ponderings: health care

[cellio]

In the comments here we were talking about health care in the US. The current system is broken in many ways, but the "nuke it and start over with some nationalized program" proposals are scary too. What incremental improvements are possible? I have to believe that there are some.

One idea I'm interested in is what would happen if we separated paying for routine care from paying for catastrophic care. What would happen if people could be on their own for the former but could buy a policy to cover hospitalizations, major illnesses, and the like? How effective would that be and what would it tend to cost? What would having that in play do to the over-the-counter (uninsured) price of routine care? (Yes, I know that not everyone can afford to pay for routine care out of pocket. I'm exploring a suite of options, not choosing a single one.)

On the flip side, would medical practices or insurance companies be willing to sell affordable plans that cover all your routine care (only), if they were not on the hook for catastrophic losses? Could that get things down to the point where the average family could afford regular checkups, preventative care, and routine tests (which helps prevent some catastrophic issues)? Such plans exist now in niches (vision and dental, most commonly in my experience), but I haven't heard of one for general medical care. Why not? (Am I totally misunderstanding where the profit centers are in the insurance business?)

Both angles are important. What I'm labelling catastrophic incidents are (as the label implies) financially devastating if you don't have sufficient coverage. Outside of elder-care issues I'm not sure how common they are, but it's the sort of thing I wouldn't want to take a chance on. I insure my car and house, after all -- how much the moreso should I insure my health?

What I suspect has a bigger impact on the poor, though, is the routine care. If you don't have insurance, you're looking at a three-digit number to walk into your doctor's office. Throw in some kids and you're in trouble. (This is why I asked what would happen to those costs if catastrophic care were a separate factor.) Could plans that just cover routine care be made affordable enough for most people? This doesn't solve the other problem, but neither does the current system -- we rely on hospitals' obligations to treat (which is a legitimate public demand while they pay no taxes), or medicaid/medicare/SSI in some cases, to get through those. Remember, incremental improvement.

I'd also like to explore the effects of reducing drug regulation, letting people buy from anywhere that's selling and reducing barriers to getting things onto the market. I know the standard argument against this (those high prices pay for R&D), but I'm not sure how much I believe that. What are the other considerations?

Where else could we look for incremental improvements?

(In case you haven't figured it out, I am not a medical professional, an economist, nor part of the insurance industry.)

Comments

[kayre]

WalMart was planning to begin a routine-care coverage program-- quite inexpensive, covered a physical, a couple of sickness or injury visits, and three prescriptions. Haven't heard how that's working.

Providing routine and preventitive care seems really important to me, because it would actually reduce catastrophic costs quite a bit.

[laid.livejournal.com]

The problem is that insurance only wants to cover the routine stuff. Insurance is like the banking industry in that respect. You've heard the oft said "The banking industry is like a friend who lends you an umbrella on a nice day, then asks for it back when it rains".

Their reasoning is, if they pay for the routine stuff, then people won't need the catastrophic stuff. The problem with this is, in an attempt to make this idiot-proof, they've built a better idiot.

I've no doubt in my mind that there are certain areas of medicine that are inflated. I got an "explanation of benefits" from Blue Cross the other day about some blood tests. Labcorp said the procedure cost $75, but after the "applied discounts", the amount was $5.35. Blue Cross paid nothing. The procedure's actual billable cost was less than 10% of the normal price.

Routine care cannot be a function of health insurance. People actually have to care about their health. Nationalizing it won't help either. Everyone cannot afford to pay for everyone's healthcare, especially in an environment where there is no incentive for price controls. Besides, do you want the same people who brought us the VA bringing you your penicillin?

Everywhere I've went for a doctor visit without insurance was $35 to $50. Tests can get expensive, yes. Most doctors will work with you, however, if you can't afford the most expensive testing. Lots of times it's not really needed for diagnosis.

[anastasiav.livejournal.com]

What would happen if people could be on their own for the former but could buy a policy to cover hospitalizations, major illnesses, and the like?

That is essentially the system we have for low income uninsured people in this country now -- uninsured people are "on their own" for preventative care but in case of catastrophic illness they can often get care through various "charity care" arrangments at major hospitals and the like.

Bottom line: When people have to pay out of pocket for preventative care, they will often choose (maybe I should put that in quotes - "choose" - as in choose between paying the oil bill or seeing a doctor) to budget that money in other ways.

Such plans exist now in niches (vision and dental, most commonly in my experience), but I haven't heard of one for general medical care. Why not?

So, say your free routine mammogram turns up a lump, and now suddenly you need a biopsy and chemo and heaven knows what else. What do you do? Its the "exceptional" care that drives most of the costs in our medical system now, and its in treatment of things like Breast Cancer where you see the largest disparity between well insured and un- or under-insured populations in terms both of treatment options and outcomes -- to be blunt, the better your insurance, the more likely you are to get wide-ranging treatment, and the more likely you are to live.

