I would have to say that I have a generally cheery, optimistic, “can do” disposition that is somewhat tempered by my belief that we have to persevere through adversity brought on by those who subscribe to a variety of reactionary attitudes. (My endearing, sarcastic cynicism stems — most likely — from the recognition that I have these same, conflicting attitudes within myself.) For the most part I am stoically undeterred. I go about my day gathering information, using that to formulate solutions, and acting on them as much as I can.

In short, I’m an engineer.

But I have to say that the uncertain future of healthcare change — I’m hesitant to call it “reform” or “improvement” these days — is really dragging me down. It challenges my fundamental belief that we can come up with good, equitable solutions to social and governmental problems, that we can form a more perfect union. It’s getting harder for me to push down the unwelcome, paranoid, elitist, (probably) untrue feelings that the demagogues are tricking the hoopleheads into ruining my life for inscrutable (but certainly nefarious) reasons.*

But that’s not really helpful. So today I’m going to muddle through in the only possible way I can: by writing unit tests, going to meetings, and listening to Tracy Chapman. (Oddly Tracy’s music — I’ve seen her twice, so we must be on a first-name basis by now — usually cheers me up by reminding me that it could be worse, that it was worse in the late 80s and early 90s, that there’s pain and heartbreak, that we’ve got to keep going.) Because if I can’t make things better right now, at least I can calmly carry on get excited and make things. I can keep doing what I do well and wait to get back into the right frame of mind to think about healthcare again.

* — I do recognize that there are legitimate reasons for disliking the current proposals and/or the way that the legislation might be passed. I’m limiting my resentment to those who object with questions like “Why now? Why here? Why so far-reaching? Why should I give up anything I’ve got? Why should I pay anything to help someone else?” despite all of the evidence of the need for change in order to improve the health, economic security, competitiveness, and essential fairness of the nation.

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Updated on 5 March 2010 at 8:30AM: I added a few more questions that were written down at the office.

It seems like I have a lot of answers about healthcare, but I really don’t. However, I do have some anecdotes and a few facts. And I have done some research when prompted or to fact-check other people’s claims. I even have a lot of opinions that I usually try to keep to myself.

But mostly I have a lot of questions and a rubric for evaluating options. I have a lot of questions. That’s what I do: I ask myself questions that I’d love to have answered before I come up with a firm opinion, if I come up with one at all.

I’ll tell you what I wonder, and I would love to know your questions about healthcare reform and costs.

Here are some of my questions, which I’ll number in case you want to provide your own answer:

1. How should we pay for insurance?
2. How much should individuals have to pay for their healthcare? Should everybody pay the same amount? Should we have tiers of service? Should it be tied to income? Is the important thing equality of coverage or equality of access?
3. How would allowing health insurance competition across state lines impact costs, benefits, and outcomes?
4. Would cross-border insurance competition lower insurance premiums? If so, what are the mechanisms? Would it cause a “race to the bottom” in covered services?
5. What are “health insurance compacts?” Are they run by states, nonprofit organizations, or for-profit companies? Would they promote competition, lower costs, lead to cuts or improvements in covered services, etc.?
6. What’s the proper amount of regulation of insurance companies and healthcare costs and services?
7. How would simplification — going from 51 or so different regulatory schemes and hundreds of insurance plans to a dozen or fewer — affect costs, coverage, and patients’ health?
8. What should be mandated? Why should this vary by state? What’s the right way to determine what’s covered?
9. If we continue to have a system with different mandates, aren’t we going to end up exactly where we are now, with some people covered for some illnesses and others not?
10. What’s the proper role for federalism in healthcare?
11. Does actively preventing chronic illness cost more than treatment?
12. How much of our healthcare spending is attributable to “unnecessary” incentive-based, fee-for-service activities? What are these “unnecessary” services?
13. Is radiology too expensive? Do hospitals buy the appropriate power of scanner? Is there a point where spending more doesn’t get us better results?
14. What impact would electronic health records have on costs and outcomes?
15. What is the cost to hospitals, governments, and the insured for “uncompensated care” provided to the under-insured?
16. Is it okay to bring currently healthy individuals into the insurance pool (thus lowering premiums per capita) without enacting a plan to reduce total healthcare costs at the same time? How will we sustain momentum for cost containment if we don’t?
17. What are the subsidies for insurance premiums and/or healthcare costs that are part of the (current) Democratic plan? How much are they? Who would get them? Where do the funds come from?
18. How do the plans proposed by the House and the Senate reform delivery to “ensure better outcomes” as Kent Conrad (D-ND) said they would on “Meet the Press?”
19. How does the Medicare pricing and reimbursement model impact providers, patients and costs?
20. What does the Congressional healthcare plan do to Medicare? Would the President’s plan move people to Medicaid, as the GOP says? How would it affect taxes, the costs to the states, insurance premiums?*
21. Why does everyone hate Medicaid?
22. Will the fees in the President’s plan increase the cost of healthcare, as John Kyl (R-AZ) suggests? What are these fees?
23. How much healthcare do we really need? Is there a target number?
24. What is the rationale for more government involvement? How do we know its influence won’t mess everything up or politicize coverage?
25. Why aren’t the administrative costs and overhead lower for private insurance companies?
26. With as many people paying so much for care, everybody must know someone who is having a hard time or paying a large part of their income. Why isn’t there something like a “pink ribbon campaign” to mobilize for lower healthcare costs?

