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Listen to Atul Gawande: Insurers Aren't the Problem in Health Care

Dr. Atul Gawande, author of the now-ubiquitous New Yorker article on regional variations in health-care spending, delivered a customarily graceful commencement speech at the University of Chicago's Pritzker School of Medicine graduation. In it, he spoke about the value of positive deviants: the individuals who seem to do thing more cheaply, effectively, and innovatively than the rest of us.

So far as health-care writers go, Gawande is clearly one of those positive deviants. The central insight of his article -- that health-care providers act very differently, with very different impacts, and policies should be implemented to bring the low performers nearer to the high performers -- has been said before, but never so persuasively. And one of Gawande's best practices, I think, was taking the focus off of insurers. Look, for instance, at this word cloud of his original article:

mcallenwordcloud.jpg

Or of his commencement speech:

gawandecommencement.jpg

The word "insurers" doesn't figure into either one. "Doctors" are big, particularly when combined with the words "physicians," and "doctor." "Patients" get a starring role. But not insurers. And there's a reason for that. Put simply, the reason most Americans hate insurers is because they say "no" to things. "No" to insurance coverage, "no" to a test, "no" to a treatment.

But whatever the problems with saying "no," what makes our health-care system costly is all the times when we say "yes." And insurers are virtually never the ones behind a "yes." They don't prescribe you treatments. They don't push you towards MRIs or angioplasties. Doctors are behind those questions, and if you want a cheaper health-care system, you're going to have to focus on their behavior, as Gawande does.

One addendum to this is that to make the insurer-narrative more plausible, many liberals have focused on administrative costs as a key driver in health spending. I don't find that to be a credible explanation, and if people are interested, I can write up a longer post explaining why.

By Ezra Klein  |  June 12, 2009; 2:51 PM ET
Categories:  Health Economics , Health Reform  
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Comments

I mostly agree with this. But you forgot another dimension of the problem, the problem of making sure that individuals do not go bankrupt in the face of medical problems. Insurance companies are notorious for putting lifetimes caps on reimbursement and looking for any excuse to drop people who have insurance once they become sick, looking for any technicality in the original application that they can use as an excuse. So for that part of the problem, insurance companies are part of the problem. I guess if they get regulated to not be able to use pre-existing condition, and to not be able to cherry pick healthy customers, and forced to use community standard premiums for everyone, then they will stop contributing to the problem.

Posted by: mufti2 | June 12, 2009 3:21 PM | Report abuse

Rather than looking at the impact of admin costs, I'd prefer you discuss how current reform bills/proposals do or do not address the cost drivers Gawande identifies.

Is the public/private debate a great red herring that distracts us from genuine, effective reform?

Posted by: humfry | June 12, 2009 3:28 PM | Report abuse

Count me in the camp that would be curious to hear more about your reasoning regarding administrative costs.

Posted by: JPRS | June 12, 2009 3:32 PM | Report abuse

So if insurance companies aren't the problem then why is this debate centering around whether or not to kill them with a public option? Having to "compete" with a taxpayer funded entity with regulatory preferences would surely kill them. I think the correct expression would be "shooting the messenger."

Don't you think some of the regional price disparity in health costs is simply a side effect of innovation? For instance, if one region started using a new technology or technique before other regions there would be a price disparity but if those practices proved effective and other regions began adopting them then that disparity would disappear. Innovation doesn't spontaneously happen everywhere at once. You need individual doctors and regions to start the ball rolling and since this process is constantly happening you will always have some regional price disparities. I'm worried that focusing too much attention on eliminating these disparities could stifle the spread of innovation. Stifling innovation is not exactly a good way to improve the healthcare process in this country and that is the point right?

Posted by: fallsmeadjc | June 12, 2009 3:34 PM | Report abuse

I guess what I was saying above though not in so many words is that cost is not the only problem, otherwise we could just get rid of any insurance coverage whatsoever, whether private or public, and let individuals struggle on their own. But of course we also want people to have coverage, at a reasonable cost of course, that ensures that they do not go bankrupt or are overly burdened when they face medical problems large and small.

Posted by: mufti2 | June 12, 2009 3:39 PM | Report abuse

As an addendum, I can see how other cost-drivers would be major factors, but it's pretty clear that administrative costs are a factor in the cost of health care too.

As an analogy, I can see how, in a hypothetical case involving privatized fire dept. services, you could have redundancies in terms of crew and equipment unrelated to billing/customer service operations.

The fire engines would likely be the biggest cost driver -- especially if there were say, three fire depts. each with its own engine in a jurisdiction that only really needed one fire engine, each competing to serve individuals within the jurisdiction.

However, even in that case you'd also have redundancies in the administration of each separate fire departments.

The net result in this analogy would be a much more costly delivery of fire dept. services than a more centralized, public one -- provided the public one has good responsible public managers who are responsive to complaints from the public. This is the idea behind natural monopolies as we have with utility services.

Related to this topic -- if doctors are the main source of inefficiency (or unnecessary equipment, procedures, some other factor) -- is it possible that a patchwork insurance system still plays a contributing roll in failing to control costs? (albeit an indirect one).

Private insurers typically don't compete for clients on the basis of their providers, so it's not clear to me why they wouldn't squeeze providers, or dump providers who ate into their margins.

Speculating here -- curious to hear what your reasoning is.

Posted by: JPRS | June 12, 2009 3:56 PM | Report abuse

Spoken like a healthy guy who's never had to shop for insurance on the open market!

Health care is fraught with many challenges, test-happy docs is one, yes.

