The Destruction of American Medicine

By Greg Scandlen

The New York Times has published a sobering article by Gardiner Harris  which describes how quickly we have allowed the best health care system in the world to slip through our fingers.

The story keys off Dr. Ronald Sroka, a family practice physician in Crofton, MD. It says,

Handsome, silver-haired and likable, Dr. Sroka is indeed a modern-day Marcus Welby, his idol. He holds ailing patients’ hands, pats their thickening bellies, and has a talent for diagnosing and explaining complex health problems. Many of his patients adore him.

But he is being pushed into extinction by academics like David J. Rothman, president of the Institute on Medicine as a Profession at Columbia University who is quoted:

Those of us who think about medical errors and cost have no nostalgia — in fact, we have outright disdain — for the single practitioner like Marcus Welby.

Mr. Rothman’s disdain and his allies in the insurance industry and government bureaucracies are winning the war. The article explains:

The share of solo practices among members of the American Academy of Family Physicians fell to 18 percent by 2008 from 44 percent in 1986. And census figures show that in 2007, just 28 percent of doctors described themselves as self-employed, compared with 58 percent in 1970.

It’s enough to make you weep, but there is perhaps a sliver of good news. A friend sent the following e-mail to one of my discussion lists:

Last week, Senator Whitehouse came to northern Rhode Island to speak to his home community. He had largely an elderly and retired audience of about 300. His comments were focused on them as he spoke of how he would fight to retain Social Security and Medicare. The audience clapped politely. Whitehouse continued to discuss healthcare. He eventually came to speak about physicians, lighting upon the topic as to how our actual charge per service differs depending upon what insurance each person has. “Go ahead,” he said, “call a doctor and ask what they charge for a certain visit or procedure. They’ll ask what insurance you have.”

I rose and said “$50.” I introduced myself to the audience and said that I charge $50 for an office visit, that I don’t take insurance, and that as a result of the massive cost savings by not having a coding specialist, collections specialist, or billing overhead, and by not having to rent an office big enough to house all those people, I can charge a reasonable fee while each patient retains the confidence of knowing that no third party will have any of their private medical information, of knowing that there are really only two people in the room when we talk, and of trusting that I’m going to provide the treatment that they really need rather than the treatment some third party tells me I should be providing.

I expected that this largely Medicare-covered audience would shake their heads and whisper “dinosaur” under their breath. Instead, I received applause and a few dozen new patients the next day. Each said roughly the same: “I’d rather pay for the care I want than have insurance cover me for care I don’t want.”

If indeed most new physicians choose to look toward the type of practices described in the Times article, that will allow all the physicians who want to run their own lives to do so without worrying about whether they’ll have enough patients. There will always be patients willing to pay a reasonable fee out of pocket for the kind of care that can be delivered by doctors like Dr. Sroka.

While the bulk of American medicine may accept becoming little bureaucrats, doing the bidding of their masters in Washington, a sliver will simply offer their services to patients on a cash or concierge basis. These few may grow until medicine becomes once again the noble profession it once was.

Krugman’s Blinders

By Greg Scandlen

There has been a lot written about Paul Krugman’s recent op-eds  and blog posts about how thinking of people as “consumers” rather than “patients” violates their “sacred” relationship with doctors.  My colleague Ben Domenech had one of the best rebuttals in Consumer Power Report #269.

It is more than a little disconcerting to hear people like Paul Krugman suddenly invoke the sacred doctor/patient relationship when they have been working so hard to have bureaucrats control both physicians and patients. But I want to make a different point, one that has been lacking in most of the commentary.

The whole point of Consumer Driven Health Care is to get people involved in their health care decisions long before they become patients.  For decades the “health policy community” has been fretting over this very thing – how to improve “health literacy,” how to get people to make healthy lifestyle choices, how to get people to ask questions about their treatment alternatives, how to teach people when it is appropriate to rush to the Emergency Department and when it is not, how to teach people the differences between the various medical specialties, etc., etc., etc.

We have health education classes in high school. We have newsletters with “Tips for Healthful Living.”  We have media reports about the latest breakthroughs in prevention and treatment.

None of it worked very well – until the advent of Consumer Driven Health Care. Suddenly people are responsible for making decisions about how to spend their own money for their own health, and they demand more information about their options. They sit together in the kitchen to decide how much money to set aside in a saving account and how big a deductible they can handle.  They have discussions about how often the kids go to the doctor and whether they will need glasses or dental work in the coming year. They look for lower cost generic drugs to replace the name brands they have been using. They use home remedies first, before making an appointment with the doctor. They participate in wellness programs.

