Why are American health care costs so high?

[doodle]

This video is interesting: http://youtu.be/qSjGouBmo0M

Presenter brings up an interesting point. Why is our public percapita expenditure for health higher than nations that have nationalized health care when Americans don't?

[doodle]

Oh, I forgot....the primary reason we pay more....no leverage and centralized negotiation of contracts for services. For that we need a big national healthcare system and a single purchaser.

[MediumTex]

Fraud, inefficiency, U.S. consumers of health care subsiding international drug development, high cost of liability insurance, doing unnecessary diagnostic procedures, doctors prescribing expensive drugs when cheaper drugs are available, and spending a lot on end of life care.

Those are a few things that increase costs.

[Xan]

Don't forget the utter disconnect between prices and the people who receive services.

[Pointedstick]

To add to MT's list:
Drug patents, insurance mandates that transform insurance into a weird cost-sharing membership system, high cost of medical education and indebtedness of medical professionals, caps on the numbers of medical professionals graduated each year, poor understanding of nutrition in the medical profession, tendency to treat the symptoms of chronic conditions rather than the causes ... I could go on and on.

[doodle]

Fraud, inefficiency, U.S. consumers of health care subsiding international drug development, high cost of liability insurance, doing unnecessary diagnostic procedures, doctors prescribing expensive drugs when cheaper drugs are available, and spending a lot on end of life care.

Those are a few things that increase costs.

Yes all of those...but according to the short video the 800 pound gorilla is lack of leverage in negotiation of prices. This leverage is what gives Walmart a big advantage over a mom and pop store when buying things. In nationalized healthcare systems this is where the bulk of the cost savings come from.

[Mdraf]

Fraud, inefficiency, U.S. consumers of health care subsiding international drug development, high cost of liability insurance, doing unnecessary diagnostic procedures, doctors prescribing expensive drugs when cheaper drugs are available, and spending a lot on end of life care.

Those are a few things that increase costs.

Yes all of those...but according to the short video the 800 pound gorilla is lack of leverage in negotiation of prices. This leverage is what gives Walmart a big advantage over a mom and pop store when buying things. In nationalized healthcare systems this is where the bulk of the cost savings come from.

You can call it leverage but I call it coercion. In many of the other countries you are not allowed to practice medicine outside of the system

[Pointedstick]

In nationalized healthcare systems this is where the bulk of the cost savings come from.

Right, because those systems haven't generally fixed most of the other problems. They address the symptoms with mandates, price caps, and other things like that, and it works well enough for two or three decades until the systems get totally bogged down.

I'm convinced that costs for most things can be contained with competition and market forces. I mean, witness what happens with generic drugs: As soon as the government-granted monopoly expires, the price comes down to usually something ridiculous like 1% of what it was before. Market forces will take care of most of these things if you let them...

[doodle]

Spending higher than expected given our wealth



Why? Check out the green section

[WiseOne]

Let's get some definitions down...

Fraud: that's the label stuck on doctors' inability to remember the insanely complicated rules for how much to bill for a given service.  Such as: 14 point review of systems (13 is not enough and would constitute fraud), full specialty exam must include e.g. funduscopy even if it's not relevant for the clinical situation, 3 "medical decision-making" points, 4 history points, and on and on.  And you will still make mistakes unless you take into account your patient's insurance - it's different for Medicare vs private insurance.  Better hope your doctor doesn't remember all this stuff, because if they do then it's unlikely they're focusing on what you WANT them to focus on, i.e. taking care of you!  Incidentally, "physician salaries" are actually "medical reimbursements to physicians", which covers a TON of overhead such as....

inefficiency:  See above.  Note that the whole "fraud" scene requires armies of billing/coding experts, compliance oversight, "online training", etc.  Those people's salaries, offices etc are all 100% overhead that contributes nothing to your care.  And don't even get me started on the millions that have been thrown at horribly inefficient EHR systems.