Okay, now it’s your turn. Feel free to give voice to what you know in the comments, and please share your own questions. Opinions are fine, but data/evidence-based opinions are even better. Everything civil is welcome.

* — Senator Lamar Alexander (R-TN) said some rather unflattering things about the Democrats’ plan Sunday on ABC’s “This Week.” They’re all unsourced, so I’m going to leave the actual claims unstated. But it’s worth checking them out.

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There are three questions I ask whenever I look at potential healthcare changes:

1. How will it improve patient health outcomes?
2. How will it contain or reduce the cost of healthcare?
3. How will it increase access to healthcare for all Americans?

The first question focuses on the basic purpose of medicine: making or keeping us healthy. In general, it makes little sense to make a change that does not improve our wellbeing. I feel like this frequently gets lost in the conversation. Of course, treatments have costs along with benefits, so . . .

We should also ask, “What kind of value will we get for the money that we spend?” After all, it makes no sense to spend money on healthcare that doesn’t make us healthy or to pick an expensive option that is no better (medically) than a less costly one. Not every drug, procedure, or policy involves such a choice, but many do.

And finally, a variety of changes aim to move people onto insurance rolls or improve access to medication and services. These solutions ideally encourage wellness and move patients away from using the emergency room as a primary care option.

Personally, I think that we have been focusing almost exclusively on the second question: “How will this change reduce my insurance premiums and out-of-pocket costs?” And we rarely ever ask the last one: “How will this change improve the health of my relative, neighbor, coworker, or the guy I don’t know on the bus?” We seem to think that we’re not all in this together, that we’re autonomous healthcare consumers, that we can improve our own outcomes and costs without making changes at the societal level. (Ironically, if we improve everyone’s health, we should see lower overall costs. These questions/issues are all related.)

At least, that’s how I see it.

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From Atul Gawande’s The Checklist Manifesto: How to Get Things Right, p. 44:

In December 2006, the Keystone Initiative [which used checklists in the ICU and integrated executives to help remove roadblocks] published its findings in a landmark article in the New England Journal of Medicine. Within the first three months of the project, the central line infection rate in Michigan’s ICUs decreased by 66 percent. Most ICUs — including the ones at [Detroit's troubled] Sinai-Grace Hospital — cut their quarterly infection rate to zero. Michigan’s infection rates fell so low that its average ICU outperformed 90 percent of ICUs nationwide. In the Keystone Initiative’s first eighteen months, the hospitals saved an estimated $175 million in costs and more than fifteen hundred lives. The successes have been sustained for several years now — all because of a stupid little checklist.

This is the kind of thing that has to happen in every department of every hospital if we’re going to have affordable, first-class healthcare everywhere in the US. Unlike some other changes this one is relatively easy to implement and costs very little, with almost immediate payback.

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Update from the day after: Just so that everyone knows, I’m not singling out any specific people or any particular party. I’m only angry at Congress and the pundits who are more concerned with scoring political points than with improving an obviously broken, expensive system. It’s true that I was angry when I wrote this, but it was an anger born of systemic frustration and not any specific interaction I’ve had. My anger was not directed in a partisan fashion; it’s a truly bipartisan emotion, with enough for each party. But now that I’ve railed, I can get back to the nonpartisan task of looking at all sides of this topic. As always, I welcome practical political dialogue — even of a partisan nature — with anyone and everyone interested in an honest discussion about what’s possible and what the trade-offs of these choices might be. Stay well!

