In April, Kent wrote of a woman who had signed up for a “consumer-directed health plan.” While the plan saved her money, she yearned for days when she didn’t have to think about the cost of a doctor’s visit or a prescription.
Traditional health insurance insulates us from the visit-by-visit, script-by-script cost of care. That’s a problem. Facing only a fixed co-pay (or not even that), we don’t look at the “right side of the menu.” In our health care “restaurant,” the menu doesn’t tell us that the Lobster Thermidor costs twice as much as the Chicken Piccata. And we don’t care, because “insurance” will pay for it.
Last week we explored regulatory approaches to slowing health care spending growth. Today we discuss changing the incentives for consumers, providers and insurance markets.
There is a speechwriter in Washington who smiles each time someone says “bending the cost curve.” “Cutting health care costs” may be unattainable but “bending the curve” is essential.
To summarize our first two columns: Cost lies at the heart of the health care problem. Health care insurance masks the price signals that guide buyers and sellers. Providers are paid to do more and consumers have little incentive to refuse (go to www.cgr.org and click on the Policy Wonk link to read the first two).
In this column and the next, we look at ways to tame cost growth.
Welcome to the second in our series on health care. (If you missed the first one, check it out at blog.cgr.org.) Today we discuss the growth in health care cost, both how much and how fast it has grown, and the reasons. Next week’s column will focus on ways to reduce health care costs—or, more realistically, to slow the rate of growth.
In 1960, health care spending was 5% of gross domestic product (GDP). This year it’s expected to reach about 18%. For the past 30 years, health care cost has been rising 2% faster than GDP.
On the one hand, perhaps this doesn’t matter. We are spending more on health care and sometimes we get more for our money. Medical science has discovered new therapies. Pharmaceutical companies have identified fabulously successful new drugs. The survival rate for many dread diseases has increased significantly. For example, many cancer sufferers are living longer and experiencing a higher quality of life. Some diseases that were fatal only a few years ago—AIDS is the most prominent example—are now considered almost chronic illnesses. But these new therapies, these new drugs, these new treatments aren’t cheap. Genentech’s Avastin, currently used for a broad range of cancers, can cost from $4,000 to $9,000 per month.
You, too, can be fluent in Health Care! In only 10 easy audio lessons, you can amaze your friends with your command of phrases like single payer, health co-operative and rescission, plus acronyms like ERISA, LOS, IPA and HIPAA. Available on CD or by MP3 download for 10 easy payments of only $29.95.
Tempted? We’ll be attempting a similar feat over the next four weeks. Jim Fatula and Kent Gardner will be offering a “back to basics” look at the debate over health care reform. Two core issues—health care cost and health insurance coverage—occupy center stage.
Visiting Washington this summer, Kent watched a session of the Senate and listened to a member’s passionate speech on this subject. Yet he spoke to an empty chamber. Only one other senator was present. Oh, and C-SPAN’s camera, focused only on him. It seemed a metaphor for what has been a sorry debate, filled with speeches but few discussions. Radicals on both ends of the spectrum are driven more by ideology than by thoughtful differences in policy. This is a war between different faiths, a bitter competition between tribes in which winning is the only goal.
My 84 year-old mother has a bad back. She’s way beyond surgery, and her doctors are just trying to manage the pain. So every six weeks or so she goes back to the pain doc and he tries something else—a shot of cortisone this time, a nerve block the next, radio frequency ablation on the third visit (you’ll have to google it, I’ve got a word limit . . .). There is always something else to try.
She’s weary of the pain and becoming convinced that her case is hopeless. Yet my frugal mother also worries about the cost—“I can’t believe that Medicare keeps paying for all of this. I get these bills for thousands of dollars—but at the bottom, it says I owe $2.11.” As her son, I’m delighted that Medicare keeps paying and I hope that this process of trial-and-error eventually produces a solution.
In partnership with the Finger Lakes Health Systems Agency, CGR sponsored a conference in Albany on November 27 to discuss the role planning should play in New York’s health care industry. This column is an edited version of my remarks to conference participants.
My father-in-law practiced radiology at Howard Community Hospital in Kokomo, Indiana for 40 years. And I was always hearing stories about the latest threat from St. Joe’s, the competition across town—a new CAT scanner, or this new technology called “magnetic resonance imaging.” When the radiology practices of Howard Community and St. Joe’s merged just before he retired, you’d have thought the Berlin Wall had come down.
An article published in the current issue of Health Affairs reports on pricing for self-pay patients, one of the only parts of the health care business that is largely “unregulated.” The author, Gerald Anderson, reports that people who pay their own hospital bills get charged more for care than those whose bills are paid by insurance companies or have Medicare or Medicaid coverage.
That’s not a surprise, of course. We’re accustomed to bulk discounts and buying clubs—the “membership has its privileges” sort of thing. Yet the magnitude of the difference should capture your attention: on average, patients without public or private insurance pay three times the Medicare-allowable cost. Anderson doesn’t report the average for New York but in New Jersey self-pay patients are charged a whopping 4.56 times the Medicare-allowable cost. Pennsylvania is right behind with a charge-to-cost ratio of 4.33. California, Alabama and Nevada round out the rest of the top five. At the other end of the scale Wyoming and Maryland hospitals charge self-pay patients 1.85 times and 1.23 times the Medicare-allowable cost. Note: Let me suggest that “cost” is in the eye of the beholder (or, at least, the beholder’s accountant). I don’t claim here that the Medicare number is the right way to define cost—hospitals don’t think so—but I do want to call attention to the discrepancy.
The article isn’t describing a new problem, but it is getting worse. In 1984 the average ratio was 1.35.
Oh, great. Send your daughter off to college—across the country, for heaven’s sake—and one thing you notice right away: You have REALLY lost control. Unless you own a Lear or a nice $20m Gulfstream, there is no way to get to California quickly in a crisis.
OK, maybe not a crisis. Turned out she was fine—too much caffeine, too little sleep. They put in an IV, did some blood tests, then sent her back to campus.
I wish I could say that there was nothing wrong with ME when I got the bill! Are you sitting down? The hospital sent me a bill for $2,335. If that wasn’t bad enough, I soon got the bill for the “accessories,” like the extras you get with some gadget on a late night infomercial: “But that’s not ALL! Buy the hospital visit today for only $2,335 and get a doctor for ONLY $547! And don’t miss the lab work! Call the toll free number on your screen and get your personalized pathology report (YES, we test YOUR OWN BLOOD) along with your hospital visit WITH the doctor for a mere $354.25! That’s right—the whole emergency room visit for just $3,236.25!!
Many of you have had a similar experience. What’s my point? Read more »
Need drugs? The legal kind, I mean? I think you’ll agree that there is no shortage of sources. I did a quick check of the phone book and found ten places to buy prescription drugs within a two mile radius of my house (3 Eckerds and 2 Wegmans plus Tops, Rite Aid, CVS, Kmart, Walmart and Medicine Shoppe). And there are more planned—Target & Walgreens will be in the radius by the end of the year.
Doesn’t this seem rather odd? Let’s put aside the places that do drugs as part of a one-stop-shopping model, such as the grocery and department store chains. It is the stand-alone pharmacies that puzzle me. How can Eckerds make money with three stores in my backyard? I can’t remember a time when these places were particularly busy. Waiting at the check-out is a rare event. Offhand, this doesn’t look like an efficient model. So either they are ready to go bankrupt (Ah, that must be why Walgreens is entering our market—they want to share in the losses!) or the margin between the price they pay and the price we pay is pretty rich. Read more »
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