The Trouble With Trillions

Health care is a tough industry. It is built on the idea of helping people, but it is still a business. Providing treatment can be expensive. Hospitals need to make money to survive. Physicians need to make money to keep their practices alive. At the same time, the people most in need of medical treatment are often the least able to afford it.

For the decades, the government has helped with programs like Medicare, Medicaid and CHIP. But the government through Medicare has overpaid hundreds of billions of dollars since 2002, according to an article Paul Levy cites in his recent post.

I am not going to get into all the details of sustainable growth rate, because I am not expert enough to discuss it intelligently. What I do find interesting is that any time the government tries to adjust payment rates, there is significant push back from physicians. It is always followed by physicians threatening, "We will be forced to stop accepting Medicare patients."

Levy doesn't really give an opinion on the matter. (He does respond with a "No." in the comments section when asked if BIDMC would drop Medicare patients.) Instead, he puts the matter out there, and he tacitly endorses reform while taking a wait-and-see approach.

The problem is there is considerable waste in the medical system. “Waste” according to the payer (government, insurance companies and patients), however, is profit in the eyes of the hospital.

Levy, despite not really voicing an opinion on the matter, does link to an article by Austin Frakt, an assistant professor at Boston University's School of Public Health. In his article, Frakt proposes some measures that could help stop waste. He points to a topic I discussed in an earlier post, which has to do with reimbursing based on quality not quantity.

The fact is, until they feel it in their wallets, hospitals usually don't make changes, and there is a precedent for reforming payment structures leading to positive change. For instance, when Medicare changed its policy on reimbursement for treatment of hospital-acquired conditions, hospitals began implementing more rigorous standards to ensure patients didn't get sicker at the hospital. This isn’t to say hospitals ignored this before, but they were now motivated financially to prevent these conditions.

Frakt also points to the problem of too many specialists in the industry. He references a recent Newsweek article, which claims specialists are responsible for hundreds of billions of dollars of waste. The current system is setup to financially reward specialists. As a result, primary-care physicians have decreased over time as med students with crushing med-school debt choose the more lucrative specialties over being a PCP. Most projections figure that the U.S. will have a shortage of PCPs when the new health care reform measures take effect. One would think fewer specialists would equal less waste, but incentives have to change for this to happen.

While most of the comments on Levy’s post support the need to reform, one commenter chose the ideological approach.

Anonymous said...
Paul - A little history here.... this was a deal cut by Obama and the American Medical Association. The AMA would support Obamacare and he would reverse scheduled Medicare cuts. The kicker, of course, was he couldn't include the fix in his Obamacare bill because it would have added billions in cost to his bill and made it way too expensive. So they said they would do the fix in a seperate bill so they can still get on their soapbox and pretend Obamacare doesn't add to our trillions in debt. This is just a perfect example of everything wrong with politics and why this country is heading quickly towards bankruptcy. No transparency on cost and dealing straight with the American public.

This is an interesting theory, despite the fact that the SGR was put into place in 1997 and has been a problem ever since the U.S. started accruing huge national debt in 2002. In fairness to the commenter, he is pointing to the AMA’s refusal to support health care reform if it meant less money for physicians. (I guess by history lesson, he meant recent history that supports “Obamacare” being evil.)

Politicizing the problem and stamping Obamacare all over it just pushes us farther from a solution. This shouldn’t be a political issue. This isn't about punishing doctors or business, it is about eliminating the waste physicians freely admit exists (most estimates say about 33 percent of health care spending is unnecessary). Both hospitals and physicians need to get serious about limiting waste, or they will have to accept the consequences of their greed.

What would be interesting, and is noticeably absent from Mr. Levy's post, is what his hospital does to eliminate waste. At the very least, he should point out some solutions. But, I guess the first step to healing is admitting you have a problem.

Not included in this discussion, but a guilty party in all this waste is the patient. Possibly in a future post, we could tackle how the American patient contributes to medical waste and how better chronic disease management could save us.