It's not just the right-wing crazies who oppose health reform. In addition, there are many sane Americans who worry about committing a trillion dollars to it. They have a point. We already spend more than twice as much per person on health care as other advanced countries, and our costs are rising faster. How much is enough?
Make no mistake, sky-high and rapidly rising costs are the core problem. If money were no object, it would be easy to provide full care for everyone. But even a perfectly designed system will fail if it is unaffordable, or rapidly becomes so.
So it's crucial to ask just why we are spending so much more than other countries. Where is all that money going? Yet, that question is seldom asked in the current debate, even though it's not logical to try to fix something without understanding why it's broken.
In the trenchant words of Deep Throat, let's follow the money. This year we will spend roughly $2.5 trillion on health care. Although about half that money comes from federal and state governments, most of the total is funneled to private insurers and entrepreneurial providers. Alone among advanced countries, we treat health care like a market commodity to be distributed according to the ability to pay, not like a social service to be distributed according to medical need.
For nearly two-thirds of Americans, we rely on hundreds of private insurance companies to set prices and benefits and pay providers. They profit by refusing to cover the sickest patients and limiting services to others. In fact, we have the only health system in the world based on avoiding sick people. Insurers cream 15 to 25 percent off the top of the premium dollar for profits and overhead (mainly underwriting) before paying providers.
Providers themselves have high billing and collecting expenses to deal with the Byzantine requirements of multiple insurers. The innumerable health facilities, both for-profit and nonprofit, also have high overhead expenses to cover their business costs, executive salaries, and the promotion of their profitable services. Altogether, overhead accounts for at least 30 percent of our health bill. If we spent the same percentage on overhead as Canada, we would save about $400 billion this year.
Our method of delivering care is no better than our method of paying for it. We provide much of it in investor-owned health facilities that profit by providing too many services for the well-insured and too few for those who cannot pay. Most doctors are paid on a piecework basis -- that is, fee-for-service -- which gives them a similar incentive to provide too many services for the well-insured. That is particularly true of specialists who receive very high fees for expensive tests and procedures (like cardiac angiography and MRI's).
Not surprisingly, our ratio of specialists to primary care providers is much higher than in other countries. There is no way to know exactly how much money is wasted in medically unnecessary tests and procedures, but it is probably on the order of hundreds of billions of dollars per year. Many people point to technology as a cause of our high health costs, but the culprit is not technology per se (all advanced countries have the same technologies), but the flagrant overuse of it for financial gain.
In sum, the answer to the question, "Where is all that money going?" is that much of it is diverted to profits and overhead, and to exorbitantly priced and medically unnecessary tests and procedures. Any reform that has a prayer of containing costs, hence being sustainable, must deal with these two massive drains.
Yet, most reform proposals would leave the present profit-driven and inflationary system essentially unchanged, and simply pour more money into it.
That's what is happening in Massachusetts, where we have nearly universal health insurance, but costs are growing so rapidly that its long-term prospects are bleak unless we drastically cut benefits and greatly increase deductibles and co-payments, or change the system. We're learning that health insurance is not the same thing as health care; it may be too limited in what it covers or too expensive to actually use. It is ironic that the President is said to have looked to Massachusetts as a model for national reform, even though the state has the highest health costs on the planet.
To control costs, the President is pinning a lot on electronic records, disease management, preventive care, and comparative effectiveness studies. But while these initiatives may improve care, they're unlikely to save much money because they don't deal with the underlying problem -- a system based on maximizing income, not maximizing health. Promises by for-profit insurers and providers to mend their ways voluntarily are simply not credible. Regulation of the present system is also unlikely to modify profit-seeking behavior very much, without a bureaucracy so large that it would create more problems than it solves.
Nearly every other advanced country has a largely nonprofit national health system that guarantees universal care. Even countries with private insurers, like Switzerland and the Netherlands, require uniform prices and benefits and limit profits. Not only are expenditures much lower in other advanced countries, but health outcomes are generally better. Moreover, contrary to popular belief, they offer on average more basic services, not fewer -- more doctor visits and longer hospital stays, and they have more doctors and nurses and hospital beds. But they don't do nearly as many tests and procedures, because there is little financial incentive to do so.
It's true that there are waits for some elective procedures in some of these countries, such as the U. K. and Canada (although hardly the long lines of desperately ill patients depicted by the Republicans). But that's because they spend far less on health care than we do. If they were to put the same amount of money into their systems as we do into ours, there would be no waits. For them, the problem is not the system; it's the money. For us, it's not the money; it's the system. We already spend more than enough.