U.S. consumers of health care subsiding international drug development:  YES.  Big item.

high cost of liability insurance:  lawyers are an expensive hobby :-)

doing unnecessary diagnostic procedures:  yes, because reimbursements for face to face patient time aren't enough to pay expenses, so people "play the game" by substituting procedures for good old fashioned thinking and history-taking.  The EHR systems and ICD9 coding system push you in that direction as well, by taking far more physician time and forcing big cuts to patient time, and forcing everything into code-shaped boxes which then are tied to iron-clad "care guidelines".

doctors prescribing expensive drugs when cheaper drugs are available:  Yes.  Banning drug reps from physician offices would instantly solve the problem, not that it's likely to happen since the pharm companies have a pretty strong lobby going.

and spending a lot on end of life care:  Yes, big item.  I get really incensed whenever I see things like an 89 year old with metastatic lung cancer in an ICU.  Which by the way I did not make up...saw that case yesterday.

Those are a few things that increase costs.

AMEN!!  Very nice summary.

[Mdraf]

Let's get some definitions down... <snip rest of great post>

Wow. Excellent post. We are doomed.

[doodle]

Let's get some definitions down...

Fraud: that's the label stuck on doctors' inability to remember the insanely complicated rules for how much to bill for a given service.  Such as: 14 point review of systems (13 is not enough and would constitute fraud), full specialty exam must include e.g. funduscopy even if it's not relevant for the clinical situation, 3 "medical decision-making" points, 4 history points, and on and on.  And you will still make mistakes unless you take into account your patient's insurance - it's different for Medicare vs private insurance.  Better hope your doctor doesn't remember all this stuff, because if they do then it's unlikely they're focusing on what you WANT them to focus on, i.e. taking care of you!  Incidentally, "physician salaries" are actually "medical reimbursements to physicians", which covers a TON of overhead such as....

inefficiency:  See above.  Note that the whole "fraud" scene requires armies of billing/coding experts, compliance oversight, "online training", etc.  Those people's salaries, offices etc are all 100% overhead that contributes nothing to your care.  And don't even get me started on the millions that have been thrown at horribly inefficient EHR systems.

U.S. consumers of health care subsiding international drug development:  YES.  Big item.

high cost of liability insurance:  lawyers are an expensive hobby :-)

doing unnecessary diagnostic procedures:  yes, because reimbursements for face to face patient time aren't enough to pay expenses, so people "play the game" by substituting procedures for good old fashioned thinking and history-taking.  The EHR systems and ICD9 coding system push you in that direction as well, by taking far more physician time and forcing big cuts to patient time, and forcing everything into code-shaped boxes which then are tied to iron-clad "care guidelines".

doctors prescribing expensive drugs when cheaper drugs are available:  Yes.  Banning drug reps from physician offices would instantly solve the problem, not that it's likely to happen since the pharm companies have a pretty strong lobby going.

and spending a lot on end of life care:  Yes, big item.  I get really incensed whenever I see things like an 89 year old with metastatic lung cancer in an ICU.  Which by the way I did not make up...saw that case yesterday.

Those are a few things that increase costs.

AMEN!!  Very nice summary.

WiseOne, if you look at the pie chart it seems like all of these barely account for 30% of higher costs. It's that mysterious green chunk that we should focus on.

[WiseOne]

I'm curious about some of these things:

insanely complicated rules for how much to bill for a given service.  Such as: 14 point review of systems (13 is not enough and would constitute fraud), full specialty exam must include e.g. funduscopy even if it's not relevant for the clinical situation, 3 "medical decision-making" points, 4 history points, and on and on.

The EHR systems and ICD9 coding system push you in that direction as well, by taking far more physician time and forcing big cuts to patient time, and forcing everything into code-shaped boxes which then are tied to iron-clad "care guidelines".

Who set up these systems?  What did they used to be?  When did they change to the monstrosities you describe?

CMS, i.e. Medicare and Medicaid.  Every time there is a perceived problem, the rules get more complicated.  It's about to happen again, with the advent of ICD10.  I look forward to finding out what happened to my very favorite ICD9 code, the one for death by guillotine.  I suspect a lot of motivation comes from health care administrators trying to protect/expand their jobs.

During my residency which was just over 10 years ago, you'd write a short note to document a patient encounter or procedure whose purpose was to inform other doctors/nurses about what's going on.  (And the lawyers of course.)  We all learned the "SOAP" formula:  subjective, objective, assessment, plan.  Now, the amount of informative text in a note has become maybe 5% of the total.  The rest is required by billing/coding rules.  Result:  notes are no longer human-readable.  If you want to find out what's going on with the patient, you have to pick up the phone.  So much for the stated goal of EHR systems.