(True story: When I was working at MPA we had a low-income woman begin to volunteer with us, because while uninsured she found a lump in her breast, and the doctor advised her that "a biopsy would be expensive - lets wait a couple of months and see what happens" (!) Three weeks later she had gotten a job (at the brand new Starbucks) that came with insurance, and suddenly the doctor was more than willing to provide her state of the art care.)

(Am I totally misunderstanding where the profit centers are in the insurance business?)

Google around on the term "high risk pools" - that's the technical term for groups of people who are considered "uninsurable" because of any preexisting condition.

--

I worked for three years for an organization dedicated to making Universal Single Payer a reality in Maine, and I believe strongly that the only way to fix the health care system in the US is to go to a single payer system. (Read the Mathmatica Study on USP in Maine here (http://www.mathematica-mpr.com/publications/PDFs/mainefeasibility.pdf)) We tried incremental improvement in Maine through the DirgoChoice program, and all we learned from that is that whenever the insurance companies are involved they fight to maintain the highest level of profit they can (its their obligation to their shareholders, after all), which drives up costs and drives down coverage.

Moving to a nonprofit USP system would effectively cut the insurance companies (and their excesses like $25 million dollars in compensation that Anthem paid to CEO Larry Glasscock in 2005) out of the loop. People say that "taxes would go up", which is technically true, but a system funded by a tax on employers would actually end up saving money for most employers who are currently paying all or part of the health insurance premiums for their employees -- and all employers would benefit from healthier employees and employees who were not afraid to change jobs because they fear changes to their health insurance. In addition, in the year 2000, the Maine Blue Ribbon Commission on Health Care reported (http://www.mdf.org/past_initiatives/final2000.html) that moving to a single-payer system would result in an overall Statewide cost savings of at least $300 million dollars vs. the current system (when State general fund costs, charity care, and bad debts were taken into account). A large part of this would be the result in a decrease in overhead -- between 9% and 30% of the premiums paid to for-profit insurers like Anthem vs the 5% overhead of a Medicaid, our existing single-payer system.

We're past the point where small fixes will work, sadly.

[http://users.livejournal.com/merle_/]

On the flip side, would medical practices or insurance companies be willing to sell affordable plans that cover all your routine care (only), if they were not on the hook for catastrophic losses?

It is indeed interesting that dental and medical plans moved to opposite ends of this spectrum. You don't get routine dental checkups? Look forward to a large bill. Nobody will prescribe you with preventative health care so you end up in an $80k/night hospital? Don't worry, medical will cover you (although you do have to fight sometimes).

A lot of people I know think there should be universal catastrophic coverage. I fall on the other side. Give me universal preventative, so I can be as healthy as I can be, and if something horrible happens, well, that's life. Otherwise there is such a financial (and medical history, but that's another issue) barrier to going in and asking about something mildly troubling which could become debilitating and extremely expensive to the insurers if not treated.

[jerusha.livejournal.com]

Where are you thinking the threshold for "catastrophic" lies? Right now something like an uncomplicated appendectomy and associated hospital stay can run >$20k. Cheap compared to (say) a car accident with multiple trauma, a protracted ICU stay, and extensive rehab, but the difference between a medical bill for half your annual salary and a medical bill for ten times your annual salary is, IMHO, only how quickly you go broke... I know these costs are wildly distorted by insurance (see laid's comments about the 'list price' vs. the discounted price paid by the insurer), but I don't know what the actual cost is (some of the padding in the 'list price' charged to the uninsured is to cover the expenses of people who can't pay; the better the discount the insurers negotiate, the more of that burden ends up on the uninsured, who then can't pay it *either*).

Although the pharmaceutical industry does have significant profit margins, R&D costs really are a significant burden. For every drug that makes it to market, something like 1000 candidate compounds started at the beginning of the drug evaluation process. While many of these were eliminated at earlier (and cheaper) stages in the process (compounds that lack in vitro activity aren't going to progress to animal trials, compounds with unacceptable toxicity in animal trials aren't going to get human trials, etc), some make it all the way to large-scale human trials, which are expensive.