I’m going to take a short break from my usually nonpartisan, constructive mode of looking at healthcare costs and reform. Please forgive me.

The fact that I might be inclined towards partisanship here is not something I relish. Sure, I have my political opinions. (Oh, do I have opinions!) But I’ve changed affiliations a couple times, so I believe that I have a little standing when it comes to understanding the opposing viewpoint. I don’t think either side is the enemy or stupid or destroying America or whatever mean thing one side says about the other. (Yes, it’s sad that’s what gets passed off as political debate at the present time.) So I do believe there’s more than just simple partisanship going on in Congress and around the water-cooler; I can understand why each side is deeply suspicious of the principles that underlie the other’s position.

But I am so very, very angry about what is *not* happening to get the legislation passed. And don’t even get me started about the weak content of the proposals and the counterproposals.

And when I say that I’m “angry,” I don’t mean rhetorical anger. I don’t have the luxury of rhetorical anger. Well, that’s not exactly true; unlike the under-insured, I do have very good coverage, and I live in a place with multiple care-providers for the same condition. But I do have a disease, and I use a lot of healthcare relative to the majority of the population. I don’t want to spend ever more money out of my own pocket each year for something that isn’t going away anytime soon. Worse, I strongly believe that a good portion of each dollar spent on my healthcare does not actually go very far toward providing a better chronic illness experience. And I suspect — but could probably never prove — that if we were able to spend less on disease management, we could probably invest enough of what we might save into actually finding the cure for diabetes and other expensive long-term illnesses.

I also have a nagging fear that I’m only one unfortunate life-event away from being in a truly terrible place with healthcare. If we’ve learned anything over the last couple years — and I’m not sure we have — it’s that even the “good jobs” aren’t always secure and that our wellness depends on being well-employed, which is somewhat out of our control. That’s unconscionable. In fact, it actually sounds un-American to me; and I think that if you disagree with that statement, then you and I have such vastly different notions of the American dream and our possibilities that I wonder whether we actually live in the same country, whether we were taught the same things about who we are as a people, whether we actually are or can be the great nation that we claim to be.

Why am I so angry? After all, I had planned to keep posting rational, dispassionate, argument-by-argument analyses of the different aspects of healthcare and insurance reform, building up to a convincing argument about why we should make a particular set of changes. So what’s happened to make today the day that I lose my composure and get ahead of myself?

It seems that after today’s White House-organized bipartisan healthcare summit, returning to an honest discussion about the need for changes and putting aside ideological differences seems unlikely to happen. So I’m going to be a little petty and then try to redeem myself with some realistic, practical suggestions that ought to be able to get bipartisan support. But right now, I’m angry.

In my black heart, what I really want is (a) for half of Congress to be without health insurance until a law actually fixes what’s broken with American healthcare delivery and spending and (b) for the other half to pay the same percentage of their income for healthcare as the 12% of Americans who pay completely out of pocket. Deep down in that dark place I don’t talk about at parties, I want to take this group of 535 people who are mostly beyond middle age and tell them this: “You haven’t been working, so you’re fired. You don’t have health insurance anymore except what you can get through COBRA (which was passed via reconciliation, I might add). And many of you will have pre-existing conditions so good luck getting reinsured under a generous plan. And since you don’t like governmental influence in the health system, we’re going to deny you Medicare or Medicaid — and SCHIP, too. (Because as rotten as you have been to us for the last few years, you deserve to worry about your whole family, too.) And you have to go home to your district for healthcare; I hope you live in a big city with lots of services, because you’re going to need them eventually. Some of you won’t be very lucky. If these new circumstances bankrupt any of you, I don’t care. Now you can suffer with the rest of us.”

I know, I know . . . it’s petty. But the social justice and humanitarian arguments have been ineffective in moving us toward consensus. Nor have purely economic arguments.* I don’t feel like I’m being hyperbolic when I say I believe healthcare reform is a matter of national survival. If the well-being of the nation isn’t enough to move the Congress forward, then I suspect greedy self-interest is our last hope to get meaningful reform passed. And right now Congress isn’t feeling any pain.

