Posts Tagged ‘Medicare’

Health care reform

Thursday, July 2nd, 2009

UPDATE: A bulletin from the NHS on how well single payer medicine works. IN France, the hospitals are described as spotless but patients there have free choice and competition.

A year ago, I wrote several posts on what I considered a useful model for reform of the US system. The present debate seems to be focused on everything but a viable model for reform. The Obama/Baucus plan that is slowly emerging from the Senate finance committee seems to be vague and there are aspects that seem to represent politics and nothing else. The “white paper” seems to be mostly propaganda and lacking in concrete proposals. It does point out that France spends about half of what we do on health care (page 15 chart)/ per capita with excellent results. Baucus’s “vision” continues the usual blather about providing everyone care at less cost.

It contains six “elements” that typically lack focus.

1. Individual Responsibility. Covering all Americans means the enrollment of every individual in some form of health care plan, private or public.

OK, I agree with that.

2 Strengthening the Employer-Based System. We must ensure the continued viability of the employer-based system — the principal source of health coverage
for most Americans — to allow workers to keep the insurance that they currently
have and value.

This is bogus. One of our problems is the employer-based system but, for Democrats, this means exempting union plans from any controls on utilization.

3. Guaranteed Access to Affordable Coverage for Individuals and Small
Business
.

This is the entire problem misrepresented as a factor. It is THE PROBLEM !

Here Baucus comes up with one concrete proposal.

the Health Insurance Exchange — will connect individuals and employers to insurance offered at local, state, regional, or national levels. Insurers offering coverage through the Exchange would need to meet certain requirements established by a new Independent Health Coverage Council.

This is basically what the Clinton Plan was about. It is too vague to even know what they are talking about. Presumably this is the “co-op” concept we have heard about.

4. Strengthening Public Programs. Existing public programs represent an effective and efficient way to increase access to coverage and decrease the number of
uninsured.

The existing public programs are certainly not efficient and Medicare is losing doctors at a rapid pace as they try to cut the budget by stiffing providers. Medicare will be out of funds in less than 10 years.


Offering individuals approaching age 65 the chance to buy into Medicare early and eliminating the requirement that disabled individuals wait two years to enroll in Medicare would ensure coverage to populations that the private market is under-serving.

These statements represent a big reason why Medicare is bankrupt. Adding beneficiaries without new funding is a terrible way to do business.

5. Focusing on Prevention and Wellness. Increased access to preventive care and wellness is another step that could be accomplished in the short term.

This is an old canard that has been proven to be ineffective in controlling costs. Early diagnosis in breast cancer will improve survival but whether it saves money is another matter.


Increasing the availability and effectiveness of primary care coverage could create a national
focus on maintaining wellness, rather than treating illness — which would improve
quality and reduce costs across the health care system.

This is utter bullshit but sounds good. The fatal flaw in the Canadian system is the emphasis on primary care with severe rationing of specialist care. Politics goes for the visible benefit and the long term benefit often is ignored.

6. Addressing Health Disparities. In our current health care system, racial and ethnic minorities disproportionately lack ready access to high-quality medical care.

This is standard political speech but means little. The urban underclass is the source of our poor life expectancy and child mortality figures but to expect that these people will take advantage of better access to care is naive and is the usual political pablum offered to rube voters.

None of this suggests that a useful plan will emerge from this committee.

My suggestions, which will go nowhere but which are based on 40 years of practice plus a graduate degree in health economics, are as follows.

1. The employment connection with health insurance must be broken. This can be done by forming large funds, like pension funds, to which employees can transfer their insurance plans. The Employer should be happy to do this as the plans will then be funded by payroll deduction, as they are now. The employer will no longer be expected to manage the plan. The same insurance company ASO (Administrative Service Organizations) that manages the employer plan can submit bids to manage the new funds. If the employee loses his job or changes jobs, the health plan remains the same.

2. Like in France and in Medicare, the fund will pay 80% of the approved charges for approved procedures and services. This will not be the total payment as co-pays and balance billing will be added. It does provide catastrophic insurance, which is what insurance should be.

3. Private insurance plans, chosen by the individuals, will contract with funds and the individuals to cover the remaining 20%. The same companies that provide “MediGap” insurance for Medicare beneficiaries could enter this market. For the poor, government subsidies can fill this gap.

