Without malpractice liability reform, doctors will not take that
chance.”10
More than 62 million CAT scans are performed annually in the
U.S. 11 About one-third are estimated to be medically unnecessary, done
primarily for medico-legal reasons.11 The radiation dose from a single chest CAT
scan is 500 times that of a plain chest x-ray.12 It’s estimated that 1.5% to
2% of all cancers in the U.S. in the next few decades may be attributable to
radiation from CAT studies.11 Defensive medicine may be much more than merely
wasteful.
It has been argued that the cost of medically unnecessary, but legally
warranted, defensive medicine takes up to 9% of the total national health care
spending.13 Others place the figure much higher, at 20% to 25%.14 From
personal observation, the latter figure is more likely correct. However,
defensive medicine has been so co-mingled with and incorporated into standard
medical practice, that now it is impossible to determine where one ends and the
other begins. If the 9% figure is correct, it comes to $198 billion wasted
yearly (9% of $2.2 trillion). If the 25% figure is correct, $550 billion is
squandered annually in defensive medicine decisions. The former figure
translates to $660 per man, woman and child annually. The latter figure
translates to $1,833 annually. These figures, of course, are speculative. The
percent of the health-care dollar spent on defensive medicine is unknown, but it
certainly isn’t zero, and it certainly isn’t inconsequential.
So, just what do we get for this expenditure? I have been unable to locate
any published data on the total cumulative amount awarded yearly, either by
trial or settlement, to malpractice plaintiffs. We are, however, able to make a
rough estimate, using other data.
Physicians pay yearly premiums to insurance companies of $19.25 billion.7
Nationally, malpractice insurance companies pay out 63 cents of every dollar
received. I have not included premiums that hospitals and HMOs may pay, or
awards if they self-insure, but within this limitation, this comes out to $12.1
billion dollars awarded to plaintiffs every year. We do not know what
percentages of awards are won at trial or what percentages represent
out-of-court settlements, but will assume 40% of the awards go to the
plaintiffs’ attorneys or court costs. This results in $7.2 billion getting to
the malpractice victims. If 9% of total health care spending goes to defensive
medicine, more than $26 is being spent for every single dollar that actually
reaches the malpractice victim. If we take 25% as the figure, more than $72 is
squandered to get a single dollar of compensation to the victim.
Be that as it may, the potential threat of a legal suit is considered by
the public and policy makers to be a deterrent to physician malpractice. No
doubt, to some extent this is true, but for the sake of argument, just how many
lives have been saved, and complications avoided, by the specter of litigation?
According to the Institute of Medicine, up to 99,000 lives are lost each year
due to medical negligence. If the threat of malpractice litigation is an
effective deterrent, why is that number still so high? Or, does one hold that
were it not for the threat of malpractice suits, there perhaps would be 200,000
malpractice deaths per year?
Not generally appreciated is that the costs of defensive medicine may be
matched or even exceeded by the costs of defensive documentation. The
controlling ethos in current medical practice is that if it (questions, answers,
every aspect of the exam) wasn’t documented, then it wasn’t asked for, examined,
considered, or done. Much of the physician’s and nurse’s time is spent entering
voluminous notes into the chart, which have zero or little practical relevance
to the patient’s care. It is quite necessary, however, from the perspective of
case law, should the record ever be needed at trial. The net effect is that
many physicians and nurses attend to but a fraction of the patients they
otherwise could. Time is a zero-sum game. We can do, or we can document. The
more we perform the latter, the less time we have for the former.15
The consequences of misallocating that time can be best appreciated by way
of analogy. More than 42,000 deaths occur each year from traffic accidents.16
Placing a speed limiter on the engines of all cars and trucks to restrict the
maximum speed to 30 miles per hour would certainly save far more lives on the
road than the threat of malpractice suits saves in hospitals. The same impact
such a policy would have on the general economy is what is happening to the
health care economy now. Because of defensive medicine, we are choking our
productivity,
Medicine, in its bare essence, is a war---a war against disease. As it now
stands, the rules of engagement are determined by lawyers. Attorneys are fine
people, but for them---whether because of personality, training, or
indoctrination---words often take precedence over reality. Such priorities, in
medicine, are a prescription for disaster. Rightly or wrongly, unless lawyers
are removed from the equation, there will never be any significant reduction in
health-care costs.
There is much talk of a “single-payer” health care system. Why not then, in
a similar vein, employ a single-payer malpractice system? All physicians are
assessed 5% (or some other figure to be determined) of their net income to be
placed into a pool to compensate victims of malpractice. As for the actual
determination of malpractice, panels of actively practicing physicians, drawn
like juries, would review and adjudicate the claims, without any involvement of
lawyers. The costs would be minimal. Money, instead of going to malpractice
insurance companies and lawyers, would go to the malpractice victim, and the
case would be resolved within weeks, not years.
Critics of such a system would argue that physicians cannot objectively
judge each other. “…Doctors who ‘get along’ with their colleagues are never
effectively called to account for their negligent acts; ...hospitals that
engage in sloppy care are shielded from redress and corrective action by a
mutual dependence with respect to their own medical staffs….”17
If that is true, to correct for potential bias and conflict of interest,
the malpractice panels should be drawn, and conducted, out of state. There is
reason to believe that doctors on these panels will judge honestly as to what
transpired---not only because it is the right thing to do, but because few are
eager to return to the current tort system.
These panels should make one of four findings regarding culpability:
1. There was unequivocal malpractice. The doctor is clearly guilty.
2. More likely than not, there was malpractice. The evidence leans towards
malpractice, but there is some reasonable doubt as to whether it actually
occurred. The doctor is likely guilty.
3. It is possible there was malpractice, but more likely than not, there was
none. The doctor is likely innocent.
4. There was definitely no malpractice. The doctor is unequivocally innocent.
If the physician is guilty beyond a reasonable doubt, he or she is
immediately reported to the state medical board for consideration of suspension
or removal of his or her license. If the physician is guilty only at the
standard of more likely than not, the license is not removed, but if there is a
second such finding within seven years (a number we have arbitrarily chosen as
an example), the board may consider removal. If there is no subsequent verdict
within seven years, the record of the malpractice is removed. For determinations
where it is found that more likely than not there was no malpractice, there is
no reporting to the medical board.
Under this plan, we divorce to some extent culpability from compensation.
A second, separate panel, perhaps drawn from the general public or consisting of
appointed boards, could evaluate the plaintiff for the compensation. Even if
the physician panel at the malpractice hearing found it unlikely that
malpractice occurred, as long as it is reasonably plausible that it may have
occurred, the plaintiff is still permitted to argue for compensation.
Thus, if a determination is made by the malpractice panel that more likely
than not an obstetrician did not deliver substandard care, he or she is found
innocent. However, because that ruling still concedes that its plausible there
may have been malpractice, the brain-damaged infant from that delivery is still
eligible to be considered by the compensation panel for monetary support.
The Patient Protection and Affordable Care Act of 2010 includes a provision
awarding five year grants to states for the development of alternatives to tort
litigation for malpractice claims. It is doubtful, however, that the above
proposal would get past the trial lawyers association, or be approved by the
courts.
Currently, in many states, malpractice awards have significantly decreased.
California, for instance, has sharply reduced malpractice
premiums and payouts to malpractice victims. In Los Angeles and Orange
counties, yearly malpractice premiums for general surgeons are $68,000, compared
with just under $300,000 in Florida’s Dade County.18 The difference is due to
the Medical Injury Compensation Reform Act (MICRA) enacted in California in
1972, limiting pain and suffering awards to $250,000. Thirty other states have
similar legislation.18 In 2008 dollars, this is not a large amount, and few
attorneys will now take contingency lawsuits unless there has been a large
income loss due to the alleged malpractice. 18
This benefit to insurance companies has not fully trickled down to
physicians. In California, insurers pay out only 39 cents of every dollar
collected in premiums, compared to 63 cents nationally.18
Where awards have been capped (limits have been placed in 35 states),19
there is, in many cases, clear injustice to those who have been harmed. On the
other hand, where malpractice awards are not capped, physicians, such as those
who practice obstetrics and gynecology, face prohibitive premiums. Because most
physician charges are controlled by Medicare or insurance companies, physicians
cannot pass those costs onto their patients. The net result is an exodus from
practice and consequently a shortage of physicians in those states. The
immediate corollary is that in those states, there also is a lack of access to
care.
Malpractice awards appear to have little impact on protecting the public,
at least in New York State. There, one anesthesiologist has made payments to
settle 10 malpractice suits between 1998 and 2007. Most recently, his misuse of
syringes led to the development of hepatitis C in at least one patient. It took
the state 34 months after that discovery to notify 628 patients that they may be
similarly at risk of hepatitis B or hepatitis C. The anesthesiologist was not
disciplined by the Office of Professional Conduct because he has since changed
his methods to conform with infection control procedures issued by the Center
for Disease Control (CDC).20
The primary purpose of a medical board is to protect the public. It is not
to give physicians second, third, or fourth chances. The Medical Board of
California appears to be taking the right approach. The president of that board
has announced, over the objections of the California Medical Association, that
physicians will no longer be allowed to enroll in confidential treatment
programs designed to divert drug-and alcohol-abusing doctors from public
disciplinary action. State auditors had found that impaired physicians continued
to practice.21
CHAPTER 3 BUSINESS
Unnecessary labor costs, in the form of non-productive work, are not the
only facet of the health care economy that is ripe for correction. The
business aspect of medicine can be divided into three industries: insurance,
hospital, and pharmaceutical.
1. Insurance
“If you don’t know where you’re going, any road will get you there.” The
Cheshire Cat, Alice in Wonderland
America’s health insurance system is not the result of any coordinated,
well-thought-out master plan, nor has it evolved naturally through free-market
forces. On the contrary, it developed piecemeal and under the heavy influence
of political decisions. There has been no coherent, objective and neutral
summary of the industry. An analysis will therefore be attempted here, with the
primary goal the reduction of overall health care costs for the public. We will
focus on particularly germane aspects of the medical insurance
industry---specifically, managed care, administrative costs, employer- vs.
individual-based policies, and some of the unique business practices of the
industry.
a. Managed Care
Ninety percent of privately insured Americans are now under some form of
managed care.1
The intellectual theory justifying managed care arises from an observation,
perhaps apocryphal, that in Imperial China doctors were paid only when their
patients remained healthy. In this country, prepaid health plans have been in
existence since the early 20th century. The name “Health Maintenance
Organization,” or HMO, was coined by the Nixon Administration to popularize the
plans. In a nutshell, physicians, or the corporation they worked for, would
receive a capitation---that is, a preset fee---for each patient they cared for.
If they succeeded in keeping patients healthy, the doctors would make a profit.
If the patient became ill, the expense of their care would be subtracted from,
and could exceed, that preset fee.
The economic rationale for moving the public into managed care was to rein
in costs brought about by the Medicare program. This government-subsidized
program, begun in 1964, was followed immediately by an explosion of health care
demand. There likely also was a presumption, never openly stated, that tens of
thousands of physicians were over-billing Medicare. The response was the
establishment of a management structure that would be rewarded by limiting care
to only that which was necessary. Unfortunately, to some extent this has
changed the American health-care system from one in which the misconduct
typically was an act of commission, to one in which the misconduct may instead
consist of an act of omission. 2
Recent studies report that health care outcomes have not improved under managed
care,3 and HMOs and PPOs have not reduced health care expenditures vis-à-vis
traditional fee-for-service medicine.3, 4 An earlier analysis published in 1994
found that HMOs reduced the use of services by 7% compared to unmanaged care and
4% compared to a mix of managed and unmanaged fee-for-service care. However, the
subsequent rate of growth in costs was the same for HMOs and the fee –for-
service sector.5
The dominance of managed care was not a natural development in the evolution of
health care. Not widely appreciated is the extent of thought that went into
this public policy.
The following is excerpted from the Nixon White House Tapes. It is a
meeting between Richard Nixon and his aide, John Ehrlichman, on Feb. 17, 1971:
Ehrlichman: “On the---on the health business—”
President Nixon: “Yeah.”
Ehrlichman: “We have now narrowed down…problems on this thing to one issue, and
that is whether we should include these health maintenance organizations like
(the) Permanente thing.”
President Nixon: “…You know I’m not too keen on any of these damn medical
programs.”
Ehrlichman: “This---this is a…”
President Nixon: “I don’t (unclear)…”
Ehrlichman: “…private enterprise one.”
President Nixon: “Well, that appeals to me.”
Ehrlichman: “Edgar Kaiser (son of Henry Kaiser) is running his Permanente deal
for profit. And the reason that he can---the reason he can do it---I had Edgar
Kaiser come in---talk to me about this….All the incentives are toward less
medical care, because…”
President Nixon: “(Unclear)”
Ehrlichman: “…the less care they give them, the more money they make.”
President Nixon: “Fine. (Unclear)”
Ehrlichman: “(Unclear) and the incentives run the right way.”
President Nixon: “Not bad.”6
The next day, Feb. 18, 1971, Nixon, in a speech to the nation, announced
his HMO plan.7
Neither market forces nor efficacy are responsible for managed care’s
controlling and preeminent position in the health care universe, which had
fallen into profound decline until resurrected by Nixon’s Health Maintenance
Organization Act of 1973 (supra). It provided government subsidies and compelled
employers to offer the plans.8 These subsidies, amounting to hundreds of
millions of dollars, allow managed care to offer more benefits than traditional
insurers, and do so at lower premiums as well. The result was a marked increase
in their market share.9
Government policy, utilizing the managed care model, has transferred
control of American medicine from individual doctors to an industrial corporate
model.
U.S. Healthcare, one example of the HMO “experiment,” was created as a
nonprofit corporation financed through a government loan. Converting to
for-profit status (we discuss nonprofits later), it was purchased by Aetna for
$9 billion in 1996, earning its founder nearly $1 billion.10
Managed care has been lucrative for other executives as well. In 2003,
Norman Payson, chief executive of the Oxford Health Plan, received a
compensation of more than $76 million.11
Perhaps a more lucrative example of the managed care corporate model is
William McGuire’s windfall. The CEO of United Health Group, McGuire in 2002 held
unexercised stock options in that HMO worth $530 million. 12
To most of the general public, the actual managed care business model is an
unknown. Typically, the managed care company contracts with groups of private
physicians, giving them a yearly capitation for each enrollee they place under
their care. As noted earlier, if the physician group spends less on health care
for the enrollee than the capitation, they enjoy a profit. If they spend more,
they suffer a loss. The managed care entity, on the other hand, is at no
financial risk.
Managed care companies are government-subsidized, politically connected
brokers, which have been given a virtual monopoly on health care. The median
operating margins of HMOs in 2003 reportedly were 2.8%.13 It is clear,
however, that a select few individuals have made a killing in managed care. The
question is---off of whom?
The following testimony before Congress represents the worst-case scenario:
“My name is Linda Peeno. I am here primarily today to make a public
confession. In the spring of 1987, as a physician, I denied a man a necessary
operation that would have saved his life, and that caused his death. No person,
and no group, has held me accountable for this because, in fact, what I did was
I saved my company a half-million dollars, and furthermore, this particular act
secured my reputation as a good medical director, and it ensured my continued
advancement in the health-care field.
I went from making a few hundred dollars a week as a medical reviewer to
an escalating six-figure income as a physician executive. In all my work, I had
one primary duty, and that was to use my medical expertise for the financial
benefit of the organization for which I worked, and I was told repeatedly that I
was not denying care, I was simply denying payment.
I know how managed care maims and kills patients, so I’m here to tell
about the dirty work of managed care, and I’m haunted by the thousands of pieces
of paper in which I have written that deadly word – denied.”14
Denied can be a deadly word. One well known gynecologist, as a favor to a
friend, saw an HMO member. She was term, at 38½ weeks, with an excess of
amniotic fluid, and the baby in the breech position. The gynecologist informed
her she needed a Cesarean section that day. She agreed. Her HMO, however,
refused to urgently do the operation, stating that in 3% of such cases the fetus
will turn back to the vertex (head down) position on its own. Routine delivery
is less expensive than a C-section. Several days later, she showed up for the OB
appointment she was given by the HMO, with a stillborn, cord wrapped around the
neck.
Managed care has a great competitive advantage. Because of a strained
judicial interpretation of the Employee Retirement Income Security Act---or
ERISA---pension statute, managed care is immune from malpractice suits, and more
importantly, immune from suits for wrongful denial of care.15
That said, the author has worked, at some point in his career, for HMOs
(Kaiser and Cigna), and during that period was not aware of any life-threatening
denial of care.
Managed care should lose its governmental preferences and special judicial
immunity. It should compete fairly in the free market.
b. Administrative Costs
Over the past five years, health insurance premiums have risen 8% to 14%
annually.16 For many, particularly the self-employed or those with pre-existing
illnesses, insurance is unaffordable and/or unobtainable.
The high cost of health insurance is the result of one or more of the
following:
1. The insurance industry is merely passing on the increased costs of health
care in its premiums.
2. The industry, because of excessive administrative costs, is inefficient;
therefore premiums have increased.
3. The industry is adding to the cost of health care by making excessive
profits.
The industry and its proponents embrace the first position. Critics point
to the second and third positions.
It should not be that difficult to assess the validity of the first
statement. If that assertion is true, the rise in insurance premiums over the
past five years should not exceed the rise in cost of basic outpatient and
hospital services and procedures. While there is no published analysis of this
specific question, we do have the data to make the comparison, and will do so
later, at the end of this section.
In theory, the second and third statements also should be easy to assess.
Unfortunately, clarifying just what administrative costs encompass has been
muddled, perhaps for political reasons. One would think administrative costs
are simply the cost of running a business, not unlike the costs of operating a
casualty or auto insurance company: the outlay for claims adjusters,
appraisers, secretaries, salaries and leasing of office space. The McKinsey
report, however (discussed shortly), includes profits in administrative costs.17
I am not an economist, and certainly profits from the premium dollar are of no
benefit to the insured, but this appears incorrect to me, and confounds accurate
analysis.
Administrative costs are a political issue. Secretary of State Hillary
Clinton, no stranger to health care initiatives, has asserted that the health
insurance industry spends $50 billion annually to avoid paying claims. 18
“This is all part of their business model. This is how they make money, but it’s
so bad for the rest of us. I say to them, use the $50 billion to
actually take care of people.”18 This is also the central position of those who
argue for a “single payer” health system. The claim is that money spent on
“administrative costs” could be used instead to finance health care for the
uninsured.
Administrative costs are a necessary expense of any business. Moreover,
scrutiny of claims prevents over-billing and fraud, which if unchecked, would
lead to higher premiums. The question is whether the current level of
administrative costs is justified.
The McKinsey Organization, as noted earlier, is a consulting company that
published a report on health care costs in 2007.19 Their findings have been
widely repeated in the media. McKinsey reported administrative costs at 11%
to14% for private insurance companies, compared with just 3% for Medicare. 20
Another analysis found that 19% of all premiums paid to for-profit HMOs go
into “administrative costs.”21 Here too, profits were included in the
administrative costs.22 In contrast, the Canadian health plan returns 99% of
its premiums directly into patient health care.21 There is, of course, no
profit factor with government programs.23
I have found no published scrutiny of true administrative costs in the
private health insurance industry. There probably are data that would confirm
just how much money is spent on scrutinizing health insurance claims, but this
would likely be proprietary, and not in the open literature. Data confirming the
cost-effectiveness of these measures are also unavailable. The lack of
transparency on these issues can only be speculated upon. Without critical
analysis, we can make no firm conclusions about administrative costs and cost
control on the efficacy of a single-payer system vs. private insurance.
One additional problem: I am uncomfortable with euphemisms, such as “single
payer.” Any individual HMO or proprietary insurance company, within itself, is
a single payer, with its own single billing form and its own single pharmacy
formulary. For any particular payer (an insurance company, for example), the
presence of other multiple payers in the market, in terms of administrative
costs, cannot have any impact on those costs. On the contrary, the headache from
having multiple
payers affects the practicing physician, who must deal with numerous forms,
formularies, corporate procedures, and phone calls for approval for treatment
programs from numerous companies. Yet the cost of this aspect of health care is
not addressed in any of the above reports. One of the authors is in private
practice and must employ four assistants merely to fill out the myriad insurance
company forms. Administrative costs for U.S. physicians are nearly 27% of gross
income, compared with 16% of Canadian physicians’ income.24 Requiring all
insurance companies to use a single standardized billing form and fairly and
expeditiously resolve claims might be helpful.
Furthermore, by commingling true administrative costs with profit, it
appears the aforementioned analysts are actually criticizing for-profit
medicine. It is probably misleading to talk of administrative costs, when what
they actually refer to is profit.
I cannot discern, from the publicly available data that I have come across,
just what the true administrative costs are for insurance, and whether those
expenditures are for the public good. For instance, if insurance companies are
billing the public, in premiums, an extra $400 per year for administrative costs
so that the company may recover an additional $2 in revenue, that added expense
may not be in the public interest. It might be appropriate for the Government
Accountability Office to perform a forensic accounting to determine just what
constitutes these administrative costs. Are they cost effective from a public
policy standpoint? Are they a cover for profit? I do not accuse the health
insurance industry of Hollywood accounting, but Hollywood has gotten away with
such accounting for years, and it would reassure the public to verify just where
their premiums are going.
c. Employer-based vs. Individual Policies
During World War II, the government froze wages. To attract workers,
companies began to offer health insurance in lieu of wages they could not
increase. The insurance had a double tax advantage. The companies were able to
deduct the money they spent on their employees’ health insurance from their
taxable corporate income, and the value of the health insurance the employees
received was tax-free.25 Most of those who have insurance now receive their
insurance through their employer.26 Employers pay an average of $9,000 per
year for a family policy,27 and GM spent $1,600 per car on health care.28
The number of those covered by employer-based plans, however, is dropping.
In California, from 2001 to 2005, jobs with health benefits declined by 678,000.
29 Nationwide, 17 million people now obtain their insurance as individual
purchasers, not through their employers.30 These policies are paid for with
after-tax dollars. Thus, because of the tax code, those who do not have health
insurance provided by their employer are subsidizing those who do. The
injustice is even greater for the working poor, who cannot afford to obtain
health insurance on their own. When they show up at emergency rooms or are
hospitalized, they are charged fees far greater than the much lower rates given
insurance plans. Hospitals demand payment from the uninsured at a rate 250%
higher than that which they readily accept from insurers, and more than 300%
more than Medicare’s allowable costs.31
The Mayo Clinic Health Policy Center has recommended moving from
employer-based coverage to portable, individual-based insurance policies.32
Eliminating the income-tax exclusion for employer-paid insurance and replacing
it with a tax credit of lesser value is another suggestion.27 The George W.
Bush Administration proposed a flat $15,000 per year health insurance
deduction.33
Continued employer-based health insurance, with its lack of portability,
is to the advantage of the insurance industry. If insurance is tied to
employment, when employees become ill and lose their jobs, they lose the
insurance. COBRA policies (discussed in detail later)---which give employees the
opportunity to continue temporarily their health coverage---can be purchased.
They are, however, expensive, because the new premium takes into account the new
illnesses and health conditions of enrollees, and the employer is no longer
contributing to the cost of the plans, which terminate after 18 months.34
The sickest apples, those
who would cost the insurance company the most money, fall from the tree, leaving
only the healthy, who need little coverage. Mixing our metaphors, it’s a form
of automatic cherry picking.
Employer-based insurance also is a boon to the managed care industry. In
2004, less than 20% of those who had their insurance through their employer had
the option of conventional, rather than managed-care, insurance.35
The average individual policy, when including out-of-pocket expenses, costs
the enrollee $6,500 per year.36 Not only must the individual purchaser pay for
his or her policy with after-tax dollars, the coverage also tends to be
poorer.36
d. The Uninsured
According to U.S. Census data, there are 47 million uninsured
people in the U.S.37 Some say that the significance of this figure is
exaggerated. Here is why:
1. Of the 47 million, 10 million are not U.S. citizens.
2. Many are eligible for Medicaid but have not applied, and are uninsured in
name only.
3. About 18 million have family incomes of more than $50,000 and therefore could
buy insurance, but haven’t.
4. About 25% of the uninsured declined insurance offered by their employers.37
Nearly 40% of the uninsured are between the ages of 18 and 34, and most
need little health care.27 The decision to be uninsured---those in the fourth
category---is likely driven by price. A calculation may be made that the cost of
insurance is so high and unjustified that the wiser course is to remain
uninsured. This may not be an irresponsible decision, but rather, quite
rational. As for those with family incomes of more than $50,000, it might
appear that these families are reckless.
That’s nonsense; $50,000 a year does not go very far when one has other burdens,
such as a mortgage, a struggling business or other family members to support.
Expending a large percentage of income for prohibitively expensive insurance
that one is unlikely to tap into may not be practical.
e. State Lines
Current law dictates that health insurance may not be bought from
out-of-state companies. The effect is to prevent individuals from skirting high
costs imposed by unwanted mandates. Individuals should be free to purchase any
plan from any insurance company in the U.S.
f. Contentious Coverage
The economic tactics of the health insurance industry have antagonized
much of the American public. The industry defends its business policies as
necessary to assure profitability.
These contentious tactics are as follows:
1. Rescission
Health Net of California recently was ordered to pay more than $9 million
to a patient with breast cancer whose coverage was cancelled, forcing her to
stop chemotherapy. At the arbitration hearing, internal company documents
revealed that Health Net employees were given bonuses for meeting a cancellation
quota and for the financial savings achieved by the cancellation. The company
claimed that the plaintiff had not disclosed her true weight on the application,
and that she had a pre-existing heart condition.38
The insurance industry appears to have used any error or oversight, no
matter how slight or irrelevant, in the disclosing of past medical history, as
an excuse to retroactively cancel a policy holder’s coverage. It does so when
that individual has had a large claim that should be covered by the policy. The
impression many have is that this is solely to maximize corporate profits.
Rescission, though, may sometimes be justified. The insurance industry is at a
disadvantage when applicants apply for coverage. Applicants may have a
pre-existing illness that will generate significant future expenses, which they
deliberately conceal from the insurer. Rescission is a means to discourage such
tactics.
The Patient Protection and Affordability Act of 2010 prohibits rescission,
except in cases of fraud or misrepresentation.
2. Usual and Customary Charges
Usually, when patients are treated by “out of network” doctors (doctors who
have not contracted with the patient’s insurance company), the insurer still is
contractually obligated to pay the majority of the bill. Typically, the policy
promises to pay 70% or 80% of the “reasonable and customary” charges for a given
medical service in the geographic area. The patient is responsible for the
remainder.
The problem lies, however, in the calculation of “reasonable and customary”
charges. The calculations for most of the insurance industry have been made by
Ingenix, a company that, according to the New York Times, is “conveniently”
owned by UnitedHealth Group, parent to one of the nation’s largest health
insurers, UnitedHealthcare. “The whole system is rendered suspect by an obvious
conflict of interest: if Ingenix pegs the customary rates low, it keeps
insurance reimbursements low and shifts more of the costs to the patient.”39
UnitedHealthcare, Aetna, Cigna, Wellpoint and 12 other insurers recently
were investigated by the New York Attorney General’s office for setting
unreasonably low “usual and customary” payment scales for billings from
out-of-network providers. In one example---a doctor’s visit for which the
fair-market rate, determined by the New York Attorney General’s office, was $200
(the insurer should have paid 80% of that rate)---Ingenix calculated a
fair-market rate of $77. The insurer paid $62 (at 80% it should have been $160).
The patient then paid $138 (it should have been $40).40 Among other tactics,
Ingenix pooled charges for services performed by low-paid nurses with those
performed by high-paid doctors, and used outdated information.41
“For years this database was treated as credible and authoritative, and
consumers were left to accept its rates without question,” said Andrew Cuomo,
Attorney General of New York. “This is like pulling back the curtain on the
Wizard of Oz. We have now shown that for years consumers were consistently
low-balled to the tunes of hundreds of millions of dollars. ”42
The problem is best described in a report by the New York Times. Mary
Jerome, a Columbia University professor with ovarian cancer, was treated at
Memorial Sloan Kettering on the advice of her primary-care doctor. She expected
to pay no more than her $3,000 deductible for going out of network. Instead, she
was left with bills of $80,000 that were not reimbursed.
The inability to decipher insurers’ calculations can be overwhelming to
patients with serious medical conditions. Jerome found herself trying to
decipher bills with more than 200 line items.
“You’re lying there on a morphine drip with someone draining your lungs,
trying to figure this out, and you just cannot...It cannot be done.”42
On Jan. 13, 2009, a settlement was announced in which UnitedHealthcare
Group agreed to the establishment of an independent database, which will be run
by a university yet to be selected. UnitedHealthcare Group denied any
wrongdoing. Ingenex generates $1.5 billion in annual revenue from consulting
and other services, a small portion of UnitedHealthcare Group’s annual revenues
of $80 billion. 42
3. Non-payment of Claims
United Healthcare has been fined $3.5 million by the California Department
of Managed Care for 130,000 alleged violations over a one-year period during
2006 and 2007. The violations include wrongfully denying claims, paying claims
late or not in full, and giving patients erroneous information on co-payments.
There may be additional penalties that theoretically could reach $1.3 billion,
but several analysts think the amount will be far lower, given the amounts
typically levied in California. An administrative law judge will make the
determination.43
Insurers make remarkable demands for paperwork, which some physicians
believe is “a conspiracy…to deny, delay and diminish payments to health-care
providers.”44 UCLA oncologist John A. Glaspy said in a Los Angeles Times story
that, “Nurses who used to care for patients now spend 40% of their 60 to 70 hour
workweeks filling out forms and phoning for authorizations…We have one employee
just getting radiological approvals, eight to ten a day. That’s $45,000 in
salary, plus benefits, not going to healthcare. It can take us a whole day just
to find out whom to get the authorization from.” 44 In California, such paper
work accounts for 21% of private health insurance spending.44 This figure
doesn’t include the time expended in superfluous documentation doctors and
nurses must perform for reimbursement.
Four insurance companies---Wellpoint Inc., UnitedHealth Group (the parent
company of UnitedHealthcare), Aetna and Cigna Corp.---enroll almost half of the
population subscribing to private insurance. Additionally, in two-thirds of
the nation’s major metropolitan areas, one insurance company controls at least
50% of the market. Such dominance, in effect a de facto monopoly, leaves
hospitals and doctors in a weak position in terms of negotiating fees and
contesting the failure of insurers to pay bills. 44
4. Pre-existing Illness – Refusal to Insure
Obtaining coverage has been impossible for many who do have not gotten
their health insurance through an employer. Among the conditions that have
resulted in insurance rejection are jock itch, varicose veins, acne and breast
implants. The use of many commonly prescribed medications has also rendered one
uninsurable. 29 It is unknown what percentage of the 45 million uninsured
attained that status because they fell into one of the above situations. 29
There has been economic distortion as a consequence. The need to obtain health
insurance through an employer caused many to abandon self-employment, and caused
others to remain in jobs they would have otherwise left. “People go through
hell and high water to get employer-based coverage because they know they can’t
get coverage in the individual market”.29 Beginning in 2013, under the Patient
Protection and Affordable Care Act of 2010, insurance companies can no longer
deny coverage to those with pre-existing illness, nor will they be able to
charge higher premiums to those with pre-existing conditions.
5. Commandeering of Care
Insurance companies (and managed care) have intruded into the
physician-patient relationship. Under the rubric of “medical necessity,”
(insurers will pay for all medically necessary care), they have established
control of medical care, effectively supplanting decision-making from the doctor
and patient to the corporation. Insurance companies have accomplished this
authority by awarding themselves the power to define just what is “medically
necessary.” Among their rationales justifying the exercise of this commanding
power are:
a. They do not dictate medical care, they merely refuse to pay for it.
b. By refusing to pay for care that they define as “not medically necessary,”
they reduce total health-care costs, and therefore reduce premiums for all.
c. By managing care, they obtain better outcomes.
These claims should be suspect. The agenda of the decision- maker varies,
depending on who is making the decision. If it’s the patient and the physician,
then the decision more than likely benefits the welfare of the patient. If it’s
the corporation, in all likelihood profit for either management or the
shareholder is the ultimate motive. Therefore, we should systematically examine
each of these rationales.
a. They do not dictate medical care, they merely refuse to pay for it.
