Monthly Archives: January 2010

Medical Malpractice and Health Care Costs

There are a lot of opinions and economists’ assumptions bandied about as facts in the discussions about changing the American health care system. Today I want to look at this assertion: The cost of medical care is high in the United States in large part because of medical malpractice insurance and medically unnecessary, cover-your-ass tests and procedures ordered by trial-wary doctors. But first, let’s take a quick look back at the ground we’ve already covered.

So far I’ve looked at the economists’ arguments that if consumers knew the true cost of their health care, we would choose less expensive options and that patients would use fewer services if we had more of our own money at stake. I’m just a sample of one, but I have trouble believing from my own data that either of these are the true root causes for the high cost of health care in the U.S. It’s possible that I’m an overly conscientious consumer of medical services. And it’s also conceivable that I’m unknowingly proving their models correct. After all, I already spend some of my own money in the form of copays, I don’t go to the E.R. for routine events*, and I’ve turned down certain therapies (even though they might improve my overall health) because they would have meant more out-of-pocket costs to me. Perhaps I’m an outlier. Perhaps the savings from passing along the cost to the patient are overstated. In either case, I doubt the conclusions except at the extreme — having incredibly small copays is probably a bad idea if there aren’t sufficient alternatives to the E.R. or expensive therapies.

Another overstated argument having a kernel of truth is the impact of tort reform. Limiting pain-and-suffering awards and punitive damages would certainly have an effect on possible payments to suing patients and on malpractice insurance premiums? After Missouri reformed its medical damages laws, premiums fell (sometimes by as much as 25% to 30%) because malpractice insurers paid out fewer claims, according to a very thorough article from last September in the Cleveland Plain Dealer. But overall health costs still went up in Missouri, as they did in Texas, which also sets limits on the amount an injured patient can claim.

The reason, as has been reported in the Plain Dealer and multiple other sources, is that the costs related to medical torts are quite small relative to the whole 2.2 trillion dollars of health care spending. The nonpartisan Congressional Budget Office (CBO) estimates that aggressive caps on malpractice claims would result in a reduction of only 0.4% to 0.5% in American health care costs. (More information from the Washington Post about the CBO findings.) While that works out to about $54 billion over 10 years, the figure is nowhere the large figures — anywhere from $100-200 million per year, or roughly 5-10% of all health care spending — that are frequently claimed by tort reform advocates, such as Philip K. Howard did in his Post editorial “Health Reform’s Taboo Topic.”

The high figures are partly based on a 1996 study by two Stanford economists. Here’s how the Plain Dealer described it:

“The authors found wasteful defensive medicine in the treatment of elderly heart disease patients and extrapolated their findings to other areas of health care. But other experts, including the CBO and researchers at Dartmouth College, have been unable to replicate those findings.”

Syndicated columnist Charles Krauthammer has become another frequently quoted source who differs with the new CBO estimate. The Washington Independent casts doubt on his methodology:

Krauthammer cited a study by the Massachusetts Medical Society that found that five out of six doctors said they ordered additional tests, procedures and referrals to protect themselves from lawsuits. He also relies on a much-criticized study from the libertarian Pacific Research Institute on the civil justice system to conclude that “defensive medicine” wastes more than $200 billion a year.

(The doctors in the Massachusetts survey and a similar one done in Pennsylvania were specialists in high-risk fields.)

So, the dollar amounts given by tort reform advocates are (most likely) very overstated — perhaps as much as 40 times. But that doesn’t necessarily mean changing medical malpractice is a bad idea. Five billion dollars a year is a significant amount of money when it comes to providing insurance for people currently without good access to health care. If tort reform can reduce the number of medically unnecessary procedures as it brings down malpractice insurance premiums, it’s likely — though certainly not guaranteed — that these savings would get passed along to patients.

Okay, okay. So it’s only a cost savings of at most $15 per American per year if everyone is covered, but that’s more than zero. Including medical malpractice changes could make a broader package of health care changes more palatable to doctors and insurance groups. Furthermore, it might help build bipartisan support for a bill by giving something to conservative members of Congress who have been asking for these changes for years.

