WHY IS AMERICAN HEALTHCARE SO EXPENSIVE?

Part Two

In this blog’s early posts, we saw how Big Pharma exploits its near monopolistic powers by raising prices simply because it can, resulting in the shortened lives of many patients who have been priced out of living.

In the current two-part series, the first part showed the results of Physicians and other providers gaming the system by ordering unnecessary procedures – which benefits mainly them, unlike Patient Centered systems like the Mayo Clinic, where their salaried doctors have no incentive to drive up charges, and everything is focused on institution-wide teamwork in healing the patient.  The former is profit-driven, the latter patient-driven, resulting in better outcomes at lower costs.

So far, if we’ve been paying attention, we’d be justified in concluding that where patient care is concerned, considerations of profit are poison.

But what about Hospitals and Clinics, Dialysis Centers and the like? Are considerations of profit poison for them as well? The answer is a resounding YES, according to Steffie Woolhandler and David Himmelstein, the pre-eminent Physicians/Scholars, co-founders of the Physicians for a National Health Program,  the lead authors of the PNHP’s healthcare reform article published in the Journal of the American Medical Association, which in turn is the basis of H.R. 676 , the Single-Payer Bill from the House of Representatives. Woolhandler and Himmelstein are, in my opinion, the God-Parents of our movement. and are worth listening to.

They spell out their position in the article: IMPORTANCE OF ALIGNING HOUSE AND SENATE SINGLE-PAYER BILLS THE RIGHT WAY: Removing Medicare’s Profiteering Incentive is Key. I encourage you to read it:

Aligning House & Senate Versions of Single-Payer The Right Way.

Woolhandler and Himmelstein say that the Senate Bill, unlike the House Bill “...would, like Medicare, pay hospitals and other institutional providers on a per-patient basis, intermixing payments for current operating expenses with funding for future capital investments and profits. At present, hospitals’ success, and even survival, depends on generating profits (“surpluses” in non-profit facilities). Hospitals with a favorable bottom line can invest and add new buildings and programs, while unprofitable ones can’t modernize or expand, risking a downward spiral toward takeover or closure....It’s this profit imperative that drives hospitals’ financial gaming, e.g. upcoding, and concentration on the most lucrative services, such as elective cardiac and orthopedic services, rather than money losers like mental health. This payment mechanism (and S.1804 as a whole) also leaves the door open to investor-owned providers.”

The authors go on to explain why payment for performance schemes – in addition to requiring expensive bureaucratic overhead – provide “no evidence that they’ve improved patients’ outcomes in any setting.” Moreover – it should go without saying – the minute you have an investor-owned enterprise, you must compromise quality to ensure profits. Privately owned dialysis centers, for example, have far worse outcomes than community owned ones.

Contrast all this with the model provided by Scotland and several other European countries who pay these institutions the way we pay firehouses – globally – to take care of operating expenses. Our firehouses aren’t expected to make a “profit” to save for a new firetruck.  If they need one, they appeal to the local municipality to buy them one.

The House’s H.R. 676, similarly, would pay medical institutions globally, covering all operating costs, and would allow no “profits.” If new equipment or expansions are warranted, they would get them from the government, which – if it wanted to stay in office – would provide them promptly. And privately owned facilities would be made publicly owned by the government’s buying them out. This would be less expensive than  it might at first appear, partly because health facilities typically carry a debt load, and partly because it would not be done all at once, but over a period of time.

Everyone agrees that once established, Single-Payer would save money if for no other reason than obscene profits and bloated bureaucratic overhead would be eliminated (contrast Medicare’s 2% overhead with conventional insurance’s 12%).  While that is not small potatoes, it might well not be enough to meaningfully lighten the burden of healthcare on our economy.  As our authors point out:
“In sum, the financial viability of a single-payer reform turns on cutting administrative costs and minimizing incentives for financial gaming. Maintaining Medicare’s current payment strategies, as under S.1804, would be substantially costlier than adopting the non-profit global-budgeting strategy used in several other nations.”

Atul Gawande, physician/author of the article on which the previous post is based, is more blunt:

“When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen.”

To me this means that setting up Single-Payer – by itself – will not be enough, unless it removes the profit motive, regulates  greed, minimizes the incentives to game the system, and unless it requires healthcare providers to meet carefully fashioned public standards . If this happens, the cost savings and improvements in care will be very great.

There will be plenty of arguments, pro and con, for everything that’s been said in all my posts. Our job is to stay on top of them, making sure that when reform is done, it’s done right.

Dio

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