4. The insurance funds will pay on a national fee schedule, which will be negotiated with provider organizations like hospital associations and medical associations. This fee schedule will resemble the indemnity-style health plans that were still around when I began practice. This pays a flat fee for each service. “Usual, customary and reasonable” fee payments have led to fee inflation and moral hazard. The flat fee will be on the low side but no lower than Medicare fees and without the hassle. The doctor can negotiate a higher fee with the patient and fees should be posted in the office. This is the only way we will ever get a market in medicine. The greatest benefit of such a system will be the open disclosure of charges. Only when prices are known can we have a market.

5. Balance billing, the charging of an agreed upon fee over and above the insurance payment will be permitted. If someone wants to see the best surgeon or internist in town, they will be expected to pay accordingly.

6. Patients will be expected to pay doctors for services at the time of service and they may seek reimbursement from the plan for covered services. This is why posted charges are important. France has a program where very large bills need not be paid first. The out-of-pocket payment can be capped.

7. Community clinics and HMOs will be permitted to do business as they do now with the insurance fund negotiating a rate of payment for coverage. The subscriber may be expected to pay extra for services not covered by the plan.

8. Drugs will be covered but co-payments will be expected for non-generic drugs. This will be far less expensive for younger patients but Medicare Part D has cost much less than expected.

9. Payments from the plan will be limited to services accepted as scientifically valid by evidence-based medical guidelines or other scientifically based guidelines.

10. A program to forgive medical student loans in return for adhering to the national fee schedule will be developed and extended to future medical students. Eventually, this should result in very low medical school tuition.

11. Ideally, Medicare, Medicaid and workers compensation should be brought under the fee schedule and the program of management of the health plans.

How we got here in health care.

Thursday, June 11th, 2009

For those who have not read Paul Starr’s book , The Social Transformation of American Medicine, or my own chapter on medical economics, here is a brief introduction to American medical economic history. Along the way, I will mention some European history.

The first government health plan was in Germany, established by Bismark, who introduced a disability and old age insurance program in 1883. Initially, retirement age was set at 70 and later lowered to 65. His reason was to preempt the Socialists in the German political world. The German health care system evolved over the next 100 years but it is not a government single payer system.

In Germany, statutory health insurance, which covers 90 percent of the population, is financed by a payroll tax. The individual’s premium is not a per-capita levy, as it is in the United States. It is purely income-based. Ostensibly, about 45 percent of the premium is contributed by employers, although economists are persuaded that ultimately all of it comes out of the employee’s take-home pay (See this and this).

An employee’s non-working spouse is automatically covered by the employee’s premium.

The Clinton Plan was allegedly based on the German model.

The health insurance premiums paid by Germans are collected in a national, government-run central fund that effectively performs the risk-pooling function for the entire system. This fund redistributes the collected premiums to some 200 independent, nongovernmental, competing, nonprofit “sickness funds” among which Germans can choose.

The sickness funds are based on employment or the town in which the subscriber lives. The Germans have different priorities than we do. For example, our fixation on hospital length of stay (LOS) is absent. I presented a paper on hemorrhoid surgery to the European laser medicine society in 1988. Most of the questions after my presentation concerned my policy of doing hemorrhoid surgery as an outpatient procedure. The Germans think that is cruel and recommend hospital stays of several days. They also have (most Germans have, anyway) a benefit for two weeks of spa treatment per year. I once had a patient in Orange County who was eligible for German health care, as well. He had his surgery here but he returned to Germany each year for his two weeks of government paid spa care.

I have already done a lengthy analysis of the French system which I think the best model for US reform.

Now, some US history. American medicine was purely private and fee-for-service until the Depression. There were public hospitals, like Charity Hospital in New Orleans, or Bellevue Hospital in New York, or Cook County Hospital in Chicago, or the Massachusetts General Hospital in Boston, or the Los Angeles County General Hospital in Los Angeles. In 1928, the new LA “Big County” hospital opened and during the Depression it offered the finest care in California. I have been told by older physicians that doctors denigrated “the County” to patients, not out of concern for their welfare but because of concern that private patients would choose to go there leaving private doctors in dire straits. Those great public hospitals could have formed a nucleus for care of the poor even today but they were destroyed or badly damaged by Medicaid after 1965 which refused to pay the county hospitals as it emphasized (often inferior) private care over the public hospitals. The budget shortfalls occurred just before the illegal aliens began to flood the public hospitals. The result has been a distinct decline in quality of care.

