Posted on 12/07/2015 10:43:23 AM PST by Kaslin
As I explained in last week's column, the U.S. health care system is an unsustainable mess: One dollar of every five worth of economic activity is spent on someone's medical care; Medical costs are growing twice as fast as incomes; Medical prices are rising at three times the rate of consumer inflation. The Affordable Care Act was supposed to fix those problems and make health care "affordable." However, the method used required everyone to purchase overpriced health insurance. That's like throwing gasoline on a fire hoping to smother it. As a health economist, it's hard to imagine a policy agenda that could be any more damaging to the health care system -- or less effective.
Obamacare enrollees with cost-sharing subsidies bear little consequence when they are wasteful and little benefit when they are prudent. Once their deductibles are met, Obamacare bans any limits on the services patients consume. Neither does it do anything to mitigate the perverse incentives for providers to squander resources. For example, medical providers have few financial incentives to control costs and keep beneficiaries out of the hospital -- especially if the provider is a hospital. These problems could be improved with better incentives and better plan design in virtually all programs, whether Medicare, Medicaid or private insurance.
A dozen years ago health reformers promoted Health Savings Accounts (HSAs) coupled with high-deductible plans. A fair criticism of HSAs is that hospitalized patients have long since exceeded their deductibles. Moreover, critically-ill patients are unlikely to forgo a potentially beneficial medical service merely because they bear a portion of the marginal cost. Much more needs to be done.
Our health care system could be dramatically improved, but it must involve more efficient care for our sickest patients. Consider this: about 5 percent of patients spend nearly half of all health care dollars, while the sickest 1 percent consume nearly one-quarter of health care expenditures. These figures suggest there are more opportunities to reduce health care spending by carefully managing the sickest 5 percent instead of wasting our efforts on the 80 percent who are relatively healthy. Thus, health reform requires improving incentives that positively affect the sickest patients.
Increasingly, controlling costs means keeping people out of hospitals, where nearly one-third of health care spending occurs. Health reform must focus on reducing hospital spending on beneficiaries in poor health. It can only do so by better managing their chronic conditions.
To sufficiently slow medical spending, policymakers must allow plan designs that create price sensitivity among patients long after they have met their deductibles. To reduce health spending from the supply side, policymakers must allow insurers to promote competition among providers. In addition, plans and providers must be rewarded when they implement cost-saving programs that provide high-quality care at a lower cost.
A few health plans are experimenting with a concept known as reference pricing, designed to boost price sensitivity for high-cost procedures. Reference pricing is an arrangement where enrollees face unlimited cost-sharing for all costs of a treatment or a procedure above a stated reference price set by the health plan. It is generally set close to an average or median price readily available in the market. Because enrollees are very sensitive to marginal costs above the reference price, providers have an incentive to price their services close to the reference price to avoid losing business.
More needs to be done to help enrollees ascertain the price of medical services when shopping for medical care. A recent study confirmed high-deductible plans lower spending but not because patients shop for lower prices. High cost-sharing merely causes people to skip care. Although skipping unnecessary care is a good idea, forgoing beneficial care is not. Patients who comparison shop and negotiate for services provide better price signals to the market than ones who suffer through a condition until they improve on their own. Without interacting with potential customers, medical providers won’t have a clue they lost a sale due to high prices.
There are other methods that plans could use to raise quality and reduce costs. Enrollees' cost-sharing could be reduced in return for working closely with a plan’s care coordinator. Patients who first call their medical home to inquire about medical tests, prescription drugs could be rewarded. Some health plans are hiring firms -- such as Vitals and Compass Professional Health Services -- to assist enrollees and provide price transparency tools. Exchange plans are increasingly relying on narrow networks, where providers have negotiated lower prices.
Reforming our dysfunctional health care system requires more than high deductibles and HSAs. We must consider where the money is spent: on high-cost patients. Increasingly, slowing the growth in health care spending must focus on improving the care for patients in poor health. Health reform must also include improving end-of-life counseling and hospice care.
Reforming our dysfunctional health care system requires more than high deductibles and HSAs.
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Right. We have to do something about the politicians who prefer dysfunction because that leads to bigger government, more money and more power for them.
Central planning, cartels, and government programs are the problem.
Good post. No one should look at Canada for a good example since coverage has been slowly diminishing by constantly removing covered procedures and medications. Health care here has become rationed big time. Surgical waits are unbelievable and dangerous. I’m so thankful we were smart enough to continue employment extended health care on our own, sort of costly, but more valuable every year.
Go back to free market. Let charity work w/the poor. Used to have charitable hospitals before the depression.
I know it's simplistic .... but isn't that what we want ?
The Affordable Healthcare Act is typical of all liberal policies. It does the opposite of what it claims to do.