What do I think is “meaningful reform?” Without tipping my hand too much about what it could look like or how it might get implemented — I would like to continue investigating the various aspects of healthcare spending without favoring or dismissing any particular idea — here’s a broad outline of what I would very much like to see:

1. Insure every American by mandate. You can refuse treatments if you want. That’s your business. But you can’t refuse to pay for insurance and/or healthcare. This is the very basis of insurance: Share the economic risk as broadly as possible so that over our lifetimes we pay the lowest possible amount.
2. Ensure that no American can be denied insurance coverage, be dropped from any plan, or be forced to pay more than they can afford. Again, the goal is two-fold: everybody pays a reasonable amount at the same time that everyone has access to healthcare. (BTW, you can’t have this without an individual mandate. Universal coverage requires a universal mandate.)
3. Reduce the administrative costs of private sector health insurance — if we keep that system — to the same level as government run programs (currently 2%).
4. Discourage the use of the E.R. for routine care. For example, we might encourage producing more primary care physicians. We might also need to build more community-based, 24-hour primary care clinics for non-emergent care.
5. Aggressively target the elimination of preventable chronic illnesses. Chronic illnesses — preventable or not — constitute up to 85% of all medical spending.
6. Incentivize the use of evidence-based medicine. This means doctors and hospitals should get bonuses when patients do well and costs are low.
7. Focus on waste reduction. In medicine this means choosing lower cost options (such as generic drugs and older scanners) whenever the outcomes are the same; lowering administrative costs; preventing medical mistakes; reducing the number of unnecessary, duplicated, and purely defensive tests; using electronic medical records that are shared by all healthcare providers; etc.
8. Establish a national health strategy. We lack systemic coordination and goals. Ideas for goals include making wellness more prominent in policy, reducing preventable illnesses by encouraging positive lifestyle choices, improving rural medical access, implementing electronic health records, creating high-quality protocols, etc.
9. Do some one-time changes that are politically palatable but won’t really do very much to lower costs: prohibit companies from advertising prescription drugs on television, over the radio, and in non-medical publications; reform medical malpractice; etc.
10. Create a panel of medical professionals who can set reimbursement rates and maximum costs for all providers and insurers.

I am purposefully steering clear of issues where I think there are multiple good solutions. I don’t know enough about the potential costs, revenues, and savings of the choices. Maybe a single-payer system will make implementation of these goals easiest. Perhaps interstate competition between private insurers will lead to lower costs. If so, how would different states handle different requirements for covered services? Should we eliminate antitrust exemptions for insurance companies? Encourage co-ops? Create public plans? What role should the individual states play? I suspect there’s a place for federalism, with states as laboratories for innovation, but how much? Should we tax Lexus Cadillac healthcare plans? Reasonable people can come up with different conclusions on all these proposals.**

There’s one big, lingering, completely untouched question: “How much healthcare do we really need?” I won’t propose an answer. Everyone wants their healthcare completely covered, whether that’s continuous glucose monitoring supplies, fertility treatment, or experimental therapies for a rare disease. It’s something I grapple with myself. Unfortunately, it’s also the issue that led to the first (tragically) effective attempts to derail reform. (Remember “death panels?”) From a selfish perspective, I would also like to see a system where the chronically ill aren’t forced into higher cost plans.

And for most Americans that’s what it all comes down to: “What’s in it for me?” For Congress it’s a political game. For all the rest of us, it’s our health.

* — Healthcare costs are higher in the US than in any other developed nation. In fact, healthcare spending as a percentage of GDP is 50% higher in the US than in other countries, limiting what companies can pay employees and what individuals can spend and invest. Healthcare costs employers more than $2 per hour per employee, harming US competitiveness. And it’s only getting worse; by the end of the decade, spending will account for 20% of GDP. One out of every five dollars spent in the US will be go toward returning us to health or keeping us well. And on top of all that, Medicare will be insolvent by the end of the decade at current levels of spending, requiring higher taxes or reduced services if costs don’t come down.

** — Simply saying something is “socialism” is not a reasonable counter-argument. Show me why it’s bad. Prove to me that socialized health systems in other democracies have worse outcomes than the United States — because they don’t, and they’re less expensive. If you’re just “red baiting,” then perhaps you should stop, take a moment to reflect, and grow up. I’m back to being civil now; so let’s carry on our conversation without poisoning the well any further, shall we?