They are not yet “patients.” They are active “consumers.”

If the Krugman’s of the world would take off their political blinders, they would see something wonderful is happening in the market.  But that would shatter their illusion of an all-powerful bureaucracy fixing everybody’s problems.

I Get a Kick Out of Uwe

By Greg Scandlen

Princeton professor Uwe Reinhardt is a really funny guy. Really. If you have ever caught one of his talks, he will leave you in stitches. Not the medical kind of stitches, but the other kind usually associated once-smoky nightclubs and a lone comic on the stage.

But he tops all of his previous comedic efforts in a single letter to USAToday. He begins by trying to rebut a recent op-ed:

One of the more mindless clichés trotted out in the health care debate is that “one size doesn’t fit all.” In seeking to rebut USA TODAY’s fine editorial on “RyanCare,” a proposal by Rep. Paul Ryan, Ed Haislmaier trots it out once again. He does this in a country whose entrepreneurs discovered a century ago that there are huge economies of scale in the idea that one size does indeed fit all to meet common human needs.

But, then his comic gifts kick in. He just can’t help himself:

KFC, McDonald’s, Burger King, Holiday Inn, Marriott Hotels and many more now global companies all base their business models on the idea that one size fits all. And Wal-Mart might soon teach us that the idea also applies to medical clinics, and someone might show it for hospitals as well.

Wal-Mart as an example of how “one-size fits all?” I know a lot of my liberal brethren would rather be caught dead than be seen inside a Wal-Mart, and there may not be any in the rarified environs of Princeton, New Jersey, but c’mon – are there no photographs in Princeton? Every Wal-Mart I’ve ever seen includes acre upon acre of variety.

And, in case someone doesn’t find anything to his liking in the Wal-Mart, there are thousands of other stores from Dollar General to Saks Fifth Avenue to choose from.

Now, my friend Uwe may prefer the old Soviet-style GUM Department stores for his retail needs, but is that really the model he wants to apply to health care? I can’t wait to hear the reaction once all the Princeton professorate is required to shop only at Wal-Mart.

Fortunately, right below Uwe’s letter is one from a Frank Zoz of Waterloo, Iowa, that is not nearly as funny, but might actually work –

I am absolutely convinced that health care costs will never be brought into control until people are spending their own money, or at least think they are. “RyanCare” changes to Medicare seem to be a step in that direction.

I think the ultimate solution is Health Savings Accounts (HSA) for everyone, with which they pay for insurance premiums and health care. The question is how these accounts are funded.

I am a John Deere retiree and on Medicare. John Deere provides insurance for its retirees. It provides money into an account (similiar to an HSA) from which we can pay for insurance and medical bills. My wife and I happen to have a Medicare Advantage plan and are very happy with it. The HSA covers our premiums and any significant additional costs. We have leftover funds that can be used for emergencies. If the government must be in health care, the best thing it could do is help fund HSAs for everyone.

House of Mirrors

By Greg Scandlen

So, you think the debate over ObamaCare was frustrating? You ain’t seen nothing yet.

Just as Massachusetts provided a preview of that debate, it is also debuting the coming argument over cost control. An article by Amy Goldstein in the Washington Post  tells us exactly how it will play out.  The internal contradictions are mind-boggling.

She begins by explaining that,

Massachusetts Gov. Deval L. Patrick (D) is trying to “shove,” as he put it, the health-care system here into a new era of cost control.

Yes, “shove,” — kind of like Obama shoved us into his version of Wonderland.

She explains,

The governor’s proposal builds on a surprising consensus among leaders from the state’s insurance and hospital industries, medical society, legislature and governor’s staff who served on a special state commission assigned to diagnose the culprit behind the soaring medical spending. Fee-for-service medicine “is a primary contributor to escalating costs and pervasive problems of uneven quality,” the commission unanimously concluded in 2009.

This, even though it is patently untrue.  Fee-for-service does not drive inflation in health care – or in any other sector of the economy. What drives inflation in health care is the one thing that makes it different from any other sector – third-party payment. Of course, all of those “consensus makers” benefit enormously from third-party payment, so they aren’t about to kill this golden-egg laying goose.

The article also disavows any responsibility the state may have for the unique cost increases in Massachusetts.  It says,

The spending per person on health care is 15 percent higher than the national average — even taking into account the comparatively high wages here and outsize role of medical research and training. The move to near-universal coverage, state figures show, accounts for a sliver of recent increases in insurance premiums, which have soared above inflation. The main reason has been a rapid escalation in prices.