Doodle - interesting pie chart but everything in it is extremely subjective ("more than expected"...??).  No idea what the thing means.  I just know what I see every day. No surprise that many physicians are planning to retire early or escape into some CMS-free practice style (e.g. concierge or cash-only), or into research which is what I'm doing. Even national health systems like the UK's NHS are not anywhere near this bad.  I wonder sometimes if someone decided the best way to get rid of our current system is to make it so unwieldy that health care becomes completely impossible.

[Pointedstick]

Can you avoid all that nonsense by not taking Medicare and Medicaid patients? Or do the insurance companies impose their own separate hell on you as well?

[WiseOne]

Can you avoid all that nonsense by not taking Medicare and Medicaid patients? Or do the insurance companies impose their own separate hell on you as well?

Some like the EHR and meaningful use/PQRI code requirements, but not all.  Private insurance companies tend to follow Medicare's lead.  Going to cash-only is the only way to really avoid this stuff, but it has its own pitfalls.  There was an interesting article in CNN about this recently.  It's a great trend if it continues, because for minor & preventative care, the free market would be the best arbiter.  It might even have a positive impact on government-funded "disaster" care (see recent thread about having single payer government insurance with very high deductible - still think that's a fantastic idea).

TennPa - there was a landmark case of "Medicare fraud" against the University of Pennsylvania for $30M in the 1990s that started us down this path.  Penn wasn't doing anything different from any other teaching hospital, they just happened to be the first victim.  CMS discovered that they could make lots of one-shot windfalls by accusing major medical centers of fraud, but from there it somehow evolved to increasing oversight and micromanagement of physicians, because as we all know, people who commit "fraud" can't be trusted with anything.  (Except of course your health care...ironic isn't it.)  One of the immediate consequences was to limit the autonomy of medical students and residents.  There was a confusion of direct oversight (which is what CMS wants documented ad nauseum) and readily available backup (which is what every resident has always had).  The negative impact on medical education cannot be overstated.  This is yet another reason for "unnecessary procedures" - that's what physicians do when they don't have the knowledge or confidence to figure stuff out on their own.

[Pointedstick]

What is "CMS?"

[Kshartle]

I get really incensed whenever I see things like an 89 year old with metastatic lung cancer in an ICU.  Which by the way I did not make up...saw that case yesterday.

Who is paying for this? Is she paying? Is an insurance company she paid premiums to paying for this?

[Kshartle]

doctors doing unnecessary diagnostic procedures 

doctors prescribing expensive drugs when cheaper drugs are available

Why do insurance companies let doctors get away with cutting into the insurance companies profits? Are they just dumb? Is it too expensive to request that doctors use cheap generics instead of high-priced drugs?

Can insurance companies not dispute unnecessary diagnostics successfully? Why have no insurance companies been able to figure this out? You'd think they would profit immensely.

[notsheigetz]

Can insurance companies not dispute unnecessary diagnostics successfully? Why have no insurance companies been able to figure this out? You'd think they would profit immensely.

It has been my experience that insurance companies do dispute and refuse to pay unnecessary diagnostic services - and then the bill is sent to me. The last one cost me about $1100 for various vitamin deficiency screenings on a blood test that I had no idea the doctor even asked for.

This is why I choose to stay away from the system until I'm having a near death experience.

[doodle]

doctors doing unnecessary diagnostic procedures 

doctors prescribing expensive drugs when cheaper drugs are available

Why do insurance companies let doctors get away with cutting into the insurance companies profits? Are they just dumb? Is it too expensive to request that doctors use cheap generics instead of high-priced drugs?

Can insurance companies not dispute unnecessary diagnostics successfully? Why have no insurance companies been able to figure this out? You'd think they would profit immensely.

Lack of leverage in negotiating...maybe. Doctors can charge what they want and then just refuse to accept insurance from a company that tries to pay less than that. If the government was the only insurer, there would be a lot more negotiating leverage I would think.

I don't see the point of private insurers actually. It seems to complicate the system enormously.