But the insurance industry has created opaque pricing for treatment (how much would I pay for this test if I used this doctor or that; or this insurance plan or that? Impossible to know, as the system is set up now) - balks at paying covered expenses - kicks people off the rolls when they most need insurance.

To succeed in the insurance business requires taking in more than they pay out - so they take money from the healthy and say no too frequently to the sick.

Because everyone knows insurance companies won't pay full dollar for anything, the prices for everything are highly inflated (when my husband broke his ankle, the $20K bill included an $80 ace bandage.)

To let them off the hook completely will result in failure to change health care for the better.

To herald them as heroes because they say "no" to treatment is short-sighted in the extreme.

http://wardonwords.blogspot.com

Posted by: anne3 | June 12, 2009 3:58 PM | Report abuse

There's a little bit of patient blame to go around as well; we demand a lot of care that isn't necessarily good for us.

One funny thing is how in many other countries medicines that require a prescription here...don't.

Posted by: staticvars | June 12, 2009 4:15 PM | Report abuse

I've asked several of my MDs how much something costs (treatment, diagnosis, or drugs), and they don't know. Why don't they know? Because the price charged depends on who pays the bill. How many other things you buy have multiple, and hidden, prices?

Prices are negotiated with the insurers (including Medicare), but only the billing dept. of the providers knows the price a particular payer will charge.

As for admin costs, everything I've read suggests about a 10-15% spread between the actual costs of Medicare patient's admin charges and the charges that insurers bear, which should include the costs of selection pre-coverage and weeding post coverage - plus the costs of fighting with the MDs on service and costs.

In addition, profits are a consideration only for insurance carriers, and they want big profits (>10%?).

Together, its seems like more than 20% of healthcare from insurance companies is unique to them and wouldn't be charged with public options. One buck out of every five!

Ezra, you haven't convinced me. Sure, variations in local/regional practices are major (and hard to change). But admin costs are national and much easier to change by elimination of the costs.

Posted by: JimPortlandOR | June 12, 2009 5:04 PM | Report abuse

Ezra, I have to disagree with you here. Administrative costs especially the costs focused on denying treatments and drugs, delaying payments, forcing excessive administrivia forms, advertising costs, maintaining dividends and share prices for shareholders are all endemic to private insurers and significantly raise health care costs, probably by as much as 20-30%. Insurance companies make money by not paying claims. The longer it takes to pay a claim (by say initially denying payment and then forcing the user to go through a lengthy and onerous appeal process even though the service is covered) the more money they make. This is the brutal calculus of insurers.

Posted by: srw3 | June 12, 2009 5:09 PM | Report abuse

I agree with your commenters here. Let's not misunderstand Gawande's article (which I loved, and agree with completely). He's talking about specialist physicians divorced from whole-cost views of the patient, and recommending procedures partly because they know they'll be paid for.

There are protocols of medical method that take such whole costs, and lifetime care management, into account - and this is why Mayo is way cheaper.

The McAllen model is dysfunctional, and the Mayo model needs to replace it - but still too many people in this country can't buy into either model because they can't afford the coverage it takes, regardless of model.

We fix the insurance because we can. We get government weight (and thus public morality) involved in a more transparent system. Then we might stand a chance of helping the Mayo model prevail.

The insurers themselves are happy wioth the status quo, so while they may not particularly care one way or another, they're in the way because they lobby against any change. They are still the enemy, still the target.

Let's love Gawande, take the time to understand the nuances of his article, and still push very firmly to reform the insurance industry. Stay on target Ezra.

Posted by: wapomadness | June 12, 2009 5:22 PM | Report abuse

I won't speak for how large of an impact the method of reimbursement has, but it's clear that the method of payment isn't an independent issue from physician behavior because, as I know you know, physician behavior is substantially affected by reimbursement patterns.

Here are some examples of ways in which a profit-motivated insurer may be incentivized to behave in ways which are socially inefficient:

1) Insurers recognize that, because their customers change companies from time to time, future health benefits of a procedure should be discounted by the probability that they will no longer be on the hook for a patient's expenses. Thus, there is an incentive to make doctors choose less preventative care.

2) Insurers are motivated primarily by what keeps customers within their company rather than what improves health outcomes. Thus, there's a bias towards uninformed patient preferences over what an informed patient might choose in the same situation.

3) Insurers seek to discourage claims through administrative work. This decreases their costs by decreasing claims, but harms social welfare.

I'm sure you can think of more. I don't think the role of private insurance is the primary driver of health care costs, but I also don't think it should be ignored as a significant one.

Posted by: davestickler | June 12, 2009 5:39 PM | Report abuse

"The fire engines would likely be the biggest cost driver -- especially if there were say, three fire depts. each with its own engine in a jurisdiction that only really needed one fire engine, each competing to serve individuals within the jurisdiction."

The personnel costs will dwarf the cost of fire trucks and other equipment.

Posted by: jwogdn | June 12, 2009 5:49 PM | Report abuse

A very good post from Maggie Mahar (a couple years old, now) explaining why Ezra is basically right here in saying that insurance companies aren't the real problem here.
http://www.healthbeatblog.org/2007/12/health-care-spe.html

The insurance system is big and screwy and inefficient and pretty scummy and in need of a major overhaul (I'd prefer a single payer system, if it were feasible). But, Ezra's right. As a source of waste, it's wasteful, but actually still much less wasteful than other players in the health sector. (Insurers, public and private, are also the only real brake on runaway spending because they can, occasionally, deny claims, and perhaps more importantly, can negotiate prices with doctors and hospitals. Uninsured typically pay much higher rates for medical care because when you're in need of chemotherapy, for example, you're not in a very good bargaining position.)

