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Controlling Health Care Costs November 18, 2011

Posted by The Armchair Economist in Economics, Fix Health Care, Health, Health Care, Medicine, Technology.
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I cam across an Op Ed on controlling health care costs through bundling.  I’ve read about novel health systems that focus on high risk/frequent fliers that take daily vital signs via telemedicine and other ways to prevent costly admissions (ie: daily weights for CHF patients, daily in person clinic visits to monitor healing wounds in diabetics).    With the enormous cost of admissions, and inefficient management of patients as inpatients (ie: often working up problems that can be worked up/treated as outpatients)  I see this as a potential way to reduce the cost on our health system.

One particularly interesting statement:

Half the population — mostly young people and healthy adults — consumes just 3 percent of costs, while the sickest 10 percent consumes 64 percent

It would be interesting to see where this information comes from – and to compare insurance company statistics to see what percentage of health care costs are consumed by the sickest 10%.   Although I am a proponent of capitalism and the free market, there are areas (health insurance being one of them) where I feel that the free market cannot work.  Too many inefficiencies – administration/marketing/overhead amounting to as much as 25% of costs being directed to non healthcare related costs, too much incentive to game the system (your legal obligation is to minimize payouts to the insurees and to maximize profits).    I’ll elaborate on all of this in a future post (hopefully)

Fixing health care in the US? Part I November 16, 2007

Posted by The Armchair Economist in Business, Commentary, Economics, Fix Health Care, Health, Medicine.

Huge task… I know. I realize that I always come up with ideas to ponder but I’m discouraged in pencilling it down because it means taking hours away from my day to flush out my ideas that will likely be a unintelligible tome. Rather, I will post short segments/thoughts (open to discussion if you feel like commenting) of problems I’ve identified.. as well as possible solutions. Search under the category ‘fix health care’ for future installments.

Problem: The oft cited ‘America spends XX% of their GDP and health care still sucks’
The reason for our high costs are obviously multifaceted…

  • We have the newest technologies, newest procedures, newest pharmaceuticals.. All of this costs money. If I was deathly ill, I definitely want to be in the US with all of its resources at its disposal to cure my illness, over any other country.
  • We subsidize the rest of the world’s health care. The cost of most new technologies are not regulated in the US (ie: manufacturers can charge whatever they want) while prices are heavily regulated by all other nations (ie: thats why drug prices are so much cheaper in socialized systems than in the US), otherwise these nationalized systems would be bankrupt. (likewise, allowing competitive pricing in other countries would likely drive down the prices in the US)
  • Preventative health care is not a priority in the US: Since there are so many insurance companies out there (all focusing on the bottom line) there is no guarantee that the expenditures they lay out today (for a disease you do not have and may not get), would benefit them in the future, since you can always go to another insurance company thus negating their investment in your health. Their solution? Reduce emphasis on ‘low return’ preventative health care, and try to ‘manage risks’ (ie: minimize sick patients on their rosters.. even to the point of canceling policies in the middle of expensive chemotherapy as elucidated by Health Net recently)

Yet for all of our costs, our health doesn’t seem to be any better..

  • Our health isn’t a failure of our health care system, it is a failure of priority and accountability. With a cultural priority on wealth accumulation, work, and leisure time becomes a valuable commodity. Increase in middle class and disposable income means more money to spend on dining out and convenience foods. A cultural focus on higher education is migrating our workforce to a more sedentary service oriented economy. Health care is a means for us to enjoy those steak dinners and burgers yet maintain a ripe old age. (ie: 1 surgery to make up for 30 years of culinary indiscretion, hit me)
  • Our infant mortality rate sucks (#17 according to Michael Moore’s Sicko) Two key reasons that come to mind: the definition of ‘infant’ is different. In the US, infant mortality counts an infant exhibiting any signs of life, regardless of gestational age or size. (ie: high risk, premature babies <28 weeks or less than 1000gr would not be counted as infants in some countries). Additionally, the technology allows us to birth high risk babies that would likely not be carried to term elsewhere. Basically this is a numbers game.. the question is, if you were going to have a high risk baby, what country would you want to be in?
  • Lies, damn lies, and statistics: Statistics can be massaged to support any statement. Lets look at objective statistics.. for exampling by match risk factors (ie: obesity) with outcomes by country.. (I’m not suggesting that US would come out on top)


  • Use our political and economic leverage to allow less restricted pricing by socialized nations This will obviously face substantial resistance. Arguably, we are suggesting to raise the health care costs of other nations so that we won’t have to pay as much (although rightfully, we have been subsidizing R&D for the rest of the world)… probably not the most popular proposal.
  • Increase the accountability of health to the individual: With the exception of genetics, your health is your decision. Your decisions can influence your health in 50 years. Each cigarette you smoke increases your risk for emphysema, lung cancer, coronary artery disease, etc.. why should your decision affect my financial wellbeing (in terms of higher insurance premiums.. to take care of your sick ass in 30 years). Each bag of fries, canister of pringles, slab of filet mignon, and can of soda will increase your chance of obesity, diabetes, hyperlipidemia. How can we influence peoples decisions and make them financially accountable for their decisions? Consumption tax… or Fat and Sugar tax if you will. Taxes collected can be used to subsidize healthcare costs as well as fresh fruits and vegetables (not necessarily to pay for farm subsidies though).
  • Prohibit health insurance companies from being for profit entities: There is an inherent conflict of interest in making money in the insurance industry. While the industry argues that it increases competition and reduces costs to the consumers, all it does is reduce corporate accountability. Ideally insurance works by pooling risk, in a profit motivated world insurance works by reducing costs. By becoming mutual companies where profits are distributed to the policy holders, there is a form of checks and balance.. money saved goes back to people who payed the premiums, and any policy changes that might reduce benefits affects only policy holders.
    • Shift the responsibility of verifying information accuracy on applications to the insurance companies: In response to the Health Net fiasco, insurance companies shall be prevented from changing coverage once they begin accepting premiums. Insurance companies argue that this will foster fraud (ie: people will underreport existing conditions).. I’m not sure why no one has thought of this before, but rather than sitting back and collecting premiums, insurance companies should be responsible for doing due diligence on the health of a prospective client BEFORE they begin accepting premiums rather than while they are undergoing expensive and lifesaving therapy. (I would classify this responsibility as ‘risk management’) This is not as much of a hardship on insurance companies as you would think, insurance companies can protect themselves by easily sharing patient information with each other to verify the accuracy of applications.