This is a false claim. The patient has paid the insurance company for the
health care coverage. In return---for a not insignificant premium---he or she
has relied on the promise that when health care is needed, it will be paid for
by the insurance company. There typically are no other funds available to the
patient to pay for care, so in refusing to pay, the insurance corporation is
dictating care.
The above noted gynecologist, within a two-week period just prior to the
completion of this book, treated three patients whose insurance companies
dictated care. In one case, an insurance company refused to authorize necessary
chemotherapy for a very aggressive form of breast cancer, ordered by one of the
leading oncologists in Los Angeles. The treatment plan did not follow the
insurer’s generic treatment protocol for the disease. Another patient was
denied coverage for a warranted uterine ultrasound--the pregnant woman’s uterus
was not enlarging satisfactorily--possibly endangering the fetus. The rationale
for the denial was that the fetus turned out not to be compromised, therefore in
retrospect, the ultrasound was not necessary. Therefore the ultrasound, to the
insurer’s reasoning, was not warranted. Still another patient, with a strong
family history of DCIS, a type of breast cancer that is not picked up by
mammography, needed a breast MRI. The insurance company refused to pay.
b. By refusing to pay for care, insurers reduce total health care costs.
This is a problematic claim, and to the extent insurers do reduce costs,
their intent likely is to maximize corporate profit, not reduce global
health-care costs. The companies certainly do reduce costs for themselves by
refusing payment and restricting care and drugs. Not factored into this
equation, however, are the hours expended by physicians and their office staff
in attempting to comply with the micromanagement demands of the insurance
corporations.45
There is certainly a role, and a need, for oversight. Its neutrality,
though, should be questioned. Sophisticated radiological tests offer an example
of the problem. Doctors, as noted earlier, must get prior permission from
insurers for each CAT scan, PET scan, or MRI ordered, before insurers consent to
pay. The procedures are expensive. Medicare reimbursement for a CAT scan of
the head is $228; an MRI of the neck and spine, $977; a PET scan can top $2,000.
The insurers utilize radiology benefits managers, which are outside firms that
review and make the decisions on the requests. The problem is that their
business comes entirely from the insurance company, not the physician or the
patient. They may not be neutral. On the other hand, some of these
studies are ordered by doctors who have a financial interest in the equipment
being used, or order the tests primarily for legal liability concerns. 46
There may be a conflict of interest in that case as well.
c. Insurers obtain better outcomes.
They don’t.
The following proposal would address the problem of “medical necessity”.
If a physician is a contracted provider for a particular insurance plan, he
or she determines “medical necessity,” not corporation management, nor corporate
employees. Insurance companies, however, may review a physician’s status
vis-à-vis continued participation in the plan every two years. If the company
disapproves of the doctor’s pattern of practice, it can drop him or her from
their plan at that time. Since any individual insurer may control a large part
of the local market, there still will be powerful economic pressure on doctors
to comply with the insurers’ practice guidelines. As such, physicians should be
allowed to appeal any adverse termination to a panel approved by their
particular medical- specialty college. With this fallback position, doctors
more likely will follow approved clinical guidelines, rather than insurance
company economic protocols.
The exception to the above is for expensive and/or controversial
procedures, for which the insurer may demand pre-authorization. The insurer’s
decision, however, must be made expeditiously and if payment for the procedure
is rejected, there must be an opportunity for immediate appeal to, and a
decision from, a neutral and balanced board.
Clearly, if the procedure or its application to the patient is outside
standard medical practice, the insurance company need not cover the expense, nor
should the decision be open to appeal. Furthermore, if a physician is ordering
unnecessary procedures, he or she could be reported to the state medical board.
Summary of Corporate Health Insurance
It could be argued that the health insurance industry has been the target
of vilification from the media and politicians. It could also be argued that
those charges are correct. The available data suggest the industry is
overcharging the public. In 2000, national health care expenditures rose 7.2%.
The following year, the industry raised its premiums 10.9%. In 2001, health
care expenditures rose 8.9%. The following year, the industry raised its
premiums 12.9%. In 2002, national health care expenditures rose 9.3%. The
industry raised its premiums 13.9%. In 2004, national health care expenditures
rose 7.7%. The following year, the industry raised its premiums 11.2% .47
We began this section listing the three possible reasons for the very high
cost of health insurance. The first of these possibilities--that the insurance
industry is merely passing on the costs of health care to its
enrollees---clearly is not supportable. On the contrary, insurers are
attaching hefty premiums onto their premiums.48
Proponents of the industry, however, argue that its profits are just a
small portion of total health care spending, and therefore “profit hungry
insurance companies were never the problem…industry profit margins are around 3%
and the entire industry recorded profits of just $13 billion last year, close to
a rounding error in Medicare fraud estimates.” 49
This is accurate, if somewhat concrete thinking. The problem is not
primarily in its definition of profit, which fails to include executive
compensation and bonuses, but in not considering the amounts expended by the
public for the corporations to obtain that profit, i.e. the 11% to19% of the
premium dollar spent on “administrative costs”, and in not considering the man
hours expended by doctors attempting to comply with insurance company
requirements.
The insurance industry is not part of the solution. On the contrary, it
appears to be a major part of the problem. That problem is dealt with later in
this report, in the Medicare section.
Nonprofits
Much of American health care is provided by non-profits, either as HMOs or
hospitals. Essentially considered charities, nonprofits are exempt from
property and income tax.50
Because of the great trust much of the public places in nonprofit
institutions, there is an inclination to give nonprofits a pass on oversight.
The default position is that they are charities, therefore their motives are
pure, and thus their accounting honest. This may be a naïve view.
The distinction, in idealized theory, between profit and not-for-profit
institutions is this: a nonprofit organization makes money so that it may
provide a service; a for-profit entity provides a service so that it can make
money .51 That theory is not necessarily reflected in reality.
The management of some nonprofits disburse their profits as salaries to
themselves. More significantly, several nonprofit HMOs have converted to
for-profit status, for reasons that appear suspect.
Converting a nonprofit institution into a for-profit one requires
machinations appreciated by few. Such conversions usually violate the charter
of the charitable hospital or HMO. To get around this restriction, the cy pres
doctrine is utilized, in which a new charitable foundation is set up, ostensibly
to carry on the mission of the converted nonprofit.
There are real-world questions that compromise the application of the
doctrine. Those questions appear to remain unasked. How much money will the new
foundation receive from the purchaser? (It may be just a token amount). Who
will control the new foundation? (It may be the purchaser of the former
nonprofit). Was there an independent valuation of the nonprofit? (The
management of the nonprofit, who will buy the enterprise, may have influenced
the valuation; was the price set artificially low?). Are the financial details
made publicly available? (The details of the sale may be labeled as trade
secrets). Did management or trustees of the nonprofit receive a financial
inducement to support the sale? Governmental oversight of these conversions may
be quite limited.52
What happened in California in the 1990s may be instructive. In 1992, a
nonprofit HMO, Health Net, became Health Systems International. Thirty-three of
the executives of the nonprofit purchased a 20% ownership in the new entity for
a total of $1.5 million. Just four years later, their shares of that 20%
ownership were worth $315 million.53 There are but two possible explanations
for this astonishing gain: Either the company suddenly became remarkably
profitable, or the valuation, and hence sale price, of its nonprofit predecessor
was set remarkably low. 54
In another conversion, in 1991, the nonprofit Blue Cross of California
created a new for-profit subsidiary, WellPoint Health Networks, which
would hold 90% of its assets. By formatting the conversion as a
subsidiary, no charitable foundation would be necessary. However, the state
eventually intervened in 1996, requiring creation of a new public foundation, 52
funded at $3 billion.55
Yet another conversion is instructive. In 1996, Blue Cross and Blue Shield
of Ohio agreed, for $299.5 million, to sell 85% of its ownership to
Columbia/HCA. The deal was designed in such a way as to avoid the strict legal
definition of conversion. As such, there was no legal requirement for the
formation of a charitable foundation, or a payout to policyholders.
Interestingly, Blue Cross and Blue Shield at the time of the deal had $223
million in reserves, which would transfer to the new owners. In effect,
Columbia/HCA would be buying Blue Cross and Blue Shield with the latter’s own
money. It is unclear to us what Blue Cross had to gain in this arrangement.
Under the deal, three executives at Blue Cross and Blue Shield received a
severance package of more than $15 million in consulting fees and agreements not
to compete, and the outside lawyer for Blue Cross received a consulting fee of
$3.5 million.52
A nonprofit health organization with an ostensible charitable purpose may
prompt one to assume that its controlling officers have a similar intent. This
is not necessarily so. The actions of Blue Cross and Blue Shield of Maryland, as
described by James Robinson, may be instructive.56 During the 1980s, the plan
established “subsidiaries” in Paris, the Channel Islands (off the coast of
England), Hong Kong and similar sites elsewhere. Its executives traveled by
Concorde jet and they stayed in five-star golf resorts and hotels to check on
the status of these sites. About $44,000 per year was spent on golf balls and
greens fees alone, and the nonprofit flew dozens of managers to both the winter
and summer Olympics. The plan also established money-losing contracts with
companies controlled by the Blue Cross executives.
In 1998, Blue Cross of Maryland merged with Blue Cross of the National
Capital Area to form a new nonprofit, CareFirst BlueCross BlueShield. In 1999,
ostensibly to obtain access to capital to invest in information technology,
CareFirst sought to convert from nonprofit to
for-profit status, and negotiated to merge with Tigon, the Blues’ plan of
Virginia. Tigon had converted to for-profit status in 1997, transferring $170
million to the state of Virginia. When a nonprofit converts to profit status,
it must either establish a new charitable foundation to replace the assets of
the nonprofit foundation it is terminating, or give money to the state. It
appears that Tigon may have been worth more than $170 million. Tigon was sold
just five years later to another company, Anthem, for $4.2 billion.
Regardless, the negotiations between CareFirst and Tigon failed. CareFirst
demanded $120 million in bonuses for its executives, which Tigon refused.
CareFirst’s petition to convert to profit status was denied by the state of
Maryland. That state’s insurance administration concluded that CareFirst’s
argument that it needed to convert to invest in new information technology for
the plan was invalid, and that executive enrichment was the true motive for the
conversion. 56
Beyond the issue of how the public gains from converting nonprofit
institutions to for-profit corporations, there is the question of just what the
public gains from nonprofit status of these organizations in the first place.
A nonprofit must have a purpose for the public good. It does not have
shareholders or owners, and it pays no dividends. That does not mean it makes
no profit. For instance, the University of Pittsburgh Medical Center had over
half a billion dollars’ profit in 2006.57
Nonprofits have an advantage over for-profit hospitals. Not only, as
previously stated, do they not pay income, sales or real estate taxes, they also
can issue tax-subsidized bonds.58 Nonetheless, a 2004 congressional committee
found that nonprofit hospitals provided essentially no more charity care than
for-profit hospitals. 59
As for that charity care, hospitals charge the uninsured a markedly higher
rate than those with private insurance or Medicare. They demand, as noted
earlier, payment from the uninsured at a rate 250% to 300% higher than that
which they readily accept from insurers and Medicare.30 When nonprofits
tabulate the dollar value of charity care they have dispensed, it is at that
exaggerated rate.
The disconnect between nonprofit status and charity was enabled by IRS
rulings. The initial requirement, from 1956, was that for a nonprofit hospital
to obtain tax-exempt status, it had to provide “to the extent of its financial
ability” services to those unable to pay. A series of subsequent IRS rulings,
beginning in 1969, replaced that obligation with one requiring only that the
hospital “promote health for the benefit of the community as a whole.” 60
Unless there is some heretofore unrevealed rationale for that change, the
rule should be returned to its original standing, and the conversion of
nonprofit institutions to for-profit status should be halted. It appears to be a
bonanza for the few, at the expense of the public interest. A return to the
original intent of these institutions might reduce health-care costs.
Nonprofit hospital systems operate as commercial ventures, not charities.
The business model is to close money-losing hospitals in poor cities, and build
in affluent areas. Ascension Health, the nation’s largest nonprofit health
system, has closed three hospitals serving the poor in Detroit over the past
decade, while opening a new $224 million facility in a wealthy suburb.61
Ascension argues it must make profits in the suburbs to subsidize care in the
city. Anthony Tersigni, Ascension’s CEO, earned $2.4 million in total
compensation in 2006. 61
There is yet another aspect to the nonprofit issue. Remember that
nonprofits are required to spend their profits either as salary to management or
on the institution. It has been suggested that some of the impetus for new
hospital construction by nonprofits is the need to spend the money they have
accumulated.
Problems with nonprofits are not limited to the health-care industry.
Roger Chapin Veterans’ Charities, which include the Coalition to Salute
America’s Heroes and Help Hospitalized Veterans, raised $168 million from 2004
to 2006. Of that, $125 million went to fundraising, administrative expenses,
salaries and perks. During that period, Chapin and his wife received $1.5
million in salary, bonuses and pension contributions. They also were reimbursed
more than $350,000 for meals, hotels, and entertainment, plus they were given a
$444,000 condominium and a $17,000 golf club membership. 62 The soldiers, of
course, did receive some charity from the nonprofit. Almost $18.8 million in
phone cards were sent to the overseas troops. The phone cards, unfortunately,
did not allow them to call their families. They only allowed them to call a
stateside business selling sports scores. 62
Hospitals in General (Nonprofit and For-profit)
The nation’s hospital bill in 2005 rose 7%, to $873 billion, accounting for
32% of this nation’s health care expenditures.63 Adjusted for inflation, this
was nearly double the spending of 1997.64 It is reported that of the excess
health care spending in the U.S., nearly 50%, was due to costs related to
hospital care. 65
There are avenues to reduce these costs. Roughly 50% of a hospital’s
expenditures are salaries and benefits.66 Mitigating the threat of malpractice
litigation, as suggested earlier, should significantly reduce those labor costs.
For instance, in European medical-surgical wards, as many as 10 to 12 patients
may be cared for by a single nurse.67 In the U.S., the figure is 6 to 8
patients.67 It could be argued that this is due to a higher level of severe
acute illnesses in U.S. hospitals; and accreditation rules and regulations that
require a higher level of staffing. I suggest, however, that the majority of
American nurses’ time is not spent in actually taking care of patients, but
rather in documenting the care given. Again, the purpose of this documentation
is not to promote patient care, but to provide documentation of care in the
event of litigation.
Interestingly, there is a disparity between what hospitals charge insurance
companies, and their actual costs. In 2005 in California, insurance companies
paid hospitals $18 billion for care that cost the hospitals $13 billion.68 The
difference reduced the $7.1 billion shortfall these hospitals had from treating
the uninsured and inadequate reimbursements from Medicare and Medicaid. 68
The Pharmaceutical Industry
Pharmacy costs represent 11% of U.S. health-care expenditures.69 The
percentage has dramatically increased over the past quarter-century. From only
$12 billion spent annually on prescription drugs in 1980, the amount increased
to $197 billion by 2003.70
In 2007, the wholesale price of the 50 top-selling branded drugs
(non-generics) increased by 7.82%. By way of comparison, the U.S. inflation rate
for 2007 was 4.1%. 71 The pharmaceutical industry is trying to maintain
revenue that it sees as falling, due to a dry product pipeline and loss of
patent protection for many of its brand-name drugs.
Regardless, the industry is remarkably lucrative for its executives. In
2002, the CEO of Bristol Myers-Squibb received $74.9 million in compensation and
the CEO of Merck received $93 million in stock options. 72
Independent of the question of whether pharmaceutical management warrants
its compensation, there are issues as to how the business operates.
About 35% of the revenues of large drug companies, according to SEC reports
in 2001, are expended in marketing. 73 Those marketing costs are not paid for
from executive compensation, but rather are added to the price of the drug. For
a drug to reach “mega-seller” status, or $1 billion in annual sales, it requires
in its first two years on the market up to $1 billion in promotion. 70
Direct-to-consumer advertising is now a central component of
pharmaceutical promotion. Approved by the FDA in 1997 (under pressure from
court decisions), drug advertising to consumers is now a mainstay of network and
cable television, particularly news-division programming. The result is to
create a consumer demand for heavily promoted drugs. Spending by the industry
on direct to consumer advertising was $4.2 billion in 2005.74
Glucose test strips, a product of the pharmaceutical industry, are a good
example of big-pharma’s and the medical supply industry’s business model. Each
strip, which is inserted into glucose meters that provide a numeric reading of
the diabetic patient’s blood sugar (glucose) levels, costs about $1. The actual
cost of manufacturing the strip is a trade secret, and not revealed to the
public. The current U.S. market share is 21 million people. It has been
estimated that the cost of producing a test strip is 8 cents to 12 cents per
strip, which translates to roughly a 900% markup. The industry argues that the
markup is justified because of the cost of research and development, and because
the glucose meters frequently are sold at a loss or given away. The meters are
proprietary, meaning they are designed only to accept those strips produced by
the manufacturer.75
How the meters and strips are marketed to the public is relevant. There
are incessant vendor commercials on cable television. One, from Access Diabetic
Supply, features an older actor purporting to be a diabetic, intoning in a grave
voice as he points to a glucose meter, “If you’re a diabetic, you know what this
is…it’s your lifeline.” He then informs the viewer to call a toll free number,
and follows with: “Access will send you no charges. You will not be charged. We
will bill Medicare or your insurance.” 76
The meters are not free, of course; Medicare is billed. Medicare is also
billed for the strips, paying out $806 million in 2006.77 The price for a box
of blood glucose strips online is $17. Medicare pays $36 per box. 77
Glucose meters and glucose test strips are not a lifeline. They are of
benefit to the health of diabetics, but certainly are not a lifeline. 78
Whether paid for by the patient (indirectly through higher insurance
premiums), or paid for by the government, neither party (patient or government)
derives any great benefit from this marketing; the pharmaceutical industry,
however, does.
Advertising to a market that does not directly pay for the product is a
cash cow, and it’s the working American who is being milked.
In theory, legislation could be crafted to prohibit the direct marketing of
pharmaceuticals and medical devices to the general public. The savings would
primarily go to Medicare in the form of lower demand. This proposal, of course,
may not be politically feasible. Out of financial self-interest, management on
the business side of the media will oppose any such limitation. Drug
advertising is one of their larger revenue streams. Furthermore, the courts will
likely strike down any such legislation or regulation. Just recently, the
courts found unconstitutional, on free speech grounds, an act of Congress that
outlawed “crush videos.” These are videos of women who impale trapped, live
animals---typically kittens and puppies---while weight bearing with high heels.
79 The original intent in the Constitution was to protect political speech.
Modern courts have expanded that intent far beyond what the Founding Fathers
ever imagined. Arguments in favor of drug commercials will insist, quite
plausibly, that the purpose of the ads is to educate the public. It is all but
certain the courts will disallow any congressional action restricting
direct-to-consumer drug advertising.
A more practical option might be to impose price controls (or a tax) on
any product that is advertised directly to consumers, when that drug or product
is paid for by a third party, such as insurance (private or government).
Two proposals have recently been made to reduce this nation’s
pharmaceutical expenses. The first is re-importation, in which Americans would
be allowed to purchase American-made drugs from Canada, where pharmaceuticals
are considerably less expensive.80
The pharmaceutical industry objects to this plan, arguing it is unsafe to
import drugs, even when it is American drugs that merely are being re-imported.
Recent developments make that argument disingenuous. Ostensibly
American-produced drugs are manufactured, unbeknownst to the American public, in
unregulated foreign facilities. Sixty-two deaths since 2007 have been linked to
heparin marketed by Baxter,81 which actually was produced by suppliers in
China. Heparin is made from pig intestines. Baxter bought the heparin from
Scientific Protein Laboratories, which is in a joint-venture partnership with a
facility--- Changzhou SPL in Changzhou, China---82 which in turn bought “raw
heparin produced in some cases, in small, unregulated family workshops in
China…”83
Of the active pharmaceutical ingredients in drugs taken by Americans, 80%
are manufactured in foreign plants (40% of which are produced in China and
India).81 These facilities are rarely inspected by Western governments, and
the Chinese did not inspect the facility making the contaminated heparin since,
according to their regulators, “everything made at the plant was shipped
overseas.”84
The second proposal draws again from the Canadian experience. It has been
suggested that the government buy pharmaceuticals directly for Medicare Part D,
and therefore save costs by using its massive buying power to drive down price.
Current law prevents government from buying directly from, and negotiating with,
drug makers. “…If the exclusionary clause were lifted, government would be in a
position to effectively dictate price”.85
The pharmaceutical industry has received some bad press recently. Besides
Baxter’s problems with heparin production, the company also has been sued for
failing to recall vials of heparin that had been poorly labeled. The twin
infants of actor Dennis Quaid and his wife, Kimberly, were given 1,000 times the
recommended dose of heparin.86 Merck, another pharmaceutical giant, has agreed
to pay $671 million to settle claims that it overcharged the government from
1997 to 2001.87 And yet another, Eli Lilly, has made a $62-million settlement
with 32 states over improper marketing and the inadequate disclosure of side
effects of its anti-psychotic, Zyprexa.88
An interesting dilemma that crystallizes some of the issues in the
pharmaceutical industry is the drug Cerezyme, which treats Gaucher’s disease, a
very rare, inherited enzyme deficiency. The disease, untreated, causes a
massively enlarged liver and spleen, anemia, low platelet counts and bone
deterioration. The drug is a synthetic version of the missing enzyme, and
extremely expensive---costing more than $300,000 per year at doses recommended
by the manufacturer (51 units per kilogram every 2 weeks). Some experts argue,
however, that much lower dosages would be just as effective. “It’s economic
malpractice to give a much higher dose of an expensive drug than is required.”
89 In Israel, for instance, the dosage is just 15 units per kilogram, every
2 weeks.
Cerezyme, produced by Genzyme, had sales of $1.1 billion in 2007. About
5,000 people worldwide are on the drug, 1,500 of them in the U.S. The drug was
developed by the National Institutes of Health (NIH); it gave Genzyme a contract
to manufacture Cerezyme. It has been estimated that the cost to Genzyme to
produce the drug is only 10% of its price.89
The argument against government driving down drug prices is that such
legislation or regulation would financially harm an industry that we depend on
for new advances. However, most of this nation’s medical advances come from
government-funded research, primarily in academia. NIH spends more than $28
billion annually on research. 90
Nonetheless, it is best that research not be limited to government alone,
and that is what likely would occur should the industry be significantly
weakened. There are two reasons to encourage research by the pharmaceutical
industry. The first is that the focus of government-funded research, to a
greater extent than is commonly known, often is politically directed. Special
interests influence where money is spent and cures tend to follow the money.
There is only so much scientific talent, and that talent has to support itself
financially. Contrary to the general public impression, scientists do not do
research on any topic that interests them. They can only do research on topics
that are funded by grants. If there is a preponderance of research money going
to Disease A, resulting in a dearth of money going into Diseases B through Z,
the scientific talent and the progress will likely be in Disease A. The agenda
of the pharmacy industry, on the other hand, has no political component, but is
largely for profit. A vibrant pharmaceutical industry will allow for a greater
diversity of research to encompass more diseases.
There is a second reason why it’s best that scientific and pharmaceutical
research not be limited to government. There often is orthodox dogma, or
politics, within science itself, in which certain schools of thought strive to
shut out competing schools of thought. 91 , 92 It is healthier for the
advancement of science that not all research power (money) be concentrated in a
single source (those dispensing the government’s funds).
But just how much of the pharmaceutical industry’s research budget is
directed to potentially groundbreaking research, and how much is spent on merely
tweaking existing drugs, to extend their patent protection ?
Drug prices are rising at a remarkable rate, and a major reason is the
soaring price of “specialty drugs.” These are drugs for which pharmaceutical
companies have given exclusive marketing rights to distribution companies known
as “benefit managers.” The companies can demand high prices for these drugs, as
patients have no other alternatives. The “benefit manager” companies take as
much as a 10% to 15% markup. Specialty drugs are directed against conditions
such as multiple sclerosis ($80,000 to $100,000 per year) and severe combined
immunodeficiency ($352,000 to $532,000 per year).93 One such drug, H.P. Acthar
Gel, an injectable drug derived from hog hormones, had been selling prior to
Labor Day 2007 for $1,600 per vial. The price was increased over that holiday
weekend to $23,000 per vial by Express Scripts, the “benefit manager” company.
86 The drug is necessary to treat children with a rare and severe form of
epilepsy. Express Scripts stated that the increase was a manufacturing
decision. The manufacturer, Questcor Pharmaceuticals, gave exclusive rights to
Express Scripts in the summer of 2007. The Questcor executive vice president,
Steve Cartt, said that the new price was determined by looking at the prices of
other specialty drugs and by estimating how much insurers and employers would be
willing to bear. “Market research gave us some comfort that the strategy would
work, and physicians would continue to use the drug and payers would pay. The
reality was better than expected.” 93
The reality is that for Reagan Schwartz, age 3, two courses of treatment
with H.P. Acthar cost her father’s health plan $226,000.93
Spending on specialty drugs totaled $62 billion in 2006, about 23%
of total drug sales in the U.S. The spending for these drugs increased 16.5% in
2006.93
Thalidomide is an interesting specialty drug; it became infamous in the
1960s when used as a tranquilizer during pregnancy, causing limbless babies.
It’s now used as a cancer treatment, and works by shutting off blood supply to
the tumor. In Brazil, it sells for pennies a pill. It is produced in the U.S.
by Celgene, which in 1998 charged $6 per pill. The company raised the price
30-fold to about $180 per pill, or $66,000 per year, as the drug’s popularity
against cancer grew. “The price increases reflected the medicine’s value,”
company executives said.94
Great Britain has taken a controversial approach to the expense of
specialty drugs. When Bruce Hardy’s cancer spread from his kidney to his lungs,
his doctor prescribed a new drug from Pfizer. But the British health authorities
refused to buy the medicine, upsetting Hardy’s wife, Joy. “Everybody should be
allowed to have as much life as they can,” she said outside their modest London
home, according to a New York Times story.94 Britain’s controlling health
agency, the National Institute for Health and Clinical Excellence, has
established a policy in which its health service will automatically approve any
drug that extends good quality life by six months as long as it’s less than
$15,150. A drug that accomplishes the above for between that figure and $22,750
might be approved. Any figure over that is almost always denied. The drug Mr.
Hardy needed, Sutent, extends life expectancy for six months at a cost of
$54,000.
Replicating this policy in the U.S. may be difficult. Denying life to
hardworking, honest people could be hard to reconcile when the government this
year invested more than $1 trillion to bail out financial speculators. The money
to pay for that bailout was earned by those working-class and middle-class
Americans.
The issue in Britain gets more interesting. “After consulting a citizens’
group, the institute decided that the nation should spend the same amount saving
or improving the life of a 75-year-old smoker as it would a 5-year-old,” the New
York Times continued.94
There are problems with this thinking.
1. The 75-year-old had some role in inducing his illness. The 5-year-old,
unless a prodigious smoker, had no role in hers.
2. One year of a 75-year-old’s life represents 1.3% of his lifespan. For the
5-year-old, it is 20%.
3. On the outside chance that some new treatment is discovered or announced
in the interim, the 5-year-old has another 70 years of life. The 75-year-old
smoker, on the other hand, is at the tail end of his.
Taking the above-mentioned into account, the position of this report is
the following:
1. Direct marketing of drugs and medical devices to consumers should be
discouraged, either by the imposition of price controls on those particular
drugs and devices, or taxation.
2. If government is to buy drugs for seniors, as it does now with Medicare Part
D, common sense dictates that it do so directly to obtain lower prices.
3. The author has published elsewhere calling for direct government control of
specific portions of the pharmaceutical industry.95 Any such action for
prescription drugs, particularly specialty drugs, however, could prove
counterproductive. On the issue of price controls, though, we are close to a
tipping point. I question whether it is truly “free market” economics when
corporation executives demand $226,000 for two courses of injections to control
seizures in a 3-year-old girl because that is what the market will bear.
CHAPTER 4 GOVERNMENT
Government now accounts for the majority of health care expenditures. Its
effects on spending are direct---through Medicare and Medicaid--and indirect,
through tax subsidies for employer-based health insurance and unfunded mandates.
Medicare and Medicaid
1. Medicare
Medicare is government health insurance provided to those 65 and older and
others with special conditions (including the disabled, those with kidney
failure on dialysis or awaiting a transplant, and those with Amyotrophic Lateral
Sclerosis - Lou Gehrig’s Disease). The program was initiated in 1965, to be
financed by a payroll tax of 2.9% on self-employed individuals, and a similar
tax on those employed, with half paid by the employee and half matched by the
employer. That financing has proved to be inadequate. In 2007 the government
spent $440 billion on Medicare.1 Only 42% of total Medicare funding now comes
from the Medicare payroll tax; a nearly equal amount, 40%, comes from general
government revenues.1 The situation will only get worse. Today, nearly four
workers contribute payroll taxes into Medicare for every enrollee receiving
benefits. This number will drop to 2.4 workers by the year 2030.2
One-third of all health care expenditures in this country are paid for by
either Medicare or Medicaid.3 Since 1990, the two programs combined have
jumped from 12% of federal spending to 21%. 4 Over the next decade, Medicare
expenditures are expected to grow by 7% a year.5 Medicare currently enrolls 43
million Americans,3 and by 2030 it is projected to enroll 79 million.2
Medicare comprises four parts. All enrollees receive Part A (hospital
insurance), and most elect to participate in Part B (generally outpatient
services), which requires a small ($88.50 per month) premium. Part C (Medicare
Advantage, an extra benefits program in which private insurers are paid a
subsidized, preset amount by Medicare) and part D (a prescription drug plan),
also are optional.3
Medicare Advantage enrolls one-quarter of Medicare subscribers. The
program consists of doctor networks managed by corporate insurers, such as
UnitedHealthcare and Humana, in the form of HMOs, PPOs, and PSOs
(provider-sponsored organizations).
Introduced by the Bush Administration in 2003, these private insurers
receive a bonus to take over Medicare coverage for seniors. The advantage to
seniors is that they receive some services above and beyond that of regular
Medicare enrollees. The advantage to insurers is that they are subsidized by the
government. Payments to private plans average 13% over the cost, had the
services been provided through regular Medicare.6 Because premiums for
Medicare are tied to the government’s overall costs, the monthly premiums for
all Medicare enrollees have risen.
While giving some increased benefits to enrollees, the program has
generated excessive costs to the federal government.7 “It’s a runaway train,”
said Senate Budget Committee Chairman Kent Conrad (D-ND). 8 The Medicare
Advantage program will be significantly curtailed by provisions in the Patient
Protection and Affordable Care Act of 2010 which cut its government subsidies.
Medicare Part D is a complex, voluntary drug benefit program. 9 The plan
is not available directly from Medicare, but instead is made available through
private insurers, each of which has its own design, further compounding the
complexity. There currently are about 56 Medicare Part D drug benefit plans.10
The net cost to the government for the period 2004 to 2008 was $147 billion.11
The plan was enacted by the Bush Administration just prior to the 2004 midterm
elections; there is little doubt it was politically motivated, to win votes from
seniors. It is expected the program will have added $518 billion in costs by
the year 2013.12
Medicare Plan D is too expensive, and should be terminated.
Hospitals and nursing homes are funded by Medicare Part A largely on a
prospective, rather than a fee-for-service, basis. In this system, a
predetermined payment is made based on the diagnosis. If less money is spent by
the hospital, the hospital keeps the difference. If care of the patient exceeds
the preset payment amount, the hospital loses money. The exception is outlier
payments for patients with unexpected, extraordinary high costs.