As a separate matter, a couple posters here complained about denials. The reality is that given that somewhere between 20-30% of medical treatment is wasteful, we should actually want more aggressive scrutiny of claims and more frequent claims denials. The only conceivable way to slow growth in health spending while moving toward (or to) universal insurance requires accepting the idea that someone will need to scrutinize decisions and deny payments for the unnecessary interventions.

Anne--inflated prices come from hospitals and doctors, not insurers. In part, they do this as a negotiating ploy with insurance companies: They charge really high list prices thereby starting their negotiations from a higher point, allowing them to claim they're giving huge discounts and allowing them to profit.

Posted by: brad12345 | June 12, 2009 5:53 PM | Report abuse


there is a reason the article does not discuss for profit health insurance plan behavior

the doctor's article dealt with regional disparities in medicare per patient expence

regional disparities in medicare expense are built into the medicare fee structure

the existence of regional disparities has been discussed for ages

the surprising thing about the article is how it has been framed as a center point in the media narrative

what is striking is the notion that it some how reduces the role for-profit health plans play in the healthcare mess

it does put more light on the behavior of clinicians and their financial representatives

it is commonly agreed that we spend more money for health care than anyother country/economy and while providing less health care per capita

health care is a servive, the resource being spent is labor, the time, effort and skill of people assisting other people in life inhibiting or life threatening situtions

in the us a lot of money allocated for health care is not being spent on health care services to people

no one wants to talk about who is getting the money

health care has been seen as a high profit margin business

our health care situation will improve when resources are applied more effectively

some players have to get less

how much will pharma lose?

how much will medical device companies lose?

how much will for profit health plans lose?

it appears the answer is that taxes will be placed on health benefits and upper middle class and upper class wage earners will lose some income

that is not change i can believe in

how much will medical

Posted by: jamesoneill | June 12, 2009 6:17 PM | Report abuse

economically rational, legally prudent, and products of their environment. The private insurance industry and Medicare are dysfunctional systems that don't reward outcomes, don't reward efficiency, and don't reward skill. Meanwhile, the current tort system scares doctors into practicing excessively expensive, specialist-happy, massive test-ordering, no-evidence based medicine.

The onus shouldn't placed solely -- or even mostly -- on doctors. It's the practice environment, stupid.

To quote a different Dartmouth professor not Elliot Fischer:

"Every system is perfectly designed to get the results it gets." -Paul Batalden.

To change the way doctors practice and the way people receive health care, we need to revamp a lot of things, top to bottom.

-MW

Posted by: WongML | June 12, 2009 6:48 PM | Report abuse

"The fire engines would likely be the biggest cost driver -- especially if there were say, three fire depts. each with its own engine in a jurisdiction that only really needed one fire engine, each competing to serve individuals within the jurisdiction."

The personnel costs will dwarf the cost of fire trucks and other equipment.

Posted by: jwogdn

-------------------------

Correct noted regarding equipment costs for fire dept in the analogy -- although in medical practice there likely are redundancies in technology.

An additional challenge to the analogy might be that, unlike fire personnel, there is a relative shortage of medical personnel, so even under the current health care system there are differences that must be taken into account.

In other respects, the analogy holds regarding administrative aspects (e.g. billing, marketing/sales, etc.)

Competing private fire departments would be the most costly way possible to provide the service in most jurisdictions. I suspect the quality of service would be a net loss in the comparison too. Similarly a patch-work private health insurance and medical delivery system will introduce its own inefficiencies versus more centralized model.

Posted by: JPRS | June 12, 2009 7:47 PM | Report abuse

Ezra,

You are being incredibly disingenuous and misleading with this post. You are implying that Atul Gawande SPECIFICALLY made a case against insurers being a significant problem. He did nothing of the sort. His speech is an address to doctors, about doctors. It doesnt involve insurance companies, because Atul Gawande doesnt know very much about insurance companies, not because he has some kind of inside knowledge that insurance companies "arent a problem."

Just because Gawande didnt talk about insurers to a group of people who dont know how insurers work, and who have no plans to become insurance people themselves, does NOT mean he absolves them of any responsibility.

Insurance companies provide ZERO value to the system. Doctors are essential to the healthcare delivery system, insurers are 100% superfluous. They take the money they "save" by limiting costs and funnel it to private shareholders and CEO mansions. A federal single payer system would do the same job MUCH more efficiently, and instead of funneling their savings to millionaires, they will funnel the money into providing healthcare people need.

Eliminate doctors today and nobody has any healthcare. Eliminate private insurance today and nobody will even miss them.

As Shakespeare said, "first lets kill all the insurance companies." Then focus on making doctors behavior more efficient. Insurance companies are low hanging fruit who deserve no place at the table.

Posted by: platon201 | June 12, 2009 9:42 PM | Report abuse

Gawande does explicitly state that, as far as incentives governing physician behavior is concerned, it matters not who writes the check. Agreed. This is because the checks for physician compensation are ultimately calculated in units of dollars, no matter who the payers are.

So what, then, is the unit of exchange on the other side of the equation, from the provider point of view? In McAllen, it's fee for service. At Mayo, it's salary.

That said, don't be misled by Gawande's explicit denial of a central focus on insurers, as echoed in the title of your post. Of course there are savings to be realized by decreasing administrative costs or eliminating the profit that accures to "middlemen." But implicit in Gawande's portrayal is the sharp contrast between those microcultures in McAllen that seem to be driven by revenue maximization and those microcultures elsewhere that seem to be accomodate positive deviation, which is to say, provision of high-quality, low-cost care. Relieved from the temptations and pressures of fee for service practice, Mayo clinic providers may well be able to aspire to such goals.