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So far, I’ve looked at how much my prescriptions cost (almost $6,000 per year) and how much the rest of my health care costs (about $7,100 or $4,250 depending on who you ask). Adding those numbers up, you get $10,250 – $13,100. My share is a bit higher than the American average of roughly $8,000.

That’s right, American companies and individuals spent an estimated 2.5 trillion dollars last year on health care, or about 16% of GDP. [1] That’s up from $2.2 trillion from two years earlier. [2]

Where are all of those dollars spent? The Kaiser Family Foundation published a briefing paper that breaks down the costs:

• 31% – Hospital care
• 21% – Physician/clinical services
• 10% – Other professional services
• 10% – Retail: prescription drugs
• 7% – Program administration
• 6% – Nursing home care
• 6% – Investment
• 3% – Home health care
• 3% – Retail: Other products
• 3% – Government public health activities

The New York Times presented the numbers slightly differently, but with similar findings for the year 2007:

• 31% – Hospitals
• 24% – Doctors (18%) and clinics (6%)
• 10% – Prescription drugs
• 9% – Nursing homes and health care
• 7% – Dental service, other personal care
• 7% – Administration
• 6% – Research and construction
• 3% – Government public health activities
• 3% – Medical products (other than drugs)

Somewhere in all of those numbers is the amount attributable to medical imaging and diagnostics: about 6% of all spending in 2004 [3 (PDF)]. I’ve been interested in this figure for a while, since part of my work involves helping the engineers who build those high-cost devices and assays.

Overall, the amount spent by publicly administered plans is roughly the same as through private insurance (46% and 42%, respectively) with the rest coming out of pocket (12%).* The cost of administration is significantly lower in public plans than private insurance: less than 2% for Medicare vs. 7% overall.

Furthermore, it appears that there’s a lot of wasted spending in that $2.5 trillion: perhaps as much as 30%.

Based on more than 20 years of utilization research, Dr. John E. Wennberg, director of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School, has established that nearly 30% of U.S. healthcare spending—roughly $630 billion annually—is spent on ineffective, redundant, or inappropriate diagnosis and treatment.

And 75% to 85% of health care spending is dedicated to treating chronic diseases. [4 (PDF), 5] The average per capita spending for the half of Americans without a chronic disease was a mere $994. While these conditions are certainly not all avoidable, many of them are.

Well, that’s enough data for tonight.

* — Basically, 12% of health care spending includes some of the most expensive per-service billings.

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My auntie’s husband — I guess that would make him my uncle — baited me on Facebook into debating healthcare reform. I’ve been a bit coy discussing here what I would like to see in a healthcare reform package, preferring to lay out enough evidence to make my case plausible. But having been called out, I wrote a bit; and it makes sense to post it here.

Since the talk continues about nationalized health care, what about Gov. Deval Patrick in Massachusetts, where just two years into operation, the state’s mandatory health insurance plan is already costing $400 million more than budgeted? State run health care over budget in two years and many want National coverage… hmmmmm

The Massachusetts healthcare reform law was enacted in 2006, and almost immediately the number of uninsured people in the Commonwealth dropped to under 3%.* (The national average is over 15%.) It’s true that this includes an individual mandate with tax peanlties for adults who don’t have insurance through their employers and who also choose not to buy one of the options subsidized by state and federal money. It also requires companies with more than 50 employees to provide coverage or face a penalty. (But I don’t think it says how much of the cost the employer must pay and how much can be passed onto the employee.) The penalties for individuals and companies are modest — up to $912/year for individuals and $295/employee for businesses — and they are intended to get everyone into one insurance pool or another in an effort to lower premiums for everyone.

My uncle is correct about a budget shortfall. Most people can buy into a variety of private health insurance plans, as in most other states. They aren’t part of that shortfall. The Commonwealth Care plan provides coverage for people who make too much money to qualify for Medicaid or SCHIP but not enough to afford most private health insurance plans. I don’t know how much Commonwealth Care has experienced shortfalls, although it certainly has seen some. It doesn’t help that the statehouse sees Commonwealth Care as a place to make up shortfalls in other parts of the state budget, to the tune of $130M last year.

I don’t know if this is the $400M referenced earlier; that sounds a lot like the Medicaid/SCHIP defecit of $378M out of a budget of $8.7B for 1.2M people. That’s roughly 5% over budget, or $300/person in those low-income programs. (Last year the state cut $265M for this program.) Commonwealth Care only has a budget of $880M for about 160K people. But the state administers and subsidizes this low-cost plan, too, so it’s possible it is the program after all.