Thats all I have for now. I reserve the right to continuing updating this entry for additional points, accuracy, and hopefully citations. I welcome your thoughts to fixing the system.

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One problem (of many) with our system of health care August 21, 2007

Posted by The Armchair Economist in Commentary, Health, Health Care, Politics, Technology.
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Its 1am. I have to be at the hospital in 5 hrs. These mid afternoon naps are killin me I tell ya.

What better way to spend my time than to write about the new developments going on at our favorite health care buyer – Medicare. Medicare announced over the weekend that they will stop paying for procedures that stem from medical errors, ranging from instruments left in surgical patients to patient falls to infections acquired while in the hospital (specifically UTIs from cathed patients). Basically they are only going to pay for treatment relating to what the patient originally presented with… (makes sense right?).. however the reality is that being in a hospital brings a whole host of risks that arent always preventable (not really ‘medical errors’) which brings up another issue.. in order to accurately diagnose a patient, lots of tests need to be run (no, it isnt supposed to be this way..).. but medicare only reimburses a flat rate for each case… (btw. i’m not going to talk about the inexcusable cases where the wrong leg is amputated or where a scalpel is left in the body.. these things happen.. but its so rare that the news media actually decide to write about it.. more of the financial impact to health institutions will come through ‘errors’ such as patient falls and nosocomial infections)

Unfortunately, whatever Medicare does, the private insurance industry will adapt and pervert to their will. It will be interesting to see how things shake out.. for example, how exactly do you minimize the number of times that a 75 year old patient needs to go to the bathroom (ie:to prevent falls)? You can give them a bed pan (very dignified eh?).. or maybe make them ring the nurse everytime they need to go (uh.. good luck with that.. might as well keep a bed pan handy)… or maybe you can just put them on a catheter… wait.. that increases the chance of infection.. for which treatment is no longer covered. Also, regarding preventable infections.. unfortunately until we know how to eliminate bacteria there is no such thing as ‘preventable infections’.. no matter where you are, even in the sterile surgical field, there are bound to be bacteria.. the question is whether the antibiotics and your immune system are up to snuff in dealing with it. The main point is that there are always complications (almost ‘expected’ if you will).. and it is alittle rediculous to say that no complications will ever happen. (it kind of provides indirect validation to people who sue due to bad outcomes rather than bad decision making or medical errors).

What we need is to close the liability gap between the payer and the care provider. The problem stands in that the liability for error falls in the health care providers hands.. while the purse strings are being controlled by another party who has no liability whatsoever. For example, if a 10y/o kid presents with recurrent headache with nausea and vomiting, the diagnostician has to consider brain tumor (no matter how remote the idea). The physician will order an MRI, the insurance company will come back with ‘we won’t reimburse for an MRI in this case (basically the chances of an brain tumor is very low, while the number of people who have recurrent headaches with nausea and vomiting are very high.. so it is a business decision not to do reimburse for the MRI.. otherwise they would go bankrupt)… but note: they didnt say don’t get it, they just say they won’t reimburse for it, so now, they’ve thrown te ball back into the doctors court. its up to the doctor to decide what to do.. either make the hospital foot the bill or make the patient foot the bill (btw: its very expensive).. If the doctor thinks that its REALLY low on the differential, perhaps they will tell the patient its most likely nothing (or they could be a real bastard and leave it up to the patient to decide if they want it or not ie: not give them any guidance)… but 5 years down the line, if it really happened to be a brain tumor, guess who gets sued? (by the way, doctors have been sued (and lost) by telling patients time and again to get specific tests.. (ie: writing prescriptions time and again).. but the patients never got it.. and when their disease progressed to an advanced stage, they sued the doctor because the doctor never stressed how important it was for them to get the test!! Its actually progressed to the point in which doctors can call CPS (ie: child protective services.. the same people who come if you are caught abusing your children) if parents don’t get necessary tests for their kids (ie: lead screenings)… now if that isn’t an adversarial/defensive relationship, I’m not sure what is. To be fair, I don’t really know how often this is invoked or how accurate it is.. the anecdote was just passed on to me by another doc)

If the insurance companies want to make decisions on what to reimburse for (ie: they think they know enough to make the decision of what is important and what isnt), they need to share some of the liability.

(btw: regardless of how good you think a hospital is or how good the doctors are, you never want to be in a hospital any longer than you need to be.. consider it a risk benefit decision.. )

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