It is unclear then, why there is such a disparity in the cost of health
care among institutions. Total Medicare spending averaged close to $100,000 for
patients who received most of their care at UCLA Medical Center in the last two
years of their lives, compared with about $50,000 at the Mayo Clinic hospital.13
For those in the final two years of life, most of Medicare’s spending goes to
hospital care. “Some chronically ill and dying Americans are receiving too much
health care---more than they and their families actually want or benefit
from…Contrary to popular assumption, it’s the volume of services, not the price
per service, that accounts for most of the variation in Medicare spending.”14
Medicare payments to physicians are controlled by a complex formula, the
Medicare Fee Schedule (MFS). If total Medicare expenditures exceed projections,
the payment rate is reduced commensurately. In 2006, for example, the payment
rate to physicians was supposed to decrease 4.4%. That rate was overridden by
Congress, however, and payments were held instead to the 2005 rate. Physician
payments are expected to decrease by 25% to 35% over the next several years. 3
Medicaid
Medicaid enrollment currently is at more than 52 million people.15
Nearly 20 million of the enrollees are children. Unlike Medicare, Medicaid is
administered by the states. The program is meant for individuals and families
with limited income, and is a joint federal-state plan. Each state program must
conform to federal guidelines in order to receive matching federal funds. The
wealthiest states receive half of their Medicaid funding from the federal
government, while the poorer states receive more.16
On average, Medicaid makes up 22% of each state’s budget. In California,
Medicaid is the largest item in the state’s budget, exceeding education.
Medicaid assisted with medical payments of nearly 60% of nursing-home residents
and paid for 37% of all childbirths in the U.S. 16 The health care for more
than half of patients with HIV is paid for through Medicaid.16
In the 1990s, the federal government encouraged the enrollment of Medicaid
recipients into private managed care plans, for which the plans received a fixed
monthly premium from the state. Currently, 65% of Medicaid enrollees are under
managed care.16
Overpayment and Fraud
Medicare is rife with problems that are given short shrift or are ignored
by its proponents. On the one hand, the program is penurious with physicians,
to the point that more than one-third of U.S. physicians do not accept new
Medicare patients because of poor reimbursement rates, which frequently do not
cover practice overhead.17 The problem is particularly acute for primary-care
practices. A physician quoted in the New York Times remarked that, “I
calculated that every time I see a Medicare patient, it’s like handing them a
$20 bill when they leave.”18
On the other hand, the program is lax about fraud. In a pilot program in
2006, the Centers for Medicare and Medicaid Services investigated fraud in the
medical-device industry. In Miami alone, there were 1,600 businesses listed for
such services. One-third did not exist, yet they had billed Medicare for $237
million the previous year.19
The fraud story is similar in Los Angeles, and possibly nationwide. In Los
Angeles County, where there are nearly 5,000 suppliers, investigators have
uncovered $300 million in potentially fraudulent billing over the last two
years.20
Alice Christoff, 84, is a retired accountant. Legally blind and unable to
walk, she sought a new electronic wheelchair. According to Christoff, a
saleswoman sold her products she didn’t need or ask for, including a hospital
bed and hydraulic bathroom lift. In addition, she was sold “costly, sub-par”
electronic wheelchairs. “I don’t understand anything about medical equipment,”
Christoff added. “When she said I had to have it, I just said OK”.20 The
billing to Medicare was more than $28,300.
In an investigation by the U.S. Inspector General of 300 randomly selected
claims for power wheelchairs, nearly one-third of the claims did not warrant
even a standard wheelchair, and only 13% met Medicare criteria for a powered
wheelchair. 21
One reason for the rampant fraud is that just 3% of Medicare expenditures
go toward administrative costs, resulting in inadequate scrutiny of bills.
To combat fraud, the government aims to require accreditation of suppliers
and more frequent inspections. Some of the nation’s 116,000 medical-equipment
suppliers say they may quit serving Medicare patients, asserting that the new
rules are too heavy-handed.
Medicaid also is rife with fraud, posting a loss of at least $30 billion
dollars annually.22
The majority of states spend less than one one-thousandth of their Medicaid
budgets on fraud oversight. Meanwhile, the federal agency responsible for
overseeing Medicaid employs only eight people, and beyond the salaries for those
individuals, has a budget of only $26,000 per year. The Government Accounting
Office found this to be a level of funding “disproportionately small relative to
the risk of serious financial loss.”22
According to an article in New York’s City Journal about Medicaid fraud in
Southwestern states, Nigerian immigrants, operating medical equipment
businesses, solicited customers by promising them free medical supplies such as
electric scooters. The scam artists paid complicit doctors to prescribe
motorized wheelchairs, which were billed to Medicaid at $7,500 apiece. The
swindlers then dispensed mere $1,500 motor scooters to the patients, pocketing
the difference for themselves. This was not a low-level scam; it raked in
hundreds of millions of dollars in illicit profits. In another example,
ambulance firms in New York State charged Medicaid over $300 million yearly for
services that were never done or unwarranted.23
Fraud against the federal government is covered by the False Claims Act,
which allows whistleblowers to collect up to 30% of monies recovered. One law
firm has won more than $100 million in contingency fees over the past 20
years.22
Unless there is far more active enforcement and more vigorous punishment,
the fraud will not be contained.
Fraud also can be committed directly on the general public. The “expert
service problem” is not unique to medicine. In a nutshell, the dilemma is that
the person diagnosing the problem is the same one reimbursed for fixing it.24
How can one trust the expert---whether the expert is an auto mechanic, a
plumber, or a physician? There is a financial incentive for the expert to find
a complex problem, and do more than may be necessary. This was perhaps one
rationale for the development of the capitated (pre-paid, one set price per
person to cover all services), payment scheme of managed care. However, it
merely reversed the incentive. Now it is the managed-care corporation, and the
“provider” paid by that corporation, that has a financial incentive to do less
than may be necessary.
The fault lies not only with those committing the fraud, but also with
those who enable it. Just how many Medicare and Medicaid fraud perpetrators have
gone to prison? If there are any, for how long, and was the facility a country
club-style, white-collar-crime minimum security “hotel,” or a real prison?25 I
have been unable to locate any data about how many people actually have been
imprisoned for Medicare and Medicaid fraud. I suspect the number is not high.
Given the billions of dollars gained each year by those perpetrating fraud, the
slight risk of getting caught and the not very onerous punishment, it may not be
an illogical decision to engage in swindles and scams.
To wit: Anne Chavis, a court-appointed conservator, pleaded guilty in April
2007 to forging documents and lying to the court in order to steal from a
veteran who had psychosis and seizures. In exchange for her plea, theft charges
against her involving seven other clients were dropped. She had purchased at a
discount the home of an elderly woman under her care, and facilitated a will for
another of her conservatorship clients, disinheriting his family in favor of one
of her business associates. Between $500,000 and $1 million of her client’s
funds remain unaccounted for. She was sentenced to one year in jail, but a jail
spokesman said women convicted of low-level, nonviolent offenses are eligible
for release after serving 10% of their time. Her lawyer expects her to serve no
more time in jail, beyond the three months she already has served. She also was
ordered to pay back $92,000 in restitution, but it is unclear if that will
happen. She transferred her home and another property into the name of one of
her daughters several years ago.26
In addition to fraud, there is a systemic problem of overpaying.
Medicare pays an average price of $4,024 for a power wheelchair, available
online for $1,452 (2006 total Medicare payments of $650 million); $36 a box for
blood glucose strips, available online for $17 a box (2006 total Medicare
payments of $806 million); $1,475 for a semi-electric power bed, available
online for $690 (2006 total Medicare payments of $209 million).27
And then there is oxygen equipment. Rather than purchasing the equipment
outright, Medicare rents it for 36 months before allowing patients to own it.
The average Medicare price tag is $8,280. Were the equipment purchased online,
it would sell for $3,500. Total Medicare payment for oxygen equipment in 2006
was $1.8 billion.27
Medicare is aware of the overspending, but is powerless to control it because of
Congress. Attempts to correct the overspending typically prompts an immediate
response from oxygen-supplier lobbyists. Retired California Rep. Bill Thomas
made a modest attempt to cap oxygen rentals at 18 months. Sen. George Voinovich
(R-Ohio), who has received tens of thousands of dollars in political
contributions from oxygen-company executives, blocked the legislation.27 One
of the largest oxygen suppliers, Lincare, collected $789 million from Medicare
in 2006. Lincare, since 2004, has spent $1.5 million in lobbying expenditures.27
A more recent attempt to institute competitive bidding for Medicare
equipment has been thwarted by medical equipment companies.
None of this augurs well for expansion of Medicare as a solution for
America’s health care ills.
For what it’s worth, the individual who administered the Medicare program
was subsequently appointed by United Healthcare to its board of directors, where
she earned nearly $15 million in stock.28
The Structural Problem with Health Care Insurance in America
There are structural problems with our health insurance models, both
private and government, that make them unsustainable as independent, viable
programs.
First, price competition, which is central to the workings of the American
economy, does not work when the recipient of the service has no direct interest
in the price.29 The presence of a third-party intermediary (government or
insurance) paying America’s health bills is the problem. As observed by
columnist Robert Samuelson, most Americans think someone else pays for their
health care. Employees think it’s the employer, retirees think it’s the
government.4 As both the physician and the patient are isolated from the direct
costs of studies, tests and medications, there is little incentive to control
costs. In fact,
there is a disincentive. The patient may request unnecessary studies, tests and
medications, assuming these are the obligations of the insurer. The physician
has an incentive to comply. The doctor, for personal and financial reasons,
strives for a friendly, rather than an adversarial, relationship with the
patient.
Second, because the patient is immune to the cost of the services or
products ostensibly required or provided, there is little incentive for
vigilance from the patient regarding fraud.
Third, unlike the patient, who is a witness to what has transpired in his
or her care, the insurer, private or government, is far removed from the actual
transaction, and must rely upon records created by the biller.
Fourth, insurance has been transformed from pooled resources to provide for
unexpected catastrophic loss, into a benefit, in which virtually every health
care cost is covered (from canes to Ibuprofen). Funds are sent from the
patient, as premiums, to the insurance company. Funds from the insurance
company are then sent to the billing physician, with a not insignificant slice
removed to cover administrative expenses and profit.
This system makes as much economic sense as food insurance. Imagine a
system in which people pay a monthly premium to a food insurance company to
cover one’s food expenses. This is a ridiculous concept, but not that far
removed from what is occurring in outpatient health expenses. When an
individual goes to the food market, the store records all the foods it dispensed
to that person on that visit. The market then submits a bill, drawn from those
records, to the food insurance company. The food insurance company examines the
bill for the necessity of the particular foods that were dispensed, and for
possible fraud, and then reimburses the market at a rate it determines. But how
can the food insurance company know that the customer was not short- weighed on
the ground beef? The customer isn’t paying much attention because the bill is
not out of his or her own pocket.
The analogy, of course, is far from perfect, so let’s try to make it
somewhat more relevant to health care. Instead of five or six major food chains
with whom the food insurers can establish a relationship, there are a million
individually owned-and-operated food markets (not unlike the similar number of
physicians, physical therapists, laboratories, medical-supply stores, ambulance
and transportation services). Instead of a single customer, there are 300
million. To complete this picture, instead of a limited inventory of readily
identifiable, objectively established food items, there are myriad combinations
of items (just as there are myriad combinations of procedures and illnesses)
created by the food markets. How can any system keep track of, let alone keep
honest, all of these transactions?
One option for Medicare and Medicaid would be to fund routine health care
not on the service provided, but on the severity of disease. Under this system,
vouchers are given to the patient to pay for outpatient health care, with the
amount based on the degree of health or illness. A type-2 diabetic is given so
many dollars each month, with the recipient to directly pay the physician or
pharmacist for services and medications from that amount. An additional amount
is provided for the patient’s asthma. Any funds not spent during the year are
carried forward to the next year. How the funds are spent is determined by the
patient. It is his or her responsibility to make sure the funds are spent
prudently. This returns the incentive for cost consideration to both the
physician and the patient, and allows for market forces to impact costs. If
implemented, the voucher system would apply only to the stable expenses of
chronic diseases. Hospitalizations and unpredictable health care expenses, such
as deep-vein thrombosis, pneumonia or fractures, would continue to be covered,
separate from the voucher system.
The overwhelming majority of Medicare and Medicaid fraud occurs in the
outpatient setting. By giving patients a set yearly amount of funds (in the form
of nontransferable vouchers) for which they are individually responsible, they
will likely husband those resources far more carefully and wisely than a
disinterested computer program thousands of miles away.
The argument that Medicare and Medicaid patients will be unable to manage
their affairs is elitist.
A voucher program would significantly reduce the fraud in the Medicare and
Medicaid programs. It also would remove corporate managed care and its
administrative costs/profit cut from the equation.
The great, and possibly fatal, problem with this proposal is that it will
incite vehement opposition from the elderly, who view open-ended Medicare
benefits as an entitlement not to be encroached upon, even theoretically.
Antagonizing this constituency is the third rail of American politics. The
proposal would have to be introduced on a bipartisan basis to have any chance of
serious consideration.
CHAPTER 5 MANDATES
Mandates are unfunded demands that government places on hospitals,
physicians, and insurers.1 Mandates can also be indirectly imposed, via the
establishment of “standards of care,” by non-governmental organizations and
committees. These standards are diagnostic and therapeutic guidelines expected
to be adhered to by physicians to meet the definition of acceptable care.
Just because mandates are not funded, does not mean they incur no costs. It
merely means that the entity imposing the mandate isn’t paying for it. The
mandates discussed below are de jure (from government) and de facto (from
quasi-governmental agencies). They are an underappreciated cause of accelerating
health care costs.
De jure
Government Mandates
Government mandates can serve the public, such as protecting people from
actions of the insurance industry. COBRA,2 passed by Congress in 1985, is such
an example. Some enrollees in health plans became ill, and as a consequence,
lost their jobs. Because their insurance was provided through their employer,
when they lost their jobs, they lost their insurance. In effect, insurance
companies covered some enrollees only while they were healthy. If they got so
sick as to no longer be able to work, they were no longer covered. COBRA
policies extend their insurance for 18 months beyond termination of employment.
Unfortunately, COBRA was not implemented with any great enthusiasm on the
part of the insurance industry. COBRA premiums far exceeded those the enrollees
had while employed. Did this reflect the absence of the former employer’s
subsidy, the increased risk of the pool that had lost its employment, or was
that increased premium a strategy by the insurance company to discourage such
policies?
There is evidence to suggest that insurers were not eager to see COBRA
policies maintained. Kaiser, for instance, did not send billing statements to
its COBRA enrollees. If the COBRA enrollee was late with a payment, the COBRA
plan was irrevocably cancelled (this also applied to those with individual
coverage outside of COBRA. A single late payment was cause for cancellation of
the policy).3 It is not public knowledge how much money insurance companies
made, or lost, on COBRA policies. Although COBRA is not directly addressed in
the health reform legislation of 2010, the mandate compelling insurers to insure
those with pre-existing illnesses, at no extra premium, makes COBRA policies now
largely unnecessary.
The mandate that emergency rooms must treat all, regardless of ability to
pay, serves a public purpose too. Conventional wisdom is that emergency rooms
are failing and closing “because of a lack of universal health coverage.” 4
The reality is that a large part of the problem is due to caring for illegal
immigrants, for which hospitals generally receive no compensation.4
Some mandates are controversial. Universal access, with parity of premiums,
is the best example. The health insurance reforms of 2010, however, will go a
long way towards settling the issue. This mandate, already applicable in New
Jersey, required insurers to insure all applicants, regardless of their health
status, and to charge the unhealthy person premiums no higher than the healthy.
The net effect was to raise premiums so high, that the healthy could not afford
health insurance for their families.5
A further argument against universal access was that unless all are
required to obtain insurance, people may avoid getting health insurance until
they become ill. 6
Insurers argue that the only way to keep premiums affordable is to screen
out the costliest cases. “In 2001, the sickest 10% of insured patients
accounted for 60% of total costs.”7 If everyone must be offered insurance at
the same rates, the healthy will game the system by waiting until they are ill
before obtaining insurance.
This violates the basic economic theory of insurance, in which risks are
shared, and in terms of health insurance, the healthy subsidize those who become
sick (as opposed to those who already are sick).
Prosthetics provide a good example of the mandate dilemma. Many insurers
cap benefits for prosthetic limbs at $2,500 or $5,000 per year.
Most prosthetics cost between $3,000 and $15,000, and some, which are computer
assisted, can cost $40,000. Some plans allow only one prosthetic per lifetime,
even for a growing child.
A bill before Congress would mandate full coverage. Those who argue for
the mandate note that it would add just pennies per month to premiums. The
insurance industry responds that such mandates drive up costs and deprive
consumers and small businesses the opportunity to purchase less-expensive plans.
“The issue isn’t the merits of any single mandate,” says Mohit Ghose, a
spokesman for the insurance lobby America’s Health Insurance Plans. “It’s what
mandates collectively do to the affordability of health insurance.” 8
Some mandates have political origins, and adversely impact health care
costs for all. One, enacted in California four years ago, is typical. The state
legislature enacted a law requiring that private insurers provide translators
for those who speak little or no English. Fines for noncompliance were scheduled
to begin in 2009. All insurance providers are now required to include a
demographic profile of their membership, and limited-English members must
receive bills and medication forms in their native language. Items like
promotional fliers must be translated within 21 days if a patient so desires.
The law requires that health plans provide an interpreter for patients at their
medical appointments or when they call customer service.9
California’s hospitals and Medi-Cal (Medicaid) are already required to
provide translators and translated documents. Translators must be provided,
regardless of immigration status.
California health officials could not cite any fatalities due to the
language problem. The operations manager at the UC Davis Center for Reducing
Health Disparities in Sacramento did cite a case, among others, in which a
Chinese-speaking patient mistakenly placed hemorrhoid ointment in her eye. She
was rushed to the hospital.9
There are some 70 languages spoken in Los Angeles. Insurance companies, whether
indemnity or HMO, will have to contract with a translating firm to cover the
range of possibilities for which they are now responsible. The fines are
$10,000 or more for each incident if they fail to comply.
The number of firms that can provide such a service is few, and they can
likely demand a very large retainer to agree to be available to the insurer. As
pointed out earlier, Blue Cross expects to spend $20 million per year.9 That
may be an understatement.
Another example involving translation is the Americans with Disabilities
Act, passed by Congress, and signed into law by President George H. W. Bush on
July 26, 1990. The New York Times Magazine reports an incident, written by the
authors of Freakonomics, about a deaf patient who makes an appointment to see a
prominent orthopedic surgeon for a consultation. She tells the office that she
is deaf, and asks if this will be a problem. She is informed that it will not
be, as the doctor will be able to discuss her case with her using models,
charts, and written notes. She calls back and states that she prefers a sign
language interpreter. This cost will not be covered by her insurance. The
interpreter will cost $120 per hour and has a two-hour minimum. She informs the
physician’s office that the American Disabilities Act allows a patient to demand
an interpreter, at the physician’s expense. The orthopedic surgeon will be
required to pay $240 to an interpreter for an exam for which her insurance
company will pay $58.10
Some mandates are wise, some are well intentioned, and some are politically
motivated. Regardless, they have significantly increased the cost of insurance,
to the point of making insurance unaffordable for a large portion of the public.
De facto
Quality Improvement
An unrecognized factor in health-care costs, possibly responsible for
making health care unaffordable for millions, is the “quality improvement”
movement. It comes under various guises, forms and incarnations: preventive
medicine, clinical practice guidelines, quality improvement measures, clinical
reminders, pay for performance, peer review, to name a few. However, these are
all substantively identical. To many, if not most physicians, American medicine
has become ossified in an orgy of low-yield endeavors and malignant
documentation. The majority of many physicians’ time is spent not treating the
patient, but treating the chart, to comply with the mandates of the movement.
Conventional wisdom holds that improved health-care outcomes, greater
safety and reduced health care costs come with these measures.11 The strongest
argument in favor of the movement is perhaps the recent report of a marked
decline in cardiovascular deaths over the past decade. As reported jointly by
the American Heart Association and the Centers for Disease Control and
Prevention in the online version of the journal Circulation, the nation saw a
30% drop in death rates from heart disease and stroke between 1999 and 2006. 12
The press release was widely reported by ABC News, Fox News, the Washington
Post13 and the Los Angeles Times. 14 Despite the strong benefit this
interpretation implies, the drop in death rate from those diseases actually is
due largely to more effective treatments such as statin drugs to lower
cholesterol; aspirin, Plavix and beta-blockers to prevent myocardial infarctions
(heart attacks); and appreciation of the need for a more aggressive approach to
the treatment of hypertension. The decline in disease is a function of
expanding knowledge, not expanding compliance. The conclusions of the report
are likely correct, but the basis for the data itself is considerably less
scientific than meets the eye. The statistics are based on diagnoses listed on
death certificates, and these are notoriously unreliable.15, 16
Preventive Medicine
The quality improvement movement is largely based on preventive medicine.
Preventive medicine is generally defined as medical interventions to prevent
disease. As noted in the introduction to this book, the distinction is
artificial and has little basis in reality. All medicine attempts to prevent
disease, disability and death.
Some of what is considered preventive medicine is just standard,
traditional general medicine, such as blood pressure or cholesterol screening.
Many of the parameters, however, that constitute preventive medicine have been
cherry-picked by governing authorities because they are easy and convenient to
measure, not only in terms of the parameter itself, but more importantly, in
terms of quantifying compliance of medical personnel in carrying out the
measure.
Government and the academic medical establishment emphasize that preventive
medicine is the key to better health and reducing health care expenses. For
example, “….preventive services---regular screenings and healthy lifestyle
information---are among the most cost-effective medical services around.
Guaranteeing access to preventive services will improve health and in many cases
save money.”17
Lifestyle is a key factor in health. Seventh Day Adventist vegetarians
have a lifespan 9.5 years longer for men and 6.1 years longer for women than the
American population in general.18 The public, however, is already well aware of
the dangers of tobacco, alcohol and red meat (all of which vegetarian Adventists
abstain from). The reinforcing of lifestyle information by doctors cannot hurt,
but compelling the repeated and extensive documentation of such counseling into
the medical records of patients cannot be of much help.
Preventive medicine, such as when describing some vaccinations
(particularly childhood vaccines), is clearly critical. In the context, though,
of what now constitutes preventive medicine in this country (depression
screening for example), the benefits are exaggerated. Preventive medicine, for
much of the populace and many policy makers, has become the nation’s top health
care priority. This thinking is nonsense. I recognize that in making this
statement I am committing sacrilege. 19
Few understand the extent to which the menagerie of preventive medicine
measures has expanded. The authority on preventive medicine is the U.S.
Preventive Services Task Force, or USPSTF.20 For a physician with a typical
2,500-patient caseload to comply with the preventive medicine services
recommended by the USPSTF would require 7.4 hours per working day. 21 In a
nine-hour workday, taking one hour for lunch and restroom breaks, there would be
fewer than 40 minutes left (actually 36) per workday to examine, assess, treat
and document all the ongoing medical issues--acute and chronic--of all the
patients who are seen that day. Those acute and chronic problems are the real
reasons patients seek a doctor’s care. Actual compliance with preventive
medicine protocols would collapse this country’s medical system.
The task force gives grades for the quality of evidence showing benefit for
the measure, and also gives grades for the relative strength of its
recommendation. The quality of evidence supporting the generalized use of any
particular preventive health intervention is on a three-point scale: good, fair
and poor. Over half of the preventive health measures recommended by the
preventive services task force are in the “fair” category.22 “Fair” is not
“good.”
I am not trying to be dismissive of these preventive medicine measures.
They all have some value, but some have much more value than others.
Regardless, much of preventive medicine, when given to the acute and/or
chronically ill patient, is generally not the highest priority. The undue
emphasis on these measures has distorted health care. The mantra is they will be
a panacea for exploding medical costs. They aren’t, and they won’t be.
I propose that the more valuable preventive-care measures be provided
through centers operated by nurse practitioners and physician assistants. These
services would include bone mass measurements, colorectal cancer screening
(including colonoscopy), glaucoma screening, mammograms, pap smears and pelvic
examinations, and of course, vaccinations. Contrary to prevailing wisdom, I
think these services, with the exception of vaccinations for children for
low-income families, should not be paid for by government, but by the
individual. This is not the direction taken by the health care reform
legislation of 2010, which eliminates co-pays in Medicare and Medicaid for
preventive services.
A variation of preventive medicine, in which nurses call patients by phone
to make sure they are taking their medications correctly and keeping their
appointments--on the assumption that such interventions will decrease
hospitalizations--has failed to save money.23 Eight private companies were
awarded $360 million since 2005 for this project. Senators from two of the
states in which these companies are based (Sen. John Kerry, D-Mass., and Sen.
Lamar Alexander, R-Tenn.) have written Medicare urging that the program not be
stopped. “Stopping this program creates serious health risks for the Medicare
beneficiaries already enrolled and heavily reliant (on the services provided by
the experiment).”23
The private companies charge the government a fee of up to $2,000 a year
per patient.23
Preventive medicine, although not defined as such, could arguably also
include the prevention of unnecessary medical interventions. In 2006, 1.3
million coronary angioplasties were performed, at an average cost of
$48,400---total cost $60 billion.24 A large randomized study published in 2007
found that angioplasties and stents do not reduce the risk of death or the
incidence of myocardial infarction in those with stable coronary artery disease
(the clinical classification of 85% of those who receive the procedure).25 Will
the number of these procedures now drop commensurately?
Clinical Practice Guidelines and Quality Improvement Measures
“Clinical practice guidelines” are another quality improvement initiative.
These typically are protocols delineating how to ideally diagnose and treat a
specific disease or condition. Academia and health care managers emphasize
clinical practice guidelines as the key to improving health care. Written by
specialty and subspecialty dominated committees, they are idealized standards of
management for single disease entities, such as diabetes, asthma and
hypertension. It has been noted by others that they are often of only modest or
unproven benefit. 26 It also has been noted that they are established in
isolation, divorced from other diseases that are coexistent in at least half of
patients over 65.27 Placing a priority on adherence to these guidelines, at the
expense of practical and real considerations, is not in the best interest of
patients, nor are they cost effective.
Clinical practice guidelines originally were developed as vehicles to
advise, guide and instruct clinicians. Their purpose was purely educational.
They were not intended to monitor the performance of individual physicians. The
function of the practice guidelines has been reinvented, however, to measure of
the performance of physicians; the degree of improvement in that quality of
health care being delivered by the physician serves as the parameter being
studied.
As noted earlier, the clinical practice guidelines, now reincarnated as
Quality Improvement Performance Measures, are often divorced from reality. An
editorial in the New England Journal of Medicine neatly summarizes part of the
problem:
“When selecting quality measures, leaders of the performance-measurement process
nationally tend to ignore the issues of the burden imposed on patients,
patients’ preferences, and costs, preferring instead to construct a separate
cost ‘report card’. One leader in a national performance measure informed me
that it was irrelevant how much benefit accrues from a performance measurement,
‘just as long as it’s recommended by a respected professional group and the
benefit is not zero.’ The current paradigm simply replicates the conventional
pressures within the health-care system, with performance measures for quality
suggesting that clinicians should do everything for everyone, regardless of
costs or patients’ preferences, and the measures for cost-efficacy indicating
that it is imperative to keep costs down-– producing strong incentives not to
care for sick people-–and to skimp on or decrease coverage for care that is not
part of the report card.” 26
Many physicians now require a full-time nurse and receptionist, dedicated
just to quality improvement initiatives.28
The leader of the quality improvement measures movement is Donald Berwick,
founder and CEO of the Institute for Healthcare Improvement. Berwick’s goal is
to transfer the quality assurance and safety programs of industrial
corporations, such as IBM and Toyota, to medicine. “I realized the health-care
industry was a century behind in terms of applying scientific, systematic
measurement systems to their work.” 29
An aim of the quality improvement measures he has established (more than
3,000 hospitals nationwide have implemented his institutes safety practices),29
is not appreciated by most physicians or by the American public. Berwick’s
interview with the Boston Globe may be revealing.
Sitting next to the Globe reporter as their Delta flight was waiting to
take off, Berwick argued that health care must learn from aviation. The
reporter relates that as Lisa, “the bubbly flight attendant,” finished her
“numbingly familiar safety spiel,” Berwick waved her over.
“I wonder how much you can deviate when you’re explaining the FAA safety
regulations to the passengers,” Berwick asked her.
Lisa replied that, “Most of it is dictated by the FAA.” She retrieved her
manual and showed it to Berwick.
As she walked away, Berwick turned to the reporter and said, “The more I
have studied it, the more I believe that less discretion for doctors would
improve patient safety.”30
Discretion here is the authority to make decisions, and “improving safety”
cannot be compartmentalized--it encompasses all of medicine. Under quality
improvement initiatives, for any given office visit, the priorities for that
visit are no longer decided by the patient and his or her physician, but by the
quality improvement authority.
The Institute for Healthcare Improvement claims its quality improvement
measures have helped save more than 120,000 lives that otherwise would have been
lost due to medical mishaps.29 I have found no published data in the
peer-reviewed scientific or medical literature to support that assertion.
The Institute has an annual operating budget of $40 million, mostly
generated by fee-based work, but 15% comes from grants.30 Berwick was an
author of the Institute of Medicine committee mentioned earlier, which claimed
up to 98,000 medical error deaths yearly in American hospitals.
There is an interesting conflict here between the two prime philosophies
currently in vogue in the practice of medicine: evidence-based medicine and
quality improvement.
The problem with quality improvement initiatives is that there is no
evidence to support their imposition. While the narrow specific issues being
measured show improvement in their scores, there is no improvement in either
intermediate or long-term outcomes; there is no evidence that patients are
either healthier or living longer.31 As has been noted elsewhere,
“We...(measure) that which is simple and easy to gauge and then sit back and
celebrate the improvements in our ‘measures.’ As a result, we risk wasting both
resources and opportunities.”31
Clinical Reminders
The Veterans Administration, in order to reverse a reputation (erroneous)
of providing inferior and inefficient care, in 1995 initiated a program of
performance monitoring.32 The V.A. now assesses more than 50 measures of acute
and chronic conditions and preventive medicine. At least 18 of these measures
monitor specific physician performance, and physicians must fill out
computerized versions of these “clinical reminders” (many may be filled out by
the nurse) during the patient’s medical visit. Some of the measures are
relevant indicators of quality of care, such as the rate of influenza
vaccination. Some, particularly for hospitalized patients, are quite important.
Other measures, however, are politically driven. Every veteran, no matter how
old, must be questioned about military sexual trauma. (The military sexual
trauma reminder is a specific series of inquiries as to whether the veteran
sustained any unwanted sexual advances or assaults while in the service).
It’s claimed that the V.A., based on these performance measures, is “lauded
as providing the best care in the U.S.”32 The assertion is based on two
V.A.-authored papers published in medical journals.33, 34
The V.A. does provide excellent care for its veterans, but there are two
problems with basing that claim on these clinical reminder performance measures.
First, the performance measures are only indicators of quality of care, and of
relatively narrow scope,34 that were chosen because they are readily
measurable. They measure only a very small subset of the care patients receive
and need. Second, and most importantly, it is disingenuous to claim that the
V.A.’s superior performance of these measures represents a superior quality of
care compared to other hospitals and organizations. An analogy is in order: a
school system, to demonstrate how the science education it provides its students
is superior to that of other school systems, drills into its students 20
scientific facts. It then tests the students for recall on these facts, and when
its students score better on a test limited to those facts than neighboring
school district students who were not drilled on them, it claims a superior
educational system. Of course, those who got the questions and the answers
before the test will do better than those who did not have that advantage.
It should not be surprising, then, that the V.A. did better than the
medical community on the performance measures it elected to monitor. On other
performance measures that the V.A. had not pre-selected, however, there was no
statistically significant advantage to the V.A.34
Nonetheless, the press has reported positively on the V.A. U.S. News and
World Report, in its July 2005 issue, wrote: “The care provided to 5.3 million
veterans in the nation’s largest healthcare system has improved so much that
often it is the best around…The V.A. rates much better than Medicare
fee-for-service providers in 11 basic measures of quality.” 35
The V.A. has instituted a mechanism “to make it more likely that
performance monitoring would drive quality improvement.”32 Regional
directors have an incentive of 10% of their salary to meet these quality
standards. Similarly, physicians receive performance pay for completing a
satisfactory percentage of their “clinical reminders.”
Performance monitoring may have consequences, specifically neglect of areas
not covered in performance monitoring and over-treatment of patients.26
There is no evidence that a dedicated, specifically focused preventive
medicine program such as this significantly promotes health, even if the
possibility of other health complaints being ignored is not entered into the
equation.
