Frankly, I’m skeptical that the health care reform plan proposed by Fred Gluck at RealClearPolicy would achieve the objectives he sets for it. He begins by outlining some sources of high costs in health care:
Estimates vary somewhat, but unproductive costs include:
- Administrative expense created by the unnecessary complexity of a non-system that evolved in a piecemeal manner – $500 billion
- Overutilization and fraud – $600 billion
- Lost revenue from regressive tax preference for Employer Sponsored Insurance (ESI) – $280 billion
- Pharmacy Benefit Manager middlemen – $150 Billion
- That adds up to $1.53 trillion, well over one-third of our total $3.5 trillion annual spending on health care with no reduction in care delivered. Complexity in the choice of insurance coverage, unnecessary subsidies for ESI, middlemen in the pharmacy supply chain, and the unproductive duplication of public health care agencies are the root causes of these costs.
Let’s restate that: he wants to fix our health care system by eliminating waste, fraud, and abuse, all evergreens. I have one basic question about the above: who defines “overutilization”?
He then proposes his plan:
A straightforward approach to reducing this complexity would be to mandate a single, comprehensive Guaranteed Access Plan (GAP) basically modeled on existing Medicare coverage. All insurers in both the private and public sector would be required to provide this same, separately priced GAP coverage as their flagship product. This would create an easily understood, transparent competitive market for insurance coverage uncomplicated by the largely specious options that now obfuscate choice.
Competition would be based solely on premium price, the effectiveness of control of overutilization and fraud, and quality of service. This single step would eliminate much of the wasteful complexity that now exists throughout the system, provide much greater transparency, and enable substantially more effective control of over-utilization and fraud.
People who are happy with the workplace-connected insurer they have now would be able to stay with them, with one important difference. The money employers now pay for their workers’ insurance would be turned into wage increases and workers would decide whether or not to supplement their GAP coverage. With employers out of the picture, the existing tax preference for ESI that unfairly penalizes the self-employed and others who buy their own coverage would be eliminated.
Private insurers would be free to offer supplemental plans to cover modalities not included in the GAP to those willing and able to pay. These supplementary plans would not be subsidized in any way and, given the comprehensiveness of GAP, would constitute a very small market segment.
I’m also curious about what he means by “modalities”? I’ve been to his web site; it does not define that. Indeed, he resorts to handwaving to avoid defining it.
Although reluctant to challenge someone as knowledgeable and experienced as Mr. Gluck, I think the problem with our health care system is much more basic than that and it isn’t unique to health care. The same problems would afflict any consumer good in which the providers determined what should be provided and in what quantity, helped to set the price, the good didn’t even need to suit the needs of the customer but conform to the standards established by the providers, and entry into the market was limited. Let’s consider an example using cellphones.
Imagine that cellphone manufacturers determined what features you needed in a cellphone, how often you needed to buy one, and set the prices of cellphones. The cellphones offered didn’t even need to meet your needs as long as they met the standards established by the cellphone manufacturers. It doesn’t take much of a prophet to predict that cellphone prices under such a system would soar and that manufacturers would become very, very profitable.
The solution to the problem is implicit in its statement: we’ve got to separate the various components—prescription of services, standard of care, prices, and what is actually paid for or eliminate barriers to entry. I prefer the former. Providers should continue to determine what services should be provided and how frequently. They should be paid for results.
Too much here to comment on everything so lets just look at this.
” who defines “overutilizationâ€?”
There is lots of literature on this. There are a number of procedures and therapies still used that have been shown to provide no benefit. Any utilization for these is over utilization. Insurance companies keep paying for them because they dont want to lose unhappy patients who cant receive these procedures that their docs recommend. Next, you sometimes have different methods of treating the same illness, with the costs for different treatments varying by an order of magnitude, with outcomes about the same. Insurance companies pay for all forms of treatment, even though the more expensive dont have a shown benefit.
Next, you have widely differing levels of usage of different therapies/surgeries/tests between different areas, different hospitals and different practices. One of our local orthopedic guys, who eventually got caught and fined for other fraud, ordered surveillance MRIs every 6 months on his shoulder patients for years. Not all of this is fraud BTW. It took me years to get our eye docs and the PCPs screening their patients to stop doing pre op testing on cataract patients. It was just engrained habit and fear that they might be missing something. They actually thought they were providing a benefit to their patients by doing that unnecessary care.