I would maintain that there is definitely a value in encouraging positive deviation on the part of all of us, and in writing New Yorker articles which may bend the ear of the president (but too late) and in exhorting young med school graduates to behave responsibly, and in maintaining blogs that keep us up to date on the latest developments in the health care policy world. But I doubt that anything much will change for the better anytime soon without a fundamental reorientation of the incentives which devolve from fee for service payment to providers. May not matter who writes the checks, but it does matter a great deal what the checks are written for.

Posted by: epreisin | June 13, 2009 1:21 AM | Report abuse

I agree that what Gewande talks about, inefficient medical practice, is the biggest driver of waste in our system. But nobody, not Gewande, not you, not Obama has the faintest idea of how to change it. It is very difficult because physicians don't like to admit error. This is apparent in Gewande's article.

Now the administrative waste is not as large, BUT it is low hanging fruit. Simply by passing a law (HR676 for example), we can pick up $500 Billion each year because of the high overhead and bureaucratic demands on physicians together with high drug prices to companies that spend 3 times as much on "marketing" as on R & D. each and every year which we would save if we simply gave Super Medicare (no co-pays or deductibles, few limitations and complete mental, dental, and drug coverage) to everyone. This $500 Billion of savings would allow us to do so while spending no more than we are now spending.

We took the first step when we gave Medicare to the highest risk pool, namely old fogies like me. This was very expensive, but we did it. Now we need to take the second step which will be much easier because it won't cost anything--give Medicare to the rest of the country. Then we can take the third step of reforming delivery. This third step will be very difficult. It has many complex parts. it will require that physicians change their culture It will require us to face difficult philosophical questions like how much is a life worth.

(to be continued)

Posted by: lensch | June 13, 2009 8:09 AM | Report abuse

(continued)

I'm with you. Let's get more efficient practice. Get rid of fee for service. Whatever you want.

But look at the record. We have a system based on private insurance that has not done any of these things. Look at the rest of the industrialized world. They have government run systems, mostly single payer. The few who still have private insurers like Switzerland have heavy regulation (They say, "Insurance companies may not strive for profit."). These other countries have done a much better job at the kind of reform you say you want. Some like GB and Switzerland have eliminated fee for service. Others like France have controlled it. They have a simple one page form for most treatments.

Given this record and, in addition, the waste in our private profit making insurance companies, why in God's name would you want to keep them around?

Look, in the past US auto makers managed to divert outrage about the patently unsafe cars they were building by concentrating interest on drunk driving and speeding. Now, of course these did contribute to the problem, but now we know that they were not as important as unsafe design and improper maintenance. The situation is similar today. The problems Gewande writes about are real; they are very important, but there are the problems he omitted, high overhead of private insurance, the plethora of forms required of physicians, and high drug prices, that, in theory, we could solve today. The powerful insurance industry wants to keep the eye of the public away from these problems, and I am afraid you are helping them.

Posted by: lensch | June 13, 2009 8:10 AM | Report abuse

The private insurers will do everything to preserve the current racket whereby they profit from covering the relatively healthy, while we, the taxpayers, foot the bill for all the expensive-to-insure. For example, they have discouraged enrollement of patients with HIV by exclusing HIV providers from their networks and plans. So yes, the private insurers ARE a huge part of the problem.

Posted by: KCinArlington | June 13, 2009 8:18 AM | Report abuse

Dr. Gawande cites Mayo Clinic and similar organizations as models for health care delivery. What he and other fans of these places fail to mention is that they are non-for-profits and raise considerable operating funds through charitable donations from individuals to major corporations. As a doctor who has had his income decline and overhead rise these past 7 years, I welcome a benefactor to pay my overhead. Many of my colleagues support covering everyone with insurance but worry that reimbursements will drop even further. Some are barely holding on as it is.

Posted by: cfranch98 | June 13, 2009 8:55 AM | Report abuse

cfranch98 - I have a number of physician friends who say things have gotton so bad they are thinking of retiring, but when you press them, it turns out that all of them made well over $100,000, some more than $200,000. They can think about retiring because they have so much socked away, or did have.

Would you mind telling us your adjusted gross (after business expenses) last year so we know what "barely holding on" means?

Thanks.

Posted by: lensch | June 13, 2009 3:51 PM | Report abuse

I'm interested. The admin costs are key to the Canada/US contrast, and the public option debate. Lay it out in a thorough and thoughtful post, please.

Posted by: jjkennedy | June 13, 2009 9:39 PM | Report abuse

Gawande's article in New Yorker very closely reflected material found in Dr. Guy Clifton's 2009 book FLATLINED: Rescusitating American Healthcare. The findings Clifton lays out are an inverse relationship between Medicare costs per recipient and quality of care; a positive correlation between specialist/primary care doc ratio; and a tremendous conflict of interest in doctor owned specialty hospitals.

Posted by: davemaz | June 13, 2009 11:09 PM | Report abuse

mufti2 said:

I mostly agree with this. But you forgot another dimension of the problem, the problem of making sure that individuals do not go bankrupt in the face of medical problems. Insurance companies are notorious for putting lifetimes caps on reimbursement and looking for any excuse to drop people who have insurance once they become sick,


Insurers HAVE TO BE the "bad guy" exactly as Ezra says becuase otherwise people would take advantage. If there were no caps on Physical Therapy for example people would go fovever there and get treated for the sympton but NEVER FIX the problem. At some point physical therapy doesn't work and the treatment plan needs to change.