Pay for Performance
More than 100 health plans and government agencies now have
pay-for-performance programs.36 Medicare and Medicaid are similarly considering
pay-for-performance for health plans and physicians.36 The performance being
measured is generally the degree of compliance with quality performance measures
such as clinical reminders and practice guidelines.
The V.A. now gives performance pay for documenting completion of clinical
reminders, among other parameters.37
Medicare will no longer pay hospitals for some care made necessary by
“preventable complications”--conditions that resulted from improper care during
hospitalization. The complications are objects left in patients during surgery,
air embolism, blood incompatibility, catheter-associated urinary-tract infection
and pressure ulcer.38 The total number of incidents for the above
complications in Medicare patients in 2006 was 338,267. Of these, 322,946 were
pressure ulcers. Pressure ulcers are what this pay-for-performance (technically
non-pay for non-performance) measure is really about.
Pressure ulcers occur at points where the skin and soft tissues are
compressed for sustained periods of time between the weight of the body and the
underlying surface upon which the body is resting. Healthy people change
position, consciously and unconsciously, to avoid the long periods of pressure
that lead to the skin breakdown and ulcers. The ulcers are common in the
debilitated and are a longstanding problem. Pressure ulcers have been found in
Egyptian mummies. The dogma has been that turning patients every two hours will
prevent the ulcers. The reality is that while failure to do so inevitably leads
to an ulcer, the converse is not true; these ulcers can and do occur even with
the most intensive preventive measures. Pressure ulcers do not equal poor care.
Christopher Reeve had pressure ulcers.39 The prevalence in nursing homes is
between 17% and 28%. The incidence in hospitalized patients with acute illness
is 3% to 11%. 40
Nonetheless, this new pay-for-performance policy has been met with the
approval of the academic establishment.
“The conditions for which Medicare will cease to pay hospitals as of
October have been shown to be within the control of hospitals, so there is a
relatively compelling case that their costs should fall on the provider rather
than the purchaser. It is unclear how Medicare will generalize the principle of
refusal to pay for poor quality beyond this initial and largely symbolic effort.
”38
If (or more likely, when) extended to nursing homes, the
pay-for-performance ulcer policy certainly will not be “largely symbolic.” The
cost of treating pressure ulcers in the U.S. exceeds $1 billion annually. 40
Peer Review
Peer review is the process by which physicians and other personnel, such as
nurse practitioners, are evaluated by their colleagues to make sure they are
performing up to standards. If practitioners do not pass peer review, they will
lose their credentialing and be unable to practice in a clinic or hospital.
Peer review was originally intended as just that, peer to peer. It has been
converted, however, to an administrative compliance process, in which
administrators, through cooperative physicians, determine on which parameters
the practitioner being examined is to be judged. More importantly, whether by
accident or design, it has been converted to a mechanism by which the
administration controls how the time of the patient’s visit with the doctor is
spent.
The parameters selected typically are identical to those of clinical
reminders or other preventive medicine-type issues. The review consists of
examining a randomly pulled medical record note from the electronic record or
paper chart of a patient the practitioner has examined and checking off
compliance on that record with the criteria set by the administration. Because
one never knows which chart will be pulled, and which progress note examined,
the physician must re-comply with the demands of the peer review committee and
re-document, on each and every patient, for each and every visit.
The author was subjected to a peer review. The quality of care issue was
defined by documentation in the medical record of smoking-cessation counseling
by the physician. This parameter apparently was selected based on the U.S.
Preventive Services Task Force guideline that stated that at all, or nearly all,
office visits by a smoker, regardless of the reason for the visit, advice and
counseling to quit smoking had to be performed.41 There was no prior
notification to doctors that this was expected for most or all visits.
Patients are adults, and they expect to be treated as such. At a certain
point, this intervention can be perceived as nagging and patronizing.
Following is a peer review report card for a nurse practitioner,
functioning essentially as a physician, where the focus was on how well five
patients with hypertension were treated:
The peer review process evaluates documentation of the following
components:
Criteria
Met
Diagnosis
100%
Review of risk factors 81%
Baseline laboratory tests 100%
Counseling regarding risk factors 100%
Pain level
100%
Appropriate assessment and
treatment plan for interim visits 88%
Evidence of patient teaching 100% 42
The practitioner, on each visit, must document that he reviewed the risk
factors of hypertension with the patient, he counseled the patient regarding
those risk factors, he taught the patient on that visit something about
hypertension, and that he documented baseline laboratory tests. Additionally,
the practitioner must document whether or not the patient was in any pain at the
time of the visit. If the patient did not complain of any pain, the
practitioner must state that.
Let’s say a patient’s blood pressure is high, so the doctor changes the
dose of his medication, and has him return one to two weeks later to see how he
has responded. The doctor must re-document all of the above. It was a waste of
time the first time, and it’s a waste of time the second, third, and fourth
times.
One can do these tasks far more quickly than one can type or write about
them, and these typically are not the patient’s only problems. They have
diabetes, heart disease, arthritis, kidney disease, all problems that need to be
addressed. Unfortunately, the patient’s visit time is consumed with filling out
clinical reminders (military sexual trauma, for example), reviewing again with
the patient topics that were well covered two weeks ago, then re-documenting the
redundant tasks.
As physicians, we can spend our time taking care of the patient, or we can
spend our time taking care of the medical record, documenting for the
administrative review. It’s ironic, but the physician who emphasizes the former
will be labeled as substandard. The provider who emphasizes the latter, will
receive his or her bonus pay.
Again, at any given moment one can do, or one can document.
A system that is intoxicated with documentation, that has a fetish for
documentation, will not accomplish much useful work and will be expensive to
operate. That’s what we have here. In these health care systems, only a
fraction of the patients who could be seen on any given day, are, due to quality
and peer review initiatives.
Peer review is a misnomer. It essentially is an administrative review, and
what’s being reviewed is compliance with managed care documentation demands, not
quality of care.
The managed-care conceit here should be appreciated. The assumption that
corporate management and its physician cohorts make is that if it wasn’t
documented, it wasn’t done. Therefore, to ensure that everything was done,
everything must be documented. The implicit assumption is that all physicians
are untrustworthy. Only the imposition of documentation will enforce
satisfactory care.
Because preventive medicine-type interventions are the ones most easily
measured, they are the ones measured. Employees, whether physicians or not,
emphasize and put a priority on that part of their work that is being measured.
This puts an undue emphasis on preventive medicine endeavors, many of dubious
validity, over real issues of health care that need to be addressed. It is
ironic that the primary program to improve medical care may distort it and cause
harm, rather than benefit.
The National Practitioner Data Bank
The National Practitioner Data Bank, or NPDB, has been in operation since
1990. It was established by the Health Care Quality Improvement Act to provide
information on the competence of health care professionals. It collects
malpractice data on physicians and other medical personnel. The reports
collected include not only disciplinary actions and court decisions, but also
malpractice payments made by insurance companies to settle claims. It purports
to merely be a flagging system. “The mere existence of a report in the databank
should not be taken by professional reviewers to mean that a practitioner has
performed incompetently.” 43
Where there’s smoke, however, there’s fire. In theory, it may “merely be a
flagging system.” The reality, and more importantly, the perception, is that
it’s something more. The bank receives well over 1 million inquiries per year
(for which it receives a fee),43 most from hospital credentialing committees,
potential employers, and lawyers. Before a physician can obtain hospital
privileges, be offered an employment contract, or deemed insurable, an inquiry
will be made to the NPDB.
Doctors have a problem with the system, namely, posting malpractice
settlements as reportable events. Insurers often settle unwarranted, dubious, or
weak claims, simply to avoid the expense of litigation. The cost of litigating
a case may be more than the settlement.
From the insurer’s point of view, paying off a “nuisance” case is simply
sound business practice. The physician, however, who may be innocent of any
wrongdoing, is tagged as incompetent. The doctor has little choice but to go
along with the insurer’s decision. If the doctor does not abide by the
malpractice insurance carrier’s recommendation, he or she will be personally
responsible for any payments awarded above the offered settlement.
There is a rational reason for including malpractice settlements in the
databank. An indefensible case certainly will be settled by the insurer and
never get to court. Therefore, unless malpractice settlements are included in
the database, the database is of little value.
However, there is a cost for making the database functional that overwhelms
the benefit. To minimize the prospect of being reported to the database, doctors
must practice defensive medicine. As we noted earlier, definitive costs of this
form of medicine are unknown, but not inconsequential. As long as the National
Practitioner Data Bank functions as it now does, there will be no control over
health care costs. Unless a very high monetary threshold is established for
making a settlement reportable, the system may do far more harm then good. (The
harm in making health care unaffordable to millions may exceed the harm that
would have been committed were there no National Data Bank).
This report has argued for a new malpractice adjudication system, which
makes the above problem moot. There would be no malpractice insurers in the new
system and no settlements.
Summary of Quality Improvement Measures
Peer review, clinical reminders, clinical guidelines, quality improvement
measures and pay-for-performance are all variations of the same theme, often
with redundant documentation demands, but all with the same agenda. The agenda,
of course, is to improve the outcome for the patient. There is no problem with
the measures, per se. There are problems with their application and enforcement.
The philosophy underlying the Quality Improvement movement is to apply
engineering principles to what had been a cottage industry. The stereotype, to
which there may have been some truth, is that individual doctors would “do their
own thing” rather than follow standardized care.
The Q.I. movement, in effect, intends to homogenize medical practice. When
customers go to any McDonalds in the country and order a Big Mac, they get an
essentially identical Big Mac whether in Portland, Maine, or Portland, Oregon.
While I disagree with this plan because it disregards the uniqueness of each
patient and fails to consider each patient’s individual situation, I concede
that there is an element of rationality to the plan.
The problem is in its enforcement, which is the true intent of all these
documentation demands. Engineering may trump a cottage industry, even one such
as medicine, but it does not trump physics. Time does not magically expand
each day to allow for the hours of documentation now demanded. The
documentation, other than for demonstrating compliance with demands of
management, serves no useful purpose. It is a waste of resources and consumes
the health care dollar.
Furthermore, some physicians game the system. As touched on above, doctors
who want to look good can easily do so by making it their priority to do the
clinical reminders and by padding the chart with documentation that looks good
for peer review, such as documenting the education of the patient, discussing
risk factors and counseling. The physicians who are good, on the other hand,
who place the focus on taking care of the patient, are the ones who may get an
unsatisfactory rating.
Quality practice engineers, to a large extent, have taken the agenda of a
patient’s office visit away from the doctor and patient. Decision-making, too,
has been usurped by the “engineers of quality.”
It cannot be underestimated just how distorted, and essentially deranged,
the current system is. Let’s take an inkling of the documentation burden placed
on doctors and apply it to society. From now on, all gas stations, even
self-service, must have attendants to take the air pressure on each tire of each
car for which gas is bought. Individual records must be kept on each tire’s air
pressure with each purchase, and include the name of the owner and the license
plate number, for three years, to document that they’ve been carrying out their
safety obligation. In theory, this is a legitimate safety program. Tires with
low pressure can blow out, causing fatalities. Now, let’s add brake fluid. Brake
fluid levels, are not merely to be checked, but to be documented as well.
In a similar analogy, let’s say that at every restaurant, nutrition
counseling must be given whenever a hamburger over 500 calories is ordered, and
that the counseling must be documented and filed. This could go on and on; any
such society undergoing this scrutiny would come close to collapsing. Granted,
it might be, within the narrow confines of what is being measured, a society of
higher quality and safety, but overall, it would be a disaster.
In medicine, probably 50% or greater of a primary care doctor’s time is
spent in essentially useless documentation, compelled by malpractice or quality
improvement initiatives.
Again, I am not against quality, nor against measuring quality. What I am
against is the poorly conceived policy of destroying the practice of medicine
just to measure it.
Carried too far, “quality improvement” is the enemy of quality.
Between defensive medicine (a quality improvement to protect against
potential litigation) and the various quality improvement initiatives, the cost
of medical care has become prohibitive, which as a consequence has markedly
increased the cost of health insurance.
It is estimated that lack of health insurance leads to 27,000 preventable
deaths in the U.S. each year. 44 Let us assume this estimate is correct, and
not agenda driven by an advocacy group. The primary reason people are uninsured
is the high cost. If a primary reason for that cost is “quality improvement,”
an argument could be made that “quality improvement” is not only a squandering
of resources, it is a health hazard to a large segment of the American public.
There are two other endeavors to improve the quality of health care. These
are the electronic medical record and continuing medical education.
Computerized (Electronic) Medical Records
A 2005 report by Rand Corporation, the influential think tank in Santa
Monica, California, asserts that computerizing medical records could save $81
billion annually.45, 46 This figure, in my opinion, and that of others, is
nonsense. 47 According to my analysis, there will be no savings.
The Obama Administration, however, has adopted the study as the centerpiece
of its new health care policy.47 The President on several occasions has endorsed
Rand’s claim. It is worthwhile, therefore, to look at the Rand study closely.
Because a prior Rand study found there was not enough evidence to make
any conclusions about the relative costs and benefits of health care information
technology---such as the electronic (computerized) medical record---the authors
of the 2005 Rand study decided to “help fill the knowledge gap.” They did so
“by using computer simulation models to estimate possible savings and health
benefits.”48
Typical of the logic they employed is how they derived their finding that
adoption of the electronic medical record would save $13.4 billion over 15 years
in transcription costs. The report states that: “Physicians frequently rely on
dictation as a fast way to record notes of both inpatient and outpatient
encounters…Transcription, in principle, can be eliminated when clinicians enter
notes directly into an electronic medical record…From our calculations, the
average practice spends $7,094 per full-time (physician) per year on
transcription costs…Based on the figures reported above, we estimated that the
potential savings from reduction in transcription cost are $1.9 billion,
corresponding to a mean yearly savings of $0.9 billion, and a cumulative savings
over 15 years of $13.4 billion.”48 The Rand report uses nine pages of what
appears to be calculus to support their findings. I am not versed in advanced
mathematics, so we will use common sense instead.
The Rand report is guilty of compartmentalized thinking--finding a saving
in one compartment and ignoring just how much that saving costs in another. A
transcriptionist in the U.S. makes, perhaps, $12 per hour; a salaried primary
care physician, perhaps $80; a urologist or an orthopedist, perhaps $120 per
hour. Even if physicians typed as reliably and quickly as transcriptionists (we
don’t), this is not a particularly wise policy. It most certainly does not save
money.
We have focused on just one particular “saving.” The Rand report claimed
far broader applications. It concluded that electronic medical records could
save money by “reducing redundant care, speeding patient treatment, improving
safety, and keeping patients healthier.”
It is hard to see how these purported savings could even remotely approach
$81 billion annually. As for “reducing redundant care,” occasionally patients
come from outside facilities. If urgently needed, however, outside records can
be obtained via a fax. No need for a computerized medical record here. As for
“speeding patient treatment,” it is unclear why a computerized medical record
would speed patient treatment, and it is unclear why the particular treatment,
unless an urgent condition, needs to be sped up.
The computerized medical record certainly has not sped up order entry
(laboratory tests, x-rays, consultation requests and pharmacy orders). The time
needed to accomplish these tasks in one report increased 98% with computerized
provider order entry.49 In another published report, “the physical process of
entering stabilization orders often required an average of 10 ‘search and
clicks’ on the computer mouse per order, which translated to one to two minutes
per single order as compared with a few seconds previously needed to place the
same order by written form.” 50 For what is probably the most advanced and
efficient computerized medical record system currently available (CPRS –
referred to as the “gold standard in clinical informatics” ),51 it takes 27
search and clicks to simply order a single new medication. It takes 33 search
and clicks to order a non-descript cane. This tabulation of search and clicks
does not include the full screen menus, with scores of options which must be
searched and navigated, and the narratives which must be typed in.
Purportedly, labor costs have been reduced because hospital and clinic
clerks no longer are needed to enter data to process orders and forms. These
clerical positions have been eliminated. That data entry now is performed by
doctors sitting in front of a computer terminal. The same economic principle
that applies to transcription services applies here. Ward clerks probably made
$11 per hour. Doctors make considerably more. Once again, much of what is
claimed to be a saving is actually a compartmentalized saving, with the cost of
that saving dwarfed by the cost of obtaining that purported saving.
The Rand report claims health care costs will be reduced by the
computerized medical record’s “safety improvement.” A report about the
computerized medical record and safety made, however, just the opposite
finding.50
I can see no reason why a computerized medical record, as opposed to a
paper chart, would make a patient healthier. As for the measurement of “keeping
patients healthier,” the medical literature restricts us to quality improvement
measures, which this report disputed earlier. For what it’s worth, the
computerized medical record results in little or no improvement in quality of
care, even with that quality of care being defined by the quality improvement
community.52, 53, 54, 55 The exception is a recent survey that claims improved
clinical outcomes and financial savings with the electronic medical record,56
which was promptly followed by a far more extensive and larger study (3000
hospitals vs. 41), which found none.57
That said, there are obvious advantages to a computerized medical record.
Legibility is the foremost, not only for prescriptions, but for progress notes.
Immediate access is the other. At the V.A., medical records are now
computerized. Lost and misplaced charts and waiting for the file clerk are now
things of the past. Records from out-of-state V.A. facilities also can be
viewed, as can X-rays.
But the Rand study assertion that $81 billion will be saved begs closer
examination. The biggest savings are in medical billing, and the savings likely
have been enormous. Electronic medical billing is a boon for managed care and
indemnity health insurance companies, but have those savings been passed on as
lower premiums? If not, the public has paid for an extremely expensive system
for which it receives no benefit. Health insurance premiums rose 7.7 % in 2006,
nearly twice the rate of inflation.58 It would appear those savings have not
been passed on, but rather pocketed. As for legibility, physicians with poor
handwriting could have been required to print out, in block letters, their
prescriptions, to accomplish the same result as the vast sums of dollars spent
on computers and software.
The Rand study states, “It would cost U.S. hospitals about $98 billion and
physicians about $17 billion to install electronic medical records--an average
of about $7.7 billion per year over a 15-year adoption period.” This may be a
gross underestimation.
There is no evidence that this expenditure will be of any benefit to
the American public. It will be of benefit, however, to insurance companies,
and to the companies that provide the technology for the system.
Perhaps coincidentally, funding for the Rand study “was provided by
companies interested in health information technology, including Cerner, General
Electric, Hewlett Packard, Johnson & Johnson and Xerox.”48
Beyond the financial considerations, there is another aspect to the
computerized medical record that should be examined. The traditional visit to
the doctor, in computerized managed care settings, is now irrevocably changed.
On any given visit to a primary-care physician in a managed care setting
in which there are time constraints---and there always are---there are up to
three competing agendas. The patient wants to address the pain in his elbow,
his difficulty sleeping, and a rash. The physician wants to address the blood
pressure of 145/90 and the mild anemia. The managed-care administration demands
that the clinical reminders (e.g., military sexual trauma) be completed on the
visit. The author has seen up to 18 of the latter for a single visit.59
There are two immediate consequences of the above.
First, there is now little eye-to-eye contact between
doctor and patient. In the typical managed care visit with computerized medical
records, most of the visit is spent with the physician typing into the keyboard
and viewing that keyboard or the computer monitor. The patient, meanwhile,
spends most of the visit looking at the back of the physician’s head.60
Second, because the record is now electronic, it can be easily monitored by
the managed care administration. Of the three competing agendas, management can
now enforce the primacy of its own.
Patient visits with doctors essentially are meetings. As a general rule,
whoever controls the agenda of the meeting, controls the meeting.
The new term for physician is “provider.” I do not know who invented it. I
have observed, however, that those who refer to themselves as providers are far
more compliant to managed care dictates than those who still think of themselves
as physicians.
Managed care has inserted itself into the doctor-patient relationship and
created a wedge between the doctor and the patient.
I am not a neo-Luddite. This technology is a done deal. The electronic
medical record is here, and will soon control all of medicine.61 But we need
to ask just what is the purpose of these “clinical reminders?” If they really
were just “reminders,” there would not be an accounting of the physician’s
compliance kept by management. Also, what is “clinical” in asking every
88-year-old man if he had been sexually molested during World War II?
A Machiavellian view is that by filling up the time the patient has with
his or her doctor, managed care administrators prevent complaints being raised,
and therefore reduce tests, investigations and costs to the system. I am not
that cynical.
The “performance improvement movement” has developed coincidently with the
computerization of medicine. The confluence is accidental. Providers think that
the result is basically good.62 Some physicians think otherwise.
Continuing Medical Education
Central to the theme of ensuring quality is the concept that doctors must
stay current with new knowledge. This is accomplished through continuing medical
education, and recertification.
Continuing medical education, or CME courses are mandated for every
physician who wants to maintain his or her state licensure. In California, it is
50 hours every two years. This is a modest expense for most doctors, both in
terms of time and money. Moreover, much CME is available online, at no charge.
The public thinks continuing education courses are necessary to keep the
practicing doctor up to date. The lectures, however, typically are filled with
esoteric information of no practical use. In a day-long series
of lectures, if one takes away one useful new piece of information, one has done
well.
A November 2007 statement in the Medical Board of California Newsletter
informed California physicians of a new law (Assembly Bill 1195), which
“requires all continuing medical education courses, or CME, to contain
curriculum that includes cultural and linguistic competency in the practice of
medicine. California-based CME providers’ planning courses within California
must comply with this law.”63
Most will recognize this to be a minor intrusion of “political
correctness” into medical education. In and of itself, it is not a big issue.
It reveals, however, something of considerably greater significance. Policy
agendas influence medical education, and far more importantly, recertification.
Recertification is the bigger problem for doctors. Family physicians, for
instance, must take re-certifying examinations every seven or 10 years to
maintain their specialty status. Recertification exams are a relatively new
requirement.
There are two possible rationales for these exams. The first, like
continuing medical education requirements, is to ensure that the physician has
remained up-to-date. The second is to ensure that in overall knowledge, he or
she is still competent.
I have two concerns about the recertifying exams. The first is minor, the
second, major. Exams, under medical educators, are no longer mere measures of
what one has learned. On the contrary, they have been expanded, in many
instances, into “learning experiences,” in which, through the questions, new
knowledge and insight supposedly are imparted. I think this is a co-mingling of
test-taking ability with true knowledge, which confounds accurate assessment.
A deeper concern is that some exams, in my opinion, to a very significant
degree have been converted into instruments of economic and social policy. I
refer here to the exams for those in the primary care specialties of family
practice and internal medicine.
Public policy (not openly stated) seeks to encourage primary care
physicians to shoulder more of the responsibility for those problems that would
otherwise be referred to specialists and sub-specialists. The reason is
economic. Specialist care is more expensive than primary care. And the reason
for the increased expense is more than mere remuneration. Because of case law,
specialists are held to a higher standard of care then generalists. For
medical-legal reasons, they must order an extensive battery of tests, even when
they immediately and fully know what the problem and solution are.
The recertification exams for primary care, to a very large extent, cover
material that is actually of a subspecialty nature. By making this subspecialty
material into information that the generalist is now expected to know, the
presumption is that he or she will now manage these problems routinely in their
practice. It is a false theory. If doctors see a particular complex problem
only once every five, ten or fifteen years, they lack the experience, and if
they are honest in putting the patient’s welfare first, they generally will
refer to a specialist.
Primary care, particularly in rural areas, is demanding. There is little
cross coverage, the hours are long, and the time one can spend with one’s family
is limited. Much of that time must now be spent studying for a recertification
exam, which has little to do with the primary care doctor’s actual practice.
These recertification exams are counterproductive. Many medical school
graduates do not go into the primary-care specialties, where they are sorely
needed, because the specter of recertifying exams hangs over their heads for the
rest of their careers.
If the purpose of the exams is to make sure doctors are current with their
knowledge, a more practical mechanism might be a booklet given to doctors
annually containing all the new material in their field they are expected to
know. They should be tested on that material only.
The Economic Benefits of Improving the Quality of Care
A widely held presumption among heath care policy makers is that
government (via Medicare and Medicaid) will see great financial savings if we
improve the quality of health care, and the most efficient way to do that is to
implement and enforce the aforementioned quality improvement initiatives. The
cost savings, however, may not be that clear-cut. Let’s look at one of the more
cost-effective initiatives - smoking cessation.64 The adult smoker loses an
average of 13 years of life because of the habit.65 Clearly, smoking cessation
programs are important and justified, but if the programs worked perfectly, and
all smoking ceased, just how great would the financial savings be for
government?
The answer would appear obvious. In 1997, cigarette smoking cost the
Medicare program $20.5 billion.66 The figure is certainly much greater now, and
when one factors in Medicaid, smoking is a major budget item for both federal
and state governments. The obvious answer, however, is wrong.
The average American lifespan, male and female, smoker and non-smoker
combined, is 77 years.67 An oversimplified analysis would place the average
lifespan of smokers at 66. This is just about the age Medicare (65 years) and
Social Security (less than 65 years) kick in. If these individuals were to live
to an average age (for non-smokers) of 79, both Medicare and Social Security
would be responsible for supporting these additional enrollees. One-fifth of
the population smokes.64 For Social Security alone, the increased costs
would be more than $99 billion annually.68 Furthermore, both federal and state
governments receive revenue from tobacco taxes. As of 2005, the federal
government took in $7.7 billion annually, while the states raked in $13
billion.69 With a successful cessation of smoking, these revenues would
evaporate.
Beyond the above, there is an additional consideration that is being
overlooked. The greatest health care expenses are those incurred in the last
year of life. With smoking cessation, that last year would only be put off, not
eliminated.
The reasons to strive for improved quality of health care for the public
are self-evident. The goals are vital, in and of themselves. But overall
savings on public expenditures are problematic, and should not be high on the
list.
Lobbying
Many mandates and regulations and most legislation are the result of
lobbying. The primary tool of lobbyists---campaign contributions---has been
asserted to play a significant role in formulating public health policy.70
A possible example is in the government’s involvement in renal dialysis,
present since the 1972 passage of the End- Stage Renal Disease Program. One
firm, DaVita, which owns one-quarter of the dialysis centers nationwide, has had
particular benefit. The company, with dialysis centers in 43 states, spent $1
million in lobbying expenses (read: donations) during the first six months of
2006. According to the Los Angeles Times, Medicare payments to dialysis centers
subsequently increased by $100 million. The Times alleged a causal
relationship.71
Also relating to kidney disease, the biotech company Amgen, which
produces Epogen---a drug often used in patients with kidney failure---made
congressional donations of $400,000 in 2001 and 200272 and spent $5.7 million
on lobbying expenses in 2005. 73 In 2005, its CEO had a salary of $20 million
and options just short of $50 million.74
Congress gave Amgen an effective monopoly on Epogen by granting it “orphan
drug” status, which means no similar (competing) drug may be approved for use
for seven years. Granting such status to Epogen, which had sales in 2005 of more
than $3 billion, has been questioned. 75
Epogen corrects the anemia related to renal failure. The degree of anemia
is defined by a blood test, the hematocrit. The hematocrit measures the amount
of red blood cells in a milliliter of blood plasma. The higher the hematocrit,
the more red blood cells there are, and less
severe the anemia. In 2006, the senator who chairs the subcommittee that
oversees the Medicare budget requested of Medicare administrators that the
target hematocrit for patients treated with Epogen be raised from the range of
30 and 33 to the range of 30 and 36. That change resulted in an increased annual
spending by Medicare on Epogen of $500 million.76
Amgen released a new version of Epogen, which required less frequent
administration. Medicare, however, ruled the new version to be “functionally
equivalent” to the old, which meant Medicare would not pay an increased price.
Congress responded by legislating that Medicare could no longer use the
functional–equivalence standard.77
I am not criticizing Amgen. The only intent here is to show how things are
done. Epogen offers a great advance in treating the anemia of renal-failure
patients. Amgen should be entitled to expect a higher price for an improved
version of the drug, otherwise there is no motivation for improvement. It is
not a charity. If it does not shower money on Congress, its competitors will. I
consider the compensation of CEOs exorbitant, but on the other hand, if Mother
Teresa were running our pharmaceutical industry, I suspect we would not have
much of an industry for long.
Insurers also engage in lobbying. Blue Cross and Blue Shield of Rhode
Island lobbied state lawmakers, donating hundreds of thousands of dollars. It
will pay $20 million to avoid federal criminal charges.78
CHAPTER 6 THE RIGHT TO HEALTH CARE
Is health care really a right? The mantra that health care is a right has
been the justification for expansion of health care benefits.
We risk losing credibility by even raising this question. Ethicists, the
media and academia consider health care to be a right. Furthermore, the majority
of the public believes government should guarantee health coverage.1 The courts
have also established health care as a right, albeit, only for prisoners.2
Is health care a right? This is a foolish question. Of course, health care
is a right. So, too, is taking a plane to Milwaukee, should you so desire, as is
the right to urinate. But you do not have a right to fly to Milwaukee at my
expense, nor do you have the right to urinate on my living room carpet. As long
as you do not infringe on the rights of others, by and large, you have a right
to most anything. The correct question then, is this: Is health care an
entitlement?
Most would agree that everyone is entitled to life-saving emergency care.
But is everyone entitled to a life-saving liver transplant?
Liver transplants are a prime example for the public’s perception of
inequity in health care. There are not enough donor livers to go around. Those
who get a liver, live. Those who don’t, die. The sense of inequity goes beyond
money. It appears that celebrities like Mickey Mantle, David Crosby ( Crosby,
Stills & Nash ) and John Philips (of The Mamas and The Papas), who self-induced
the destruction of their livers, always get new ones. Most often, the average
Joe, who did not, does not.
Transplant selection and the question of who is responsible for transplant
costs are among the more dramatic of health care controversies. More mundane,
but probably more relevant in terms of the financial consequences of
entitlements, are issues such as pharmaceuticals. Is everyone entitled,
regardless of financial situation, to prescription medications? If so, is every
male entitled to Viagra?
This author was criticized by an ethics committee for refusing to prescribe
Viagra. The individual who sought Viagra was HIV positive, and suspected of
being a male prostitute. The position of the committee was that HIV positive
patients are a protected class, and it was unethical to deny Viagra based on
their HIV status.
Whether or not health care is to be an entitlement is a political question.
How one arrives at their political position is through the ordering of
priorities. Some feel the most important function of government is education,
health care and social services. Some feel the priority is defense, maintaining
roads, and promoting the economy.
Many consider the first position enlightened, the second position corrupt.
There is an aphorism and an analogy, however, to lend support to that second
position. The aphorism is the tale of the goose that laid the golden eggs and
the analogy is General Motors. That company, once the largest in the world,
entitled its workers (under union demands) to a very generous health plan. The
costs of the healthcare were such, that they arguably played a pivotal role in
destroying the company.
Healthcare entitlements, beyond what this country can afford, will
similarly destroy this economy.
CHAPTER 7 HEALTH CARE DELIVERY
The objective of this report has been to detail how the underlying costs of
American healthcare can be greatly reduced. The form the delivery of that
healthcare takes is not our focus. Nonetheless, the attention of the nation and
policymakers has been on how health care should best be dispensed. Many point
to a “single payer,” socialized-medicine plan, such as Medicare, the Veterans
Administration, or the Canadian health plan. Others argue for mandating that the
public buy commercial health insurance, with those who cannot afford the
premiums---either because of lack of income or pre-existing illness---receiving
a government subsidy.
When viewed in isolation from other reforms, all these plans--to use an
overworked but appropriate cliché--are no more than rearranging deck chairs on
the Titanic. They are doomed to fail unless the underlying cost of American
medicine is greatly reduced.
There are two difficulties in making an assessment of the direction health
insurance should take.
First, before we know where we should go with insurance, we need to know
where we are. Unfortunately, we don’t. As noted earlier, we don’t know what is
transpiring with “administrative costs.” Second, in terms of expanding the
number covered to include the entire population--or universal coverage--we have
yet to see any plausible explanation of just how this is to be funded. Mouthing
terms like ‘single payer’ will not finance health care. Mantras aren’t money.
Again, the key here is reducing costs. The following analysis is offered.