Judging by the current debate, it would seem that Americans think they have nothing to learn from other countries, or perhaps that we are all alone in the world. Still, we might be willing to learn from parts of our system that are similar to systems in other countries. Medicare is a single-payer program very much like the Canadian national health insurance system. (Some of the more vociferous town hall meeting protesters seemed not even to know that Medicare is a government program.) The Veterans Health System is a socialized program very much like the U.K.'s national health service. Both deliver better care at lower prices than our private system.
I believe our best bet now would be to extend Medicare gradually to the rest of the population. We could begin by lowering the eligibility age from 65 to 55, then after a few years, drop it to 45, and so on. Medicare is the most popular part of our health system; unlike private insurers, it offers free choice of doctors, it covers all eligible beneficiaries for a uniform package of benefits, regardless of medical history or how much care is needed, and it cannot be taken away by job loss or illness.
But it would need some changes. Its costs are rising almost as fast as those in the private sector, despite the fact that its overhead is much lower, because it uses the same profit-oriented providers. If Medicare were extended to everyone, it should be in a nonprofit delivery system. In addition, fees would have to be adjusted to reward primary care doctors more and specialists less, or better yet, doctors should be salaried. There is now a bill in Congress that calls for exactly that -- H.R. 676 ("Expanded and Improved Medicare for All"), which was introduced by Rep. John Conyers of Michigan and has many co-sponsors. Unfortunately, given the power of the health industry lobbies, it's unlikely to make it out of committee without strong public pressure.
In economic terms, health care is a highly successful industry -- profitable, growing, and virtually recession-proof -- but it's a massive burden on the rest of the economy. I'm aware that phasing out private insurers would mean a loss of jobs. But I believe the job loss in that sector would be more than offset by job gains in the rest of the economy, which would no longer be saddled with the exorbitant costs of an industry that offers very little of value to justify its existence.
One thing is certain: We need a complete overhaul of our health system. Tinkering at the edges won't do it. Expanding coverage through government subsidies and mandates, as advocated by the president, won't either. Besides being a windfall for insurers and drug companies, that approach will just add to our soaring costs and be a temporary fix, at best. In my opinion, it makes no sense to throw good money after bad.
Marcia Angell, M. D., is Senior Lecturer in the Department of Social Medicine at Harvard Medical School. She was the first woman to serve as Editor-in-Chief of the New England Journal of Medicine, a post she stepped down from in June of 2000. She is also the author of the critically acclaimed book, Science on Trial: The Clash of Medical Evidence and the Law in the Breast Implant Case, as well as The Truth About the Drug Companies: How They Deceive Us and What to Do About It.
"Insurers cream 15 to 25 percent off the top of the premium dollar for profits and overhead (mainly underwriting) before paying providers.... Altogether, overhead accounts for at least 30 percent of our health bill. If we spent the same percentage on overhead as Canada, we would save about $400 billion this year.... We provide much of it in investor-owned health facilities that profit by providing too many services for the well-insured and too few for those who cannot pay. Most doctors are paid on a piecework basis -- that is, fee-for-service -- which gives them a similar incentive to provide too many services for the well-insured. That is particularly true of specialists who receive very high fees for expensive tests and procedures (like cardiac angiography and MRI's).
Not surprisingly, our ratio of specialists to primary care providers is much higher than in other countries. There is no way to know exactly how much money is wasted in medically unnecessary tests and procedures, but it is probably on the order of hundreds of billions of dollars per year."
And bet your last healthcare penny: Mormon Mitt went along with the Massachusetts plan because he thought it would fail...
"I believe our best bet now would be to extend Medicare gradually to the rest of the population."
Sounds good to me.
Don't forget that the extra costs you have so beautifully enumerated, such as insurance administration costs, end up raising medical costs for everyone, not just for people with private insurance. Insurance companies like to gripe that they "subsidize" medicare patients, but the opposite is really true, Medicare reimbursement rates really don't remove the for-profit-insurance-greed-tax from their bills, thus Medicare is really subsidizing the insurers, even if reimbursement rates are lower (though that is a questionable claim in some instances).
The most important, necessary change is to get profit-making out of health financing, period.
Thank you for your excellent commentary.
Great line - hope you don't mind if I borrow it some time - with attribution, of course.
