To Cut Health Care Costs, Unnecessary Care Must Be Targeted

                                                                        Robert A. Levine   4-9-12

Until the Supreme Court makes a decision about the legality of the Affordable Care Act (ACA) and its provisions, health care is in limbo regarding legislation that might be enacted to control health care costs and provide care to the uninsured. However, the health of the economy and federal government demand that these costs be controlled.

Recent recommendations by physician panels that doctors reduce the frequency of commonly used tests and procedures because they are often unnecessary reinforces the importance of attacking unnecessary care as a way to constrain costs. This advisory was issued by the American Board of Internal Medicine Foundation. The president of the organization, Dr. Christine K. Cassel asserted that the uninsured would be able to get coverage without any increase in government spending and that rationing of care would not be required if only appropriate care was provided.

An article in the Archives of Internal Medicine last September reported that many physicians believed their own patients were receiving too much care. The Congressional Budget Office and a number of analysts have placed the amount of unnecessary care at about 30% of health care expenditures, or $900 billion out of a total of $2.7 trillion; a considerable saving waiting to be harvested.
While politicians have spoken about broad cuts to Medicare and Medicaid to shrink the nation’s budget deficits, they have not mentioned targeting unnecessary care as a way to lower overall health care costs. They do not want to antagonize the powerful stakeholders in the health care system who would suffer financially by legislation having this objective. These stakeholders include organized medicine, insurance companies, trial lawyers, pharmaceutical companies and hospitals.

To reduce unnecessary care, physicians’ incentives to order or perform tests and procedures must be eliminated, and the rationale for defensive medicine must be ended. The paths to achieve both of these goals are clear, but the obstacles in the way require heavy lifting on the part of Congress if they are to be removed.

In order to curb defensive medicine, the ordering of unnecessary tests and procedures by physicians to protect themselves against malpractice suits, malpractice reform is needed. Trial lawyers, who are major contributors to the Democratic Party, are strongly opposed to any major changes in the malpractice process. The current system, which does not work effectively for either patients or physicians, greatly benefits these trial lawyers. Peer panels to review cases before suits can go forward should be required, with their analysis allowed to be introduced at any trials. Caps on the amounts given to injured patients for pain and suffering should also be legislated.

Even more significant in reducing unnecessary care would be ending the incentives physicians have to perform excessive tests and procedures which help determine their incomes. This means finding an alternative paradigm in order to end the fee-for-service payments that drive unnecessary care. Other methods that could be employed include bundling of payments for particular services, capitation, or having physicians on salary. Over 30% are doctors are already on salary and as I’ve mentioned previously, I favor this course as being the simplest one to implement. There are many ways this could be done. It works for the Kaiser system, Cleveland and Mayo Clinics, and there’s no reason why it can’t be successful when applied broadly. Physician salaries could also be augmented related to their productivity, patient satisfaction and quality of care.

Overall health care costs are skyrocketing. Federal budget deficits are partially due to increased spending on Medicare and Medicaid. Curtailing unnecessary care is an obvious way to bring costs under control and reduce the budget deficits and national debt while putting more money into the more productive parts of the economy. Getting it done in the current Washington environment is another story.

Resurrecting Democracy
www.robertlevinebooks.com

After the A.C.A.- Are There Answers?

                       Robert A. Levine  4-2-12

If the Affordable Care Act (ACA) is overturned by the Supreme Court, which now seems probable, how can health care costs be controlled and care provided to the one sixth of Americans who have no insurance? A bipartisan solution to the problem appears to be impossible. Evidence for this is reinforced by the fact that the individual mandate provision of the ACA, which originally had been a conservative Republican concept, became an anathema to Republicans once it had been adopted by Obama and the Democrats, and a focus of their opposition to the law.

Addressing the significant problems of overall health care costs, the one sixth of Americans who have no coverage, and increased spending by the government for Medicare and Medicaid, appears to be beyond the gridlocked, highly-partisan legislative bodies in Washington. And unless solutions to these problems are found, budget deficits and the national debt will continue to grow and the American economy will suffer. If after the November election one party controls the presidency and both Houses of Congress, with a filibuster proof majority in the Senate, there would at least be the possibility that a health care plan could be enacted. However, a more likely scenario is a continued division of the seats of power between the two parties and continued disagreement over what should be done. And cutting Medicare and Medicaid spending as the Republicans propose, or raising a few premiums, is not the answer.

The general animus between the parties and over health care in particular, masks the fact that the steps to constraining health care costs are straightforward and fairly obvious. However, it would entail abandoning the rigid insistence by conservatives on market-based solutions for all economic problems.

The market simply does not work in regard to health care, encouraging predatory behavior among the stakeholders in the system. When physicians are paid by fee-for-service, their income is determined by how many tests and procedures they perform and the intensity of the services they provide. And since there is an asymmetry of knowledge between laymen and physicians, patients usually accept whatever physicians recommend. This has led to a huge volume of unnecessary care; up to 30% of health care spending- $900 billion out of $2.7 trillion last year, with some adverse events as well. (Some unnecessary care is also generated by defensive medicine to ward off malpractice suits.)

Another 15-25% of health care spending is consumed by administration and overhead because of the complexity and inefficiencies of the insurance based system. Unable to reduce health care costs, insurance companies merely pass onto consumers in premiums whatever they pay out to providers. These companies also don’t cover those with pre-existing conditions and withhold payment for services whenever possible, to increase profits that will enhance executive salaries and shareholder dividends.

To curb unnecessary care, and save a good portion of the $900 billion dollars annually wasted there, fee-for-service payment for physicians should be eliminated. Capitation, bundling of payments for services, or having physicians on salary are all preferable options. Over 30% of physicians are already salaried and this would be the simplest and most efficient method of curtailing unnecessary care and its attendant costs.

A single payer system to reduce administration and overhead would also save hundreds of billions of dollars. This could be established through a Medicare for all system under the aegis of the government, or under a quasi-governmental agency similar to the Federal Reserve and free of political interference. Unfortunately, the chances of having this sensible path followed in the current political environment are slim to none.

Malpractice reform, expensive new technology that provides few benefits, and drug costs, must also be addressed to maximize savings for the health care system.

America’s per capita spending on health care is 50% higher than other developed countries. In terms of metrics like life expectancy and infant mortality, the medical outcomes are worse, and one sixth of Americans have no health care coverage. The nation can do much better in terms of cost and quality. The problems of soaring health care costs and lack of coverage have been ongoing problems for decades and need to be solved once and for all. Labeling necessary reform measures as “socialistic” and trying to placate the stakeholders in the current system will not help the nation find solutions. Pragmatism needs to win out over partisanship for America to win the battle over health care costs.

Resurrecting Democracy
www.robertlevinebooks.com