Vastly increase the bureacracy required to run it. Vastly increase the amount of paperwork, digital or dead-tree, Add in no modifications for pre-existing conditions, and you are going to lower costs? The only way tolower costs and keep the new structure is to eliminate medicine, remove all health delivery from the system but continue to legally require everyone to buy coverage. Even with that the overhead will inevitably rise to far outstrip income.
What crap. What the author is saying in the bold section is that it is a problem when high deductible plans work as they are designed. Their purpose is to keep you from going broke when the SHTF. But according to this idiot, it's a problem that you can now afford to keep getting health care after you've paid the deductible. He'd prefer that the seriously ill consider not getting so much care.
And then he talks about policymakers designing the plans. If it was an Aetna policy designer/actuary, then ok. But I'm sure he's talking about a government policymaker, who was the person who got us into this mess in the first place.
It's shocking an adult could be this naive.
This person thinks medical centers don't try to keep costs low? What's the thought process behind that?
Every patient is on DRGs (diagnostic related groups) or Medicare. The services they charge for are capped!!!!!
If you go in for DRG 324, you get what the insurance company or Medicare pays for DRG 324. PERIOD!
What does the hospital try to do? It tries it's very best to cover that DRG 324 for the lowest possible outlay.
The idea the care for these patients is lush and over the top reveals the writer to have no clue whatsoever about modern health care.
I think a robust savings plan and high deductible policies is the way to go. In effect you will be self insuring for a portion of your own medical care.
By the time a person is thirty and well established, they may be able to cover a $20,000 dollar deductible. That saves a whomping amount of insurance premiums. It will in short time cover your established deductible.
I support this in a plan I’m developing that covers health, cars, and homeowners. It also incorporates a private retirement plan into it.
I think there’s a way a person can start saving, avoid insurance costs, and purchase a home while still retiring very comfortably by 50-55.
Speaking solely for myself, I want insurance for when things go sideways. Kid breaks his arm and needs emergency surgery, and so on. I don't CARE about the nickels and dimes - kid has a sore throat and needs a prescription, or I need a yearly physical. That's "routine maintenance", and I wouldn't expect my insurance company to cover it, any more than I'd expect GEICO to cover fillups and oil changes.
Perhaps that is the very reason why I can get an oil change for $19.95 and can't get out of an emergency room for under $500 ... insurance companies pick up the tab for one, but not the other. But I digress....
But - politicians have gotten involved and mandated coverage. For instance, I'm covered for drug addiction treatment (not gonna be a problem), mental health evals and treatment (ditto), and treatments for both erectile dysfunction AND pregnancy (don't even know what to say, here). What's worse is that I'm paying for everyone else to have these things, too.
I think that shopping for insurance across state lines - much like auto insurance - would help drive costs down. Perhaps an a la carte plan - "There's a family history of breast cancer, let me up that part of my coverage just in case." Would take the do-good politicians out of the loop, at the least, and would let me buy health insurance that I actually might need.
That they have never worked in medical administration.
My doctor's office has four doctors, four nurses, one tech and six administrators. They used to have two. They are looking to add another two administrators after the new year to handle the paperwork.
What has changed in the past eight years?
You have three guesses and the first two don't count.
I’m not a big insurance guy. As much as possible I want insurance out of my life. That being said, we all need insurance. I just think things are out of whack.
We tend to want insurance to cover everything, so we pay very high premiums for it. We shouldn’t.
We should have $10,000 in a special savings account to cover exposures to catastrophic illness. We should cover the $10,000 fees.
It’s my take that if you look at the savings you get by not buying the policy that covers everything from $0.00 on, you more than make up your deductible. Mow that $800 a month premium down to $200. a month, and it takes about a year and a half to make up your deductible. Not using your deductible every year, you more than make up the deductible and increase your savings.
The insurance company still makes money off your policy. You still increase your net worth.
Take that deductible savings and build it up for a down payment on a home. Sound crazy until you realize you can do the same thing with your vehicle and other insurances.
If a husband and wife are both working under this plan, the savings can be extensive over a decade.
The services “they charge for” are capped.
The weakness in your argument is in “they”.
The solution used is to have “out-of-network” suppliers bilk the patient and then charge the “out-of-network” suppliers for the privilege of participation.
A center can also demand, collect and retain additional amounts from the unwary. Estates can be pilfered easily.
I agree. Paperwork...
Happy hands..
Feel good Leftist policies on parade...
Probably a good point. An agreement should be reached that the insurance fees will be the only fees the hospital will have access to.
Of course there’s the physician’s, anesthesiologist’s fees et al too.
Insurance companies will pay those fees too.
You have to play tough.
You mean something such as this-——http://surgerycenterok.com/
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