Same rules apply to what is called drug "step therapy". This works in insurance systems. People need to try the less invasive, more expensive drugs first and IF they don't work or there's a CLINICAL reason why not to take them, then move onto another drug. people don't realize that EVERY insurer has Medical directors that are doctors that guide treatment based on FDA protocols. Its not a bureaucrat somewhere counting his billions. That's where there's a disconnect that Finally Ezra I believe you've hit on something here and I commend you for it. Also most states have limited malpractice awards but providers still practice defensive medicine. Is it always defensive or is it for financial gain? I do wonder sometimes. I would say like in most industries most doctors have the best interests of their patients at heart but some are absolutely about profit and that's wrong.

Posted by: visionbrkr | June 14, 2009 11:01 AM | Report abuse

Dr. Gawande cites Mayo Clinic and similar organizations as models for health care delivery. What he and other fans of these places fail to mention is that they are non-for-profits and raise considerable operating funds through charitable donations from individuals to major corporations. As a doctor who has had his income decline and overhead rise these past 7 years, I welcome a benefactor to pay my overhead. Many of my colleagues support covering everyone with insurance but worry that reimbursements will drop even further. Some are barely holding on as it is.

Posted by: cfranch98 | June 13, 2009 8:55 AM | Report abuse

I'm not as "politically correct" as lensch.

Cfranch, i would ask you WHY many providers participate in an insurance plan to get new patients but then open up their own surgery centers that they OWN and do not have those surgery centers participate on purpose and ONLY perform surgeries there thus leading their patients to medical bankruptcy. And when they are called on the carpet for this as I have done they say that the fact that they own these surgery centers are listed on their "fact sheet" that the patient fills out on a first visit. In fact MANY TIMES providers offices will call insurers to make sure the provider will get paid and when they are quoted out of network benefits for the surgery center they fail to tell the patient this which then causes the patient to have thousands of dollars in bills that would not have been the case.

Posted by: visionbrkr | June 14, 2009 11:08 AM | Report abuse

visionbrkr - Thank you. I love being called "correct" even if it is only politically.

Seriously, I am a mathematcian. If you look at my postings you will see I try to give facts and figures and refernces to support my positions. You can certainly disagree with them, but it would be nice if you also provided some facts.

Here are some more details:

Myth - "It will be very expensive to get good health to everyone."

Fact - Actually there's a way we can have better universal health care at no more than we are now paying (see 5. below). Here are the facts (cf. www.pnhp.org):

1. We waste $100 - $200 Billion a year on the high overhead of insurance companies.
2. We waste $200 - $400 Billion a year on doctors filling out forms for insurance companies.
3. I don't know the compliance cost of patients fighting with insurance companies, but it must also be in the 100's of Billions.
4. We pay the highest drug cost in the world to drug companies that spend twice as much on profit and three times as much on "marketing" as they spend on research. This is about another $100 Billion each year.
5. Because of the above, we could give Super Medicare (few limitations, no co-pays, no deductibles and complete drug, dental & mental coverage) to everyone at no more cost per person than we are now paying.

Other countries with single payer systems get better health care as measured by all the basic public health statistics and they do it at less than half the cost per person. If we build on our rotten system, we will get a health care system with rotten foundations.

Posted by: lensch | June 14, 2009 12:27 PM | Report abuse

lensch,

no problem. I am absolutely not a mathemetician. I don't know where you come up with these numbers and whose agenda it espouses. I am simply a bystander of the system who sees the injustices go on every day. Injustices by doctors, hospitals, insurers (I don't personally deal with pharmecutical companies).

I also don't think jeopardizing 1.4 million jobs (healthcare sector) would help our teetering economy.

Also single payer has its place, just not in the US. Unless you take human nature and more specifically American's human nature and the for profit rationale of ALL Americans out of our culture including all 300 million americans, single payer won't work. You'll always find someone trying to perverse the system for their own gain.

Again I'm just happy that Ezra wrote this article to shine a light on an injustice that has been done for years.

Posted by: visionbrkr | June 14, 2009 12:42 PM | Report abuse

visionbrkr said:

Also single payer has its place, just not in the US. Unless you take human nature and more specifically American's human nature and the for profit rationale of ALL Americans out of our culture including all 300 million americans, single payer won't work. You'll always find someone trying to perverse the system for their own gain.


For example if you as I believe you want to do give Medicare style for all and cover every benefit how will that keep checks and balances to stop abuse. Medicare doesn't even investigate fraud and they readily admit that as its too expensive to.

I have an example. I have a client who is on a "self insured" plan and the owners mother has been getting physical therapy for about 2 years now. The self insured plan allows an "ex-gratia" provision where the company can and does decide to pick up the cost outside the normal terms of the contract which allow 30 visits up to $2000 per year in benefit that the employer selected. The physical therapist stopped her treatment saying she didn't need it when her coverage ran out and she was moved to private pay and balked at paying his prices. Then when ex-gratia came into play, she "needed" the treatment again and has been milking her son's company since to the tune of $200 a week.

Posted by: visionbrkr | June 14, 2009 12:57 PM | Report abuse

visionbrkr - You may be correct, but I am afraid you are never going to convince me by giving individual examples while I give the examples of whole other countries (ALL other industrialized countries) where it does work.