Possible reforms might be roughly based on what the CBO has used in their estimates. Those changes don’t prevent juries from deciding awards based on a patient’s actual loss of income or opportunity; but they do affect pain-and-suffering awards, as well as money meant to punish doctors and hospitals. A recent press release by the American Association of Neurological Surgeons and the Congress of Neurological Surgeons presents these hypothetical modifications with an air of approval:

  • A cap of $250,000 on awards for noneconomic damages;
  • A cap on awards for punitive damages of $500,000 or two times the award for economic damages, whichever is greater;
  • Modification of the “collateral source” rule to allow evidence of income from such sources as health and life insurance, workers’ compensation, and automobile insurance to be introduced at trials or to require that such income be subtracted from awards decided by juries;
  • A statute of limitations—one year for adults and three years for children—from the date of discovery of an injury; and
  • Replacement of joint-and-several liability with a fair-share rule, under which a defendant in a lawsuit would be liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury.

I’ve only just begun to think about how I feel about these possible changes. But my initial reaction, as a patient and as part of a two-income household, is that they seem okay to me. They provide income replacement, cover the cost of possibly new medical conditions, and provide a bit of retributive justice to boot. At the very least, they’re in the ballpark of what I could live with if I were — god forbid — injured by the actions of my doctor.

As health care reform goes, though, it’s definitely not enough.


* – Well, I don’t go to the E.R. for non-emergent care any more. When I was in high school and lacked a primary care physician, my step-father took me there a couple of times. Then again, he worked in the hospital as a paramedic and more-or-less snuck me in after midnight amidst the drunks getting treated for fist fights, those getting treated for alcohol poisoning, and the victims of DUI car crashes. It was probably not the best use of my time or the insurer’s money. But it was where I learned why one of my high school colleagues disappeared — she had to bring her infant twins into the E.R. for colic or croup or whatever. And it was when I learned the importance of having a primary care doctor.

Posted in General, Health Care, This is who we are | Leave a comment

If You Have to Ask the Price … (part 2)

Last week NPR’s Planet Money podcast broadcast an interview with the economist Jonathan Gruber, who said that many Americans get too much insurance. Basically, for some of us everything is covered, and consequently we “use too much healthcare.” According to Mr. Gruber’s data, 1/3 of our healthcare spending is “unnecessary.” For him and his colleagues, the simple answer: Have people pay for more of their care, which encourages us to think more carefully about whether we should go to the E.R. or to a specialist. “When people are charged for their healthcare, they use less [of it], and they’re no worse off for their health.”

There are limits, he concedes; and defining “necessary care” turns out to be rather difficult. And everybody involved in the conversation — from the podcast host, to the economist, to the radio tech in the booth — grappled with the fact that some people won’t get treatment for medically necessary things when they “have skin in the game,” because we’re not medical professionals ourselves. We don’t know whether to wait and see if our ailment gets better or if we should go to the E.R. right away.

The context for the podcast was taxing generous health insurance plans. The exact definition of these so-called “Cadillac plans*” is lost to me in a sea of numbers, but $8,500 per individual seems stuck in my head. Now that seems remarkably high and must include the portion paid by the employer — because I think I have one of those plans, and I don’t pay anywhere near that in premiums. (Thankfully!)

But it did remind me that I still didn’t know how much my medical expenses are. I know how much I pay a year in medical insurance, but not what that buys. Am I getting a good deal? Do I have too much insurance?

After a quick call to Blue Cross Blue Shield, I had the keys to the castle and could find online all of my 2009 medical expenses, as billed to my insurance. (This turns out to be rather more than what they actually paid. We’ll come back to that after the numbers.)

Date Provider Type Charged Allowed Copay Reimbursed
4/30/09 Hospital Lab Ancillary 186.00 66.85 0.00 36%
5/18/09 Hospital Lab Ancillary 83.00 45.76 0.00 55%
8/7/09 Hospital Lab Ancillary 365.00 90.06 0.00 25%
11/19/09 Hospital Lab Ancillary 79.00 30.43 0.00 39%
10/22/09 Dentist Dental 177.00 169.04 0.00 96%
3/6/09 Pump Supply Company DME 684.00 521.36 0.00 76%
5/29/09 Pump Supply Company DME 684.00 521.36 0.00 76%
8/31/09 Pump Supply Company DME 684.00 521.36 0.00 76%
12/8/09 Pump Supply Company DME 684.00 521.36 50.00 76%
11/2/09 Primary Care Physician Drug 49.01 9.01 0.00 18%
7/20/09 PCP’s Lab Lab 287.65 71.81 0.00 25%
8/10/09 PCP’s Lab Lab 224.35 62.36 0.00 28%
10/29/09 PCP’s Lab Lab 117.65 37.37 0.00 32%
5/18/09 Endocrinologist Medical Care 410.00 238.87 10.00 58%
8/25/09 Endocrinologist Medical Care 305.00 177.99 10.00 58%
9/28/09 Ophthalmologist Medical Care 145.00 84.37 20.00 58%
10/29/09 Primary Care Physician Medical Care 138.00 84.37 20.00 61%
12/1/09 Endocrinologist Medical Care 321.00 186.79 20.00 58%
1/5/09 Endocrinologist Medical Care 305.00 177.99 10.00 58%
3/27/09 Ophthalmologist Medical Care 273.00 164.42 10.00 60%
8/10/09 Primary Care Physician Medical Care 138.00 92.38 10.00 67%
7/20/09 Primary Care Physician Medical Care 789.00 376.27 10.00 48%
$7,128.66 $4,251.58 $170.00 60%