Single Payer
The current center of debate in health policy is the question of a
single-payer plan versus continued reliance on multiple private insurance
companies. Those promoting a single-payer plan argue it could be established by
an extension of Medicare to the general population below the age of 65,
expanding the V.A. system to non-veterans, or by creating a health plan similar
to that of Canada’s. Proponents of such a plan argue that markedly reduced
administrative costs would result from a single-payer system, and the savings
would finance extension of health care insurance to the entire population.
Opponents argue these plans would create a socialized bureaucracy, a decline in
quality of medical care and increased spending.
Single-payer proponents (largely the political left) draw their arguments
from a paper by McKinsey & Company,1 the management consulting firm, which
concluded that most components of the current U.S. health care system are
economically distorted, with excess spending totaling $477 billion per year.2
The authors attributed the increased costs to all areas of the health care
system, including to a large extent, administrative costs from its for-profit
elements.
Single-payer opponents 3 (largely the political right) point to a report by
Benjamin Zycher of the Manhattan Institute.4 It argues that a single-payer
system would increase costs. Zycher concedes that a shift to a single-payer
system would directly save about $99.6 billion yearly in administrative costs.
That amount would provide $2,100 yearly for each of the 47 million currently
uninsured. Zycher estimated, however, that increased annual health-care
consumption by the formerly uninsured would range between $1,700 and $3,400–-the
former number resulting in a savings of $19 billion, the latter in a shortfall
of $61 billion annually. In our opinion, both these papers have flaws that
compromise their value in setting policy.
The McKinsey report used a sample of 13 countries that are members of the
Organization for Economic Co-operation and Development, or OECD, and developed a
measure they called Estimated Spending According to Wealth. This measure
adjusted health care spending to gross domestic product per capita. The authors
then created a hypothetical country with a GDP equal to that of the U.S., but
with health care spending proportional to that of the 13 OECD countries. The
authors found that after adjusting for its higher income level, the U.S. spent
$1,645 more per capita on health care than “peer” countries.
There are some 30 member-states in the OECD. Of the 13 nations against
which U.S. health care was measured in this report, the two largest are Mexico
and Turkey. The bulk of the population in both countries is poor and their
economic development well below that of the U.S. These are not appropriate
“peer” countries vis-à-vis the U.S. for health care, and to the extent that they
were included in the McKinsey report, that data probably is not pertinent.
The paper from the Manhattan Institute poses problems as well. Its
conclusion is that a single-payer system such as Medicare would not save money
compared to the private insurance system we have now. A central tenet of that
report is that administrative costs for Medicare (3% of outlays) 5 have been
underreported. The argument is that those costs should also include the cost of
all other federal government administrative functions, multiplied by the
percentage of the federal budget taken up by Medicare. This formula would
double the administrative costs of Medicare to 6%. I do not see the logic in
this calculation. The costs of the operational running of the government
(two-thirds of which were for the administration of justice)6 would be
essentially the same whether a Medicare program was in place or not.
My disputes with both of these papers aside, we now address the three
models offered for a single-payer system: Medicare, the Veterans Administration
and the Canadian system.
The financing of Medicare, as noted above, is misleading at best, a sham at
worst. Medicare’s expenditures significantly exceed its dedicated financing.
Forty percent of its budget is paid for out of
general government revenues (income tax collections, for example). Expanding the
program in its current form to those under 65 is simply not an economically
viable option.
The claims that the V.A. offered a higher quality of care than Medicare
were addressed earlier. The basis for that assertion is suspect. The V.A.,
however, is a legitimate model for American health care if it has achieved
significantly reduced costs.
It is claimed that the V.A.’s costs per enrollee have been reduced by more
than 25% since 1996.7, 8
Technically this is correct, but factually, it is a misleading assertion.
Since 1999, there has been an explosive increase in V.A. enrollment, from 3.6
million to 5.5 million.9, 10 This increase in enrollment was not a natural
increase, but a deliberate recruitment campaign by the V.A. to markedly increase
its census. In 1999, the V.A. restructured itself into 22 (now 21) regional
entities (each referred to by the acronym VISN, followed by a number), with the
budget of each determined by the number of veterans enrolled, or “vested.”
Recruitment drives became a priority of the VISNs. There were 800,000 new
enrollees in 2002 alone.7
Of these new enrollees, only 33.8% enrolled for regular or routine health
care.11 The majority enrolled for other reasons (for example, 31.3% for
prescriptions only, continuing to see their outside doctors for their health
care. So, too, would those signing up only for hearing aids, etc.).11 Just over
half of these new enrollees were younger than Medicare patients, and even if
elderly, 60% were more likely than not to be costing little in the way of
expenses for the V.A.
The per capita drop in costs represents the massive addition of these new,
largely quasi - enrollees. (There are healthy patients in all health plans who
cost their plans little, but they pay the premiums with the intent of using the
service if necessary. The majority of these new V.A. enrollees, most of whom
already had illnesses, did not intend to use the V.A., preferring their own
insurance).
Nonetheless, the Congressional Budget Office (CBO), in its interim report
to Congress, estimated that the Veterans Health Administration
budget per enrollee grew only 1.7% in “real terms” (constant, inflation-adjusted
dollars?) from 1999 to 2005, compared to Medicare’s per capita growth of 29.4%
during the same period.12
The CBO, to reach its finding, depended on information provided by the V.A.
from the actuarial model of enrollment in its system. No specific data is
provided or cited in its report, therefore we cannot comment on its validity. My
independent analysis comes to a finding quite different from that of the CBO.
When one corrects for the very low intensity of intended health care usage by
the majority of the V.A.’s new enrollees, the cost containment claims
evaporate.12
This leaves one other “single-payer” option, the Canadian model. This
model certainly is economically viable for Canada; it may well be economically
viable for the U.S. But those who refer to it as a “single-payer” system, as if
that were its central characteristic, are being disingenuous.
In Canada, government dictates price and availability, and patients may
have little choice in the doctor they are allowed to see. Their lowered costs
may have more to do with price controls than it being a single-payer system with
lower administrative costs.
For instance, the average income for physicians in Canada in 1996 was just
over half of that of American physicians.13
Another factor may be the lower threat of malpractice suits in Canada. In
Canada, the total yearly cost of malpractice settlements, malpractice insurance
and legal fees, per capita, is one-fourth that of the U.S. 14
As argued here earlier, the greatest cost of malpractice to a health-care
system is in defensive medicine, and we suspect it is less prevalent in that
country.
Government Subsidized Health Insurance
Some call for government subsidies to pay for health insurance coverage for
those who cannot afford health insurance premiums. This is what will now occur
under the Obama health care reforms of 2010. Any subsidy, however, absent a
corresponding price control, probably will fail. I refer here to failure in an
economic, not political, sense (the
political party that legislates the subsidy, off course, wins votes). But
getting back to economics, capitalism, by its nature, will charge what the
market will bear. This is not rocket science. If $1,000 is added per capita for
health care by government subsidy, by Adams Smith’s invisible hand of the free
market, health care expenses will rise, sooner or later (typically sooner), by a
similar amount. It’s like throwing raw meat to a lion---eventually the meat is
devoured, and it’s not the lion’s fault. This happened with government loans for
students in trade schools and colleges. Once the loans became available, the
trade schools and colleges raised tuition by an equivalent amount.
Again, the key is to lower costs, not subsidize costs. If we do the latter,
we are like the dog chasing its tail. The analogy is not perfect, but the
imagery is on point.
As has been noted elsewhere, “lowering cost and increasing access are
separate and irreconcilable issues”.15
Mandated Health Insurance
What proponents of mandated health insurance generally propose when they
speak of mandated health insurance is mandatory comprehensive health insurance,
which would cover routine and preventive health care, as well as hospital care
and catastrophic illness. The overriding question is just how such an endeavor
would be financed.
Contrary to the projection made by the Congressional Budget Office for the
Patient Protection Act of 2010, that question has yet to be answered. 16
Massachusetts, in 2006, enacted universal coverage, requiring that every
resident have health insurance. State law mandated comprehensive benefits such
as prescription drug and mental health coverage. To make it affordable, the
state subsidized the premiums for those making up to three times the federal
poverty level ($66,150 for a family of four). Those who do not obtain insurance
are fined.17 Since initiation of the program, 432,000 people have gained
coverage (ibid), but the state’s spending on health care has increased 42%.18
Health spending per person in Massachusetts is now about one-third more than the
U.S average (up from 23% more in 1980). 17 The gap is growing. Lawmakers
and activists who engineered the Massachusetts plan deliberately deferred
decisions on cost containment to make the plan politically viable. Politically,
it is certainly viable. Economically, it certainly is not. The plan is not
sustainable---price controls and rationing are likely.
The Massachusetts model has failed. The belief that it can be made
economically sound by simply imposing capitation (pre-payment per head, rather
than payment for each service as it is given)17 and by yet further emphasis on
“preventive medicine”17 and “high standards of care”17 is rubbish.
A new plan is in order, and to that end, the central premises of health
care delivery need be reexamined.
The largest portion of the uninsured (56%) is between the ages of 18 and
34.19 Younger people have lower health expenses, in general, than those who
are older, typically spending $1,500 per year. This is reflected in their lower
health insurance premiums. For a $1,000-deductible policy, a 25-year-old man in
New Hampshire pays a premium of $156 per month, while a 55-year-old for the
exact same policy, pays $542 per month.
Requiring everyone to purchase health insurance would pull the young and
healthy into the insurance pool, lowering premium costs for the middle-aged and
elderly, but for the young who rarely use health services, particularly if
required to pay the same premium as the elderly, this would be at best a tax,
and at worst, a generational transfer of wealth. The notion that there will be
a financially viable health insurance program when today’s young are elderly is
problematic.
So, should government mandate that everyone obtain health insurance? That
is now a moot question. A center piece of the health reform legislation of 2010
is the requirement that all have or purchase health insurance, or be fined.
The Patient Protection and Affordable Care Act is expected to extend medical
coverage to more than 30 million uninsured Americans, and most importantly, to
those who are uninsurable because of pre-existing conditions. But it is a
mandate that requires all to have health insurance. Those who do not sign up for
insurance through their employer, must purchase individual plans. Failure to
obtain insurance results in a fine (starting Jan. 1, 2015 the penalty is $325
for each family member up to $975 per family, or 2% of taxable income, whichever
is greater. to $975 per family $695 now, and peaking at 2.5% of income by 2016)
. The subsidies for those who cannot afford insurance expire in 2015.
The legal justification is that there are mandates now for
drivers--liability insurance, for one--and to a large extent there is a mandate
for retirement insurance--Social Security.
The objection is that someone who has more pressing financial needs should
not be coerced into buying health insurance that they consider unaffordable and
unnecessary. The other side of the coin is that unless there is a requirement
for all to buy insurance, there will be freeloaders on the system. However, as
the new health reform law prominently includes a requirement prohibiting denial
of insurance for those with pre-existing conditions, clever people will not join
the program until they need it. Unless the penalties for not joining are
onerous, unless there is a mandatory lag before the insurance kicks in, and
unless debts incurred during the lag cannot be discharged by bankruptcy, many of
the young and healthy may game the system, and decline to subsidize the elderly
and sick. This would sink the financing of the health care insurance reforms.
On the other hand, if the fines for non compliance are too harsh, it could set
up a backlash that would damage political support for the plan. It appears at
this point Congress is more concerned with political, rather than economic
consequences. It can always raise the penalties later, once the program is
firmly in place.
The Patient Protection and Affordable Care Act of 2010 has left open just
how comprehensive the minimum mandated plans will be (and how high the premium
charged). Congress has empowered the Administration, through the Secretary of
Health and Human Services to “define the essential health benefits” the
insurance plans must include.
A catastrophic health insurance program, rather than a comprehensive
program, could be financially viable. With a high deductible so that the
premiums are affordable, it is the most reasonable option to cover the
population. One suspects, though, that the mandated plans will be comprehensive.
Assuming that will be the case, an alternative to the Obama plan, and one
that would be far less expensive, is as follows:
Mandated major illness insurance--with a high deductible--to cover
hospitalization and catastrophic illnesses such as cancer and rheumatoid
arthritis should be established for those under 65. If the corporate sector does
not provide fair value, then the government should set up a plan or plans that
are government-owned and contractor-operated. (The “government option” so
derided by conservatives). This could be financed by premiums paid for from
compulsory payroll tax such as Social Security. The plan must be self-supporting
and financially balanced; that is, not subsidized by government. For a chronic
or recurring major illness, the total deductible for some components, such as
pharmaceuticals, should be triggered only once. The premiums for the insurance
and out-of-pocket payments are tax deductible. For those unable to afford the
out-of-pocket expenses, low-interest, long-term loans should be immediately
available through the government, distributed as pre-issued “smart” debit cards
(India has begun distributing health care credit cards for its poor). 20 These
loans would likely be necessary for at least half the population. Forty-four
percent of employees live paycheck to paycheck, and 48% of American households
have less than $5,000 in liquid assets.21
On the other hand, the thousands of dollars per employee currently advanced
to insurers each year through employers would now go to the employees as salary,
and be available for out-of- pocket medical expenses. In 2007, the average
premium for family coverage was $12,680, and for an individual, $4,704. Of
these, one in three had at least a $1,000 deductible.22
Those 65 and older are enrolled in Medicare. Outpatient Medicare is
converted from a fee-for-service, third-party system to a voucher system. The
amount of the voucher is determined by the enrollee’s underlying medical
condition. Those under 65, who are unable to afford premiums for major illness
insurance, should be eligible for Medicaid. Outpatient Medicaid should be
converted to a voucher system like Medicare.
The health insurance industry, to a large extent, has perverted the term
“pre-existing illness”. It has distorted it from a legitimate insurance concept,
to a scheme to cherry pick market share, and maximize profit. However, for
those under 65, who are already truly ill, providing a new policy is not
insurance, but health care, and should be considered as such. For the later,
their health expenses should be covered by a Medicaid or Medicare type program,
with funding coming largely from general tax revenues, and to a lesser extent
from premiums.
Free community care clinics should be expanded, as should county health
facilities to cover any of those not covered by the above.
Everyone should be free to choose the format and agenda of their medical
care. They may elect the format and agenda directed by the patient and
physician, or they may opt for tort-mandate controls. The insurance premiums for
the latter, however, must fully cover the added costs of defensive medicine and
the added documentation that it incurs.
This must be the responsibility of the enrollee.
CHAPTER 8 CONTROLLING MEDICARE COSTS
In McAllen, Texas, Medicare spent $15,000 per enrollee in 2006. At the
other end of the state, in El Paso, the expenditures were just $7,500. 1 Atul
Gawande, Boston surgeon and best selling author, writing in The New Yorker,
attributes the difference to greed.1 He notes that 15 years ago McAllen’s per
capita Medicare expenditures were at the national average. But now, “along the
banks of the Rio Grande, in the Square Dance Capital of the World, a medical
community came to treat patients the way subprime-mortgage lenders treated home
buyers: as profit centers.”1
The article is influential. It’s cited by President Obama, and required
reading in the White House.2 McAllen is becoming the poster child for what is
wrong with American medicine.
The only city with higher costs than McAllen is Miami. In 2006, Medicare
spent $16,351 per beneficiary in that city, compared to the just $8,331 it spent
in Minneapolis.2
Between Miami and Minneapolis is an $8,000 spread. While only 10% of those
expenditures go as income to physicians, the money is not evenly distributed
between generalists and specialists. Although Medicare pays poorly, and is not
generally regarded as a feeding trough, for a select minority of corrupt
physicians with a procedure, there could be significant income generation.
Certainly, there are corrupt doctors.
I have practiced, in Detroit, Akron, and Los Angeles, for over 35 years,
and have never seen an attitude that even remotely approaches what Gawande
asserts is present in McAllen, and what he implies is present across the
country. The doctors I trained under, and the doctors I work with, aren’t
“subprime-mortgage lenders”, and they don’t regard their patients as “profit
centers”.
Besides Gawande’s position, other theories can be put forth to account for
the geographic disparities in Medicare spending.
1. Too many specialists.
In an earlier study, the annual fee-for-service Medicare costs per capita
in Miami were well over twice that of Minneapolis, at $8,414 per enrollee in
Miami in 1996, compared with $3,341 in Minneapolis, despite the similar health
status of the enrollees. This is the same pattern as noted above for 2006. The
increased spending did not garner better results.3
The authors of that study attributed the difference in expenditures to more
hospital beds and specialists in Miami than in Minneapolis, in effect,
theorizing that supply creates demand. The implications of this assertion are
significant. If correct, this would justify Canadian-style health care modeling,
such as restricting the number and location of specialists.
McAllen, however, has fewer specialists than the national average. 1
2. Difference in the health of the populations.
This theory holds that people are less healthy in the high expenditure
cities, and therefore require more treatment.
Not so. McAllen and El Paso have virtually identical health profiles.
3. Fear of malpractice suits.
McAllen and El Paso, both in Texas, are under identical law, which has
capped pain and suffering awards at $250,000. 1 Noting this limited financial
liability, Gawande is dismissive of the threat of law suits as being a factor in
McAllen’s excessive medical costs. We are not convinced. One of the authors
practices in an environment where he is fully covered (mw). It changes little.
Many doctors continue to practice as if there was a lawyer looking over their
shoulders. It’s not just the financial penalty of a law suit, it’s the headache
and time of having to mount a defense. And it’s the fear of being reported to
the National Practitioner Data Bank.
The malpractice bar may be quiescent in McAllen as Gawande reports. It
should be possible to quantify this. Regardless, it is certainly a factor
elsewhere, possibly the major factor.
4. Exaggerated demand.
As noted above, Medicare costs in Miami are well over twice that in
Minneapolis. Is it possible that there are cultural differences between the
elderly populations in Miami and Minneapolis that are playing a role? Perhaps
there is a higher expectation, and therefore demand, for an increased level of
service in Miami.
The problem with this theory is that there is a similar spread in spending
between McAllen and El Paso. These cities have virtually identical demographics
and cultures.
5. Ethos of dying
The greatest health care expenses are in the last year of life. The
aggressiveness of treatment varies greatly from city to city. In Los Angeles,
there are far more medical interventions and procedures for that last year, than
there is in San Francisco, where there is a greater utilization of hospice.
This may reflect the culture of the medical community, or perhaps the community
at large.
6. Medicare reimbursement policy
It is not generally appreciated, but the amount of money Medicare pays for
the same service or procedure varies greatly from city to city, by up to 33%.4
I do not have access to how this geographic adjustment factor, known as the GPCI
(Geographic Practice Cost Indices) is applied to Miami or McAllen etc. I assume
the GPSI was taken into account in the papers criticizing the geographic
disparities in Medicare expenditures. I don’t know.
It should be possible to determine, and not merely speculate, as to why
there is well over a twofold difference in per capita Medicare expenditures
between some cities, but it appears this has not been investigated. It should
be; it’s important.
Medicare costs need to be controlled. Peter Orszag, the President’s budget
director, has said: “nearly thirty per cent of Medicare’s costs could be saved
without negatively affecting health outcomes if spending in high and medium cost
areas could be reduced to the level in low cost areas.”1
Gawande raises two proposals to accomplish the above. The first is to
remove the financial incentives for doctors doing too much, by placing them all
on salary. This effectively would convert all of American medicine to a
salaried managed care model.
The second calls for incorporating physicians, by carrot or stick, into
“accountable-care organizations” (first proposed by Fisher),5 effectively
restricting their autonomy. Accountable-care organizations are entities like
HMO’s, and multispecialty groups.
His rationale is a follows:
“Providing health care is like building a house. The task requires experts,
expensive equipment and materials, and a huge amount of coordination. Imagine
that, instead of paying a contractor to pull a team together and keep them on
track, you pay an electrician for every outlet he recommends, a plumber for
every faucet, and a carpenter for every cabinet. Would you be surprised if you
got a house with a thousand outlets, faucets, and cabinets, at three times the
cost you expected, and the whole thing fell apart a couple of years later?” 1
The contractor in Gawande’s analogy, of course, is some form of
“accountable-care organization” or government.
The analogy makes for good imagery, but looking beyond style to the
substance, it is false.
Providing health care is not “like building a house”. It’s like
maintaining a house. The two are very different. And the American public is
quite capable of choosing their own electricians, their own plumbers, their own
carpenters.
Gawande recounts his visit at the Mayo Clinic as an example of the
“salaried physician /accountable care model”.
“There was no churn, no shuttling patients in and out of rooms….one
patient had colon cancer and…heart disease. The physician spent an hour with
her, sorting things out. He phoned a cardiologist with a question.
‘I’ll be there,’ the cardiologist said.
Fifteen minutes later, he was. They mulled over everything together.” 1
I am not insinuating this is a Potemkin village vignette, but I have
worked under salaried managed care. It wasn’t like this then, it isn’t like
this now, and it won’t be like this in the future. Such personalized care does
not, and will not, result from placing doctors on salary. Nor will it result
from transferring medical decision making authority even further from the
doctor, to the “accountable-care organization”. To put forward the above Mayo
Clinic scene as typical of what will happen with implementation of this model,
we think, is improper.
Congress is considering moves to reduce Medicare funding in high expense
outliers.2 It’s unclear, however, if this will be a blunt sledgehammer directed
at entire states. The problem is that Medicare reimbursements are already low,
and more doctors may drop out of the program.
I suggest the following. I propose that Medicare target a single high
expense outlier. It could be McAllen. It could be Miami. Focus fraud
investigators on that target, make unequivocal health fraud a “special
circumstances” crime, appoint, if necessary, overseers for hospital admissions
and diagnostic testing etc. When expenditures are reduced to the national
average, leave, and move onto the next target.
The advantage of this system is that it does not burden the entire country
with onerous regulations, it focuses only on the outliers. In choosing a single
target, Medicare will have the manpower to accomplish change.
CHAPTER 9 PROPOSALS
The proposals of this report are summarized here. The goal is to markedly
reduce health care costs, without causing any significant detriment to the
quality of care. These are to be taken as broad policy outlines, and not a
complete and detailed plan.
I. Reduce the cost of labor
A. Physicians
1. Remove four years of college from pre-medical education.
2. Replace those four years with three years of public service
for underserved populations, to be performed following completion
of medical training.
B. Non-physicians
1. Expansion of some primary care delivery (hypertension, etc.) to
medically trained non-physicians, such as pharmacists.
2. Colonoscopies, etc., to be performed by technicians.
3. Basic dental care to be provided by dental technicians
II. Reduce wasted labor. Establish an alternative to current tort-
based medical practice.
A. Malpractice
1. Remove malpractice from the tort system.
2. Decouple malpractice determinations from malpractice awards.
3. Single-payer malpractice insurance through tax on physician
incomes.
B. Documentation: terminate the legal presumption that if it wasn’t
documented it wasn’t done.
C. If patients desire continued outside oversight and tort control of their
health care, rather than patient-physician centered care, they are free to elect
to do so, but must pay in premiums the extra costs that
format of care requires.
III. Business
A. Insurance
Mandated catastrophic insurance for all (see below under Delivery
of Health Care), and should the current corporate insurance
structure remain in place, the following is proposed:
1. Terminate all government preferences and subsidies for managed
care.
2. GAO to investigate specifically where money goes in “administrative
costs.”
3 . Terminate tax-free status of employer-based insurance.
4. Terminate prohibition against purchasing insurance out-of-state.
5. Regulate coverage
a. Restrict right of rescission.
b. Regulate “usual and customary charges.”
c. Restrict non-payment of claims.
d. Restrict denials for “pre-existing” illness.
e. Restrict denials of treatment ordered by an approved physician.
6. Tax deductibility for major illness insurance (catastrophic and
hospitalization). No tax deductibility for comprehensive (such as outpatient)
health insurance.
B. Nonprofits
1. Suspend and prohibit all further conversions of nonprofits to profits
2. Revoke the 1969 IRS ruling, and require nonprofits, to the extent of
their financial ability, to provide services to those unable to pay.
3. Revisit the tax deductibility of donations to nonprofits.
C. The Pharmaceutical Industry
1. Revoke the 1997 FDA ruling. Prohibit direct marketing of drugs
and prescription medical devices to consumers.
2. If government is to continue purchasing drugs (which we
oppose), it should do so directly, without “middle men.”
IV. Medicare and Medicaid
A. Terminate Medicare Part C
B. Terminate Medicare Part D
C. Convert outpatient care from open-ended, third party, fee-for- service
payment to health-care vouchers, illness based, given to
patients.
D. Incarceration and fines for fraud.
V. Mandates
A. De jure (government)
1. With the exception of COBRA (if employer-based
insurance is to continue), terminate all existing mandates, other
than those noted above.
B. De facto (NGO’s)
1. Preventive medicine measures to be carried out by
non-physicians.
2. Terminate “pay for performance.”
3. Terminate all subsidies for computerized medical records, and
all mandates establishing computerized medical records.
4. Limit recertification examinations to a finite, manageable
amount of new clinically relevant knowledge.
VI. Delivery of Health Care
A. Establish mandatory, high-deductible, major-illness insurance to
cover hospitalization and catastrophic illness for those under 65.
1. This insurance is to be provided by private insurers.
2. If unreasonable premiums are charged by private insurers, then
government-owned, contractor-operated insurance companies
are to be established.
B. Outpatient health care to be provided on an out-of-pocket basis.
C. Shortfalls for out-of-pocket expenses to be provided by low-
interest loans.
D. Those with significant pre-existing illnesses to have their health
care financed through general tax revenues and premiums.
REALITY CHECK
Public policy is often set not for the public good, but for the benefit of
parochial interests. Setting the American health-care system on a sound
financial footing will meet with resistance from all of those special interests.
Physicians will resist allocating some of their responsibilities to
non-physicians, and nurses will object to the loss of documentation requirements
that to some extent featherbed their jobs. Academia will insist a college
education is necessary for the education of a physician. The courts will assert,
and possibly rule, that tort law cannot be excluded from health care. The
insurance and pharmaceutical industries will attempt to thwart any significant
reform that cuts into their revenues. Similarly, the media will oppose any
restriction on their advertising income from drug advertisements.
The financing of the health care industry, contrary to their protestations,
works quite well for all the above interests. For the nation as a whole, though,
it is a different matter.
However, supposing that the political opposition were circumvented and vast
savings were accomplished in health care, it may still be that little is
accomplished. Government may merely spend the money elsewhere. Even the Wall
Street Journal notes that congressional pork, in the form of corporate welfare,
amounted to $98 billion in 2007 and may exceed $100 billion in 2008.1 This
seemed like a large amount of money when the writing of this treatise began.
Since then, a trillion dollars to Wall Street speculators “too big to fail” has
become a new role for government.
CONCLUSION
The unaffordable cost of health care in America is an inevitable response
to the omnipresent specter of litigation, the imposition of quality improvement
initiatives, and the interposition of insurance companies.
The efforts to protect against the litigation threat and comply with the
quality improvement mandates, through excessive testing and documentation, has
corrupted the practice of medicine.
Similarly, there has been a corruption in the role insurance companies play
in health care. They are suited only to provide insurance. They are not suited
to manage health care. They do not provide that care, doctors and nurses do.
The validity of managed care as a means of cost-cutting is nil. Other factors
also play important roles, but unless litigation, managed care and mandates are
removed from the equation, the problem cannot be solved.
This plan turns conventional wisdom on its head. That conventional wisdom
is a sinkhole. What is proposed here, in effect, is less “education,” less
“law,” less “documentation,” less “insurance,” and less “quality improvement.”
Sometimes, less is more.
This is a radical prescription.” “Radical” comes from the Latin “radix,”
meaning “root.” I’ve tried to develop a prescription that gets to the root, the
underlying source, of the problem. Radical in common usage, however, means
extreme. Unfortunately, this definition fits as well. Common-sense proposals
appear extreme in today’s highly distorted legal and regulatory environment.
Contrary to the opining of experts, authorities and special interests, the
solution isn’t that difficult. It requires only the political will.
If there’s a will, there’s a way.
NOTES
Introduction
1. The national debate on this nation’s healthcare policy is centered on
how to extend health insurance coverage to the 47 million uninsured
(15.8% of the population). U.S. Census Bureau. Income, Poverty
and Health Insurance Coverage in the United States: 2006. Issued
Aug 2007. Accessed May 3, 2008, at
http://www.census.gov/prod/2007pubs/p60-233.pdf
2. Lightman D. Obama’s health care plan cuts deficit, CBO concludes.
Miami Herald. March 18, 2010 at
http://www.miamiherald.com/2010/03/18/1535658/obamas-health-c
care-plan-cuts-deficit.html
The Congressional Budget Office predicts a deficit reduction of
$13 billion per year over a 10 year period. Deficit reduction,
however, is not synonymous with a decrease in health care costs.
The legislation (H.R. 3590, the Patient Protection and Affordable
Care Act, and H.R. 4872, the Health Care and Education Tax Credits
Reconciliation Act of 2010) accomplishes its purported deficit
reduction by increasing the Medicare payroll tax and imposing a new
3.8% tax on investment income. and on incomes of over
$250,000, taxing high cost “Cadillac” health insurance, and taxing
various health related industries. Even if the bill actually reduced
health care spending by $13 billion year, that is but a 0.5% spending
reduction. (Annual health care expenditures of this nation are over $3
trillion). The proposition that the bill will reduce the deficit is
disputed by a former director of the CBO, who writes that by law, the
CBO must analyze legislation at face value, and not consider the
plausibility of the bill’s claims. Calling the bill “an accounting
sleight of hand” he calculates it will increase the deficit by $562
billion over ten years. Holtz-Eakin D. The Real Arithmetic of Health
Care Reform. New York Times. March 21, 2010. wk 12.
3. CMS. National Health Care Expenditure Projections 2009-2019 at
http://www.cms.hhs.gov/NationalHealthExpendData
/downloads/proj2009.pdf . and Levey N. Soaring cost of healthcare
Sets a record. Los Angeles Times. Feb 4, 2010. A1.
Healthcare spending was 16.2% of GDP in 2009
4. Congressional Budget Office. The Long Term Outlook for Health
Care Spending. Congress of the United States. Nov 2007. Accessed
March 2, 2008 at http://www.cbo.gov/ftpdocs/87xx/doc8758/11-
13-LT-Health.pdf.
Health care will be 37% of GDP by 2050, and 49% by 2082.
5. The GAO (United States Government Accountability Office) has
calculated the amount of the unfunded future obligations of the US
government (i.e., obligations which exceed projected revenue) at $53
trillion. The amount of money that would have to be set aside now,
generating the interest to pay for this debt, is $455,000 per American
household (or $175,000 for every man, woman and child in the U.S.)
Statement of David Walker, Comptroller General of the United
States. Testimony Before the Committee on the Budget, U.S. Senate.
Long-Term Fiscal Outlook. United States Government
Accountability Office. January 29, 2008 . Available at
http://www.gao.gov/new.items/d08411t.pdf
The Comptroller General states that health care costs are the nation’s
number one fiscal challenge. (ibid)
See also David Walker. “Wake Up Call.” Interview 60 minutes. May
1, 2007 at http://video.google.com/videoplay?docid=-
7461407498377956300.
Another source puts the liability at $516,348 per household.
Cauchon D. “Ruling hiding trillions in debt – Liability $516,348
per U.S. household.” USA Today. May 29, 2007: 1A.
The federal debt exceeds $9 trillion. Hurt H. “A Proposed Diet for
the US Budget.” New York Times. March 16, 2008: Bu 8.
By an accounting conceit---because Medicare, Medicaid and Social
Security are considered voluntary obligations of the U.S.
government---they are not included in the calculation of this debt.
The government is the primary heath-care spender at 60% of total
spending, as far back as 1998. Bitton A, James G. “Government
Share of Health Care Expenditures.” Journal of the American
Medical Association. 2003; 289: 1165. The federal government
spends more on healthcare than on Social Security and national
defense combined. Meeting the Dilemma of Health Care Access.
Opportunity 08: A Project of the Brookings Institution.
6. Kristof, K.M. “Tough Rx: Possible Ways to Fix Medicare.” Los
Angeles Times. June 24, 2007:C3.