The state is saying, “Don’t blame us, it is the ‘rapid escalation in prices’ that is to blame, not the universal health program.” But why is Massachusetts having a “rapid escalation in prices” that no other state is seeing? Golly. It’s a mystery!

What to do, what to do? I know! We will pay doctors more for doing less!! INSPIRATION! Blue Cross has already begun —

The arrangement is a version of the accountable care organizations that the federal government also is trying to encourage in Medicare. They pay teams of doctors or hospitals a lump sum or what is called a “global budget” for the patients assigned to them. If a team can provide care for less, it keeps some of the savings, assuming it also meets enough of 64 measures of quality that Blue Cross has defined. Today, about one-third of the primary care doctors in Blue Cross’s network are taking part. A half-million HMO patients have been put in them — but not told by the insurer.

The article goes on to say the arrangement is “voluntary,” but voluntary for whom? Apparently not the half-million people who have “been put into them” and not told about it. Is this part of the “shoving” the Governor was so proud of?

Another part of the shoving were the arbitrary denials of insurance rate increases the Governor directed the insurance commissioner to make. The article reports the commissioner rejected 235 of 274 proposed rate increases last year.  Not because costs weren’t going up. The article already said they are. But for crass political reasons, dictated by the Governor who was up for re-election.  What a swell way to run a health care system!

But the article also contains the seed of what a real solution could be. Ms. Goldstein writes:

Attorney General Martha Coakley used new subpoena power to produce a report laying out large disparities in hospitals’ prices and concluding that they are unrelated to the quality of their care, the sickness of their patients or whether the institution is a teaching hospital.

Well, golly, again. If there is a wide variety of hospital prices unrelated to the quality of the care provided, is it possible – just possible – that consumers spending their own money might be able to shop around for the best deal and thereby punish those hospitals that overcharge and reward the ones that provide value?

And is it possible – just possible – that what gets in the way of that is not “fee-for-service” but third-party payment?

Can anyone say – YOU BETCHA!?

HSA Roundup

By Greg Scandlen

Fidelity Investments reports substantial growth in its HSA business. In 2010 it added 14 new corporate and 22,000 individual clients, representing a one-year growth rate of 52%. As of February 28, 2011, it held $229 million in HSA assets.

The company found that 17% of its account holders contributed more than $5,000 to their accounts in 2010, and 46% contributed between $2,500 and $5,000. Ninety-five percent carried over a balance from year to year.

Fidelity Press Release

State employees in Wisconsin will likely be put into HSAs as a result of the new budget-repair law.  Currently, 95% of state workers have no deductible whatsoever with the remaining 5% having a deductible of $100.  The average private sector deductible in Wisconsin is $947 for singles and $1,893 for families.  The new law requires the state to do a study by June, 2012, that will likely result in changes in 2013.

Wisconsin Journal Sentinel

Towers Watson conducted an employer survey on behalf of the National Business Group on Health that found, according to an article in HRMorning:

Account-based health plans (ABHPs) — health savings accounts (HSAs) and health reimbursement arrangements (HRAs) are booming, the report said. In 2002, just 2% of all employers offered ABHPs, but by 2011, that number has exploded to 53%. By 2012, another 13% of all respondents plan to add an ABHP.

HR Morning

The Employee Benefit Research Institute (EBRI) put out a new study of HSA and HRA accounts, which, as usual with EBRI, underestimates the market penetration of HSAs. I write this up on the NCPA Blog. EBRI draws its conclusions on total deposits and account growth from an internet survey, while Bill Boyles of the Consumer Driven Market Report (CDMR), and Eric Remjeske of Devenir Investments each tallied similar data by talking to HSA administrators who actually know how much money is in their vaults.

The contrast should be embarrassing to EBRI – if it were capable of being embarrassed.

NCPA’s Health Policy Blog

Don’t Take the Bait

By Greg Scandlen

Now that ObamaCare is failing, the Democrats are trying to turn the argument around. “At least we tried,” they say, “what have the Republicans done?” Then they offer two options: 1. Let the states do their own thing, but only if they can cover as many people with as comprehensive benefits for less cost, or 2. Let the Republicans offer an equally comprehensive federal program.

Republicans should resist falling into that trap.

Democrats love to enact “comprehensive” programs that “guarantee” this, that, or the other. Problem is that the “guarantee” isn’t worth a bucket of warm spit.  The examples are legion and I won’t list them here. Let’s just say, the programs never help as many people as promised, never come in within budget, often make conditions worse for most people, and block market-based changes that might have actually worked.

