Time for a Tune Up: Health Care Isn't Like Buying a Car

Photo: Truthout

A story in Wednesday's edition of the New York Times once again raises questions about how we manage health care in the United States.

Data being released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts — sometimes 10 to 20 times what Medicare typically reimburses — for the same procedure, raising questions about how hospitals determine prices and why they differ so widely.

 

The data for 3,300 hospitals, released by the federal Center for Medicare and Medicaid Services, shows wide variations not only regionally but among hospitals in the same area or city.

The data, as the story points out, does not account for a variety of factors -- regional differences in pay scales and costs, the relative health of particular patients, etc. -- but it does raise questions about how hospitals determine prices and what recourse we have to address this system. One factor cited by the hospital industry is health insurance, though insurers counter that hospitals make it difficult to account for the real costs of any procedure.

An official at the American Hospital Association, a trade group, said there was a cat-and-mouse game between hospitals and insurers that affects what hospitals charge.

As insurers demand bigger discounts from a hospital, a facility may raise its charges to protect its bottom line, that official, Caroline Steinberg, said. “The hospital raises its rate to cover the discount,” said Ms. Steinberg, who is the group’s vice president for trends analysis.

Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the nation’s largest association of health insurers, said some member companies were reporting sharp price increases of 20 to 30 percent for some services. Some insurers are seeking similar price increases from policy holders.

“There’s very little transparency out there about what doctors and hospitals are charging for services,” Mr. Zirkelbach said. “Much of the public policy focus has been on health insurance premiums and has largely ignored what hospitals and doctors are charging.”

That this back and forth is occurring in a nation with the highest per capita health costs of any in the industrialized world is particularly galling. As PBS Newshour pointed out in October, the $8,233 we spend per person on health care in the United Staets is "more than two-and-a-half times more than most developed nations in the world, including relatively rich European countries like France, Sweden and the United Kingdom." Our health-care costs, the report adds, "now eat up 17.6 percent of GDP."

And, as the report goes on to show, we are not getting our money's worth. While a "sizable slice of Americans -- including some top-ranking politicians -- say the cost may be unfortunate but the U.S. has 'the best health care in the world,'" we generally rank poorly on most health indicators.

According to the most recent report from the Organization for Economic Co-operation and Development (OECD) -- an international economic group comprised of 34 member nations -- it's not as much as many Americans expect.

In the United States:

  • There are fewer physicians per person than in most other OECD countries. In 2010, for instance, the U.S. had 2.4 practicing physicians per 1,000 people -- well below below the OECD average of 3.1.
  • The number of hospital beds in the U.S. was 2.6 per 1,000 population in 2009, lower than the OECD average of 3.4 beds.
  • Life expectancy at birth increased by almost nine years between 1960 and 2010, but that's less than the increase of over 15 years in Japan and over 11 years on average in OECD countries. The average American now lives 78.7 years in 2010, more than one year below the average of 79.8 years.
There's a bright side, to be sure. The U.S. leads the world in health care research and cancer treatment, for instance. The five-year survival rate for breast cancer is higher in the U.S. than in other OECD countries and survival from colorectal cancer is also among the best, according to the group.
Overall, however, it is clear that we are doing something very wrong. The PBS report points to France and Japan, which "demonstrate that it is possible to have cost-containment at the same time as paying physicians using similar tools to those used in the U.S." Those countries
use a common fee schedule so that hospitals, doctors and health services are paid similar rates for most of the patients they see. In the U.S., how much a health care service gets paid depends on the kind of insurance a patient has. This means that health care services can choose patients who have an insurance policy that pays them more generously than other patients who have lower-paying insurers, such as Medicaid.

France and Japan also...

are flexible in responding if they think certain costs are exceeding what they budgeted for. In Japan, if spending in a specific area seems to be growing faster than projected, they lower fees for that area. Similarly, in France an organization called CNMATS closely monitors spending across all kinds of services and if they see a particular area is growing faster than they expected (or deem it in the public interest), they can intervene by lowering the price for that service. These countries also supplement lowering fees with other tools. For example, they monitor how many generic drugs a physician is prescribing and can send someone from the insurance fund to visit physicians' offices to encourage them to use cheaper generic drugs where appropriate. In comparison, U.S. payment rates are much less flexible. They are often statutory and Medicare cannot change the rates without approval by Congress. This makes the system very inflexible for cost containment.
Just as significantly, PBS says:

There are few methods for controlling rising costs in private insurance in the U.S. In running their business, private health insurers continually face a choice between asking health care providers to contain their costs or passing on higher costs to patients in higher premiums. Many of them find it hard to do the former.

Cost containment, I would argue, is less important to insurers than profit. If they can generate profit by increasing what they charge patients, they will do it. If maintaining or increasing profit requires denial of care or reimbursement, they will do that. But they do nothing without considering the bottom line.
 
This is a distortion of what a well-functioning health care system is supposed to be about. Health care should be, first and foremost, about health, which means that we should be judging everything we do in this sector based on health outcomes. Shouldn't the statistics -- falling life-expentancy rates, sicker kids, and growing rates of preventable diseases -- serve as the Bat-signal for change, especially with costs growing as they are?

That the Affordable Care Act -- Obamacare -- is viewed as major systemic and historic change should tell you just how distorted this argument has become. It does extend coverage, but it leaves in place much of the current system. Its improvements are, really, little more than tinkering with the machinery.

My proposal would be to cut to the heart of our system and cut private insurers out of the mix. I continue to think a single-payer system makes the most sense. But, more importantly, I think we need a full reimagining of health care that moves away from paying fees for individual services toward one in which coverage is based on the holistic treatment of individual patients; that takes profit out of the game as a motivation and makes overall health the driver of all decisions; and that views access to affordable, high-quality health care a right, rather than a privilege.

Health care is not the same as buying a car. We need to stop treating it as though it were.

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