7. Medicare’s unfunded liability is $74 trillion, according to Medicare
trustees. Goodman JC. “Markets and Medicare.”. Wall Street
Journal. Feb 23-24, 2008: A9
8. Leonhardt D. “Ignoring Reality Has a Price.” New York Times. Oct
8, 2008: B1.
9. Mongan J, Ferris T, Lee T. “Options for Slowing the Growth of
Health Care Costs.” New England Journal of Medicine 2008;
358:1509-1514.
10. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007: p. 2.
11. Bowers S. “Wall Street banks in $70 billion staff payout.” The
Guardian. Oct 18, 2008 p1. accessed Oct 29, 2008 at http://www.
guardian.co.uk/business/2008/oct/17/executivesalaries-banking.
12. Rae-Dupree J. “Disruptive Innovation, Applied to Health Care.”
New York Times. Feb 1, 2009: BU 3.
13. Welch H. “The excessive focus on mammography.” Los Angeles
Times. Nov 3, 2008: A19.
14. Chopra D, Ornish D, Roy R, Weil A. “Alternative Medicine Is
Mainstream.” Wall Street Journal. Jan 9, 2009: A13.
15. I am skeptical of many of the claims of the alternative medicine
establishment. To my knowledge, neither breast cancer nor prostate
cancer are “largely preventable or reversible by changing diet and
lifestyle.” The claim for diet and exercise is true, however, to the
extent that both can impact diabetes and heart disease. Diet
modification is certainly a central tenet of medicine. “ If the
money we use to purchase and eat the muscles of cows, pigs,
chickens, turkeys and fish were put into vegetables, fruits and lipid
lowering drugs, our health would skyrocket. ” William C. Roberts
MD. Editor. American Journal of Cardiology. Cited in Roberts W.
“Shifting from decreasing risk to actually preventing and arresting
atherosclerosis.” American Journal of Cardiology. 1999; 83: 817.
16. Fraser G, Shavlik D . “Ten Years of Life: Is it a Matter of Choice?”
Archives of Internal Medicine. 2001; 161: 1645-52.
17. Fraser. G. Diet, Life Expectancy and Chronic Disease: Studies of
Seventh Day Adventists and Other Vegetarians. Oxford: Oxford
University Press; Oxford. 2003:56.
Chapter 1 - Notes
1. Ha T Tu, and Paul Ginsburg. Losing Ground: Physician Income
1995-2003, tracking report No 15. Wash DC. Center for Studying Health System
Change, June 2006 at http://www.hschange.com/CONTENT/851/.
2. Singer N. “For Top Medical Students, Appearance Offers an
Attractive Field.” New York Times. March 19, 2008: A1.
3. Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
Accounting for the Cost of Health Care in the United States. McKinsey Global
Institute. January 2007, p 52. Accessed April 16, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_healthcare.asp
4. Sack, K. “Universal Coverage Strains Massachusetts Care.” New
York Times. April 5, 2008:A1. Graduates of private medical schools have an
average medical school debt of $160,000.
5. While it would cost little to implement, it would take years to put into
practice. In the interim, practicing physicians could be offered tax deductions
to volunteer one-half or one day every few weeks at community clinics and public
health facilities, to care for the poor and underserved.
6. Only 4% of California’s physicians are Hispanic, although Hispanics
make up 33% of the population (in 2002).
AMA Physician Masterfile and California Dept. of Finance. Cited by
Jordan M. “Program for Spanish Speaking Doctors”, Wall Street
Journal. Dec 18, 2007: B1 . Accessed January 13, 2008 at
http://online.wsj.com/public/article/SB119793741946235423.html.
7. Adams, D. “Physician income not rising as fast as other professional
pay.” AMNews July 24/31, 2006. Accessed May 1, 2008 at
http://www.ama-assn.org/amednews/site/free/prsc0724.htm.
The salary figure is for 2003. Tu HT, Ginsburg PB. Losing Ground:
Physician Income 1995-2003. Tracking Report No. 15. June 2006.
Center for Studying Health System Change.
http://www.hschange.org/CONTENT/851/
8. National Expenditure for Health Services and Supplies by
Category.
Cited by AHA. Trend watch chartbook 2005. slide 1-6. Accessed
March 30, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT#262,
6,Slide 6.
9. Amerling R. “One Patient, Many Doctors: How Did This Overload
Happen?” Wall Street Journal. June 26 2007.
10. Cauchon D. “Medical Miscalculation Creates Doctor Shortage.”
USA Today, 3/2/2005. Accessed April 22, 2008 at
http://www.usatoday.com/news/health/2005-03-02-doctor-
shortage_x.htm
Other sources place the number of physicians in the U.S. at 700,000,
but so as not to skew the data towards our position, we will go with
the higher number.
11. Smith C, Cowan C, Sensig A, Catlin A. “Health Spending Growth
Slows in 2003.” Health Affairs 2005. 24:185-194 at
http://content.healthaffairs.org/cgi/content/full/24/1/185
12. News Release. Yearly Premiums for Family Health Coverage Rise
to $12,680 in 2008, Up 5 percent, as Many Workers Also Face
Higher Deductibles. Kaiser Family Foundation. Sept 24, 2008.
13. Health Care Costs. March 2009. Henry J Kaiser Foundation. Page 2.
http://www.kff.org/insurance/upload/7670_02.pdf Figure 1.
National Health Expenditures per Capita and their Share of Gross
Domestic Product 1960-2007. Centers for Medicare and Medicaid
Services, Office of the Actuary. National Health Statistics Group at
http://www,cms.hhs/NationalhealthExpendData/
14. Fleishman J. “Egyptian doctors threatening to strike.” Los Angeles
Times. March 3, 2008: A7.
15. Health Care Costs. March 2009 Henry J Kaiser Foundation. Page 2.
http://www.kff.org/insurance/upload/7670_02.pdf Figure 2.
Average Annual Growth Rate for Nominal NHE and GDP for
selected Time periods between 2000 and 2007. Centers for
Medicare and Medicaid Services, Office of the Actuary.
National Health Statistics Group at
http://www,cms.hhs/NationalhealthExpendData/
http://www.kff.org/insurance/upload/7670_02.pdf
16. Guillaume L., Cooper R., Avery A., Mitchell S. et al.
“Supplementary prescribing by community and primary care
pharmacists: an analysis of PACT data 2004-2006.” Journal of
Clinical Pharmacy and Therapuetics. 2008; 33:11-16. accessed
June 1, 2008 at http://www.blackwell-
synergy.com/doi/abs/10.1111/j.1365-2710.2008.00869.x
17. Robert Brook, at the RAND Corporation, argues that 2 years of
focused education and training would more than suffice to create a
professional capable of procedures such as colonoscopies. Svorny S.
Docs and Doctorates. National Review. Feb 22, 2010. 24
18. Sack, K. “Universal Coverage Strains Massachusetts Care.” New
York Times. April 5, 2008: A1. Medicare pays $449.44 for a
colonoscopy, and $103.42 for a primary care visit.
Robert Brook, at the RAND Corporation, argues that 2 years of
focused education and training would more than suffice to create a
professional capable of procedures such as colonoscopies, or routine
cataract surgery
19. Berenson, A. “Boom Times for US Dentists, But Not for
Americans’ Teeth.” New York Times. Oct 11, 2007: A1.
20. Lopez, S. “Young diabetics at heart of school nurse dispute.”
Los Angeles Times. Nov 23, 2008, A1.
Chapter 2 - Notes
1. Hayward RA, Hofer TP. “Estimating Hospital Deaths Due to
Medical Errors – Preventability Is in the Eye of the Reviewer.” Journal of the
American Medical Association. 2001; 284: 415-420.
2. Kohn L.T.; Corrigan, J.M.; Donaldson, M.S., eds. To Err Is Human:
Building a Safer Health System. Washington D.C.: National Academy Press; 1999.
3. This report received wide play in the national media. Not widely
known is that the Institute of Medicine did not actually conduct this survey of
“medical errors,” but merely placed a new interpretation (spin) on two earlier
studies and repackaged them for distribution to the press and public. The lower
figure (44,000 deaths) is from data collected in 1992 in Colorado and Utah.
Thomas EJ, Studdert DM, Newhouse JP et al. Costs of Medical Injuries in Utah and
Colorado. Inquiry. 1999; 36:255-264. The higher figure (98,000 deaths) is from
the 1991 “Harvard Medical Practice Study,” on patients in New York. Brennan TA,
Leape LL, Laird NM et al. “Incidence of adverse events and negligence in
hospitalized patients: results of the Harvard Medical Practice Study.” 1. New
England Journal of Medicine. 1991; 324:370-376.
Both original studies attempted to estimate the incidence of adverse
events caused by medical management. Only a subset of those
events (27.2%) was due to negligent or substandard care.
Nonetheless, the press unfailingly perpetuates the falsehood of
98,000 deaths per year from medical errors. Berenson A. “Weak
Patchwork of Oversight Lets Bad Hospitals Stay Open”. New York
Times. Dec 8, 2008: A1; Mishori R. “Don’t Let A Hospital Make
You Sick.” Parade. Feb 8, 2009: p 12; Sack, K. “Medicare Rules
Say ‘Do No Harm.’ ” New York Times. Oct 1, 2008: A1.
I have elsewhere disputed the thinking and conclusions of other
Institute of Medicine (herein referred to as IOM) committees, and
their parent organization, the National Academy of Sciences. Weiss
M. Weiss J, Weiss P. “Anthrax Vaccine and Public Health Policy”
American Journal of Public Health. 2007; 97:1945-1951 ; Weiss,
M.; Weiss, P.; Mathisen, G.; Guze, P. “Rethinking Smallpox.”
Clinical Infectious Diseases. 2004; 39:1668-1673; Weiss, M.,
Weiss, P. “The Genie in the Genome,” (under review), and do so
again with the IOM “To Err is Human” report.
I am not alone in criticism of the IOM report. McDonald,
C.J.; Weiner, M.; Hui Siu, L. “How Many Deaths Are Due to
Medical Errors?” Journal of the American Medical Association.
2000; 284: 2187. Even an author of one of the two studies upon
which the IOM made its findings has disputed the IOM’s assertions
on medical errors. Brennan T. “The Institute of Medicine Report on
Medical Errors – Could It Do Harm?” New England Journal of
Medicine, 2000; 342:1123-1125. Both original studies attempted to
estimate the incidence of adverse events caused by medical and
surgical interventions. Most of the adverse events were normal
complications of medical and surgical care. Much of what the
committee defined as medical errors, (post- op wound infections, and
post-op bleeding) are expected complications of surgery. Unless
there is a significantly higher-than-expected incidence that can be
attributed to a particular surgeon or hospital, this is not malpractice.
On the contrary, it is nature.
There are further difficulties with the IOM’s report. Many of the
purported errors occurred in critically ill patients who were near
death. Hayward R, Hofer T. “ Estimating Hospital Deaths Due to
Medical Errors. Preventability Is in the Eye of the Reviewer”.
Journal of the American Medical Association. 2000; 286: 415-421.
Even if the supposed errors were avoided, death would have resulted
in the immediate future regardless. Moreover, the two studies upon
which the IOM issued its report did not state that the adverse event
was the cause of death. They stated that the adverse event may have
led to death, or the patient died in part because of the event, or the
event may have had nothing to do with the death. McDonald, supra.
That the figures were significantly exaggerated may be suggested by
the comment of one of the authors of the IOM report, who in
response to these criticisms, wrote that “It is time to move beyond a
fixation on the numbers and get on with the job of improvement”
Richardson W, Bewick D, Bisgard J. “The Institute of Medicine
Report on Medical Errors”. New England Journal of Medicine. 2000;
343:663-665. Perhaps even more telling, an author of the IOM
report declined to defend the report when confronted with flaws in
the IOM analysis. McDonald, supra.
The IOM report, nonetheless, is considered a landmark study, and has
set public policy. Berwick D, Calkins D, McCannon C, Joseph BA,
Hackbarth A. “The 100,000 Lives Campaign: Setting a Goal and a
Deadline for Improving Health Care Quality.” Journal of the
American Medical Association. 2006; 295: 324-327. For what its
worth, the authors of the paper in Journal of the American Medical
association which called the IOM report a landmark, are the authors
of the IOM report. Within days of release of the IOM report,
Congress held hearings, and the President ordered a feasibility study
on implementing the Report’s recommendations. Leape L. “Institute
of Medicine Medical Error Figures Are Not Exaggerated.” Journal of
the American Medical Association 2000; 284: 95-97.
I wish to make clear that I have no Pollyanna-type view, and
have hardly been an apologist for the incidence and significance of
medical errors. We have calculated elsewhere that 2,700 people may
have died annually from a “systems failure” that we lay at the
doorstep of academic training programs and the medical education
establishment. Weiss M, Weiss M. “Superficial Thinking.” American
Journal of Roentgenology. May 2008, Vol. 190 at
http://www.ajronline.org/cgi/content/citation/190/5/W318).
The IOM report exaggerates the degree and extent of medical errors.
Perception, however, in setting public policy, is sometimes more
important than reality. Nonetheless, for what its worth, if one
accepts the position of the IOM, the figures in their report referred
to hospital deaths only. They did not include morbidity (i.e. non
fatal complications), nor did they include outpatient care. As has
been noted by another critic, if the IOM report is correct, our health
care system is a public menace. Hayward, supra.
4. Annas, G. “The Patient’s Right to Safety – Improving the Quality of
Care through Litigation against Hospitals.” New England Journal of
Medicine . 2006; 354:2063-2066 .
5. Studdert, D.M., Mello, M.M., Gawande, A.A., Ghandi, T.K.,
Kachalia A, Yoon C et al. ”Claims, Errors and Compensation
Payments in Medical Malpractice Litigation.” New England Journal
of Medicine. 2006; 354:2024-2033.
Some of the payments were through settlements, others were
awarded at trial. (personal communication with the author).
6. GAO report on premiums, June 2003. Cited by Angrisano C, Farrell
D, Kocher B, Laboissiere M, Parker S. “Accounting for the Cost of Health
Care in the United States.” McKinsey Global Institute. January 2007, page 48
Accessed January 3, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_healthcare.asp
I presume the figure refers to physicians in private practice.
Government and HMO physicians do not pay for their insurance
directly, but have the cost of their malpractice coverage absorbed by
their employer, who may or may not self insure.
7. Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
“Accounting for the Cost of Health Care in the United States.
McKinsey Global Institute January 2007, page 18 . Accessed
January 3, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_healt
hcare.asp
A very different opinion and figure is put forth by Arnold Relman,
who writes “The malpractice system certainly has many problems
that need to be fixed, but I can’t believe that solving them would
have much effect on national health costs. Total direct costs of
malpractice litigation include awards to plaintiffs, legal expenses,
and insurance company overhead. These are estimated to be
approximately $7 billion. Even if these direct costs were totally
eliminated, our national health expenditures (now over $2 trillion)
would hardly be affected”. Relman A. A Second Opinion. New
York: Public Affairs; 2007: p 91. See also note 14 below.
8. Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
“Accounting for the Cost of Health Care in the United States.” McKinsey Global
Institute. January 2007, page 48.
McKinsey is a prominent management consulting company. It had
revenues of $5.3 billion in 2007. Its consulting work is wide
ranging. Hoover’s Profile at
http://www.answers.com/topic/mckinsey-company
9. Campbell E. Regan S, Gruen R, Ferris T et al. “Professionalism in
Medicine: Results of a National Survey of Physicians.” Annals of Internal
Medicine. 2007; 147:795-802. at
http://www.annals.org/cgi/content/abstract/147/11/795.
10. Sullivan JD. “Ensuring Standards for Doctors.” New York Times.
Dec 29, 2007: A 30.
11. Brenner D, Hall E. “Computerized Tomography – An Increasing
Source of Radiation Exposure.” New England Journal of Medicine.
2007: 357; 2277-2284. The figure of 1/3 of CAT scans being
medically unnecessary is from a survey of pediatric radiologists.
The great majority of CAT scans are on adults, and some
radiologists, to be blunt, may have a financial incentive, whether
direct or indirect, in CAT scans being ordered. I suspect the
number of CAT scans ordered primarily out of defensive medicine
considerations is significantly higher than the 1/3 figure widely
quoted.
12. Shulman M. “Facing a CT Scan? Think About Radiation.” US
News & World Report. May 30, 2008. accessed July 7, 2008 at
health.usnews.com/articles/health/cancer/2008/05/30/facing-a-ct-
scan-think-about-radiation.html
13. Testimony of Mark McClellan MD, PhD., Administrator, Centers
for Medicare & Medicaid Services, before the Joint Economic
Committee hearing on malpractice Liability Reform, April 28, 2005.
Accessed February 7, 2008 at
http://jec.senate.gov/Documents/Hearings/mcclellantestimony28
april2005.pdf and Kessler, Daniel and Mark McClellan. “Do
Doctors Practice Defensive Medicine?” Quarterly Journal of
Economics. May 2 1996. v111: 353-390.
14. Goldfarb S. “The Elusive Prescription for Health Care We Can
Afford.” Wall Street Journal. Feb 4, 2008: A13.
Relman, however, continuing with the arguments made in footnote
7, takes a different position. “Indirect (malpractice) costs are
unknowable and can only be guessed at. They have been variously
estimated to be between $20 and $80 billion. In any case, it is
obvious that even the highest estimates of the total cost of the
medical liability system are relatively small when compared with
the national bill for health care. At the most, the cost of the
malpractice system could account for less than 5 percent of total
national health expenditures. Furthermore, the elimination of all
malpractice-related costs would not do much to change a bill that is
relentlessly increasing at a rate that would quickly nullify any
savings. In short, while I certainly advocate thoroughgoing reform
of our dysfunctional malpractice system, I do not think it warrants
serious consideration as a cost-cutting proposal.” Relman A. A
Second Opinion. New York: Public Affairs; 2007: p92. Dr. Relman
is former editor of the New England Journal of Medicine, and
professor of medicine and social medicine at Harvard Medical
School. He writes from the vantage point of academia. Our view is
more pedestrian.
15. And just because it’s documented, doesn’t mean it was done. The
New York Times describes the Kings County Hospital medical chart
for Ms. Green as “a hive of fictions”. Handwritten entries report
that Ms. Green was ‘up and about, went to the bathroom’ at 6 a.m.,
and 20 minutes later was, ‘sitting quietly in the waiting area’. As
further documentation of her well-being during that time period, the
chart included purported vital sign data (blood pressure, respiratory
rate and pulse), all quite normal.
“Videotapes showed that actually, she was sprawled on the floor at
those times, not up and about…. And if Ms. Green still had any vital
signs, no one was taking them at the time recorded on the chart. Her
first contact with a medical staff member came at 6:35, more than
an hour after she hit the ground, and it consisted of a woman
nudging Ms. Green’s body with her toe.” Dwyer J. “After a Death
on Tape, Changes are Promised.” New York Times . July 12, 2008.
A15
16. National Highway Traffic Safety Association. U.S. Department of
Transportation. Traffic safety facts. August 2005 DOT HS 809 897.
Accessed on May 1, 2008 at http://www-nrd.nhtsa.dot.gov/pdf/nrd-
30/NCSA/RNotes/2005/809897.pdfd
17. Newhall C. “The Institute of Medicine Report on Medical Errors.”
New England Journal of Medicine. 2000; 343:663-665.
A potential criticism is from the opposite side of the spectrum.
Absent the expense of litigation, there will likely be more claims of
malpractice, most without merit. A filtering process may be
necessary, as well as a moderate fee for filing a claim (waived for
those without funds).
In England, the loser pays the winner’s attorney fees. This is a fair
and useful idea, cutting down on unjustified suits, that has been
blocked by the American Bar. With lawyers removed from the
process, this issue becomes moot.
18. Costello D. “Malpractice law may deny justice.” Los Angeles Times.
Dec 29, 2007:A1
19. Editorial. “Messing With Malpractice Reform.” Wall Street Journal.
December 1, 2008 at
http://online.wsj.com/article/SB122809479886668021.html
20. Vitello P. “Another Case of Hepatitis Among a Doctor’s Patients.”
New York Times. Nov 20, 2007: C 13.
21. Lin II, R. “Rehab program for doctors out.” Los Angeles Times. Jan
25, 2008: B5.
Chapter 3 - Notes
1. Fast Facts. HealthDecisions.org. Americas Health Insurance Plans,
Accessed on March 4, 2008 at
http://www.healthdecisions.org/LearningCenter/fatcs.aspx .
80 million people (28% of the US population), were enrolled in
HMO’s in 2001. HMO’s and Managed Care. National Center for
Health Statistics. Health US 2002. Accessed on February 27, 2008 at
http://www.policyalmanac.org/health/hmos.html. 165 million
Americans are enrolled in PPO’s (preferred provider organizations),
67% of the American public. American Association of Preferred
Provider Organizations. Accessed on February 27, 2008 at
http://aappo.org/index.cfm?pageid=1..
2. As regards medical errors, acts of omission represent a greater
problem than acts of commission. Hayward R. Asch S, Hogan M, et al. Sins of
Omission. “Getting Too Little Medical Care May be the Greatest Threat to
Patients.” J Gen Intern Med. 2005; 20: 686-69.
3. Robert Wood Johnson Foundation. California’s Shift to Medicaid
Managed Care Doesn’t Save Money or Improve Outcomes. October
2005, at
http://www.rwjf.org/grants/product.jsp?id=17107
4. Nicholas L. Does Managed Care Reduce Federal Spending?
Evidence from Medicare. Report 09-671. February 2009. Population
Studies Center at
http://www.psc.isr.umich.edu/pubs/pdf/rr09-671.pdf
5. Congressional Budget Office. CBO Memorandum. Effects of
Managed Care: An Update. March 1994. at
http://www.cbo.gov/ftpdocs/48xx/doc4890/doc16.pdf
6. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007: page 108-109 citing tape accessed on March 18, 2008 at
http://whitehousetapes.org/pages/listen_tapes_rmn.htm,tapermn_e450c Also
available on You tube at
http://www.youtube.com/watch?v=9QkgUkM0o6Q (from Sicko,
Michael Moore).
7. Accessed April 6, 2008 at
http://www.youtube.com/watch?v=9QkgUkM0o6Q
8. Mitka M. “A Quarter Century of Health Maintenance.” Journal of
the American Medical Association. 1998; 280:2059-2060.
9. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007: page 109.
10. Hall CT, “$1 Billion HMO Pay Unifies Critics.” San Francisco
Chronicle. June 20, 1996: p B1. Cited by Herzlinger R. Who
Killed Health Care? New York: McGraw-Hill; 2007: page 48 .
11. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007: page 38.
12. The Business Word. “Democrats demonize HMO exec’s high
salaries.” Accessed April 6, 2008 at
http://www.businessword.com/index.php/weblog/comments/447/
United Health enrolls more than 71 million people. Girion L. “Ex-
CEO to make huge repayment.” Los Angeles Times. Dec 7, 2007
C1. At one point, McGuire’s shares were valued at 1.6 billion
(ibid). As part of his compensation package, McGuire was given
backdated options for the years 1997, 1999 and 2000 on the days
UnitedHealth’s share price hit annual lows, a highly suspicious
timing (ibid). In a settlement with the Securities and Exchange
Commission to avoid trial, he will pay $468 million (ibid). In a
simultaneous settlement with shareholders of UnitedHealth group,
he will surrender an additional $618 million. McGuire has stated
he is happy to have the matter resolved. After the above
settlements, he will still hold options worth $800 million.
Morgenson G. “Sharper Claws For Recovering Executive Pay.”
New York Times. Dec 9, 2007. Business 1. McGuire is not the only
executive from UnitedHealth who will be returning funds. Nearly
$1 billion will be recovered. (ibid). The lack of legal action against
members of the board of directors who oversaw McGuire’s option
grants and employment agreement has been criticized. (ibid).
13. Interstudy Competitive Edge: Part II: Managed Care Indemnity
Report using data as of July 1, 2004. Cited by AHA trend watch
chartbook 2005. Accessed on January 8, 2008 at http://www.aha
.org/aha/trendwatch/2005/cb2005chapter1.PPT#289,29,Slide 29.
14. Testimony before Congress of Linda Peeno, Former Medical
Director at Humana, on Managed Health Care Quality Standards,
C Span 2, May 30, 1996, from Sicko, Michael Moore, seen on You
tube, accessed on February 27, at
http://www.youtube.com/watch?v=ZYoFBn5I5g4&feature=related
15. Mariner WK, “What Recourse? - Liability for Managed-Care”
Decisions and the Employee Retirement Income Security Act. New
England Journal of Medicine. 2000; 343:592-596 at
http://content.nejm.org/cgi/content/full/343/8/592
The Supreme Court decision dates to 1993. The court interpreted
the Federal Employee Retirement Income Security Act (ERISA),
which had been passed by Congress to protect employee benefits, as
making employers essentially immune from suits by employees
regarding their health insurance, life insurance, and retirement
benefits.
16. The Kaiser Family Foundation and Health Research and
Educational Trust, Employer Health Benefits 2000, 2001, 2002,
2003, 2004 Annual Surveys. Cited by AHA trend watch chartbook
2005. Accessed January 27, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT
#288,28,Slide28
The actual figures are 8.2% to 13.9% annually.
17. GAO report on premiums, June 2003. Cited by Angrisano C, Farrell
D, Kocher B, Laboissiere M, Parker S. “Accounting for the Cost of
Health Care in the United States.” McKinsey Global Institute
January 2007, page 70 . Accessed on January 24, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_
healthcare.asp . The figure is 52.4 million. In 2004, Medicaid
enrolled 19.7 million children.
18. Matthews M. “Hillary’s False Claims.” Wall Street Journal. Dec1-2,
2007: A12. The actual figures are 26.9% vs. 16.1%.
19. Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
“Accounting for the Cost of Health Care in the United States.”
McKinsey Global Institute January 2007. Accessed May 2, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_
healthcare.asp
20. The report found that 64% of administrative costs in the private
sector are due to underwriting health risks, sales, and marketing.
Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
“Accounting for the Cost of Health Care in the United States.”
McKinsey Global Institute January 2007: pp 18-19. Not
specifically mentioned in that subset is the cost of scrutinizing
claims. Also, we have seen no breakdown of just what percentage
of costs are due to underwriting, sales and marketing. We are
unclear why these should be such large amounts.
21. Woolhandler S, Himmelstein D. “The high costs of for-profit care.”
Canadian Medical Association Journal. 2004; 170: 12. Accessed
on December 18, 2008 at
http://www.cmaj.ca/cgi/content/full/170/12/1814
22. The authors of the above study estimate $350 billion is wasted
annually on medical bureaucracy . Himmelstein DU, Woolhandler
S. “I Am Not a Health Reform.” New York Times. Dec 15, 2007:
A35. How much of this estimate is actual bureaucracy, and how
much is profit, is unclear to us.
The methodology by which the above figures were arrived at has
been criticized, suggesting that the estimate of the difference in
administrative costs between US and Canada has been exaggerated
by 25%. Aaron H. “The Costs of Health Care Administration in the
United States and Canada – Questionable Answers to a
Questionable Question.” New England Journal of Medicine. 2003;
349:801-803.
23. The U.S. Department of Health and Human Services has also
published data on the cost of private health insurance compared to
government health programs. In 2005, of $722.1 billion paid in
premiums to private health insurers, $620.7 billion was returned in
benefits paid, resulting in 86% of every dollar paid in premiums
returned to the policy holders. By way of contrast, for Medicare, in
2005, out of $355.8 billion, 96.9 % of every dollar was expended on
health care. Zycher B. “Comparing Public and Private Health
Insurance: Would A Single- Payer System Save Enough to Cover
the Uninsured? ” Medical Progress Report. The Manhattan Institute.
No 5 October 2007 pp 7-8. Accessed January 27, 2008 at
http://www.manhattan-institute.org/cgi-bin/apMI/print.cgi . Not
considered in these figures, however, is that a significant portion of
Medicare expenditures may have been fraudulently billed (see text
below).
24. Woolhandler S, Campbell T, Himmelstein D. “Costs of Health Care
Administration in the United States and Canada.” New England
Journal of Medicine. 2003; 349:768-775.
25. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007: pp 102-103.
26. Kaiser Family Foundation, Menlo Park California and Health
Research and Educational Trust, Chicago Ill., “Employer Health
Benefits 2006”, page 4.
64% of those insured, in 2004, received their insurance through their
employer.
27. Samuelson R. “Rx for health care: Pain.” Newsweek. Dec 10, 2007:
page 47.
28. Graham J. “The Health Cost Myth.” Wall Street Journal. Nov 13,
2007: A25.
Another source places the figure at $1,525 per car. Relman A. A
Second Opinion. New York: The Century Foundation; 2007: p 78.
Health care expenses add $197 to the cost of each car manufactured
in Canada by GM, and for Toyota, in Japan, health care costs add
$97 to the price of each car. (ibid). Warren Buffet has characterized
GM as a health and benefits company, with an auto company
attached. (ibid).
29. Girion L. “How to get and keep your health covered.” Los Angeles
Times. Aug 12, 2007: C1.
30. Alonso-Zaldivar. “Critics reject claims of GOP health proposals.”
Los Angeles Times, Nov 20, 2007: A1.
31. Anderson G. “From ‘Soak The Rich’ to Soak The Poor’: Recent
Trends In Hospital Pricing.” Health Affairs. 2007; 263: 780-789.
32. Reece R. “Conflicting Ideas for Health Reform.” Practice Options.
Nov 2007: page 8.
33. Stephenson E. “Incentive Is Treatment For Health Insurance Costs.”
Wall Street Journal. Feb 14, 2008: A15.
34. In California, state law allows for an additional 18 month
extension.
35. The Kaiser Foundation and Health Research and Educational Trust,
Survey of Employer-Sponsored Health benefits 2004. Cited by
AHA. Trend Watch chartbook 2005 Accessed on March 1, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT
#278,22,Slide 22. The figure appears to be between 17-18%.
36. A study in June 2007 by Watson Wyatt Worldwide Analysts with
funding from the California Health Care Foundation. Cited by
Girion L. “How to get and keep your health covered.” Los Angeles
Times. Aug 12, 2007: C1.
Individual insurance pays a smaller percentage of the enrollee’s
expenses than small group employer plans, 55% vs. 83%.
37. Mankiw N. “Beyond Those Health Care Numbers.” NewYork
Times. Nov 4, 2007: Business 4. At
http://www.nytimes.com/2007/11/04/business/04view.html.
38. Girion L. “Insurer loses, alters course.” Los Angeles Times. Feb 23,
2008: A1.
This is an exceptional case – where an arbitrator has ruled for the
patient. Unlike patient plaintiffs, who are in arbitration proceedings
perhaps once in a lifetime, insurers and hospitals are frequently in
arbitration, and are unlikely to choose again an arbitrator who rules
against them. It is doubtful this former judge will be chosen as an
arbitrator in the future. This decision will likely cost him income.
39. Editorial. “Not So Reasonable and Customary.” New York Times.
January17, 2009: A20.
40. Healthcare Industry Taskforce. Cited by Girion L. “Heat is on
health insurers.” Los Angeles Times. Feb 14, 2008: A1.
41. Editorial. “A Rip-Off by Health Insurers?” New York Times. Feb
18, 2008: A18.
42. Hakim D, Abelson R. “Big Insurer to Update Its Fee Data.” New
York Times. Jan 13, 2009: B1.
43. Fuhrmans V. “UnitedHealth is to be Fined $3.5 Million.” Wall
Street Journal. Jan 30, 2008: D9.
44. Costello D, Girion L, Hiltrik M. “The Battle Over Bills.”
Los Angeles Times. Oct 23, 2008: A1.
45. One example of micromanagement is in pharmaceuticals. Not so
long ago, doctors prescribed, and pharmacists dispensed. Now
physicians propose, the corporate entity decides, and the pharmacist
enforces. Historically, pharmacists, in their professional capacity,
tend to be compliant to authority. In a conflict of interest between
corporate and patient, they will comply with corporate. Doctors, on
the other hand, tend to fight for their patients.
In the private sector, pharmaceuticals are controlled by pharmacy
benefits managers. These are private corporations, Medco perhaps
being the most prominent, with whom managed care organizations
contract to manage their pharmacy obligations. In effect, they are
subcontracting agents for managed care. They are discussed in
more detail later in this report. Portions of three letters, however,
succinctly summarize what transpires vis-à-vis physicians.