To the broader idea of setting a universal coverage plan and having insurance companies compete on price I am somewhat sympathetic. It is a model that has worked elsewhere, so at least it is a proven model. Literature has shown that when you give families more than a few choices they do not choose the one that is most cost efficient for them. Insurance companies can offer low value but sexy things like wellness plans and consumers dont realize they are overpaying. I would think that it would simplify our billing and lower admin costs.
Query- How do you plan to eliminate the big barriers to entry? Insurance companies, new hospitals, drug manufacturing, etc are all pretty expensive.
Steve
It is instructive to dwell on the cellphone analogy.
Relying on insurance adds 25% to the cost of a medical procedure, a hospital stay or a drug, as seen in the Obamacare “loss-ratio” requirements on insurance companies. There would be serious new competition with no barriers to entry, since virtually all countries provide access to health care.
Imagine how much that iPhone would cost if prices weren’t freely available and advertised openly, if you could find out the prices only after the purchase, if you were charged surprise fees after the fact, if the dealer had to be vetted by the gummint and carry special insurance.
An so on and on….
If we had to buy insurance to cover the acquisition of an Apple XI (256 GB), it would cost $1687.50 instead of the $1350 advertised today.
You can save even more on the iPhone by cutting some corners, like shopping used or overseas. How nice would it be if you could spend your insurance dollars on services, devices and drugs in Costa Rica, Brazil, India or the Czech Republic?
“There are a number of procedures and therapies still used that have been shown to provide no benefit. Any utilization for these is over utilization. Insurance companies keep paying for them because they dont want to lose unhappy patients who cant receive these procedures that their docs recommend.”
What a bizarre comment. The doctors recommend, but take no responsibility? Its the payor. And this from the guy who once said he didn’t care about Obamacare because they would find other ways to keep billing revenue up.
I don’t pretend to understand the whole medical billing scam. But I was recently threatened with collection because a doctor and hospital wanted to charge about $10K for an endoscopy, but the insurance company maxed out at $6K. Who is the villain here? Who is keeping a throttle on the cost of the service?
Bizarre or not it doesn’t answer my question: who defines overutilization? Physicians are prescribing these procedures so they aren’t the answer. As you point out, insurance companies aren’t interested in taking the blowback for refusing coverage. Who would enforce it? Are you proposing enhanced powers for some federal agency? Wouldn’t that result in more administrative overhead rather than less?
In answer to your question, Guarneri, no one is controlling costs. It’s still the prices. Who pays doesn’t really matter. What matters is a commitment to cost control.
There is something called the Second Law of thermodynamics. It means that waste, fraud, inefficiency CANNOT be eliminated. They are an essential part of the process. Moreover, the bigger the system, the more waste, fraud and inefficiency. As systems grow, more and more of the personal interactions are internal to the system, and fewer are with customers, clients, et al.
Electricity generation is one of the most intensely studied and controlled systems in the world. Huge efforts are made to eliminate waste. We have a detailed understanding and control of everything. Two-thirds of the generated power is lost to waste. Wake up and smell the coffee.
I’ll see your question, Dave, and raise you. Your query, and every dot point the guy raises is what markets do. They wring out the inefficiencies. Why? Competition and profit motive, not altruism.
The consumer decides what overutilization means in almost all markets. I, for one, don’t want faceless “experts” deciding.
Now I know I’ll get shouted down:
Fee for service doesn’t work. (who doesn’t provide goods or services for a price? Please tell me.)
Restrained competition. Sure, to a degree. But then all of our efforts should be to address this, not government dictates.
Information asymmetry. BS. That exists everywhere. Consumer exposure to price – not “free” from insurance, or an opaque system will go a long way. It works everywhere else. And further, we have health maintenance, not insurance. That’s flawed from the outset.
And so on. And what do I hear as a response all the time. Health care is “different,” you see. Markets can’t exist, and won’t work. Better to have government (seriously?? AYFKM??) control it. Balls.
If all we can propose is the mess that government has, and will, make of health care delivery – and that’s what the electorate opts for – then we will have people like me and the very well to do going outside the system with fine results. And the rest will needlessly suffer. But if that’s what you advocate and vote for: quityerbitch’n, its a self inflicted wound.
I suspect that you, I, and steve would all agree that fee for service is broken although we probably disagree on why it’s broken. It relied on assumptions that haven’t been valid for 50 years if they ever were. As I see things our present problem is not that we don’t have a single unified system but that none of the parties have sufficient incentives to control costs (providers, patients, politicians).