After their programs have failed to do what they promised, the response is always, “Yes, but think how many people we’ve helped. If you take it away, those people will perish.”  Even the much-vaunted Medicare program is like that. Only about half the elderly needed help when it was enacted, but now 100% of the elderly are dependent on it. This dependency is a very big problem, and Republicans have a hard time dealing with it.

Writing in the Washington Post, Ezra Klein dares Republicans to “take a stand on health-care reform.”  He writes:

To understand the trouble the Republicans find themselves in, you need to understand the party’s history with health-care reform. For much of the 20th century, Democrats fought for a single-payer system, and Republicans countered with calls for an employer-based system. In February 1974, President Richard Nixon made it official. “Comprehensive health insurance is an idea whose time has come in America,” he said, announcing a plan in which “every employer would be required to offer all full-time employees the Comprehensive Health Insurance Plan.”

This is true, but Richard Nixon was hardly an advocate of market-based solutions. This is the same president who instituted wage and price controls for the entire economy in an effort to control inflation. It is Nixonian thinking that gets Republicans in trouble every time.

Many Republicans are still subject to this kind of thinking. Mitt Romney and the Heritage Foundation got RomneyCare enacted in Massachusetts, and even today Klein writes of the Wyden-Brown proposal to allow state waivers:

The law envisions the secretary of Health and Human Services handing out the waivers, while the Heritage Foundation’s Stuart Butler would prefer to see a bipartisan commission in charge.

Here is precisely the kind of Nixonian thinking that Stuart Butler is famous for – continue having Washington dictate the terms of surrender, but put decision-making in the hands of a commission of elites rather than the Secretary of HHS.

Look, let’s be honest, when you’re dealing with markets, you can’t make guarantees. All you can do is get the incentives right, and watch things unfold.  Most of the time entrepreneurs come up with ideas that no one ever considered before. They can’t prove the merit of the idea ahead of time, and many ideas will fail. But the ones that succeed will add tremendous value and productivity, beyond all expectations.

It is amazing that we should even have to make this argument in these days of explosive innovation.  Think of all the efforts that were going into Internet search engines just ten years ago before Google came along. Think of Apple with and without Steve Jobs.

The main thing we have to do to reform health care is get the rusty old bureaucracy out of the way, and enable innovators and creators to operate with maximum freedom. It can’t be dictated by the Secretary of HHS or by a bipartisan commission, either.

How can we present this vision in a politically palatable way? Ezra Klein will never be convinced, and neither will Stuart Butler, but most of America knows instinctively that health care is still in the horse and buggy stage and we are well overdue for explosive innovation.

The last thing Republicans should do is try to find a better way of making buggy whips.

 

 

HSAs For Illinois State Employees

By Greg Scandlen

Our friend, Jim Porterfield, has written an impressive study for the Illinois Policy Institute called “Health Savings Accounts: A Win-Win for Illinois Public Employees and Taxpayers.”

In it he describes how the state and its workers could save literally billions of dollars by switching to HSAs for state employees. He writes:

When compared to the state’s HMO and Quality Care Health Plan premium costs for fiscal year 2011, properly-structured health savings account reforms could allow the state budget to show a savings every year through 2023. Under the three scenarios examined in this study, Illinois taxpayers could save as much as $18 billion to $27 billion between 2011 and 2023. Moreover, state employees and non-Medicare retirees can also save on FICA and federal income taxes while building savings for day-to-day and unexpected current and future health care expenses.

The study drills down deeply into the numbers to arrive at the calculations. Very likely you could replicate his work for your own state or entice Jim to do it for you.

 

It Costs A Lot So Use It

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Here is a true story that shows how health care costs can easily increase and drive up insurance premiums for everyone.  Recently I attended the funeral of a friend’s father.  After returning from the cemetery on this very cold day I was sitting with the family having lunch at the church.  All of a sudden I started having back pain and spasms.  They came and went.  I drove back to my office which took two hours and continued to work.  The pain level was about a 5 on a scale of 10 so I was in some discomfort.  That night I kept waking up from the pain.

During the trip I had some noises in my car.  The next morning I took my car to my mechanic.  Jokingly I told him I needed an alignment.  But the alignment was for me; not my car.  When I told him I planned to go to my chiropractor as soon as possible, he suggested I go get an MRI instead.  “You pay a lot for your insurance.  You might as well use it.” was his advice.

(He doesn’t know that I pay less because I have a high deductible policy.)