You then say Americans are different, but look, in colonial Philadelphia, there was no fire department. Each fire insurance company had its own private fire department. When you bought insurance, you got a medallion to put on your house. If a fire truck from the Green Tree company came to a burning house that had a Penn Mutual medallion, they would let it burn to the ground. After this happened a few times, a municipal fire department was established, a socialized fire department

What Conservatives fail to realize is that some things like health care are best done by cooperation, by government while some things are best done by individuals. Their problem is that they cannot distinguish one from the other.
*****************
I did give you a refernce for my figures, but here is some idea of where they come from:

You can calculate the overhead savings yourself. It is easy if you believe the figure of 15% - 20% for private insurance. If you don't, you can calculate that by looking at their financial statements. It comes to about $150 Billion a year.

According to Alan Sager, Big Pharma spends over a third of their budget on "marketing" whose purpose is to get us to use drugs we do not need or to get physicians to prescribe new expensive drugs when older cheaper drugs work as well or better. We would be better off without it. That would save us about another $100 Billion a year.

It is harder to compute the savings from simplifying physician compliance, but if you have talked to your doctor, you know it has to be enormous. People you may not believe put it in the $200 - $400 Billion range.

Finally, there's the cost of patient compliance. The transition from various private plans to Medicare has been wonderful for me. A recent Commonwealth Fund study shows this is typical. I have no idea how to even estimate this savings, and I know of no studies that compute it, but I bet it too is in the hundreds of Billions a year. I have omitted it from my calculation.

Posted by: lensch | June 14, 2009 1:14 PM | Report abuse

There are a lot of forces that induce doctors to over-order care and unless you address all of those issues, you won't fix the problem. I see mostly HMO patients, so when I order excess care, it costs me money most of the time. I still do it; for patient satisfaction/reassurance, because I'm not sure of my diagnostic skills, for defensive medicine purposes. All of those motives need to be addressed, not just dismissed.

Here is a new Robert Wood Johnson foundation study of the overhead costs that Ezra says are not part of the problem. Of particular interest, note the second part of the study about the overhead costs post-EHR installation.

Posted by: J_Bean | June 14, 2009 1:34 PM | Report abuse

lensch,

you have me convinced that is, I'll be convinced one you have every single American on board to serve for the public good and not their own self interest and or greed. Once you convince everyone to eat healthy. Once you convince all 300 million Americans to think of others before themselves first. Once you convince all the doctors even though tort reform helped them immensely to stop practicing defensive medicine. Once you convince all the patients that doctors are human and don't have all the answers no matter how much we want them to.

Again unfortunately in theory it works perfectly. The problem is that we all don't live in theory.

I believe its better to fix what works than to reach for goals that are unattainable.

Insurance is nothing more than a mechanism to pay and spread risk.

Here are my steps to fixing the system that I expect you to disagree with:

1-get rid of pre-ex and have an individual mandate.

2-tax employer sponsored benefits over the threshold of $13,000 as mentioned in previous articles.

3-use best practices methods and DON'T PAY doctors that don't use these.

4-invest to investigage medicare fraud.

5-nationalize the insurance system. every state has different rules and it is a burden to doctors, employers and patients. Have a national set of rules that must be followed.

6-REQUIRE technology upgrades for providers and insurers.

7-Include a NATIONAL HEALTH CARD that all must carry. Include data on that card, encrypted to allow it to bring to a doctors office so that they can see what doctors you've seen before and the outcomes and issues you have. ALso use it to ensure everyone is covered.

this is just a first basic step but hopefully one that can control some costs while not destroying our countries financial future for years to come. $9 TRILLION in 10 years are way too many entitlements for those that will sit idly by and take advantage of the system.

Posted by: visionbrkr | June 14, 2009 1:38 PM | Report abuse

Well since I have apparently convinced the rest of the industrialized world to act as you suggest, I should have no problem with my fellow Americans.

How are you going to do any of the things you want without the government doing them? Just think how much eaisier it would be, if you didn't have to ride herd on 1,500 different insurance plans? And you still have people in charge, people who says who gets covered for what and how much they get for benefits whose goal is not good health care, not efficient health care, but simply to make money for shareholders and executives. Good luck. You'll need it.

Posted by: lensch | June 14, 2009 3:10 PM | Report abuse

BTW -

1. The total of all malpractice insurance premiums amounts to 0.56% of health care costs.
2. The CBO has examined the idea of defensive medicine. They found no difference in practice between state with limits on tort settlements and those with no limits. Defensive medicine is a myth

Posted by: lensch | June 14, 2009 3:21 PM | Report abuse

Sorry lensch, defensive medicine is not a myth. Docs make decisions on the basis of preventing lawsuits all the time. That the cost of malpractice premiums is minimal or that the decisions don't seem to reflect differences in caps on "pain and suffering" from state to state isn't relevant.

Your two statements address the rationality of those fears of malpractice, not their existence.

Posted by: J_Bean | June 14, 2009 5:02 PM | Report abuse

Here is a quote from the book "The Medical Malpractice Myth" by Peter Baker about one of the many studies on this issue.

"In connection with tort reform legislation proposed in 2003, the CBO looked at the effect of state tort reform on per patient spending by Medicare for a variety of illnesses as well as the overall per capita health-care spending in each state, Using Kessler and McClellan's methods, they 'found no effect of tort controls on medical spending' and concluded that there would be no cost savings from a reduction in defensive medicine."

Posted by: lensch | June 14, 2009 6:59 PM | Report abuse

"Your two statements address the rationality of those fears of malpractice, not their existence"

That's simply not true. I'm not saying ther is no rational reason for defensive medicine; I'm saying that if there were defensive medicine, it would show up in differences in practice between states where it is easy to bring suit and those where it is difficult. It doesn't show up.