The McKinsey Global Institute asked the same question and came up with a very similar answer.
http://www.mckinsey.com/mgi/reports/pdfs/healthcare/US_healthcare_report.pdf
We pay our providers too much, we pay too much for administrative overhead. They see their docs more often, take more pills, spend more in the hospital, and are generally happier with their care than we are.
Unfortunately for us, too many people think it is our system that is sacrosanct, and that the problem is money.
Maybe the slogan should be - "It's the system, stupid!"
http://thehealthcaremaze.us
Your solution is do have a single payer system, since you advocate reducing the age for Medicare eligibility over time. But along with a single payer must come an attitude that insurers are not in business to make a profit, or as big a profit, as they now make. After all, that is an attitude reflective of how health care is provided overseas. It is clear that there will not be a health care overhaul with bipartisan support. And who much cares if there isn't. But if something is not done now, heaven help us all. One thing is certain, however. I wish the damn politicians stop using our health and lives like poker chips in the high stake game of who gets elected during the next election cycle. It is time for all Americans who want health care reform now to speak up, and do it loudly.
There would be no private insurers.
You seem a bit cloudy on the issues.
Please read the FAQ at www.pnhp.org
That would be real health care reform, while what is going on is a needed band-aid, it is not much more, and will not lead to real improvements in health and a real drop in costs.
Read the article, it is not perfect, but it looks like the first real step in that direction that I've seen.
This doesn't end with health care either. We've got to reevaluate the chemicals we use in food products and the pollutants we allow in our water supply. This isn't just about humans, it's also about our entire ecosystem, and it will mean getting beyond the monetary system to solve many of these problems. It will mean that the words "Capitalism" and "Socialism" will have to be replaced by simply, "what works."
It is also wrong to state that insurance companies are deciding the fate of individuals - a job the feds would like to have. Benefits are determined by contract, not the whim of management.
Reform is necessary. But, not the reform contained in HR3200. I read it.
This is a very difficult myth to dispel. One would think this is (or should be) true, and it is true in some states and at the state level. However, unlike health-care providers, who really are regulated by the states, most health insurance for the past two decades has been exempt from state regulation by ERISA.
ERISA, which was passed in the 1970s to protect employee benefits, primarily pension plans, is a federal law which the Supreme Court has ruled supersedes state law for all health insurance which is "self funded". Insurance companies "manage" this benefit package for employers and as a neat trick escape the tangle of 50 different insurance regulators with a law which has almost no language for regulating health insurance.
ERISA does show that Congress has the power to regulate insurers. Why not do so in a meaningful manner? Replace the state regulation with real regulations with teeth. Eliminate all denials of coverage for pre-existing conditions. Require all insurers to use national pools instead of state pools for underwriting, require all insurance policies to be available to anyone regardless of their state of residence.
In short, if we can't get a meaningful government option lets regulate the worst aspects of medical insurance out of existence, create a meaningful remedy for bad faith denial of benefits, open up the insurance market, and restore some meaningful competition among insurers.
That is only a stop gap measure, but it is better than nothing. The insurers will of course oppose this. They make their excess profits by denying benefits, and of course they don't really want to compete amongst themselves.
The U.S. system is afflicted with $400 billion in annual waste from profiteering and sprawling administrative bureaucracies--all of them related to the HMOs need to keep track of the billing that feeds their bottom line. That is by far the largest contributor to needless and wasteful and NONMEDICAL expenditure in the system.
If you can come up with a creditable academic source for your claim that CYA tests are the biggest source of waste and expense, let's see it. You won't be able to, because it simply isn't true.
Here is the link: http://natcath.org/NCR_Online/archives2/2007c/092107/092107u.php
Thank you.
You are absolutely correct that the current bill does nothing to address the real problems.
Absolutely correct that the cost of unnecessary tests drives up our costs. But the incentives to do those tests is not just for profit. It's to avoid lawsuits.
Good job identifying the problem, but I can't agree with your solution.
I suggest you accompany a veteran to his VA clinic appointment and then tell us how it's better than when you go to your doctor's office. Then ask some of your colleagues why they are no longer taking medicare patients.
The lawsuits are seldom criminal proceedings, but are civil proceedings that can only be practical where there has been a discernible harm. Often, they are necessary to cover the costs of remedial medicine in a situation where insurance will lapse. They may have to take the place of lost employment.
The insurance companies do exploit the doctor's fear of lawsuits and bad doctors are especially opposed to allowing legal resources to their patients. Never the less, a lawsuit is the one hope still available to the public when their trust is abused.
I would not take away someone's right to bring a lawsuit--it's intergral to our rights.