I always take his advice on my car but I decided to take my own advice as far as my healthcare.  Luckily my chiropractor was in that Saturday.  He released the tension in my back with a quick alignment. I paid him his $30 fee from my health savings account.  Within two hours I emailed him that I was already feeling better.  That Monday I went back for another treatment and paid him another $30.  I feel fine now.  I don’t know what caused the spasms.  Maybe it was the cold air at the cemetery.  Maybe I just twisted something. Maybe it was the tension I felt for my friends with their loss of their loved one.  The cause didn’t matter.  Stopping the pain and resuming normal activity was. I was cured and all for $60.

If I had listened to the advice of my mechanic I would have remained in pain all weekend, had to go to my doctor on Monday and have him order an MRI.  The MRI would have cost at least $1,000.  Then the results would have gone back to the doctor who might not have had any treatment suggestion or had just sent me to my chiropractor any way.  My time would have been wasted.  My health insurance company would have paid their share after my deductible and the cost of health care would have increased for everyone else in the insurance pool.

Each person who has health insurance has a responsibility to the other people who are covered.  If we over utilize our health insurance and if we don’t take care of our own health we contribute to the rising cost of health care.  It is far too easy to blame the insurance companies.  It is far harder to act with knowledge and wisdom when it comes to our responsibility for our own health.

Obamacare will continue to contribute to the blaming-others concept of healthcare reform.  Just listen to how the politicians including the President demonize the insurance industry for its “abuses.”  The law demands more benefits, waives pre existing condition clauses for people who didn’t bother to get coverage BEFORE they got sick or had an accident and eliminating limits on how much insurance companies must pay.  This will contribute to higher costs as the law doesn’t create any personal responsible.  It will make the problems worse as those who are forced to buy insurance will attempt to use their coverage to the maximum.  The insurance mandate is NOT personal responsibility.  It is the government making people buy something. Ask the people of Massachusetts who have the mandate under their “reforms.”  They now have the highest insurance premiums in the nation.  We need to repeal Obamacare as quickly as possible and instead promote better health literacy, personal responsibility and decision making by all of us.

Sacrificing Freedom on the Alter of HSAs

By Greg Scandlen

Our compadre, Bill Boyles, publisher of the Consumer Driven Market Report, argues that ObamaCare is good for HSAs and so repeal would therefore be bad for HSAs.  In a recent e-mail he sent around he said the following:

Repeal Could Hit HSA Market-Wide Definition
Repeal of the health reform act would also eliminate one key provision which expands the definition of all health insurance in the U.S. to include HSA law. The little-noticed section requires that a “minimum essential benefits” package for all insurers include at least the HSA law cost-sharing levels. A national committee at the Institute of Medicine meets this quarter to begin to finalize the details, including several HSA-friendly committee members. The change “Creates an essential health benefits package that provides a comprehensive set of services, limiting annual cost-sharing to the Health Savings Account limits ($5,950/individual and $11,900/family in 2010),” a chart explains. The reform law “Creates four categories of plans to be offered through the Exchanges, and in the individual and small group markets, varying based on the proportion of plan benefits they cover.” Millions would select HSAs.

So, HSA out-of-pocket maximums are the ceiling for all health plans in the proposed Exchanges. That being the case, Bill supposes that most enrollees will choose an HSA level of coverage and the lower premiums that go along with it.

That may be true. But it does not follow that repealing this law would be detrimental to HSAs, for at least two reasons:

1. The appeal of an HSA level of benefits will hold, with or without ObamaCare. I suppose it is a blessing that ObamaCare allows HSAs to continue, but repealing the reform act would also allow HSAs to continue. And without the reform law, we wouldn’t have to worry about whether there are “HSA-friendly committee members” at the Institute of Medicine. If having HSAs is dependent on the make-up of the IOM committee, what happens next year, or the year after, when those friendly committee members are no longer on the committee? Indeed, what kind of health system is it that depends on the friendship of IOM committee members, or of Kathleen Sebelius, for me to get the kind of health insurance I want to have?
2. The current design of HSAs is not the pinnacle of consumer-friendly health insurance, to be enshrined for all time. The current OOP limits will be the absolute maximum allowed for any health plan. So, if I decide that I am better served with a $10,000 deductible, I will be forbidden from exercising that option. In fact, one of the foundations of the HSA movement has been that allowable deductibles will be raised over time as the health care system becomes more accustomed to pricing for direct payment by patients and patients build-up balances in their HSAs. That evolution will not be allowed.

I’m afraid that HSAs have become another special interest group, with advocates saying, “we don’t care what happens with health care as long as HSAs are protected.” That is not where I am. I’m an advocate for patients, not HSAs. I am not willing to sacrifice individual freedom on the alter of HSAs, or any other business model.