The “Ancillary” charges are for lab work, mostly HBA1c, micro-albumin, and lipid panels. For some reason they are coded by Blue Cross differently than “Labs.” Those four expenses labelled “DME” are for durable medical equipment supplies: insulin pump reservoirs and infusion sets. And “Drug” is my swine flu vaccination. Altogether, my doctors, dentist, medical labs, and diabetes equipment billed my insurance company for $7,128.

$7,128. Of that, Blue Cross (BCBS) paid the providers $4,251.58 (or about 60%). If I hadn’t had insurance, or if I were self-employed and had to buy into a plan with a smaller pool, I would probably have been required to pay the full amount. But because my BCBS plan has a large pool, they can say to providers, “You asked for $684. We will give you $521.36. What are you gonna do about it?” **

It was something of a shock to me when I first learned about this difference five or six years ago. Because I have the great privilege of serving on the advisory group of my hospital’s diabetes management program, I’ve been able to see “behind the scenes” a bit. It’s always a huge surprise how difficult all of the payment options make things for hospitals. The same services can yield hundreds of dollars of differences in reimbursements. I get the sense that hospitals charge more than things actually cost in order to cover people at a lower part of the “payment mix.”

So what do I think about all this?

  • My experience really does vindicate the people who say that we don’t know how much our health coverage costs. But. . . .
  • I don’t feel like there’s anything I would have gone without if I had more “skin in the game?” Nothing seemed “unnecessary.” But. . . .
  • Even though I really like my insulin pump and there’s evidence that people with type 1 diabetes have better outcomes with pumps than with multiple daily injections, it’s kind of expensive. If I didn’t have good insurance, I probably wouldn’t have one — or rather, there’s a lot more scrimping I would have to do. And there’s evidence that continuous glucose monitors produce better outcomes, too; but I’ve been holding off on getting one because until recently they weren’t covered by BCBS.
  • It’s interesting to note that my annual physical was the most expensive single event ($789, plus $288 in labs). I wonder if many people without insurance (or without enough insurance) skip them because of the cost.
  • There’s no consideration for the quality of care given. If I felt like I got bad service, I can pick a different doctor for the next procedure, but I can’t get my money back.
  • My dentist — who is really great — gives me the option of a basic “100% covered” option (such as a metallic filling) or an other option that he prefers but which has a lower insurance reimbursement to him (such as clear fillings). I’m on the hook for the difference if I go for the more expensive option, and I really appreciate getting the choice. You’ll notice that BCBS paid him 96% of what he submitted for a routine service. Clearly, he’s doing something right.

Personally, I would love to see a single-payer system where there’s one rate for the same procedure no matter who received it or who provided it. This is what Medicare and the VA do, and it mostly works. Of course, not everything is covered, and doctors may see their overall reimbursement rates (and consequently their take-home pay) fall a bit. There’s always something more to think about with healthcare reform. . . .


* — To quote Snoop from The Wire: “Man said if we wanna shoot nails, this here’s the Cadillac. He mean Lexus, but he ain’t know it.”

** — Here is a faithful transcription of the conversation when I called up my new primary care physician. Me: “Hi, is the doctor taking new patients?” Them: “What kind of insurance do you have?” Me: “Blue Cross blah blah blah…” Them: “In that case, yes.”

Posted in Diabetes, General, Health Care, Life Lessons, This is who we are | 3 Comments

Flying First Class

If you have to travel a long distance by plane, Etihad Airways’ Diamond First Class Suite might be the best way to go. Of course the round-trip fares from JFK to Sydney are around $20,000 (per person) for our travel days, or roughly 15 times the cost of our Qantas economy class seats. . . .

Of course, the ultimate way to go is private charter jet. At roughly $10,000 per hour of flight time, that’s another 10 times more than Etihad.