“ I find Medco prior authorization forms…a form of practicing
medicine on their part. I have had prior authorization forms
questioning the use of testosterone replacement therapy. Asking for
the diagnosis as primary or secondary, whether the correct labs
were run to differentiate the two, and the test result. ...
I believe these forms are specifically meant to be time consuming
so that doctors simply don’t complete them and they , PBM
(pharmacy benefit managers) save money consequently….I spent
more than 45 minutes one day amongst supervisors without
satisfaction. I asked if they had a physician that I could speak with
and I was told by this second – level supervisor there were no
physicians in Medco.” Atkinson J. “Readers react to PBMs.” ACP
Internist, May 2008 Volume 28, p 5.
“We are truly caught in the middle, filling out two page detailed
forms asking such trivia as ‘which prior PPIs (proton pump
inhibitors – anti ulcer drugs) were tried and for how long and when’
before Medco might consider – or more commonly reject-
authorizing a particular drug.”
Newman G. “Readers react to PBMs.” ACP Internist, May 2008
Volume 28, p5.
“I could see two to three patients more a day if I were to add up all
the time spent on such paperwork.” Ismail G. “Readers react to
PBMs.” ACP Internist, May 2008 Volume 28, p 5.
Medco provides pharmacy benefit management services for 1 in 5
Americans. In 2007, net revenues were 44.5 billion. Medco.
Corporate Overview. Accessed May 18 at
http://phx.corporate-ir.net/phoenix.zhtml?c=131268&p=irol-
homeProfile.
Medco certainly reduces pharmacy costs for its corporate clients,
but in terms of global savings for the health care system, we suspect
its benefits may be compartmentalized only to those clients. The
cost to other parties, in terms of time and lost productivity, may
overshadow those savings.
46. Mathews A. “Insurers Hire Radiology Police to Vet Scanning.”
Wall Street Journal. Nov 6, 2008: D1.
There may be a conflict of interest here as well.
47. The Kaiser Family Foundation and Health Research and
Educational Trust, Employer health benefits 2000, 2001, 2002,
2003, 2004 Annual Surveys. Cited by AHA trend watch chartbook
2005 Accessed on April23, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT
#288,28,Slide28 and Center for Medicare and Medicaid Services;
Office of the Actuary. Cited by AHA trend watch chartbook 2005
accessed on April 23, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT
#258,3,Slide3
48. The operating margins of the top insurers in 2003 were 7.9% for
Aetna, 8% for Wellpoint, 7.9% for Anthem, 10 % for United
Health and 8.4% for Cigna. Robinson J. “Consolidation and the
Transformation of Competition in Health Insurance.” Health Affairs
2004; 23: 11-24. Cited by AHA trend watch chartbook 2005.
Accessed on May 3, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT
#290,30,Slide 30.
49. Goldberg J “The Reality of Obamacare” Los Angeles Times.
March 23, 2010. At http://www.latimes.com/news/opinion
/commentary/la-oe-goldberg23-2010mar23,0,6611246.column.
Purists will argue that return on invested capital is a better metric
than profit margin. The ROIC is quite high for the health insurance
industry, but unlike profit margin, it is not relevant to the discussion
at hand.
50. Silverman E, Skinner J, Fisher E. “When Money is the Mission –
The High Costs of Investor-Owned Care.” New England Journal of
Medicine. 1999; 341:1768-1770.
51. Nudelman PM, Andrews LM. “The ‘Value Added’ of Not-For
Profit Health Plans.” New England Journal of Medicine. 1996;
334:1057-1059.
52. Kuttner R. “Columbia/HCA and the Resurgence of the For-Profit
Hospital Business – Second of Two Parts.” New England Journal
of Medicine. 1996; 335:446-453.
53. Bell JE. “Saving their assets: how to stop plunder at Blue cross and
other nonprofits.” American Prospect. 1996; 26:60-6.
54. Igehart JK, “Inside California’s HMO market: a conversation with
Leonard D. Schaeffer.” Health Affairs. 1995; 14:131-142.
55. “Blue Cross of California public benefit plan approved by
Wellpoint stockholders; 3 billion to go to charitable foundation.”
Business Wire, May 8, 1996. Accessed April 23, 2008 at
http://www.allbusiness.com/company-activities-
management/company-structures-ownership/7228157-1.html
56. Robinson J. “For-Profit Non-Conversion And Regulatory Firestorm
At CareFirst BlueCross BlueShield.” Health Affairs. 2004;23:68-83.
57. Audited Consolidated Financial Statements. University of
Pittsburgh Medical Center, years ending June 30, 2006. Cited by
Herzlinger R. Who Killed Health Care? New York: McGraw-Hill,
2007 p 64.
58. Herzlinger RE, Krasker W. “Who Profits from Nonprofits.”
Harvard Business Review. 1987; 65: 93-106.
59. U.S. Senate Finance Committee, “Taking the Pulse of Charitable
Care and Community Benefits at Nonprofit Hospitals.” Statement of
Sen. Chuck Grassley, Sept 13, 2006 . Accessed April 3, 2008 at
www.finance.senate.gov .
A recent report found that San Francisco’s five non-profit hospitals
received $79 million in tax breaks in 2007, but provided just $16
million in charity care. Knight H. “Report rakes 2 hospitals on
charity care.” San Francisco Chronicle. Jan 29, 2008: D1.
60. Revenue Ruling 56-185, 1956 -1 C.B. 202, 1956 IRB LEXIS 422
(1956) and Revenue Ruling 69-545, 1969 -2 C.B. 117, 1969 IRB
LEXIS 176 (1969). Cited by Herzlinger R. Who Killed Health
Care? New York: McGraw – Hill; 2007: p 69.
61. Martinez B. “Nonprofit Hospitals leave The City for Greener
Pastures.” Wall Street Journal. Oct 14, 2008: A1.
62. Editorial. “An Intolerable Fraud.” New York Times. Feb 8, 2008:
A22.
The entire concept of non-profits needs to be examined. Just how
much tax revenue is lost each year in tax deductible donations to
non-profits? Charitable contributions in the US in 2003 totaled
over $240 billion. AAFRC Trust for Philanthropy/Giving USA
2004. Cited by US Department of State. International Information
US Life, Culture and History. USINFO.STATE.GOV US
Charitable contributions Top 240 billion in 2003, Feb 17, 2005 .
Accessed May 5, 2008 at
http://usinfo.state.gov/scv/Archive/2005/May/10-192837.html . Let
us assume the vast majority of these donations were tax deductible.
I estimate these donations cost the government $100 billion
annually.
Every tax deduction is a direct government subsidy. Harvard, in
2007, had an endowment of $34.9 billion , in 2008 it reached $36.9
billion. Fabrikant G. “Return of 8% For Harvard Endowment.” New
York Times. Sept 13, 2008: C3. at
http://www.nytimes.com/2008/09/13/business/13harvard.html?fta=y
and received $595 million in charitable contributions. Dolan D.
“Harvard Endowment Points One Way Forward for Struggling
Japanese Universities.” Glocom Platform Aug 27, 2007. Accessed
on April 2, 2008 at
http://www.glocom.org/debates/20070827_dolan_harvard/
index.htmlThis was topped by the charitable contributions Stanford
received in 2007 - $911 million. Scientology is thought to have
billions of dollars in property and cash. Helgeson B, Reyes R.
“Scientologists Spreading into Plant City, Beyond.” Tampa Bay
Tribune. July 9, 2006 accessed March 22, 2008 at
http://www.rickross.com/reference/scientology/history/104.html.
Donations to the church for “auditing” are tax deductible.
Donating to Harvard “is like donating money to money”. Stein J.
“Not so sweet charity.” Los Angeles Times. March 27, 2009: A31.
Harvard and Scientology are in far better financial shape than the
nation, which has a budget deficit and debt that is being moved
onto our grandchildren to pay. As such, the government subsidies
given these institutions are being paid for by our grandchildren.
The deductibility of most charitable donations should be
reconsidered. It’s not our right to burden on children yet unborn,
unnecessary expenditures we ourselves cannot afford.
63. National Expenditure for Health Services and Supplies by
Category. Cited by AHA. Trend watch chartbook 2005. slide 1-6.
Accessed on March 30, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.
PPT#262,6,Slide6
64. Francis T. “Nation’s Hospital Bill Jumped by 7% in 2005.” Wall
Street Journal. Dec 13, 2007: D6. The figure is from statistics of
the Federal Agency for Health Care Research and Quality.
65. Angrisano C et al. “Accounting for the Cost of Health Care in the
United States.” McKinsey & Company: McKinsey Global
Institute, January 2007, p 12.
66. “Hospital announces budget management plan.” MGH Hotline.
March 19, 1999 . Accessed February 13, 2008 at
http://www.massgeneral.org/pubaffairs//Issues/Mar19
Budgetpaln.htm
67. Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
“Accounting for the Cost of Health Care in the United States.”
McKinsey Global Institute January 2007, pp 49 – 50. Accessed on
March 4, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/
accounting_cost_healthcare.asp
68. Girion, L. “Hospital pricing disparities found.” Los Angeles Times.
Jan 16, 2008: C3.
69. National Expenditure for Health Services and Supplies by
Category. Cited by AHA. Trend watch chartbook 2005. slide 1-6.
Accessed March 19, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005
chapter1.PPT#262,6,Slide 6
Another source states that retail drug spending accounts for just
over 10% of all health care spending. Pear R. “Health Spending
Exceeded $2 Trillion in 2006.” New York Times Jan 8, 2008 citing
Health Affairs, at
http://www.nytimes.com/2008/01/08/us/08health.html). 40% of
America’s sicker adults, (compared to 20% of Canada’s), did not
fill a prescription because of cost. (Schoen C. “Taking the Pulse of
Health Care Systems: Experiences of Patients with Health problems
in Six Countries.” Health Affairs. Jul-Dec 2005. Vol. 24 p 509 at
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.509v3
70. Peterson M. “Pharma’s quesy feeling.” Los Angeles Times. Jan 27
2008: M1.
71. Tesoriero HW. “Drug Prices Surge Despite Criticisms On
Campaign Trail.” Wall Street Journal. Feb 21, 2008: B1.
Accessed May 17, 2008 at
http://s.wsj.net/article/SB120355185318681367.html citing Delta
Marketing Research.
In 2005 the increase was 6.73% and in 2006 it was 6.22%.
The statistics for inflation, however, are contrived, to make the rate
of inflation appear significantly lower than it actually is.
Successive administrations have corrupted the CPI (consumer
price index). This is to the advantage of the government, not only
for political reasons, but because many governmental obligations
(e.g. cost of living adjustments for government employees, social
security payments, interest on the national debt) are indexed to the
CPI. Most of the public is unaware that the CPI excludes the cost
of food and energy. Neither of these, however, should have much
of an impact on the production costs of pharmaceuticals.
72. Press release. Families USA, July 2002:17. Cited by Geyman J.
“The Corporate Transformation of Medicine and its Impact on
Costs and Access to Care.” Journal of the American Board of
Family Practice. 2003: 16:443-454.
73. Relman AS, Angell M. “America’s other drug problem: how the
drug industry distorts medicine and politics.” The New Republic.
2002; Dec 16; p 27-41.
74. United States Government Accountability Office (2006).
“Prescription Drugs: Improvement Needed in FDA’s Oversight of
Direct to Consumer” at http://www.gao.gov/new.items/d0754.pdf.
According to a study by the University of Pittsburgh Graduate
School of Public Health, total promotional spending by the industry
(including marketing to doctors) reached $29.9 billion in 2005 (up
from $11.4 billion annually in 1996). It appears the FDA approved
direct-to-consumer ads reluctantly, for fear that if challenged by the
pharmaceutical industry on free speech grounds, it would not
prevail. Brownlee S. Overtreated. New York. Bloomsbury;
2007:page 185.
75. Lazarus D. “Test Strips reveal a big profit motive.” Los Angeles
Times. Nov 7, 2007: C1.
76. Access Diabetic Supplies. viewed on GAC cable network, March
22, 2008 8:43 pm EST.
77. Centers for Medicaid and Medicare Services; OIG reports and Web
searches. cited by Duhigg C. “Oxygen Suppliers Fight to Keep a
Medicare Boon.” New York Times. Nov 30 2007: A1.
78. Only in type I diabetics, formerly known as juvenile onset diabetics,
who are on insulin and brittle (i.e., highly erratic readings and over
sensitivity to insulin), could these meters be considered a lifeline.
The vast majority of diabetics are not in this class.
79. Savage D. “Animal cruelty law is rejected.” Los Angeles Times.
July 19, 2008: A8.
80. In the US pharmacy costs per capita are $728, compared to $509 in
Canada. Paris V, Docteur E. “Pharmaceutical Pricing and
Reimbursement Policies in Canada.” OECD Health Working
Papers. Accessed on May 3, 2008 at
http://www.oecd.org/dataoecd/21/40/37868186.pdf
81. “FDA: 100 deaths tied to heparin since 2007.” The Associated
Press. April 8, 2008 accessed on April 9, 2008 at
URL:http://www.msnbc.msn.com/id/24017098/wid/11915773?
GT1=31037.
82. Alonzo-Zaldivar R. “Probe focuses on heparin sources.”
Los Angeles Times. March 15, 2008: A12.
83. Harris G, Bogdanich W. “Blood Thinner Linked to China Had
Contaminant, F.D.A. Says.” New York Times. March 6, 2008: A1.
84. Harris G. “Tainted Drugs Put Focus on the FDA.” New York Times.
March 17, 2008: A13.
In 2007, the FDA inspected only 13 of the 566 Chinese plants that
export drugs to the US.
85. Tesoriero HW. “Drug Prices Surge Despite Criticisms On
Campaign Trail.” Wall Street Journal. Feb 21, 2008 B1 . Accessed
May 17, 2008 at
http://s.wsj.net/article/SB120355185318681367.html.
86. Blankstein A. “Quaids
settle with hospital”. Los Angeles Times. Dec
16, 2008: B3.
87. Associated Press. “Merck to pay $671 million to settle fraud cases.”
Los Angeles Times. Feb 8, 2008: C3.
88. Associated Press. “Eli Lilly settles Zyprexa probes.”
Los Angeles Times. Oct 8, 2008. C7.
89. Dr. Ernest Beutler. Cited by Pollack A. “Cutting Dosages of Costly
Drug Spurs a Debate.” New York Times. March 16, 2008: A1.
90. John J. Health Care Special Issue: Creative Destruction. The New
Republic. Nov 12, 2007. Accessed January 7, 2008 at
http://www.tnr.com/politics/story.html?id=53e206dd-c286-43b1-
9c5b-079e81ab3474&p=1
91. Begley S. “Is Alzheimer’s Field Blocking Research Into Other
Causes? ” Wall Street Journal. April 9, 2004: B1.
92. Begley S. “Scientists World-Wide Battle a Narrow View of
Alzheimer’s Cause.” Wall Street Journal. April 16, 2004: A9.
93. Freundenheim M. “The Middleman’s Markup.” New York Times.
April 19, 2008: B1.
The three largest prescription benefits manager companies, Express
Scripts, CVS Caremark Corp. and Medco Health Solutions
administer prescriptions for over 200 million Americans. All three
have recently made settlements with the attorney generals of 28
states, ($9.5 million, $38.5 million and $29.3 million respectively)
over charges that they steered patients to “preferred drugs”,
ostensibly because they were cheaper, but did not pass along the
savings in the form of lower co-pays. The companies denied any
wrongdoing. Lazarus D. “Weak medicine for an ill system.”
Los Angeles Times. June 1, 2008:C1.
94. Harris G. “British Balance Gain Versus Cost of Latest Drugs.”
New York Times. Dec 3, 2008: A1.
95. Weiss MM, Weiss PD, Weiss JB. “Anthrax Vaccine and Public
Health Policy.” American Journal of Public Health. 2008; 97: pp
1945-1951.
Chapter 4 - Notes
1. Potetz L, Health Policy Alternatives Inc. Financing Medicare: An
Issue Brief. Kaiser Family Foundation January 2008. Accessed May 3, 2008 at
http://www.kff.org/medicare/7731.cfm
2. Medicare Spending and Financing. Kaiser Family Foundation, June
2007 . Accessed May 3, 2008 at http://www.kff.org/medicare/upload/7305-02.pdf .
Currently, 3.9 workers pay payroll taxes into Medicare for every
enrollee receiving benefits.
3. Congressional Budget Office. The Long Term Outlook for Health
Care Spending. Congress of the United States. Nov 2007. Accessed March 2, 2008
at http://www.cbo.gov/ftpdocs/87xx/doc8758/11-13-LT-Health.pdf
4. Samuelson R. “Rx for health care: Pain.” Newsweek Dec 10, 2007:
p 47.
From 1970 to 2005, spending per Medicare beneficiary rose 8.9%
per year.
5. 2006 Annual Report of the Board of Trustees of the Federal Hospital
Insurance Trust Funds, 1 May 2006 (PDF) . Accessed January 24, 2008 at
http:///www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2006.pdf
In 1999, Medicare’s bill per beneficiary was $5,522; in 2006, it was
$8,568. Duhigg C. “Oxygen Suppliers Fight to Keep a Medicare
Boon.” New York Times. Nov 30, 2007: A1.
6. Pear R. “Studies Say Private Medicare Plans Add Cost, for Little
Gain.” New York Times. Nov 24, 2008: B2.
7. Freudenheim M. “Two Insurers Increase Bet On Medicare.”
New York Times. Dec 5, 2007: C1
The added expenses of the Medicare Advantage Program will cost
more than $50 billion from 2009 to 2012. Editorial. “Medicare’s
Much-Too-Hard Sell.” New York Times. May 21, 2008: A26.
8. Alonso-Zaldivar, “Medicare trend raises eyebrows.”
Los Angeles Times. Feb 11, 2008: A14.
9. An enrollee pays a monthly premium for the plan, and a $250
deductible. After the deductible is paid, the enrollee pays 25%, and the
insurance company 75% of the prescriptions cost, until $500 is paid
out-of-pocket, and $2000 worth of drugs are received. The enrollee then pays
fully for the remaining costs of their drugs until another $2,850 is expended.
Once $3600 is spent out-of-pocket, the enrollee is responsible for only 5% of
additional drug costs.
10. Kisken T. “Navigating the Medicare maze.” Thousand Oaks Star.
Dec 5, 2007:A1.
11. Testimony. Statement of Leslie Norwalk, Deputy Administrator
CMMS, before Senate Subcommittee for Federal Financial
Management Sept 22, 2005. Accessed on April 24, 2008 at
http://www.hhs.gov/asl/testify/t050922.html
12. Bittle S, Johnson J. “Where Does All the Money Go? Your Guided
Tour the Federal Budget Crisis.” Cited by Hurt H. “A Proposed Diet
for the US Budget.” New York Times. March 16, 2008: Bu 8.
13. Wennberg JE, “The 2008 Dartmouth Atlas of Health Care.” Cited
by Pear R. “Researchers Find Huge Variations in End-of-Life
Treatment.” New York Times. April 17, 2008: A17.
The figures were $98,842 at UCLA, $53,432 at the Mayo Clinic.
14. Wennberg JE. Cited by Pear R. “Researchers Find Huge Variations
in End-of-Life Treatment.” New York Times, April 7, 2008: A17.
15. Center for Medicine and Medicaid Services. Cited by AHA Trend
watch chartbook 2005. Accessed March 2, 2008 at
http://www.aha.org/aha/trendwatch/2005/cb2005chapter1.PPT
#275,19,Slide19
16. Kaiser Family Foundation. Medicaid Managed Care Enrollees as a
Percent of State Medicaid Enrollees as of June 30, 2006. Accessed
March 2, 2008 at
http://www.statehealthfacts.org/comparemaptable.jsp?cat=
4&ind=217
17. Wagner L. “Citing national losses of 2.2 billion, physicians closing
doors to seniors.” Physician Financial News. May 15 2002;
20:1,24. Cited by Geyman J. “The Corporate Transformation of
Medicine and its Impact on Costs and Access to Care.” Journal of
the American Board of Family Practice. 2003. 16:443-454.
18. Sack, K. “Universal Coverage Strains Massachusetts Care.”
New York Times. April 5, 2008:A1.
19. Matthews M. “Hillary’s False Claims.” Wall Street Journal.
Dec 1-2, 2007: A12.
20. Hennessy-Fiske M. “Feds fight Medicare fraud.”
Los Angeles Times. Jan 8, 2008: B1.
21. Office of the Inspector General. DHHS. Apr 2004 medicare
payment for power wheelchairs. OIG Report No: OEI-03-02-00600.
Cited by Goodwin JS, Nguyen-Oghalai TU, Kuo YF, Ottenbacher
KJ. “Epidemiology of Medicare Abuse: The Example of Power
Wheelchairs” J Am Geriatr Soc. 2007; February 55 (2): 221-226.
Allegations of Medicare fraud are widespread. Kyphon, a unit of
Medtronic, has been charged with deliberately urging hospitals to
admit patients overnight for a simple outpatient procedure (injecting
a proprietary cement into small fractures in the spine), even though
the admissions were unnecessary, to obtain a much higher
reimbursement from Medicare. Its alleged the hospitals saw the
admissions as a way to raise revenue. More than 4,500 doctors in
the US have used the Kyphon product, the vast majority on an
inpatient basis. Medtronic, in a settlement, will pay the federal
government $75 million, plus interest. Walsh MW. “Medtronic
Settles a Civil Lawsuit on Allegations of Medicare Fraud.” May 23,
2008: C1.
22. Malanga S. “How to Stop Medicaid Fraud.” City Journal Spring
2006. Accessed on January 20, 2008 at
http://www.city-journal.org/html/16_2_medicaid_fraud.html
23. The author of the City Journal article, Steven
Malanga, also notes
that in 2005, a report by Ohio’s inspector general found that state
officials prefer to “educate” those who overbill Medicaid, rather
than consider prosecution. The Ohio Medicaid agency settled a
$500,000 overbilling for $409. In Florida, a $40 million nursing
home fraud case was settled for $100,000. Malanga S. “How to
Stop Medicaid Fraud.” City Journal Spring 2006.accessed January
20, 2008 at
http://www.city-journal.org/html/16_2_medicaid_fraud.html.
24. Leonhardt D. “When Trust In an Expert Is Unwise.”
New York Times. Nov 7, 2007: C1.
25. In 2006, the Medicaid Fraud Control Unit of the Office of the
Inspector General convicted 1,226 individuals, but how many went
to prison? Sweet L. “Preventive medicine and the seven deadly
sins: avoiding discipline against your medical license.” Medical
Board of California Newsletter. Nov 2007: p5.
26. Larrubia E. “Conservator who stole from client gets 1-year jail
term.” Los Angeles Times. Feb 14, 2008: B3.
27. Duhigg C. “Oxygen Suppliers Fight to Keep a Medicare Boon.”
NewYork Times. Nov 30, 2007: A1 at
http://www.nytimes.com/2007/11/30/business/30golden.html?
pagewanted=1&_r=1.
28. “Controversy, Salaries, Rise.” Modern Healthcare July 31, 2006.
and Unitedhealthcare 2006 proxy p 13. Cited by Herzlinger R. Who
Killed Health Care? New York: McGraw-Hill, 2007 p 20.
29. Relman A. “The Health Care Cost Crisis Is All Too Real.”
Wall Street Journal. Nov 26, 2007: A19.
Chapter 5 - Notes
1. According to the Council for Affordable Health Insurance (a trade
association of the health insurance industry), there are more than 1900 state
mandates, which include such services such as chiropractic and mental health.
Matthews M. “Hillary’s False Claims.” Wall Street Journal. Dec 1-2 2007: A12 .
Idaho has 14 mandates, Minnesota 63. Matthews M. “A Health Insurance Solution.”
Wall Street Journal. Dec 12, 2007: 18). Massachusetts mandates insurers to
cover 40 benefits, including hair prostheses and chiropractic services. Dalmia
S. “Saying No to Coercive Care.” Wall Street Journal. Jan 31, 2008: A16. For
some of these mandates, their primary, albeit not sole basis, is often legal
and administrative, and have less to do with the specific medical needs of the
patient. Together with defensive (tort-based) medicine, they constitute a
significant part of the spectrum of legalic medicine.
2. Consolidated Omnibus Budget Reconciliation Act of 1985.
3. Girion L. “How to get and keep your health covered.”
Los Angeles Times. Aug 12, 2007: C1.
4. Editorial. “Emergency Room Delays.” New York Times. Jan 19,
2008: A30.
It is not just emergency rooms that are shutting down. In Los
Angeles County, 15 general acute care hospitals have closed since
2000, to a large extent because of mandated, unreimbursed care of
illegal immigrants. Steinhauer J. “A City Where Hospitals Are as Ill
as the Patients.” Los Angeles Times. June 5, 2008: A1.
5. New Jersey has such a regulation. When enacted in 1994, the
monthly premium for a low end policy in New Jersey was $463. It is
now $1726. Matthews M. “A health insurance solution.” Wall
Street Journal. Dec 12, 2007: p18. Florida, however, has recently
enacted legislation that will allow insurers to provide low cost,
stripped-down, bare bones policies that will sell for no more than
$150 per month. To make the policies affordable, insurers will no
longer be mandated to cover services such as podiatry and
acupuncture. The insurers will be prohibited from denying coverage
based on age or pre-existing conditions. Sack K. “New Florida Law
Allows Low-Cost Health Policies.” New York Times. May 22, 2008:
A18.
6. This is like a homeowner calling an insurance company as his
house is burning, with the insurance company mandated to provide
coverage. This may be a cartoonish view. Many of the ill people
who have no insurance are in this status because they lost their jobs,
and could not afford COBRA premiums, or the COBRA ran out.
7. Alonso-Zaldivar R, “Critics reject claims of GOP health proposals.”
Los Angeles Times. Nov 20, 2007:A1. Wellpoint states 8% of their
membership (those with chronic diseases such as asthma, congestive
heart failure, end stage renal disease, depression, and those with
high risk pregnancy) accounted for 70% of their costs. Accessed on
April 11, 2008 at http://www.secinfo.com/d14D5a.227pt.htm1996 .
8. Fuhrmans V. “Insurers Pressed To Pay More For Prostheses.” Wall
Street Journal. March 11, 2008: D1.
9. Vara-Orta F. Language gaps hinder doctor-patient relationships.
Los Angeles Times. Nov 23 2007: B3.
There is a published case where lack of translation is purported to be
responsible for quadriplegia, and a $71 million malpractice
judgment. Flores G. “Language Barrier to Health Care in the US.”
New England Journal of Medicine.2006; 353:p 229-231. An 18 year
old Spanish speaking male reported he was “intoxicado” before
collapsing. Paramedics took the word to mean intoxicated, and for
36 hours in the hospital he was worked up for a drug overdose. The
comatose patient was eventually diagnosed as having an
intracerebellar hematoma with brain stem compression, and a
subdural hematoma secondary to a ruptured artery. The meaning of
“intoxicado” in Spanish is nauseated. Without knowing the details
of the case, I do not see how language played a role here. Any
comatose patient, whether intoxicated or not, needs brain imaging
(CAT scan or MRI), which would have made the diagnosis.
Intoxicated patients may have fallen, struck their head, and
suffered traumatic brain injury, as here.
10. Dubner SJ, Levitt SD. “Unintended Consequences.
Why do well-meaning laws backfire?” New York Times Magazine.
Jan 20, 2009:18
11. Stennes R. “The Toll Road to Mandated Health Insurance.”
Wall Street Journal. Jan 11, 2008: A9.
12. Lloyd-Jones D, Adams R, Carnethon M. “Heart Disease and
Stroke Statistics – 2009 Update.” Circulation. 2009; Jan 27;119(3):
e21-181 Epub 2008 Dec 15, at
http://circ.ahajournals.org/cgi/content/full/119/2/e21.
13. Edelson E. “Deaths From Heart Disease, Stroke Down 30%.”
Dec 5, 2008 at http://www.washingtonpost.com/wp-
dyn/content/article/2008/12/15/AR2008121502201_pf.html
14. Maugh T. “Heart, Stroke deaths down.” Los Angeles Times.
Dec 16, 2008: A16.
15. Ravakhah K. “Death Certificates are not reliable: revivification of
the autopsy.” South Med J. 2006; 99(7): 728-33.
The death certificate missed acute myocardial infarction in 22 of 52
autopsy proven cases, (48% errors of omission) and conversely
erroneously reported acute myocardial infarction in 9 of 36 cases.
(25% errors of commission). Multiple organ systems fail as death
occurs, and depending on the doctor’s orientation as to the cascade
of events, any one of several diagnoses may be validly entered.
Contrary to public perception, little thought is generally expended
in filling out most death certificates.
16. Smith Sehdev A, Hutchins G. “Problems with proper completion
and accuracy of the cause-of-death statement.” Archives of Internal
Medicine. 2001 Jan 22;161(2):277-84.
17. Cutler D, DeLong J, Marciarille A. “Why Obama’s Health Plan Is
Better.” Wall Street Journal Sept 16, 2008: A25 at
http://online.wsj.com/article/SB122152292213639569.html .
18. Fraser G, Shavlik D. “Ten Years of Life: Is It a Matter of Choice?”
Archives of Internal Medicine. 2001:161; 1645-52.
19. We are not alone in that sacrilege. “ It’s a myth that preventive
medicine will simultaneously reduce costs and improve
health….prevention has become less about health promotion and
more about early diagnosis….any savings from prevention is
dwarfed by cost…no wonder pharmaceutical companies and
medical centers see preventive medicine as a great way to turn
people into patients – and paying customers”. Welch HG.
“Campaign Myth: Prevention as Cure-All.” New York Times. Oct
27, 2008: D6.
20. The USPSTF, sponsored by the Agency for Healthcare Research
and Quality, under public law 915, is the leading independent panel
of private sector experts in prevention and primary care. US
Department of Health and Human Services. accessed April 3, 2008
at http://www.ahrq.gov/clinic/uspstfab.htm.
21. Yarnall K, Pollak K, Ostbye T, Krause K, Michener J. “ Primary
Care: It There Enough Time for Prevention?” American Journal of
Public Health. 2003; 93:635-641.
22. USPSTF Task Force ratings, accessed April 3, 2008 at
http://www.ahrq.gov/clinic/3rduspstf/ratings.htm
“Fair” is defined as follows: “Evidence is sufficient to determine
effects on health outcomes”, but the strength of the evidence is
limited by the number, quality or consistency of the individual
studies, generalizability to routine practice, or indirect nature of the
evidence on health outcomes.
The USPSTF grades its recommendations based on “the strength of
evidence and magnitude of net benefit (benefits minus harms)”,
into one of five classifications (A,B,C, D, I). Most preventive
health measures fall into the “B” classification, which is defined as
follows:
“The USPSTF recommends that clinicians provide (this service) to
eligible patients. The USPSTF found at least fair evidence that
(the service) improves important health outcomes and concludes
that benefits outweigh harms”. There are two potential problems
here. First, the evidence for grade B interventions, by the
USPSTF’s own definition, is not necessarily good. (It’s the grade A
interventions that had good evidence). Second, that evidence is not
particularly applicable to routine practice.
23. Abelson R. “Medicare Finds How Hard It Is To Save Money.”
New York Times. April 7, 2008: A1.
24. Chopra D, Ornish D, Roy R, Weil A. “Alternative Medicine is
Mainstream.” Wall Street Journal. Jan 9, 2009: A13.
25. Boden W, O’Rourke R, Teo K. “Optimal Medical Therapy with or
without PCI for Stable Coronary Disease.” New England Journal of
Medicine. April 12, 2007; 356:1503-1516. at
http://content.nejm.org/cgi/content/full/NEJMMoa070829v1 .
Stable coronary artery disease is where the intensity and frequency
of cardiac pain is not new nor increasing. The authors of the report
note that in about 1/3 of such stable patients, the disease will
eventually progress to where they would warrant angioplasty.
26. Hayward R. “Performance Measurement in Search of a Path.”
New England Journal of Medicine 2007; 356:951-953.