The Depression brought the first health plans for the middle class. In Dallas, in 1929, the Baylor University hospitals established a plan for school teachers. For six dollars per year in dues, the subscriber was entitled to 21 days of hospitalization. Similar plans began in California and New Jersey and finally, a plan called “Blue Cross” won a suit in New York that exempted it from insurance company reserve requirements. The hospitals were not selling insurance but promising services, hospital care, and did not need to maintain cash reserves.

Blue Shield plans began in California where the California Medical Association devised a plan in which low income subscribers would be guaranteed physicians services. The AMA, in those days still very powerful, opposed the plan but it persisted and a fee schedule was established in spite of Federal Trade Commission opposition. At one point, when I was first in practice, the FTC required the CMA to surrender all copies of the fee schedule, called Relative Value Schedule (RVS) but Medicare required that doctors use the RVS for billing ! We all had xerox copies of the RVS for a while. Such was the stupidity we encountered.

Until the Second World War, medicine was relatively inexpensive and of limited effectiveness. Surgery was effective in curing most surgical conditions after 1900. Critical care came as a result of the war and antibiotics arrived just in time for the war casualties. Blood banks began about 1937 at Cook County Hospital. Few medical conditions other than infection were treatable until the 1950s. Hypertension was the cause of death for President Roosevelt but there were no effective drugs until the 1950s. Winston Churchill’s life was saved in 1943 by sulfa drugs in an episode little known to historians. The “golden age” of medicine began about 1950.

Health insurance in America began with unions and the Stone Cutters Union had the first health plan that would pay for delivering a baby in 1887. In 1945, the United Rubber Workers Union established a health plan that paid $50 for delivery of a normal pregnancy. For years, the doctors in Butler, PA had collected a fee of $50 for this service. That was the established fee. When the insurance began to pay this $50 fee, the doctors increased their fees to $75. Here was the beginning of the destruction of the profession although it seemed to be progress at the time. The union health plan increased its payment to $75 and the doctors then raised their fees to $125. They were now back to the original arrangement with patients. The patient paid $50 cash and the insurance paid the rest. Here was the fatal bargain. A third party was paying the bill and both the doctor and the patient had little responsibility. The cost issue began here. In 1969, my second son was born in Pasadena at a cost (hospital bill) of about $260. It was not covered by insurance. A few years later, with insurance paying the bill, the price was more than ten times that amount.

The French had similar cost issues in the 1950s after the French system was established in the aftermath of the war. Our own system was also a consequence of the war as wage and price controls allowed a loophole for “benefits.” The employer offered health benefits as an inducement for scarce labor when 12 million men were in uniform. In France, President De Gaulle settled the issue by scolding the medical associations and asserting “I saved France on a colonel’s salary !” A national fee schedule was established but it is not mandatory. It does, however, provide the fee schedule that is paid by the health plans. Doctors and hospitals may charge more but the balance is up to the patient to pay. Canada made a terrible mistake by banning private practice. The result has been emigration plus a disincentive for young physicians to train in long programs since they will not be rewarded financially for the specialty and the hours and years invested. We are already seeing a similar effect in this country as medical students choose “lifestyle” specialties, which allow shift work, like Emergency Medicine, and which avoid long hours and weekend call.

The factors that have brought the crisis include technology, the incentive for both patient and doctor to overuse benefits, plus the aging population. The Obama program, if passed, does not seem to bar private practice. I am seeing doctors dropping out of Medicare and practicing on a cash basis. Whether that will become an issue if there is a large exodus from the government option is a question.

One major issue is the fact that medical bills do not reflect real costs. A hospital bill for $100,000 may in fact represent only $25,000 in insurance payments. The cash patient is at a huge disadvantage. This becomes a factor if you have a 20% co-pay, as many high deductible policies do. The “20%” you pay may be more than the amount paid by the insurance company for the “80%” share they have. The 20% co-pay is based on the inflated retail price of the care. It also makes medical IRAs far less useful since the cash market is using inflated retail prices that may by four times the negotiated price the insurance plan, or Medicare, may pay.

Doctors may be willing to practice on a cash basis with realistic bills approximating the actual Medicare payment. I have heard of orthopedic surgeons doing total hips for $1200.00, far less than the usual billed fee but approximately what Medicare actually pays. If such a surgeon bills that fee, Medicare (if he is still a member) will reset his fee “profile” at that rate, then pay him 25% of that lower fee. Thus, the surgeon must drop out of Medicare completely to switch to a market price practice. Will hospitals be willing to do this ? I doubt it. Will Obama’s new plan reset the prices so they represent actual costs ? I doubt it.