One thing that I think would solve two problems (although it does introduce yet another 'where is the money coming *from* issue) is to transition to public funding of Stage III and Stage IV human trials. [Generally, Stage I is animal trials, Stage II is small-scale human trials examining gross toxicity/safety, Stage III is large-scale human trials examining efficacy (and establishing dosage), and Stage IV is post-marketing trials (usually for either extended surveillance or to study new indications.] The problems I see with the pharmaceutical companies funding these studies (the current model) are: 1) The costs of these trials, including the trials for all the compounds that never make it to market, is part of the R&D cost that gets rolled into the cost of each drug. 2) Because the study is funded by an interested party, we see distortions like burying unfavorable studies, studies done only against placebo (which is necessary for approval) but not against competitor drugs (because neither drug company wants to pay for them - what if the study is unfavorable?!), when study against competitor drugs is really what's needed to help establish which treatment is better, and by what margin. (Knowing not only the relative costs and risks but the relative efficacy of drugs is necessary to do a cost-benefit analysis which may guide therapy).

One argument I would make towards a simplified, if not single-payer system, is this: My primary care physician is a member of a large group practice with offices all over our county. His particular office has four practitioners. For four practitioners, they have one full-time person just to deal with insurance issues! What we pay for medical care currently goes to pay not only for our practitioners and our care, but for all of the support staffs necessary (including one insurance-wrangler per four doctors). What we pay for insurance goes to cover not only costs related to our care but costs related to having insurance - not only insurer profits, but advertising, coverage review/denial specialists, etc. If most or all of this overhead were eliminated, how much would we still pay for healthcare? I don't know the answers to these questions, but I'd sure like to...

Edited to fix my HTML error

[dsrtao]

The problem with healthcare:

1. It's too expensive.
a. Because insurance firms make profits on denying claims, so doctors need to hire more staff to deal with insurance firms
b. Because malpractice insurance is horrendous
i. Because biological systems are complex, and humans prone to error, and litigation is encouraged by the legal system (which feeds into why lawyers are a drain on the economy, different feedback loop)
c. Because doctors have a lobbying agency that keeps the supply of doctors low, so that they can all charge more money
d. Because medical school is so expensive
i. Because doctors who make huge amounts of money can afford the debt of medical school (loop back to d here)
e. Because technology costs so much
i. Because it's produced in such limited runs. If the market for MRI was 10 million units a year instead of 1 thousand, the unit cost would go down.
ii. Because it's covered by insurance...
e. Because in the 1940s, companies were encouraged to make health insurance part of their benefits packages because it was cheaper than additional income. As a result, your healthcare depends on your employer, which ironically fails to cover you at the time when you are least able to afford it, i.e. when unemployed.
i. And as a result, people don't see the current cost of healthcare; it's all funny money. What people see are copays for office visits, emergency rooms and prescription drugs.
ii. Oh, and somehow optical and dental care are different, even though podiatry and dermatology and otolaryngology are all lumped in as 'health insurance.'
f. Because healthcare is called insurance, even though a lot of it bears no resemblance to insurance at all. Insurance is a bet that something nasty won't happen, shared with enough people that you can all pay a little to cover the few who actually get unlucky. That's not how this works anymore, nor should it for the most part.
g. Because more treatments are available, so people can live longer at higher expense.
h. Because we haven't got a standard for how much human life is worth, and we are not likely to come to a consensus (as a nation).

[grouchyoldcoot.livejournal.com]

I think the arguments for universal coverage are very strong. You'd prefer a model where people can opt in or out. Of course the young and healthy would opt out or be offered preferential insurance rates, making coverage unaffordable for the less fortunate. This spiral of cherry picking is ubiquitous in the insurance industry. I think we're starting to see a backlash even now, in that there is a new law (not yet in force) making it illegal to deny coverage based on genetic predisposition to a disease.

Then, of course, the young healthy people get hit by cars, and the system has to somehow eat the tremendous cost of their treatment. Those patchwork mechanisms are very inefficient.

I do like the idea of government paying for late-stage clinical trials, by the way. I suspect that would also cause more low-profit drugs to be brought to market. We need a lot of new drugs, but I really don't see a pressing need for more erectile dysfunction remedies.

Routine vs. catastrophic health insurance

[(Anonymous)]

Like another respondent mentioned, health plans that cover most of routine care and a little of major care do exist. They seem to be the norm in Alaska. The plan I was offered (and did not accept, opting to go back to school in order to get back on my dad's union plan) allowed one to go to the doctor 6 times per year and pay only $20 per visit. After six visits, one pays full price. (Sometimes I have 6 doctor visits in a month).

Each category of care besides office visits has a separate deductible. This means that if you are in an accident and are hospitalized, the deductibles (up to several thousand dollars each) inlcude: ER care, OR care, pharmacy, skilled nursing, PT, OT, radiation, home care, multiple categories of diagnostics. I did the math for a sample year in my life (you know, but for the benefit of other readers, I am a YOUNG healthy-appearing person who eats healthy, exercises, does routine check ups, etc, but has several "pre-existing conditions") and it hit six figures. How is that supposed to be a viable option? I don't think it's realistic for a system to *hope* people stay healthy.