How much are Commonwealth Care premiums? For someone my age, 35, two-person plans start at $580 per month and run as high as $1,022 for something that looks a lot like what we have now through my employer. Here’s a comparison:

If we’re going to compare a hypothetical federal program with individual mandates to a Massachusetts plan, we should probably only really consider Commonwealth Care. It certainly is true that mandates haven’t really helped lower costs yet; that’s part of the yet-to-be-implemented second part of the reform program. And you may remember that the national economy tanked last year, which pushed a lot of people out of employer-funded programs into Commonwealth Care.

So what do I take from this?

1. Even if we don’t have mandates for coverage, the government is already paying a lot for healthcare. But the mandate itself isn’t driving up the costs.
2. Any program that involves individual/employer mandates needs to include cost control. Getting more people into the pool is necessary, but it isn’t sufficient to lower costs. Having people flee the pool does raise costs even more, though.
3. Be wary of arguments that say insurance competition is all it takes to lower costs.
4. We should focus a significant amount of our political capital on cost reduction mechanisms, but that’s pretty difficult since that’s where the hard choices have to be made: price caps for services and/or drugs; favoring the quality of outcomes over the number of services provided; focusing extra money on prevention and wellness instead of predominantly treatment; encouraging the entry of more physicians assistants and primary care physicians into the system; getting people out of high-cost ERs for primary care; maybe even penalizing people for poor health choices; etc.

But all of those topics are for another time. I need to find out how much they will cost, how much they will save, and how much they will improve our nation’s health.

* — I’m not going to source everything independently. I just don’t have the inclination tonight, since I’m watching the opening ceremonies of the Olympics. But here are the web sites I used to get my (hopefully correct) facts and figures:

• Mass. Health Connector — the official Commonwealth Care site
• Boston Globe: $75m hike sought for health plan
• The “Health Care Reform” section of the Governor’s FY 2010 budget presentation
• Wikipedia: Massachusetts health care reform
• MassResources.org
• New York Times: Massachusetts Health Care Program

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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.

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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.)

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.”

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One thing that I hear from time to time during the debate discussion about healthcare reform legislation goes something like this: “Healthcare is expensive because healthcare consumers are unaware of the true cost of their choices. Patients would pick less expensive care if they knew up front the actual price of the healthcare services and products they use.”*

I’ve always been a bit leery of this argument. It assumes that, if all the information is public, patients will research the costs of providers, even though most patients don’t currently look at the public data about the quality of their doctors or hospitals. Furthermore, it treats healthcare like a bulk commodity, which it isn’t. We patients usually place much more emphasis on on the quality of outcomes doctors provide, how available they are, and the personal relationships we build with them than we do on the cost of their services. Sometimes it may be possible to swap one drug for another; but even then we want the best that we can afford — the one that’s most effective with the fewest side effects — not just the one that’s least expensive. Patients shouldn’t be penalized for choosing a pricier option when the different treatments have different medical outcomes. (Of course, it would be nice if patients were informed when there’s no actual difference in efficacy between two drugs or procedures, especially when one costs a lot more than the other.)

But it occurred to me that I really don’t know the full cost of my healthcare. Maybe the proponents of the “people would pick the least expensive option if they knew better” point-of-view have a point. So I started to uncover these costs today while shopping at CVS, my local pharmacy chain. (Later I’ll post the costs submitted by my doctors to my insurance company.)

I did two things at the pharmacy. First, I bought some over-the-counter items: vitamins, Breathe Right nasal strips, glucose tablets, etc. For them, price absolutely comes into play. A pharmacist had previously confirmed that there’s no actual difference in effect between more expensive name-brand vitamins and the store-branded generic versions. So I bought the bottle of vitamins with the least expensive per-unit price. Ditto for the glucose tablets. (Fortunately the CVS brand tastes pretty good . . . all things considered.) But the generic nasal strips aren’t the same, and I like the Breathe Right versions much better. Since I can afford to pay the 30% price premium, I do.

I also refilled my three prescription medications. The pharmacy tech was nice enough to tell me what the cost would have been if I didn’t have insurance, that is, if I actually had more of my own cash at stake.