There are currently 2316 clinical practice guidelines. National
Guideline Clearinghouse. at
http://www.guideline.gov/browse/guideline_index.aspx
27. Boyd C, Darer J, Boult C, Fried L, Boult L, Wu A. “Clinical
Practice Guidelines and Quality of care for Older patients With
Multiple Comorbid Diseases: Implications for Pay for
Performance.” Journal of the American Medical Association. 2005;
1294:716-724.
28. Vonnegut M. “Is Quality Improvement Improving Quality? A View
from the Doctor’s Office.” New England Journal of Medicine 2007;
357: 2652-3.
29. Essick K. “Prescribing Quality in Health Care.”
Wall Street Journal. Feb16-17, 2008: R5.
30. Swidey N. “The Revolutionary.” Boston Globe. Jan10, 2004. p 10.
Accessed on March 3, 2008 at
http://www.chipolicy.org/pdf/5649.Boston%20Globe%20
Donald%20Berwick%2001042004.pdf
Berwick’s position is also taken by Peter Pronovost, in his recently
published book, “Safe Patients, Smart Hospitals”, Hudson Street
Press.
31. Hayward R. “Performance Measurement in Search of a Path.”
New England Journal of Medicine 2007; 356:951-953.
32. Kerr E, Fleming B. “Making performance indicators work:
experiences of US Veterans Health Administration.”
British Medical Journal. 2007; 335:971-973.
33. Jha A, Perlin J, Kizer K, Dudley R. “Effect of Transformation of
the Veterans Affairs Health Care System in the Quality of Care.”
New England Journal of Medicine 2003; 348:2217-2218.
34. Asch SM, McGlynn EA, Hogan MM, Hayward RA, Shekelle P,
Rubenstein L et al. “Comparison of quality of care for patients in
the Veterans Health Administration and patients in a national
sample.” Annals of Internal Medicine. 2004;141:938-45.
35. Gearon CJ. “Military Might. Today’s VA Hospitals are Models of
Top-Notch Care.” US New and World Report. July 18, 2005 p 100.
accessed March 3, 2008 at
http://health.usnews.com/usnews/health/articles/050718/18va_2.htm.
Another article lauding the V.A. in a mass circulation magazine is
Longman P. “The Best Care Anywhere.” Washington Monthly. Jan-
Feb 2005; Accessed May 3, 2008 at
http://www.washingtonmonthly.com/features/2005/0501.
longman.html.
That article has been expanded into a book, Longman P. Best Care
Anywhere. Sausalito: PoliPointPress; 2007. Additional praise for
the V.A is found in Kristof N. “Health Care That Works.” New
York Times . Sept 3, 2009 A25.
36. Rosenthal MB, Landon BE, Normand S, Frank R, Epstein A. “Pay
for Performance in Commercial HMO’s.” New England Journal of
Medicine 2006; 355: 1895-1902.
37. Dept of Veterans Affairs. Performance Pay Recommendation&
Approval VA form 10-0432 Dec 2005.
38. Rosenthal MB. “Non-payment for performance? Medicare’s New
Reimbursement Rule.” New England Journal of Medicine. 2007;
357: 1573-1575. accessed on April 3, 2008 at
http://content.nejm.org/cgi/content/full/357/16/1573.
39. Jesitus J. “Christopher Reeves Death Spotlights Pressure Wounds:
Chronic Ulcers Pose Serious Challenges, Despite Medical
Advantages.” Dermatology Times. November 1, 2004. Accessed
May 1, 2008 at
http://www.highbeam.com/doc/1G1-128663523.html.
40. Revis DR. “Decubitis Ulcers.” e medicine. Oct 25, 2005. Accessed
May 1, 2008 at http://www.emedicine.com/med/topic2709.htm.
41. Fiore MC, Jaen CR, Baker TB et al. “Treating Tobacco Use and
Dependence: 2009 update.” Clinical practice guideline. Available at
www.surgeongeneral.gov/tobacco/treating_tobacco_use08.pdf
42. Dept of Veterans Affairs, APRN Review Board. Q1 Data Report.
VAGLAHS Credentialing & Privileging Office.
43. Oshel RE, Croft T, Rodak J. “The National Practitioner Data Bank:
the first 4 years.” Public Health Rep. 1995 Jul-Aug; 110(4): 383-
394. It received more than 1.5 million inquiries in 1994.
44. The Urban Institute. Cited by Krugman P. “Health Care Horror
Stories.” New York Times. April 11, 2008: A23.
45. Brink S. “ ‘It’s never just one thing’ that leads to serious harm.”
Los Angeles Times. Jan 28, 2008: F1.
46. Hillestad R, Health Affairs. Sept 14, 2005. Cited by Rand Corp.
“Rand Study Says Computerizing Medical Records Could Save $81
billion annually and improve the quality of medical care.” News
release. at http://rand.org/news/press.05/09.14.html.
47. Groopman J, Hartzband P. “Obama’s $80 Billion Exaggeration.”
Wall Street Journal. March 12, 2009: A15.
48. Girossi F, Meili R, Scoville R. “Extrapolating Evidence of Health
Information Technology Savings and Costs.” Rand Health 2005;
page 21.
49. Poissant L et al., “The Impact of Electronic Health Records on Time
Efficiency of Physicians and Nurses: A Systematic review.” Journal
of the American Informatics Association 12 no 5 (2005): 505-516.
Cited by Sidorov J. “It Ain’t Necessarily So: The Electronic Health
Record and the Unlikley Prospect of Reducing Health Care Costs.”
Health Affairs 2006; 25: 1079-1085.
50. Han YY, Carcillo JA, Venkataraman ST et al. “Unexpected
Increased Mortality After Implementation of a Commercially Sold
Computerized Physician Order Entry System.” Pediatrics 2005, Vol
116, No 6. page 1506-1512 at
http://pediatrics.aappublications.org/cgi/content/full/116/6/1506
51. Morgan MW. The VA Advantage: the gold standard in clinical
informatics. Healthc Pap. 2005;5(4):26-9
52. Linder J, Ma J, Bates D, Middleton B, Stafford R. “Electronic
Health Record Use and the Quality of Ambulatory Care in the
United States.” Archives of Internal Medicine 2007; 167:1341.
53. Blumenthal D, Glaser J. “Information Technology Comes to
Medicine.” New England Journal of Medicine. 2007; 356: 2527-
2534.
54. Walsh M, Fonarow G, Yancy C. “Abstract 2382: The Influence of
Electronic Health Records on Quality of Care for Heart Failure.”
Circulation 2008;118:S_714.
55. Ludwick D, Doucette J. “Adopting electronic medical records in
primary care: Lessons learned from health information systems
implementation experience in seven countries.” International
Journal of Medical Informatics. 2008 Vol 78, Issue 1, Pages 22-31.
56. Amarasingham R et al. “Clinical Information Technologies and
Inpatient Outcomes.” Archives of Internal Medicine. 2009; 169:
108.
The authors measured the degree of information technology
automation in 41 hospitals, using a questionnaire they had
developed earlier. They then compared the degree of automation in
the hospitals with mortality, complications, costs and lengths of
stay. They assert significant benefits with the electronic medical
record in all these parameters. Most significantly, they claimed a
55% decrease in “adjusted odds of death” in coronary artery bypass
graft procedures, associated merely with high scores for the
electronic entry of orders. Even if we accept this data as valid, an
accompanying editorial in the journal which published the study
notes the following: “Of course, merely demonstrating that
associations were present does not mean that the associations were
causal. Hospitals that have more HIT (health information
technology) tend to have more resources and probably had better
performance to begin with.” Bates D. “The Effects of Health
Information Technology on Inpatient Care.” Archives of Internal
Medicine 2009; 169: 105.
Of more value, perhaps, would have been a comparison of the
parameters measured in these 41 hospitals, before and after the
implementation of electronic medical records. If the differences
between the hospitals appeared only after the arrival of the
computerized record, it would make a strong argument favoring their
implementation.
As regards the 55% decrease in “adjusted odds of death,” this
number is an “odds-ratio”, a statistical calculation that is not
synonymous with relative risk, and can appear to greatly magnify
differences. An example given elsewhere translates an “odds
ratio” of nearly 10, to a 2.5 greater probability in terms of risk.
(Simon S. “Odds ratio versus relative risk.” Children’s Mercy
Hospitals and Clinics.
http://www,childrensmercy.org/stats/journal/oddsratio.asp).
Regardless, it is not plausible to me that a doctor entering his or her
orders into a computer, rather than a paper chart, would result in a
“55% decrease in the adjusted odds of death.”
The authors also claim financial savings with the electronic medical
record. It appears, however, that the authors did not include the cost
of the systems in their calculations.
The systems can be prohibitively expensive.
The paper was funded by the Commonwealth Fund. A disclaimer
at the end of the paper states that “the Commonwealth Fund was
not involved in the design and conduct of the study; the collection,
management, analysis, or interpretation of data; or the preparation,
review, or approval of the manuscript.” The Commonwealth Fund
has been an advocate for the adoption of the electronic medical
record, well prior to the publication of the paper. Commonwealth
Fund. 2007 Annual Report. “A Prescription for Our Nation’s Ailing
Health Care System.”
http://www.commonwealthfund.org/usr_doc/site_docs/
annualreports/2007/index.htm.
Like the Rand report, this paper will likely be regarded as a
landmark by advocates of the electronic medical record.
57. Himmelstein D, Wright A, Woolhandler S. Hospital Computing
and the Costs and Quality of Care: A National Study. American
Journal of Medicine. 2010. Volume 123, Issue 1. Page 40-46. See
also Lohr. S. Little benefit Seen, So Far, in Electronic Patient
Records. New York Times. November 16, 2009 B3.
58. Health Insurance Premium Growth Moderates slightly in 2006, but
still increase twice as fast as wages and inflation. News release.
Kaiser Family Foundation Sept 26, 2006 accessed April 25, 2008 at
http://www.kff.org/insurance/ehbs092606nr.cfm
59. The patient, RM, was seen June 19, 2008. The clinical reminders
due for that visit were:
Influenza Immunization
Depression Screening
Screen for PTSD (post traumatic stress disorder)
Tobacco Use Screen
Colorectal Cancer Screening
Prostate Cancer Counseling
Hypertension Assessment
Pneumovax
Diabetes Eye Exam
Diabetes Foot Exam
Serum Creatinine & Urine Protein
Diabetes – Lipids annual measurement
Diabetes – HgA1C >9
Hemoglobin A1C
Alcohol Use Screen (AUDIT-C)
Military Sexual Trauma Screen
Colorectal Cancer Screening – H. Card v2
Nutritional Screening –OPT
The Administration mandates that the clinical reminders are a priority
and a patient safety issue. All are to be completed on the visit.
(Department of Veterans Affairs. Memorandum March 11, 2009 to
PAC primary care providers Re: Provider expectations for safe
delivery of care. “You are expected to address and complete your
reminders for each patient at the time of their appointment”). In
effect, the agenda and priorities of the patient’s visit with the doctor
are set miles away, and years earlier, by the clinical reminder
committee. The mandates may or may not be relevant in any given
patient, but more likely than not, from a medical perspective, they
should not be the priority for that visit. Moreover, the time expended
in the mandated documentation of compliance with each of the
mandates typically exceeds the time that would be spent in simply
doing the task. In the managed care setting, between clinical practice
guidelines, medico-legal documentation requirements, and clinical
reminders, it can be problematic whether all the problems the patient
actually presents with will be adequately addressed. The Military
Sexual Trauma clinical reminder is a microcosm of these
quality improvement mandates, and runs as follows:
Patients should be asked the following questions:
1. When you were in the military, did you ever receive uninvited sexual
attention
(i.e., touching, cornering, pressure for sexual favors or inappropriate verbal
remarks etc…..)?
2. When you were in the military, did anyone ever use force or the threat
of force
To have sex against you will?
Please check off the appropriate box below based on the patient’s
responses to the above
questions.
O Patient reported experiencing MST in the past.
O Patient denies experiencing MST in the past.
O Patient declined to answer questions regarding MST.
O Patient unable to participate in the exam.
O Patient is not a veteran.
If patient is interested in receiving more information regarding MST
services, he/she should
be referred to one of the following clinics.
Consult to Mental Health
O referral for F/U female patients.
O referral for F/U male patients.”
Compared to other clinical reminders, this one is quite brief, and
remarkably straight forward. However, for male veterans, and
especially the very elderly, this cannot be a particularly fruitful area
of investigation. That it is mandated is likely a reflection of
legalistic dogma trumping common sense.
There is an aspect to these preventive medicine/quality
improvement mandates that is not of concern to the policy makers
who have imposed them. It relates to the doctor- patient
relationship, and more importantly, to the dignity of the patient. I
suspect that Warren Buffet, Colin Powell, the Dalai Lama, etc.,
would not be subjected to the same scripted screening
questionnaires on sexual trauma, depression, current illicit
drug use, alcoholism, etc., that are being mandated on the American
public. And I suspect they would have a physician, not a
provider. And I suspect their physician would spend most of the
visit facing them, rather than the computer monitor.
The American public is entitled to that same respect.
60. It isn’t that bad at other offices, where apparently clinical reminder
mandates etc haven’t yet been imposed. In those reports, “1/3 of the
time, the doctor was staring at the computer”. Michael Robovsky
MD . Cited by Butterfield S. “Computer screen can be barrier
between doctor and patient.” ACP Internist. Feb 2008 vol 28 no 2
page 7.
61. Only 4% of American physicians have “fully functional” electronic
medical records systems, and another 13% have more basic systems.
By way of contrast, nearly all doctors in Denmark and the
Netherlands use electronic medical records, as do the majority in
Britain, Australia and New Zealand. The New York Times has
editorialized that “it is time to drag private physicians out of the
paper age” Editorial. “Our Pen-and- Paper Doctors.”
New York Times. June 24, 2008 A22.
62. Berthold J. “Investing in EHRs pays off in paperless perks.”
ACP Internist . Feb 2008 Vol. 28, No 2. p1.
63. Medical Board of California Newsletter, page 9, Nov 2007 written
by Jill Silverman, President and CEO of the Institute for Medical
Quality, and Hedy Chang, Vice President, Division of Licensing,
Medical Board of California.
64. Education, primarily in the form of public service announcements
in the mass media, has reduced the prevalence of smoking among
US adults from 24.7% in 1997 to 20.8% in 2006. CDC. “Early
Release of Selected Estimates Based on Data from the 2006
National Health Interview Survey.” Figure 8.2. Prevalence of
current smoking among adults aged 18 years and over: United
States, 1997-2006. at
http://www.cdc.gov/nchs/data/nhis/earlyrelease/200706_08.pdf .
Furthermore, formal smoking cessation programs also reduce
smoking. “Compared with other preventive interventions, smoking
cessation is extremely cost-effective.” Cromwell J, Bartosch W,
Fiore M, Hasselblad V, Baker T. “Cost-effectiveness of the Clinical
practice Recommendations in the AHCPR Guideline for Smoking
Cessation.” Journal of the American Medical Association 1997;
278:1759-1766. For every $2587 expended in such programs, a
year of life is gained. (ibid). With optimal treatment (nicotine
replacement therapy, Bupropion and in person counseling and
group programs), in a motivated population, one year abstinence
rates are reported to exceed 30%. Rennard S, Rigotti N, Daughton
D. “Management of smoking cessation.” UpToDate. January 1,
2009 www.uptodate.com.
65. Centers for Disease Control and Prevention. “Annual smoking-
attributable mortality, years of potential life lost, and economic
costs – United States 1995-1999.” Morbidity and Mortality Weekly
Report. 2002; 51: 300. The report states that adult male and
female smokers lose an average of 13.2 and 14.5 years of life
respectively because they smoke. Another report states that
smokers (in this case British doctors), lose about 10 years of life.
Doll R. et al. “Mortality in relation to smoking: 40 years
observations on male British doctors.” British Medical Journal.
1994; 309:901.
66. Zhang X, Miller L, Max W, Rice D. “The Cost of Smoking to the
Medicare Program.” Health Care Financing Review. Summer 1999.
20(4) 179-196.
67. National Center for Health Statistics. Health United States 2007
Table 27. “Life Expectancy at Birth.” at
http://www.cdc.gov/nchs/data/hus/hus07.pdf#027 .
The actual figure is 77.8.
68. There are 35,967,000 people over age 65 receiving social security
benefits. U.S. Social Security Administration. Office of Retirement
and Disability Policy. Monthly Statistical Snapshot. January 2009.
Table 1. “Number of people receiving Social Security,
Supplemental Security Income or both.” January 2009. At
http://www.ssa.gov/policy/docs/quickfacts/stat_snaphot/ ). They
receive an average of $1,153 per month in benefits, or$13,836 per
year. Social Security Online. Press Office. “2009 Social Security
Changes.” at http://www.ssa.gov/pressoffice/colafacts.htm .
If that 1/5th of the population, i.e. smokers, who currently die at an
average age of 66, now live to the average age of non-smokers, 79,
that adds another 7,193,400 enrollees to social security. The annual
increased expenditures for social security comes to $99,485,882,400
69. Associated Press. “With fewer smokers, states see less tax revenue,”
Feb 15, 2007 at http://www.msnbc.msn.com/id/17170991/ .
The roughly $20 billion government takes in annually from tobacco
is dwarfed by the $157 billion in annual “health-related economic
loses” due to smoking, reported by the CDC (Centers for Disease
Control). Centers for Disease Control and Prevention. “Annual
smoking-attributable mortality, years of potential life lost, and
economic costs – United States 1995-1999.” Morbidity and
Mortality Weekly Report. 2002; 51: 300. There are problems with
the latter figure. “Health-related economic loses” is not defined in
the CDC report, and the data, at least in part, is based on
econometric analysis. It appears “Health-related loses”
encompasses not merely health expenses, but also lost economic
productivity. Actual health expenses (by Medicare, Medicaid,
insurers and out of pocket) appear to be represented by the term
“personal health care expenditure” CMS – Centers for Medicare and
Medicaid Services. Overview. At http://www.cms.hhs.gov/
nationalhealthexpenddata/. Annual totals for personal health care
expenditure are not disclosed in the CDC report. One might
extrapolate, however, from another study, where for smoking, lost
productivity costs were calculated to be over twice that of direct
health care costs. (Rasmussen S, Prescott E, Sorensen T,
Sogaard J. “The total lifetime health cost savings of smoking
Cessation to society.” European Journal of Public Health 2005:
15:601-606, at http://eurpub.oxfordjournals.org/cgi/reprint/15/6/601.
If one accepts this Western European data as being relevant to the
U.S., this would place the direct health care costs from smoking in
the U.S. at $52 billion per year.
Another approach, however, would have the annual health care
expenses of smoking exceeding the original $157 billion figure.
The medical costs of smoking are reported to have represented 8%
of personal health care expenditures in 1998. Centers for Disease
Control and Prevention. “Annual smoking-attributable mortality,
years of potential life lost, and economic costs – United States 1995-
1999.” Morbidity and Mortality Weekly Report. 2002; 51: 300. As
health care spending in the US now exceeds $2.2 trillion annually
(Hartman M, Martin A, McDonnell et al. “National Health Spending
in 2007: Slower Drug Spending Contributes to Lowest Rate of
Overall Growth Since 1998.” Health Affairs 2009;28:246-261 at
http://content.healthaffairs.org/cgi/content/full/28/1/246. ) and if we
presume ‘health care spending to be essentially synonymous with
‘personal health expenditures’, this comes to $176 billion (8% of
$2.2 trillion). The accuracy of this estimate is dependent, of course,
on the validity of the 8% figure. Elsewhere, the figure given is 8%
for men, and 3% for women. Barendregt J, Bonneux L, van der
Mass P. “The Health Care Costs of Smoking.” New England
Journal of Medicine. 1997; 337:1052-1057 at
http://content.nejm.org/cgi/content/full/337/15/1052).
An analysis in the New England Journal of Medicine found that
the financial benefits of the total elimination of smoking would be
only for the short term. Because of the longer life spans that would
result from smoking cessation, more health care costs would be
incurred at advanced ages, and health care costs would actually
increase. Barendregt J, Bonneux L, van der Mass P. “The Health
Care Costs of Smoking.” New England Journal of Medicine.1997;
337:1052-1057 at
http://content.nejm.org/cgi/content/full/337/15/1052).
This study, from the Netherlands, concluded that if no one
smoked, total health care costs would be 7% higher in men, and
4% higher in women, than in the current mixed population of
smokers and non-smokers. The analysis did not include the
impact of prolonged pensions (e.g. social security equivalents)
would have on the public treasury. Other studies support the
contention that there are no financial savings in smoking
cessation. Lippiatt BC. “Measuring medical cost and life
expectancy impacts of changes in cigarette sales.” Prev Med
1990;19:515-32; Manning WG, Keeler EB, Newhouse JP, et al.
“The taxes of sin: do smokers and drinkers pay their way? ”
Journal of the American Medical Association. 1989; 261:1604-9:
Leu R, Schaub T. “Does smoking increase medical care
expenditure?” Soc Sci Med 1983;17:1907-14.
70. Since 1990, physicians and other health professionals have
contributed $179 million in soft money, PACs and individual
contributions, while HMO’s have given $20 million and insurance
companies over $150 million. Managed Care. Opensecrets.org.
Accessed March 24, 2008 at
http://www.opensecrets.org/news/mcare/index.htm .
71. Hamburger T, Roche W. “Congress Closes with a Pork-filled
Flourish: Dialysis Industry, Other Interests that Donated to
Lawmakers Get Lavish End-of-Session Breaks.” Los Angeles
Times, December 21, 2006: A1 . Cited by Herzlinger R. Who
Killed Health Care? New York: McGraw-Hill, 2007: 119.
72. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007: p119 citing The Center for Responsive Politics,
www.opensecrets.org .
73. Dolan K, “Amgen’s Enemies; Doctors are Rebelling Against Its
Marketing practices, Dissidents Think Medicare Is Too Generous
to it and Competition Looms.” Forbes , Oct 30, 2006; 178: 126-
128. Cited by Herzlinger R. Who Killed Health Care? New York:
McGraw-Hill; 2007: p 119 .
74. Herzlinger R. Who Killed Health Care?. New York: McGraw-Hill;
2007: p 119 citing Amgen Inc Proxy filing, dated May 20, 2006
and Biography resource center online.
75. Herzlinger R. Who Killed Health Care? New York: McGraw-Hill;
2007. pp 121-122.
76. Cotter et al. ”Translating Epoeitin Research into Practice: The Role
of Government and the Use of Scientific Evidence; Untested
Research Findings That Have Been Translated Too Quickly into
Policy That Encourages Large Epoetin Doses.” Health Affairs.
2006; 25 :1249-1260. Cited by Herzlinger R. Who Killed Health
Care? New York: McGraw-Hill, 2007 page 123.
77. McGinley L, Hamilton D. “Drug Dispute is Dragged to Capitol Hill
– Amgen, Johnson & Johnson Take Battle over Anemia Drug to
Legislators.” Wall Street Journal. April 22, 20003. p A4; and
Herzlinger R, Slurzberg J, “Note on Health Insurance Coverage,
Coding and Payment” HBS Case No. 304-005, rev August 2006
(Boston: Harvard Business School Publishing, 2003). Cited by
Herzlinger R. Who Killed Health Care? New York:
McGraw-Hill;2007: p 124 .
78. AP. “Rhode Island Insurer to Pay Millions.” New York Times. Dec
14 2007: A24.
Chapter 6 - Notes
1. Several polls, CNN, New York Times, and Gallup, report that
roughly 2/3 of Americans think it is the government’s responsibilty
to guarantee health coverage for all Americans. Jackson D.
“Kucinich is right on healthcare.” Boston Globe Aug 29, 2007 at
http://www.boston.com/news/globe/editorial_opinion/oped/articles/
2007/08/29/kucinich_is_right_on_healthcare/ .
2. Paris J. “Why Prisoners Deserve Health Care.” Virtual Mentor 2008.
10:113-115 at http://virtualmentor.ama-assn.org/2008/02/msoc1-
0802.html. The U.S. Supreme Court, in Estelle v. Gamble 1976,
ruled that under the Eighth Amendment, deprivation of health care
was cruel and unusual punishment. As a consequence of this
decision, health care is mandated for all in custody. Correctional
authorities who infringe on this right may be prosecuted. The result
is what some would argue is a dichotomy, where prisoners are
assured all necessary care, while the law abiding are not. For
instance, Theodore Frank, an inmate in a California prison, and a
child murderer, received cardiac surgery at taxpayers’ expense while
he was incarcerated. People Helping People. Accessed 4/28/2008 at
http://www.wtvzone.com/LadyMaggie/php/AmySueStory.html
Chapter 7 - Notes
1. Angrisano C, Farrell D, Kocher B, Laboissiere M, Parker S.
“Accounting for the Cost of Health Care in the United States.”
McKinsey Global Institute January 2007. accessed April 7, 2008 at
http://www.mckinsey.com/mgi/rp/healthcare/accounting_cost_
healthcare.asp
2. supra at p 10.
3. Editorial. “Medicare for all?” Wall Street Journal. Oct 29, 2007:
p18
4. Zycher B. “Comparing Public and Private Health Insurance:
Would a Single-Payer System Save Enough to Cover the Uninsured?” Medical
Progress Report. The Manhattan Institute. No 5 October 2007. Accessed March 3,
2008 at
http://www.manhattan-institute.org/cgi-bin/apMI/print.cgi
5. Zycher, supra at p 10.
6. Zycher supra at p 9.
7. Perlin JB, Kolodner RM, Roswell RH. “The Veterans Health
Administration. Quality, Value, Accountability and Information as
Transforming Strategies for Patient-Centered Care.” American
Journal of Managed Care. 2004; 10:828-836.
8. Center for Health Transformation. Health Solutions Lab. Veterans
Administration Healthcare System. MyHealthevet. Accessed July
13, 2008 at http://www.healthtransformation.net/cs/veterans_
administration_healthcare_system_my_healthvet.
9. Executive Summary. 2003 Survey of Veteran Enrollee’s Health
and Reliance Upon VA. Dec 2004, accessed on July 12, 2008 at
http://www1.va.gov/vhareorg/dols/soe2003_reportsES.pdf .
10. US Dept of Veterans Affairs. Mississippi and the US Dept of
Veterans Affairs. July 2008 at
http://ww1.va.gov/opa/fact/statesum/msss.asp
11. Executive Summary. 2003 Survey of Veteran Enrollee’s Health
and Reliance Upon VA. Dec 2004, accessed on July 12, 2008 at
http://www1.va.gov/vhareorg/Docs/SOE2003_ReportES.pdf
12. The medical budget of the VHA has grown from $17 billion in
1996 to $36 billion in 2007. Congressional Budget Office. “The
Health Care System for Veterans: An Interim Report.” Congress
of the United States. December 2007 page 9. During this time,
the number of veterans using the V.A. as their primary health
resource has gone from 3.64 million to, by our calculations,
essentially 4,385,622, rather than the nominal figure of 5.5 million
claimed by the VA. The 4,385,622 figure corrects for the 60% of
new enrollees who are not using the VA as their primary health
care provider. I arrive at this figure by the following: As just
noted, as of 2007, the V.A. claims 5.5 million people were treated
at V.A. facilities. US Dept of Veterans Affairs. Mississippi and the
US Dept of Veterans Affairs. July 2008 at
http://ww1.va.gov/opa/fact/statesum/msss.asp.
The increase in enrollees between 1996 and 2007 is 1,857,463
people, but with only 34% of these intending to use the V.A. for
their primary health care, and 31% intending to use the V.A. for
prescriptions only. While prescriptions account for 11% of the
global health budget nationally, in the V.A. they account for 16%,
so I will therefore use the latter figure to calculate the expected
expense to the VA of those who enrolled only for prescription
coverage. The increase in the V.A. rolls of 1,857,463 therefore
translates into an increase equivalent to 742,985 actually using the
V.A. to any substantial degree, giving a total effective number of
enrollees of 4,385, 522. Using this latter figure, there was an
increase in expenditures from $4,670 per enrollee in 1996 to
$8,208 per enrollee in 2007. During this same period, national
health expenditures went from $4,033 per capita in 1996 ($1.068
trillion for 265 million people) to $7,466 per capita ($2.245 trillion
for 301 million people).
Thus, there was no substantive difference in cost containment
between the V.A. and the nation as a whole.
I am alone in asserting that the V.A. has not reduced costs
compared to other health care systems.
“Between 1995 and 2004, the cumulative increase in the VA’s
cost per enrollee was just 0.8%, while that of Medicare was a
whopping 40.4%. Over the same period, the Medical Consumer
Price Index increased by 39.4%. ” Longman P. “Best Care
Anywhere.” Sausalito:PolipointPress; 2007: page 5. see also
Krugman P. “Health Care Confidential.” Economists View. Jan
27, 2006 at http://economistsview.typepad.com/economistsview/
2006/01/paul_krugman_he.html.
But I think I am correct.
13. Health Care Systems: An International Comparison. Strategic
Policy and Research Intergovernmental Affairs, May 2001.
Accessed March 28, 2008 at
http://pnrec.org/2001papers/DaigneaultLajoie.pdf.
14. Anderson G, Hussy P, Frogner B, Waters H. “Health Spending in
the United States and the Rest of the Industrialized World.” Health
Affairs. Chvy Chase: Jul/Aug 2005. Vol 24 Iss. 4; pg 903, 12 pgs.
15. Editorial. “Terminated.” Wall Street Journal. Jan 30 2008: A16.
16. The former director of the CBO calls the legislation “an
accounting slight of hand”. Holtz-Eakin D. The Real Arithmetic of
Health Care Reform. New York Times. March 21, 2010 wk 12.
A similar projection that was made for the last great social
program passed by Congress may be relevant. In 1966, at its
inception, Medicare cost $3 billion per year. The House Ways and
Means Committee estimated, including an allowance for inflation,
that the program would cost $12 billion by 1990. The actual cost
for Medicare in 1990 was $107 billion. Hayward S. Peterson E.
The Medicare Monster. Reason.com January 1993
http://reason.com/archives/1993/01/01/the-medicare-monster
17. Sack K. “With Health Care for Nearly All, Massachusetts Now
Faces Costs.” New York Times. March 16, 2009: A1.
18. Editorial. “National Health Preview.” Wall Street Journal. March
27, 2009: A12.
19. McGaughey B. “The Truth About Mandatory Health Insurance.”
Wall Street Journal. Jan 4, 2008: 11.
20. Range J. “India’s Poor Get Health Care In a Card.”
Wall Street Journal. Aug 26, 2008: A10. At http://1.b5z.net/i/u/
6104257/i/India_Poor_Get_Health_Care_Card.pdf
21. Scelfo J. “After the House is Gone.” New York Times. Oct 23,
2008 D1, citing a MetLife survey 2007 and NY Univ study on
poverty by Edward Wolff.
22. Associated Press. “Health costs rise 5% as coverage gets
skimpier.” Los Angeles Times. Sept 25, 2008: C3.
Chapter 8 - Notes
1. Gawande A. “The Cost Conundrum.” The New Yorker. 7/ 1/ 2009 at
http://www.newyorker.com/reprting/2009/06/01/090601fa_fact_
gawande?printable=true
2. Pear R. “Spending Disparities Stir a Fight In Effort to Overhaul
Health Care.” New York Times. June 9, 2009: A1
3. Fisher E, Wennberg D, Stukel T, Gottlieb D, Lukas F, Pinder E.
“The implications of regional variations in medical spending. Part 1;
the content, quality and accessibility of care.” Annals of Internal
Medicine. 2005; 138: 273-287.
4. Iowa Medical Society. Facts Re: Medicare Physician
Reimbursement. April 2008 at
http://www.iowamedical.org/documents/medicare/gem/
MedicarePhysicianReimbursement.pdf
5. Fisher ES, Staiger D, Gottleib D. “Creating accountable care
organizations: the extended medical staff.” Health Affairs.
2006;26;w44-w57
Chapter 9 - Notes
1. Editorial. “The Corporate Welfare Congress
Wall Street Journal. Oct. 23, 2007: A18
– Refusal to Insure (Nonprofit and For-profit)