Other countries are not nearly as litigious as we are. Just a fact.
Of course if the government was the sole provider, I guess that would go away...
Whether coverage of the uninsured is obtained gradually from old age down, or a new "public option",similar to medicare,started from the bottom up(see my blog on huffposthttp://www.huffingtonpost.com/burton-l-wise/universal-health-care-pos_b_255233.html0 )some action must be taken, along with stringent cost control measures
You state, "I doubt that we can exclude the for-profit players from this struggle." The for-profit players have no doubt that they can and should exclude single-payer advocates--so why should we be so obliging toward them? You attitude sounds suspiciously similar to those who, around 1850, who were saying, "The slaveowners are so POWERFUL. We just can't wipe them out. They must have a place in our country." Then, fifteen years later, they were out of business. See what a little stiffness of the spine can accomplish?
With this surrender-in-advance mentality, we never would have seen the abolition of slavery, women's right to vote, the right to organize unions, etc.
Abandoning single payer out of purported "realism" becomes a self-fulfilling prophecy. If enough people like you were to stand up on your two feet and join with others to fight for single payer, it can become a reality.
If you want to stop surrendering in advance and fight for meaningful reform, you should check out the following Web sites:
www.pnhp.org
http://www.1payer.net/
www.singlepayeraction.org
http://www.healthcare-now.org
http://www.guaranteedhealthcare.org/
Salaried physicians have no incentive to do what is best for the patient; only what is best for the institution/insurance company/entity paying them.
The ideal solution is a single payer system, elimination ALL for-profit health insurance companies.
Physicians who are not practicing in the real world on a day to day basis have no clue about the economics of medicine, or the market forces that drive increased costs. The concept that "fee for service" drives costs upward is a fallacy; the for-profit insurance companies decide care now, and what fee is actually paid. There is usually an administrative assistant or lower level nurse from these insurance companies that deny care in 99% of cases.
Medicare fee for service works fine; the increased costs of Medicare have come from the privatization by for profits getting payouts. (ever hear of Anthem "Medicare advantage" the medicare HMO?) That and the insane medicare drug payout benefit for private for profit insurance companies are the SOLE reason Medicare costs are rising.
Academia needs to meet real world practicality. Perhaps then can we have real HONEST health care reform.
Salaried physicians have no concept of the actual financial implications of what affects the cost of medicine in general, and health care costs in particular.
There are several "salaried physician" practices in this city (Cincinnati), and the hallmark of these "practices" are the 9 to 5 physician. God help you if you have an after-hours emergency; you are sent to "Doc in a box" facilities staffed by Residents (physicians-in-training).
Allowing Physicians to be an integral part of care is the hallmark of fee for service; any other approach puts a private bureaucrat in between you and your health care.
A single payer system like Medicare can preserve the quality of care AND reduce costs if the physician's primary obligation is to the patient, not a corporation, academic institution, or any entity paying the MD's salary.
Any other approach will not produce real reform, and will only serve to enrich Insurance company CEO's, administrators, and stockholders.
Wall Street pushes up stock prices of these public companies, people invest, and then the companies suck out the money when "someone" drives the prices down. But somebody got paid.
Investor loses.
Insurance company charges high premiums, patient gets sick and is denied care, the insurance company profited, the patient loses.
The "money machine" controls this country, and until we fix THAT, it will remain the same - we pay, they profit. - Obama is siding with the "money machine". He just appointed Bernanke ahead of schedule. Bernanke allowed the banking fiasco to happen under his watch. The Panel on risk management of the derivitives were the same "players" that got bailed out! They've been doing this for over a decade, same story. We need to clean house in our government and DEMAND legislation that prevents ANY politician from receiving contributions from ANY corporation, period! Until we get that, there will be no real reform in any area of our economy, because the elites run it!
We are their slaves, they profit, we pay.
Solution - Eliminate profit in healthcare.
By far the biggest source of inflation in the health-care sector is the price gouging and administrative waste of the HMOs and Big Pharma, which accounts for $400 billion in annual waste in the U.S. health system, with its bloated 30 percent overhead compared to 3 to 5 percent in the rest of the industrialized world, all of which has gone over to predominantly nonprofit models of health care.
Your issues are relevant, but addressing those lifestyle issues will merely whittle away at the costs of our current system. Getting rid of the unnecessary middlemen profiteers--through single payer Medicare for all--will result in massive savings at a stroke, so this issue is quite properly central to the current debate.