• Humalog insulin from Eli Lilly — 2 vials = $242.99
• Freestyle test strips from Abbott Labs — 200 count = $235.98
• Timolol eye drops (generic version) — 15 mL bottle = $31.39

That’s $510.36 for one month of medication. I feel very fortunate that I have good insurance which includes a prescription drug benefit. The monthly cost to me in copays is rather high, about $80, because I somehow manage to hit all three tiers of the benefit ($10 generic, $25 preferred name-brand, and $45 non-preferred drug).

So how about the argument? Now that I know how much my drugs cost — now that it’s no longer hidden behind copays — will I make different choices? For the Humalog insulin, absolutely not. There are less expensive insulins out there, but they either act differently or are no less expensive. And the eye drops are generic, so we’re talking price differences in single-digit dollars . . . billed to my insurance . . . who can use its reimbursement power to negotiate a better price if it so chooses. Those test strips, though. Each costs slightly more than $1. That’s expensive, especially given that I go through 7+ per day.

When my copays on them went from $35 to $45 over the summer, I actually did look at switching to a less expensive option. But I’m very pleased with my meter’s reliability, even if it is a bit long in the tooth. Nevertheless, I check out the Bayer Contour, but the copay was the same, and the full price was comparable, too. What about the “preferred” brands for my insurance? Maybe this sounds like a cop-out, but switching meters is tricky. You have to get the meter — which can be expensive unless you go somewhere where they’re just giving them away to get you hooked — and if you don’t like it you’re stuck with a prescription.

What about using a different vendor? In the abstract, that’s a great idea. At the moment I write this, Wal-Mart is selling 50 count boxes at $39.00, or $156.00 for an equivalent amount to what I get now. (Amazon has even better prices, but this is one of the few times where I’d rather go with Wal-Mart, since they actually have pharmacies, maintain a reliable chain of custody, and would process my insurance.) And I could lower my copay to $90 every three months if I switched to having a 90-day supply mailed to me. So there are options that would lower the cost to me both directly and indirectly (through potentially lower premiums). I think I will try to save myself some money and do that when I exhaust the refills on this prescription.

But I won’t be switching to Wal-Mart as my pharmacy, even though the out-of-pocket price for the same product is one-third less. For one thing, the nearest Wal-Mart is an inconvenient two towns away, while CVS is just down the street. And I don’t like Wal-Mart’s business practices very much, so I try not to shop there. (And, yes, I know that I can afford the luxury of outrage and that many others can’t. Let’s just move along. Nothing to see here.) But most of all, there’s no good reason why I should have to switch pharmacies based on price.

Here I’m getting quite close to validating the point that I started out being leery of. I am insulated from the costs of my medication via copays, so I do possibly make more expensive medical decisions. But I don’t feel that it’s my responsibility to navigate all of the choices of vendors to find the lowest price. The insurance companies should do this, and I’m sure to a certain extent they do. (I’m 90% sure that they can afford to lower copays when you switch from 30-day to 90-day supplies because they work directly with the manufacturers and can negotiate a price.) Medicare has proven that if you say what price you’re willing to reimburse, healthcare providers will go along with that price. One of the benefits of having insurance is to have someone else doing this work for me. No, not “me” . . . “us” . . . the pool of the insured . . . a very large group represented by a company that should be trying to maximize its profits — if you believe in that sort of thing for insurers — by using its market power to drive down prices (just like Wal-Mart does).

But I disagree with the whole “if patients were more aware of the costs, they would spend fewer healthcare dollars” argument from a different angle, too. Everyone without insurance — and even a lot of people with it — are acutely aware of the cost of their healthcare. And they do spend less, but often that’s because they’re forgoing treatment or taking half-doses of medications or skipping checkups or living with chronic, treatable pain or choosing options that cost less but have poorer outcomes.

If we want to control costs, being aware of them is not enough. We should look at actually fixing why costs are high to begin with and why there’s such a large variance between the cost at different stores and for patients with different insurers.

Part 2 . . .

* — Few rarely come out and say it, but there’s usually also the following implied sentiment: “. . . And the way we will make patients aware is by having them pay for their healthcare out-of-pocket before reimbursement or via a healthcare debit card that they’ve paid into via payroll deductions or tax credits.” John McCain lost my vote last year when he laid out a position very similar to this. Seeing these prices today, makes me even happier that this isn’t really a politically viable option.

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