The point is that defensive medicine is simple a rationalization for unneeded tests and treatment. Look at the first part of Gewande's article.

Posted by: lensch | June 14, 2009 7:31 PM | Report abuse

Sorry lensch. Your book says that Dr. Kessler and Dr. McClellan proved that changes in tort law don't change physician practice, not that physicians don't take -- possibly quite specious -- fears about malpractice liability into account when making decisions.

Just about every doc who posts comments on any of these blogs (as well as the ones I eat lunch with every Thursday) mentions malpractice as a concern. All of my employers have made me attend a lecture called "risk management" every quarter for almost a decade. However, you (and Ezra) are quite certain that fear of malpractice does not influence doctors because malpractice premiums aren't that big a percentage of health care costs. I don't think that you (or Ezra) really understand the problem.

Posted by: J_Bean | June 14, 2009 7:42 PM | Report abuse

J_Bean - You are absolutely correct. Practically all physicians like the ones in McAllen will say they are influence by the possibility of malpractice. But the point is that this does not affect what they do. They still order the unnecessary tests and treatments in places like McAllen where the probability of being sued is low. It has no effect on their practice or the cost of medicine.

That's what a rationalization is. I don't know why the doctors order the extra stuff, but they try and explain it away by blaming it on the fear of lawsuits even when they know a suit is very unlikely. It has nothing to do with the cost of premiums. That's an entirely separate issue.

Look, physicians also believe fervently that high malpractice premiums are caused by high malpractice settlements when there is no correlation between the two. Just because doctors believe something doesn't make it true even if it concerns their own behavior.

Maybe the problem is in definitions. By defensive medicine I mean ordering unnecessary tests and treatments because the physicians is afraid of being sued. That's a property of how they practice. And as you quote:

"Your book says that Dr. Kessler and Dr. McClellan proved that changes in tort law don't change physician practice"

Posted by: lensch | June 14, 2009 9:34 PM | Report abuse

O.K. I've been thinkling about what you've been saying. You believe physicians are crazy, paranoid. That they fear law suits no matter what the actual possibility of one is. In that case, of course, "tort reform" is useless.

I can live with that as it is functionally equivalent to what I think even though I think you are incorrect.

My final remark is that we are told the doctors are moving to Texas because they know it is very difficult to get sued there. But according to your interpretation, they still practice defensive medicine.

Posted by: lensch | June 14, 2009 9:47 PM | Report abuse

the point of this matter lensch and J_Bean is that while tort reform has helped substantially, currently there are NO mechanisms in place to stop doctors from practicing defensive medicine so if I was a doctor I'd go ahead and continue practicing that way. If there's a 10% change I'd be sued if i didn't perform a specific test but a 0% chance I wouldn't get paid if I did unnecessary tests, I'd chose the latter rather than the former.

Personally, as an example this is why pre-authorizations are in place with insurance companies and even with that they're overdone. But all you need is one story on the 11pm news saying how an insurance company wouldn't pay for "fill in the blank" test and a patient died and that would be the end of that.

Posted by: visionbrkr | June 14, 2009 10:37 PM | Report abuse

Well since I have apparently convinced the rest of the industrialized world to act as you suggest, I should have no problem with my fellow Americans.

How are you going to do any of the things you want without the government doing them? Just think how much eaisier it would be, if you didn't have to ride herd on 1,500 different insurance plans? And you still have people in charge, people who says who gets covered for what and how much they get for benefits whose goal is not good health care, not efficient health care, but simply to make money for shareholders and executives. Good luck. You'll need it.

Posted by: lensch | June 14, 2009 3:10 PM | Report abuse

sorry you won't convince Americans to do that in my opinion.

And don't you realize that the government plan says what things are and aren't covered. Medicare denies claims too. Oh and if their system was fullproof I'd be fine with that but they are as bad if not worse than the insurance industry. At least insurance investigates fraud. Medicare won't spend to do that for some reason and I'd be willing to be unscrupulous providers realize that and only submit fraudulent claims to Medicare. From my understand Medicare only covers treatment for macular degeneration when you've lost vision in one eye. How is that not the worst kind of rationing?

Posted by: visionbrkr | June 14, 2009 10:42 PM | Report abuse

"And don't you realize that the government plan says what things are and aren't covered."

But they are not doing it to make money for executives or stockholders.

The stuff about macular degeneration is another myth. I've heard it said about England and Canada too.

http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=242

Posted by: lensch | June 14, 2009 11:31 PM | Report abuse

lensch,

oh so that's it. But when the waste an inefficency of government is far greater than the "for profit" model isn't that worse? Sorry but my reality is the lesser of two evils.

And why doesn't medicare cover preventative care? dental care? some prescriptions under Part D such as Forteo a drug for osteoperosis of all things is generally not covered. sorry but once a public plan was to overburden the system it would work even worse than it does.

Do you know that in my line of work I call Medicare fairly regularly with regards to my clients and many Medicare employees don't even know that if you're working that Medicare is primary coverage for those whose companies employer under 20 employees? Also in those situations people that apply for Medicare for the first time are told by Social Security on a regular basis that if they are working they don't need Part B even though most insurances ASSUME they have Part B and pay their portion accordingly? Sorry but there is an extreme disconnect in the system of Medicare.

Posted by: visionbrkr | June 15, 2009 7:40 AM | Report abuse

" the waste an inefficency of government is far greater than the "for profit" model"

The overhead for the Federal part of Medicare is 2%; the overhead of for profit companies is 15% to 20%. Canada's overhead is 1.3%

Obama says he can insure the uninsured for $100 Billion a year. Clearly we would save a lot more than that by eliminating for profit companies and lowering drug prices. So we could afford a Super Medicare without spending any more. Medicare today does need some work, but I think it would be easier to do that than control private companies.