Health Care Reform- the doctors

Tuesday, June 24th, 2008

This piece in the NY Times reports on discontent among physicians. These are young men and women in the prime of their careers and they are talking about quitting. Congress is doing what it can to force them out by cutting reimbursement for Medicare. by 10.6% this year.

Over the next nine years Congress will slash Medicare payments to physicians by 37 percent, at the same time practice costs will increase at least 22 percent.

I think my suggestions for reform based on the French system are worth consideration but I see no interest.

Health Reform- a few further thoughts

Monday, May 19th, 2008

UPDATE:The article here offers an interesting comparison between the French and British health care systems. Almost a controlled trial since the writer had one hip done in the NHS and the other in France. That article link is no longer valid but this one is interesting. Sound familiar ?

In recommending Medicare as the vehicle for the basic coverage in a national health plan modeled on the French system, I did not intend to suggest that Medicare, as that vehicle, would be a government agency. I was recommending a non-profit corporation funded by payroll or other contributions from beneficiaries. Medicare, in theory, is funded by the Medicare tax contributions of workers prior to retirement. A system for active workers would be called the same name and the two programs, plus Medicaid, would be rolled into one system. It would be funded, however, not by general tax receipts but by the assessment for health care, analogous to the French funds, the largest of which, CNAMTS, is for salaried workers. There are many other funds for other workers such as agricultural or managerial workers.

As far as the name is concerned, Medicare was the name for the health care program for military dependents when I was in the Air Force. The name was adopted for the retirement health plan in 1965 and the military then called its program “CHAMPUS,” and now calls it “Tricare.” The name is secondary.

My point is that this should be a non-profit corporation or foundation, sort of like CalPERS, the California pension program for government employees. Beneficiaries, employers, unions and providers should all serve on the board of directors. The retirement program, which is mostly funded by tax receipts now, can be represented by bureaucrats. Working people should be represented by their own members, elected or appointed, depending on the format chosen by members. This may be a very important part of the French system.

We have learned a lot about managing health care in the past 25 years. When I was in graduate school ten years ago, there were students in the same program from all over the world. This is a universal problem. I have consulted for the NHS when they adopted the “Fund Holding” reforms of Margaret Thatcher. The Labour government, once it took over from the Conservatives after Mrs Thatcher was no longer Prime Minister, made many disparaging remarks about Fund Holding, a reform with some similarities to American HMOs. However, they have kept most of the reforms in place.

In considering reforms, most critics of the US system look to Canada for ideas. This is because they are close to us and share our language and many of our institutions. They are not, however, a good model. I believe many mistakes were made and too much coercion was used in dealing with providers, a feature of our current treatment of doctors in the US. Because of language, few know much about the French health care system but those of us who have been working in health care, especially in surgery, are aware of the very high quality of care and innovation. We should also become aware of the similarities and of the very high level of satisfaction, both by patients and doctors.

Health Reform- the transition

Saturday, May 17th, 2008

I have been reviewing the details of the French health care system, as it was established in 1945, and how it has evolved in a history somewhat similar to our own. The Second World War marked the divergence between the two countries. Wartime labor shortages left us with an employer-based system that has become too expensive and rigid. France, in the social upheaval of defeat, had the chance for radical reform and took it. Britain took a similar opportunity and went another way with single payer, tax supported health care in the NHS. The pre-war differences in the three countries made some of this probable, if not inevitable.

What do we do now ? Why is it necessary to reform the US system ?

Our system is very expensive and does not have universal coverage. Those are the two features most listed by critics. People who are covered are largely satisfied with the care they receive but are often uneasy about the cost and the possibility of being left without coverage if they develop a serious chronic illness or lose a job. Our system has evolved away from community rating, in which everyone paid the same premium based only on age and sex. Now we have experience rating, in which a history of illness can make us uninsurable.

One of my patients 20 years ago had had a thyroid cancer, a form of cancer that is 100% curable when properly treated. A couple of years later, she needed a breast biopsy for what was almost certainly a benign lump. Her insurance excluded coverage because she had had thyroid cancer, totally unrelated to the present condition.