Back to the article in question. I don’t have a problem with Mr. Gluck’s plan if his GAP plans were to be minimalist. Isn’t that what the ACA was supposed to offer? But it didn’t. It offered something closer to a maximalist plan. No plan that covers uninsurable risks can pretend to be minimalist. But politicians have no incentives to proffer minimalist insurance plans as we have seen during the Democratic presidential primary campaigns.
“It relied on assumptions that haven’t been valid for 50 years if they ever were. As I see things our present problem is not that we don’t have a single unified system but that none of the parties have sufficient incentives to control costs (providers, patients, politicians)”
As we all know, Roosevelt’s intervention caused employers to offer health care benefits and the rest is a mess. Health care is “free.”
My prediction is that employers will slowly morph the health care benefit towards an insurance concept rather than a maintenance concept. They almost have no choice. Defacto markets. Good. Democrats will scream, as they will see power slipping away.
Some will argue that employers can foist the problem on to government. If so, the result will be disastrous. The masses will not be happy. But as I say, its a self inflicted wound.
I know you disagree, Dave. But only price exposure to the consumer will resolve this mess. It would be lightning-like in its speed and efficacy. Its only impossible because vested interests say its so.
It’s not that I disagree. It’s that it doesn’t work. When it has been tried consumers forgo necessary health care as well as the unnecessary, aggravating their problems and causing more expense.
But I do agree that in a positive feedback loop a governor must be applied. I just think that the governor needs to be applied on providers who will in turn apply it on consumers.
“What a bizarre comment. The doctors recommend, but take no responsibility? Its the payor.”
Its not bizarre, its what really happens. This is the other side of the market you like to forget. It encourages maximizing profits. There’s no law against it. The doc orders, the pt agrees since we know consumers know best because that is how markets work. Insurers pay. Of course this is true even when insurance is not involved. Billions of dollars are spent on “natural”, “herbal”, whatever therapies that dont work and are not paid for by insurance. I don’t see a very good way for a market based mechanism to stop this.*
“And this from the guy who once said he didn’t care about Obamacare because they would find other ways to keep billing revenue up.”
Nope. Dave said the way to affect total health spending was to decrease costs. I pointed out that if you cut costs providers would find ways to increase utilization. IOW, I think provider induced demand is real. There is a whole literature on it. If you want to cut total spending you also to keep some control on the number of procedures, tests, therapies etc that are done.
“Isn’t that what the ACA was supposed to offer?”
No, the ACA just said you had to cover a certain minimum number of things. There is still a lot of variability in what they offer and how you pay for it. Some plans only have deductibles on expensive tests like MRIs. Some offer wellness programs. Some cover almost all of your drug costs but others pass on a lot of the drug costs. Patients are supposed to try to pick which of those offerings are best for them. They suck at it and insurance companies know that, which is why they have so many offerings.
*”But only price exposure to the consumer will resolve this mess.”
You have to remember how health care dollars are spent. 50% of people account for about 3% of health care spending. 15% of people account for about 80% of spending. IOW most of us dont use health care that much but when we do it is expensive. Someone making $60,000/year, above median income, won’t be able to afford $100,000 for chemo. That is why we have insurance. That 26 y/o couple that has premie twins? That could run up to $500,000 or more. Even if we had world record low prices this care would still be expensive. There is no practical way to expose people to prices. Besides, we have found ways to expose people to prices and it hasn’t made much difference.
“none of the parties have sufficient incentives to control costs (providers, patients, politicians)—
In fact a lot of people in health care have incentives to make more money, not less.
Steve
Over utilization?
Unless I missed it no one brought up litigation. If a patient presents with say, confusion, and has a history of frequent and acute UTI’s or bladder infection they will be given a CT scan of the brain to eliminate stroke. It is a good idea to cover all the bases, but if the goal is to lower cost something like triage needs to be practiced to maximize cost/benefit w/o risking litigation.
Only America has no universal healthcare in the developed countries.
Because America is ; of the scammers, by the scammers, for the scammers.
American medical industrial complex (unnecessary medical associations, Pharmaceuticals, Hospital administrators, doctors, medical equipment companies, middlemen; insurance and marketing companies, hedge funds etc) made one of the biggest scam system (scam coding, scam pricing, scam billing, scam income), and they are exact like greedy cancers, sacrificing and killing many ordinary Americans.
They refuse universal health care system, because American business love scam.
Change this country name to Scamerica.