The Swiss have 94 private insurance companies that insure evrybody. But they are non-profit. They all have to offer the same basic policy which is written by the government which also tells them how much to charge for it. Physicians have to be paid monthly by the insurance companies. Everyone must have insurance. The government helps those who need financial help.

I could live with that. It sorta works. They have good outcomes. They spend more per person than other countries except for the US, but we spend 50% more per person than they do and they cover everyone and get better results.

Posted by: lensch | June 15, 2009 8:09 AM | Report abuse

lensch,

i'm not talking about overhead and how the goverment tracks it. I'm talking about hundreds of billions of dollars in FRAUD that medicare does not even bother to go after that private insurers have done so fairly effectively.

I likewise could find middle ground with private insurers as mandatory non profits and a good percentage of them are already, although I'm not exactly sure of the figure. I'm not for their profit but rather for fixing what works in this system as opposed to what doesn't work in an almost bankrupt Medicare system.

Posted by: visionbrkr | June 15, 2009 8:35 AM | Report abuse

visionbrkr,

Could you give me a reference that shows that fraud is worse in Medicare than in private insurance companies?

BTW the issue of Medicare going bankrupt is another red herring. It won't go bankrupt if we pay for it. If we eliminate private insurance payments, we'll have plenty of money for a better Medicare.

Also Uwe Reinhardt has computed that in 40 years we will have more per capita GDP (in constant dollars) after paying for Medicare than we do now. This is under very conservative assumptions--high for Medicare and low for GDP.

Posted by: lensch | June 15, 2009 9:05 AM | Report abuse

lensch,


here you go. some startling statistics in there.

http://www.insurancefraud.org/stats.htm

Posted by: visionbrkr | June 15, 2009 9:46 AM | Report abuse

Also Uwe Reinhardt has computed that in 40 years we will have more per capita GDP (in constant dollars) after paying for Medicare than we do now. This is under very conservative assumptions--high for Medicare and low for GDP.


yes because all of the baby boomers will have died i suspect but we have to get to that point by being fiscally sound and Obama's approach is not that.

Posted by: visionbrkr | June 15, 2009 9:47 AM | Report abuse

"yes because all of the baby boomers will have died i suspect but we have to get to that point by being fiscally sound and Obama's approach is not that."

No, it has nothing to do with that. It's a mathematical computation. Here's the basic idea.

Suppose I make $100 and spend $10 for Medicare now. Suppose in 20 years, Medicare costs double to $20, but my income only goes up 50% to $150. Medicare costs have increased from 10% of my income to 13.3%, but the amount I have to spend after paying for health care has gone from $90 to $130.

Posted by: lensch | June 15, 2009 9:54 AM | Report abuse

but the problem is that people's income is increasing at a far less rate than medical cost trends. That's why all the talk of "bending the cost curve". GDP if we're lucky goes up at what 2-3%? Medical cost trend is at 10+% every year. That is unsustainable in the long run.

Posted by: visionbrkr | June 15, 2009 10:00 AM | Report abuse

You didn't read my example. I had Medicare increasing twice as fast as the GDP.

Try again.

Posted by: lensch | June 15, 2009 10:34 AM | Report abuse

here is Reinhardt's discussion:

"If "economic sustainability," then exactly what do people have in mind with that phrase? During the past 4 decades or so, the long-run, smoothed average annual growth rate in real (inflation-adjusted) GDP per capita has been about 2%. Suppose that fell to only 1.5% for the next four decades. The current average real GDP per capita of about $40,000 would then grow to about $72,500 by 2050 in constant-dollar terms. Medicare now absorbs about 3% of GDP, leaving a non-Medicare real per capita GDP of $38,800. It was estimated by the CBO about a year ago that Medicare will absorb about 9% of GDP by 2050. Let’s make that 10%. At these numbers, the non-Medicare real GDP per capita available to today’s little critters who will run America in 2050 will still be close to 70% larger than is our current non-Medicare GDP per capita."

Posted by: lensch | June 15, 2009 10:36 AM | Report abuse

but the problem is that your example is not economic reality. reality is that GDP goes up 2-3% while medical trend costs go up 10+%.

In theory your idea works but only there.

Posted by: visionbrkr | June 15, 2009 10:54 AM | Report abuse

Frankly visionbrk, I would trust Reinhardt's and CBO's figures a lot more than yours. They use current estimates. My example was just to show that there is a big difference between looking at how much something will cost in the future and how much will be left over.

Where did you get the 10% figure?

Posted by: lensch | June 15, 2009 11:59 AM | Report abuse

10% is the cost trend that medical expenses have been going up.

2009 has dropped a bit:

http://www.aishealth.com/ManagedCare/CompanyIntel/PremiumandMedical.html

here's a good link to pricewaterhouse cooper's info on it.

http://www.healthmgttech.com/editorial_whitepages/PricewaterhouseCoopersBehindthenumbers2008.pdf

maybe its not quite been as high as 10% but in the Northeast where I am, it is that high from my own experience.

Posted by: visionbrkr | June 15, 2009 3:50 PM | Report abuse

But we were talking about Medicare costs, not total health care which includes wasteful profit making insurence.

Posted by: lensch | June 16, 2009 7:40 AM | Report abuse

lensch,

this does not include profit. this is true medical cost analysis.

Posted by: visionbrkr | June 16, 2009 12:10 PM | Report abuse

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