[Kshartle]

Can insurance companies not dispute unnecessary diagnostics successfully? Why have no insurance companies been able to figure this out? You'd think they would profit immensely.

It has been my experience that insurance companies do dispute and refuse to pay unnecessary diagnostic services - and then the bill is sent to me. The last one cost me about $1100 for various vitamin deficiency screenings on a blood test that I had no idea the doctor even asked for.

This is why I choose to stay away from the system until I'm having a near death experience.

Have you ever comunicated back to the doctor's office that you are now on the hook for what they perscribed? You can't be alone. Why are doctors getting away with this?

Do you end up paying then? Does the insurance company? Does the doctor/hospital just take it on the chin?

This sounds so weird. Unneccessary procedures means wasted money and that cost has to fall on someone. Who is taking the beating for all this?

[Kshartle]

doctors doing unnecessary diagnostic procedures 

doctors prescribing expensive drugs when cheaper drugs are available

Why do insurance companies let doctors get away with cutting into the insurance companies profits? Are they just dumb? Is it too expensive to request that doctors use cheap generics instead of high-priced drugs?

Can insurance companies not dispute unnecessary diagnostics successfully? Why have no insurance companies been able to figure this out? You'd think they would profit immensely.

Lack of leverage in negotiating...maybe. Doctors can charge what they want and then just refuse to accept insurance from a company that tries to pay less than that. If the government was the only insurer, there would be a lot more negotiating leverage I would think.

I don't see the point of private insurers actually. It seems to complicate the system enormously.

If the doctor refuses someone's insurance wouldn't that cut into their profits because they're losing patients? How could an individual doctor or even a group or hospital have more leverage than an insurance company?

How can doctors charge whatever they want? Another doctor can undercut them right? Are all these doctor's in collusion? There has got to be something else going on that we haven't accounted for.

[rhymenocerous]

I don't have anything particularly insightful to contribute, but I thought I'd just share an anecdote.  A few years ago, my company switched health care providers and I was switched from a plan without a deductible to one with a deductible.  Previously, I had never come into contact with what health care costs.  I had bronchitis a few months later and the doctor asked me to blow into this tube which made a little graph on the computer.  Somehow, I messed it up the first time, so he asked me to try again.  Later when I received the bill, I was charged $80 for each time I blew into that stupid tube!  If the doctor had told me at the time what it would actually cost, I would have declined.

[Kshartle]

I don't have anything particularly insightful to contribute, but I thought I'd just share an anecdote.  A few years ago, my company switched health care providers and I was switched from a plan without a deductible to one with a deductible.  Previously, I had never come into contact with what health care costs.  I had bronchitis a few months later and the doctor asked me to blow into this tube which made a little graph on the computer.  Somehow, I messed it up the first time, so he asked me to try again.  Later when I received the bill, I was charged $80 for each time I blew into that stupid tube!  If the doctor had told me at the time what it would actually cost, I would have declined.

Did you end up paying it? Did you complain to the doctor? Are doctor's just tricking people?

Why did you get a bill and not the insurance company? Did you not ask the doctor if the test had a cost and if not why not?

I'm definately not trying to be hard on you, I'm just wondering why this stuff is happening. I've gone to the doctor maybe one or twice in the last 15 years and it was very minor so I don't ever encounter this.

[rhymenocerous]

Did you end up paying it? Did you complain to the doctor? Are doctor's just tricking people?

Why did you get a bill and not the insurance company? Did you not ask the doctor if the test had a cost and if not why not?

I'm definately not trying to be hard on you, I'm just wondering why this stuff is happening. I've gone to the doctor maybe one or twice in the last 15 years and it was very minor so I don't ever encounter this.

I did pay the bill, but I complained to the doctor, telling him that I was covering this out of pocket and he lowered the total for me.  I guess that he just bills everything he possibly can to the insurance company, but he was willing to work with me when I asked.  I got the bill instead of my insurance company because I had not yet met my deductible for the year (a minimum amount of health-related expenses that I have to cover before insurance picks up the tab).  As soon as I could, I switched back to a health plan at work without a deductible.  I didn't think to ask the doctor the cost at the time.  I've heard stories though of people who try to find out the price of an operation or something beforehand from a hospital and it's almost impossible because there are so many moving parts and in-the-moment decisions that are made.