Recently, it has been reported that almost all medical groups in California are financially insolvent. For decades, the American system relied on cross-subsidies as insured patients paid for those without insurance by funding hospitals and doctors’ practices, which, in turn, cared for the poor and uninsured for free. The development of managed care and HMOs has eliminated the cross subsidy by squeezing out of the system the resources to provide uncompensated care. No one ever went without acute care in our system. Chronic illness has been another matter, but many of the patients who rely on emergency rooms and charity hospitals would probably not have availed themselves of chronic care anyway. Now, acute care is in jeopardy as public health systems, like that of Los Angeles County,  are being bankrupted by the demand from illegal aliens.

How do we proceed ?

The United States is much larger than France with a much larger population, 300 million compared to 64.5 million. Our economy is much larger and healthier with an unemployment rate of 5% vs 10% or higher in France. Our people tend to work longer hours and produce more per worker. Some of the French problems with health care are, in fact, problems with their economic model, which is more protectionist and less productive with huge agricultural subsidies (even larger than ours) and excessive vacation time and early retirement. The French health care system would fit our economy better than a British or Canadian model and the relative cost would be tolerable. Ours is already based on payroll deductions rather than general tax revenues and this could be continued. Workers already pay FICA taxes to fund Social Security and Medicare. In addition, they pay health insurance premiums. Combining the two would allow some cross subsidy for the Medicare deficit we face in the next few decades as “Baby Boomers” retire.

The US has 50 states and there have been a few attempts to use states as “laboratories of democracy” to test health care reform experiments. These do not work (except, perhaps, for Hawaii, which is relatively isolated) because states are not large enough and people will move around to acquire benefits. Any real reform has to be national. What I propose is to move to a universal Medicare program which would pay 80% of health care costs. The co-payment would be paid by private insurance, just as is done in France. Costs would be subject to “Evidence-based Medicine” criteria for reimbursement. If people want chiropractic treatment or acupuncture or massage, let them pay for it without subsidy. This may, in fact, be the most difficult part of the problem to solve as our state regulation is highly politicized and influenced by lobbies of various health care organizations.

I would also strongly recommend that the Workers Compensation system be integrated into the health plan, as is done by France. I work with the Workers Compensation programs in multiple states, reviewing claims,  and find that many of these workers have no private insurance. Integrating workplace injury treatment would avoid costly duplication and help reduce fraud, rampant in workers comp.

What do we do with illegal aliens ? They dominate public care in Los Angeles and fill emergency rooms of private hospitals. Since the Federal Government chooses to allow them to come into the country, they should pay for care of illness and injury. They are already eligible for workers compensation care.

What about nursing homes and treatment of the disabled? Medicaid is already the principle source of funding for care of the elderly and disabled poor. Integrating this into a national health plan would relieve a huge burden on the states and might reduce some of the gamesmanship in state-federal relationships.

What about a fee schedule, like that of France ? Doctors’ incomes have been eroding steadily the past 30 years as HMOs gained power and the FTC has prosecuted doctors’ groups for any attempt to negotiate fees with them. They should be allowed to represent members as a union and negotiate fees and terms. The Los Angeles County Medical Association has disappeared as members found themselves without the means to support it and it was dissolved with its magnificent library dispersed.

New doctors are heavily burdened with debt. USC medical school, where I teach, now has a tuition rate of $40,000 per year. The average medical student leaves with loan balances of $250,000. New young doctors must earn enough to repay loans. The problem has become so severe that a new medical school organized by the Cleveland Clinic and Case Western University has decided to grant 100% scholarships to all students accepted, in hopes of encouraging more to choose academic medicine. The military services offer full scholarships to medical students who agree to serve a minimum time as military physicians. What if we offered all new doctors, who agreed to accept the national fee schedule as payment in full (after co-payment), a full scholarship to medical school ? If later, they decided to shift to the equivalent of Sector 2 in the French system and charge higher fees, they would have to repay their scholarships. A system to forgive existing loans could even be introduced. Each year a new doctor participated in the Sector 1 equivalent, part of the loan was forgiven.

There are many permutations of a program like this and I offer these suggestions only for discussion. What about it ? One additonal advantage of a system like this is adminsitrative savings. Doctors offices have severe overhad problems trying to deal with the many HMO and IPA contracts plus Medicare paperwork. When I was in practice 13 years ago, I had 246 different contracts with various insurance groups, most with different requirements for pre-authorization and the like. I finally bought a computer system for the office to deal with the complexity. A card reader system like the carte vitale would be a godsend to doctors’ offices. The savings alone would make a lower fee schedule more acceptable. I know pediatricians whose capitation payment for HMO patients is no higher than the French Sector 1 fee. I am not an accountant but I think this could work. Something has to.