Another thought on the routine care issue: I worked in the health center at the mid-sized university I went to. Part way through my schooling, they changed the payment structure for clinic visits from co-pays per visit to charging all students a flat fee--around $100--billed with their tuition (and thus covered by loans and financial aid if needed). In that particular case, the health center decided the math worked better and students got better routine care (because they were more likely to schedule appointments). Maybe something like that would work for routine care on a larger scale? And then a separate funding system for major medical events.

cash on the barrelhead

[brokengoose.livejournal.com]

I suspect that many people would save money with a catastrophic-care-only policy if not for two things: the prevalence of insurance policies that demand a discount, and deadbeats (including, in some cases, the insurance companies).

I've run across a few doctors who offer a substantial discount for cash-only patients. Most, though, charge an official fee on the order of $100+ per visit because many of their patients have policies that pay a fraction (60% or whatever) of the fee IF the office fills out a bunch of paperwork and waits a few weeks for it to be approved. Given the wait and the fees involved, the doctors simply jack up the official fees so that the discounted price is still sufficient to cover their costs. Possible solution: don't base the reimbursement on any sort of base price.

The second problem is people who don't pay their bills. Both the obvious refusal to pay a bill that arrives later, and the problems with bounced checks, lost mail, etc. A lot of places have full-time staff devoted to billing issues. Possible solution: require cash, debit cards, or (for an extra 3% or whatever the fee is) credit cards when you walk in the door. By paying in advance, the customer also avoids surprise fees.

[sethg]

When Kerry ran for President, part of his health care plan involved Federal reinsurance for catastrophic health care (above some tens of thousands of dollars per year per patient--I don't remember the exact number). The idea was that patients with this level of expense constitute a large chunk of every insurer's expenses, and it would be Good For America if those insurers were not looking for ways to wriggle out of paying for those folks' care.

One incremental change I'd like to see (if I have to put up with incremental changes) is universal dental insurance. That's an area where cheap routine care can prevent all sorts of problems later on in life, and in some parts of the country a lot of poor people aren't getting that cheap routine care, and if you're poor, then losing a few teeth can have some real consequences for your employability and quality of life.

[jducoeur]

Honestly, I'm pretty suspicious of incremental changes at this point. The current system is so deeply vested right now that it is likely to run rings around incremental changes, finding ways to work around them. I mean, remember that there are hundreds of billions of dollars at stake here, and it's not very hard for the entrenched players to tweak incremental changes as they come so that they don't lose as much money. So purely from a political standpoint, I think it's actually fairly unlikely that incremental changes will *succeed* in saving money: there's too much stacked against them.

(Nuking the system is in some respects even harder to accomplish, but stands a somewhat better chance of succeeding in saving money, simply because the power structures for gaming the system wouldn't be in place yet.)

On the specifics: I really don't think you can duck the definitions question here. The issue of what constitutes "routine" vs. "catastrophic" is totally central to this idea, and every company has considerable incentives to make sure that any given procedure does *not* fall into their bailiwick. So my guess is that you're actually going to need a whole new government bureaucracy, just to manage to extremely subtle definitional problem and keep the end users from getting very badly screwed.

(The market-purist response to this is that companies that go too far in avoiding their responsibilities will lose business to better ones. That would be correct in a large and thriving market, but absolutely not in one dominated by a few giants. And currently the system is so *complicated* that only giants can survive. The result is a far cry from a properly competitive market. If you want the central problem from a libertarian POV, that's it.)

This is made even worse by the fact that one day's "catastrophic" incident becomes tomorrow's "routine" one. It's actually fairly hard to see a system that *doesn't* somehow wind up in the government's lap when someone has a long-term but survivable-if-treated issue. Ultimately, it comes down to a moral question: are we willing to let these people die for lack of personal funds? (Or, putting a cooler spin on it, how much are we as a society willing to collectively invest in people whose healthcare requirements are beyond their means? And how do we make that decision?)

I'm sympathetic to not trusting the concentration of power inherent in a single-payer system. But it's important to also recognize that an oligopoly can often be even worse, and a poorly-regulated oligopoly (which we more or less have today) is often the worst possible alternative...

[byronhaverford.livejournal.com]

Aaaaah! Way too much! I really did want a different forum (e.g. face-to-face) rather than a new thread. LJ threads are too disorganized to construct a single coherent argument.

I will say this: You are too optimistic about people buying insurance when it is not mandatory. /You/ would buy it, but a large fraction of the population would not. There is a reason that car insurance is mandatory.

I would say that about 50% of the information in this thread is accurate. (I'm of course talking about the 50% in /your/ thread, whoever you are.)