Update: So what do you get for a measly $4,000 or $5,000 more by upgrading from economy to business class? Well, the Cranky Flier recounts a recent experience on Air New Zealand: faster check-in, shorter security lines, a nicer departure lounge, free drinks to wash down your Ambien, a personal concierge, a seat that turns into a bed, and (presumably) better food choices.

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Aussie Aussie Aussie!

What do I know about Australia? Other than the stereotypical — Sydney Olympics and Opera House, Aborigines, Uluṟu, Great Barrier Reef, Aussie Rules Football, kangaroos, killer koala bears, cuddly crocodiles, stinging jellyfish, and beer — so far my experience has been limited to film and music:

Men at Work, INXS, Olivia Newton John, Air Supply, Crowded House, Liam Finn, Nick Cave, Midnight Oil, Kylie Minogue, AC/DC, Helen Reddy, Keith Urban, Divinyls, Hoodoo Gurus, Jet, Wolfmother. (And Savage Garden . . . uh, I’ve been trying for decades to forget them. Thanks for nothing, Wikipedia.)

“The Adventures of Priscilla Queen of the Desert,” “Strictly Ballroom,” “Mad Max,” “The Piano,” “The Proposition,” “Rabbit Proof Fence,” “Flirting,” and of course “Crocodile Dundee” and the “Crocodile Hunter.” Fortunately, I have forgotten most of “Joey.”

Basically, I know next to nothing about the real Australia. But that’s all going to change, because we just bought our tickets to Australia. Yup, we’re taking a four week vacation to Oz for most of June. That should be plenty of time to get thoroughly steeped in Aussie lore and customs.

How are we going to immerse ourselves in this not-so-foreign culture? Well, despite the fact that none of y’all gave us any advice on what to see in Australia, and even though most of my coworkers said that we should go to New Zealand instead of Australia, we’ve worked out a basic itinerary. It starts with a l-o-n-g 23-hour trip from Boston to L.A. to Sydney. We’re going to spend a few days in Sydney; and hopefully soaking up the sun at the beach will help us fight jet-lag. (Sydney is 15 hours ahead of Boston.) Then a comparatively quick plane ride (or two) will take us to Darwin, where we’re renting a camper-van and hitting the big national parks in the Northern Territory — Kakadu, Litchfield, Nitmiluk, Watarrka, Uluṟu-Kata Tjuṯa, and maybe even West MacDonnell — as we drive to Alice Springs over a couple weeks. Personal and marital happiness will probably require staying in one place for a little while in something other than an RV, so we’re spending a week on or near the Great Barrier Reef. Then back to Sydney for a couple days before another 22-hour flight home.

Fun, fun, fun!

(While compiling those lists, I saw that there are SEVEN volumes of “Australia’s Deadliest Destinations.” We probably won’t be watching any of them anytime soon.)

Posted in Australia, Travel | 1 Comment

Why I Love My Job

So you already know that I ♥ my pancreas. I hope that soon I’ll be able to ♥ both my real and “artificial” pancreases. Kerri at Six Until Me has a great write-up of an announcement between JDRF, Johnson & Johnson, and DexCom which should speed my new love’s arrival. (Update: The Diabetes Mine has even more details and an interview.)

And I ♥ my job. I won’t try to take credit for any of the hard work that JDRF-funded scientists and industry R&D folks are doing to make an artificial pancreas a reality. They deserve all of the credit and so much more. But I know for certain that many people at those institutions and others are using our tools as part of the day-to-day toil of making this a reality. (MATLAB’s graphics have a very *ahem* distinctive appearance, which I’ve seen in presentations about the artificial pancreas and diabetes self-management findings.)

The MathWorks‘ mission statement is that we “accelerate the pace of engineering and science worldwide.” Although it might just sound like nice words on a web site or T-shirt, at times like this it makes me very proud to know that we really do make great things happen faster. And knowing that — even as a peripheral actor — I help with progress, well, that inspires me to do my job that much better, by putting a little more care and polish into my features (especially those related to medical imaging), by rooting out all of the hidden software defects that I might otherwise overlook, and by working hard to get as many of those customer-requested features into the product that I can. That may sound a little corny, but I know that everything I do to accelerate the development of our products helps other people accelerate the creation of their products. And I’m not the only one in the office who feels this way.

Now, back to (indirectly) helping other people fight the good fight. . . .

Posted in Diabetes, MATLAB, Software Engineering, This is who we are | 1 Comment