quinnscommentary

Following is the text of an article I wrote in early 2008, little did I know then how accurate I would be or more important how far off I was in the timing of my prediction for the consequences of the risks being taken.  In retrospect it appears that both the company and the union were either unaware of their true state of crisis or simply chose to ignore it.  When I wrote the article I was worried about the funds running out of cash, now it turns out the cash will never be placed in the funds at all.

In any case, the retired employees of GM and the other auto companies are far worse off today than when this deal was done. 

Please note that I am not bashing the good people of Minnesota, rather I am trying to point out that solving the health care problem is not merely expanding coverage or waiving a magic legislative wand that makes health care affordable. Moreover, it is simply not fair when you do not tell people the full consequences of what you are proposing.

Like several other states, Minnesota has a group of interested citizens pushing for a state single payer system.  Legislation is gradually working its way through the system in Minnesota.  The following information about the proposed system is taken directly from the website of the: Minnesota Universal Health Care Coalition • 2469 University Ave W, Suite W 150, St. Paul, MN 55114 651-641-4073.   http://www.muhcc.org/

“Mission

The Minnesota Universal Health Care Coalition is dedicated to establishing comprehensive single-payer health care for all Minnesotans through advocacy, education, lobbying, and community organizing.

Values

We believe that health care is an essential human need and that unequal access to health care is an injustice. A single-payer system is the only system that can provide comprehensive, affordable, high quality health care for each and every person.”

Well, I am not disappointed because there is my favorite word again “affordable.”  Health care must be the only service or commodity around where you can make it comprehensive, where virtually all the decisions are left to the seller, you can have the highest quality and provide all this to every person and still have it “affordable.”

Following are several questions from the MUHCC website; these questions are reflective of the well intention naiveté of Minnesota’s health care reformers.

My comments follow each of the questions and answers. I have placed in bold italic words within the Q&A that are of particular relevant to my comments.  Remember, this is not about the good people of Minnesota or their efforts, it is about the false assumptions that all the problems of the health care system go away simply because a government bureaucracy runs it or that the problems are due in large measure to the big bad inefficient, claim denying insurance companies. 

“What services are covered under the Minnesota Health Plan?

All necessary medical care is covered under the MHP.

Under the Minnesota Health Plan, medically appropriate care is completely covered, including primary care, dental, mental health care, hospitalization and prescription medication. Medical equipment, skilled nursing home care, home health care, substance abuse care, prescription glasses and hearing aids are also covered.

Elective cosmetic procedures are not covered.”

Observation: Medically appropriate or medically necessary care is always covered under a health plan; the controversy arises when there is a disagreement as to what is medically necessary. Without that review, costs skyrocket because frankly there is a lot of care that is not medically necessary even though the treating doctor says it is.  When an independent third party reviews these disagreements, the failure to substantiate medical necessity is frequently sustained in favor of the health plan, under the Minnesota plan that determination is the responsibility a government board.  Does anyone think that costs can be maintained at the illusive “affordable” level without following exactly the same procedures used by health insures (and Medicare) today?

In addition, completely covering services clearly subject to abuse and questionable medical necessity such as some mental health care, hearing aids and some dental care is a prescription for out of control costs that cannot be managed.  There is good reason why such services are closely monitored by health plans and it is not merely “the vast bureaucracy devoted to denying care.”  It is in fact, to help keep the plan “affordable.”

“How does the Minnesota Health Plan control costs?

The MHP controls costs by cutting waste, not by denying care to patients.

The MHP controls costs through:

• Administrative efficiency and elimination of the vast bureaucracy devoted to denying care, billing and paying out claims for care at different rates and with different coverage for the same procedure, elimination of insurance marketing and administration.
• Increasing access to preventive services and early intervention for everyone, preventing costly emergency room and hospitalization expenses.
• Bulk purchasing of drugs and medical supplies at lower, negotiated prices
• Allocation of medical infrastructure and resources (like hospitals and surgical centers) based on a region’s needs
• Annual budgets for health care facilities, rather than the current method of itemizing each pill dispensed, and each individual expense, and then billing them at different rates to different insurance companies for each patient treated.
• Negotiation of provider fees
• More efficient delivery of care (use of school nurses to administer flu shots instead of sending each student individually to an outside clinic, not sending patients by ambulances to more distant hospitals because closer hospitals are not in “network”)”

Observation: One wonders how a government agency of any kind operates without a bureaucracy, yet health care reformers seem to think that is the case. While I admit there are efficiencies to be achieved in the current system, replacing a government, system for the private system will not do it.  Who determines medical necessity? On top of that, there is no impact on the continuing rise in health care costs. Preventive services and early intervention increases costs at least in the short run and perhaps entirely, especially within an environment where “there are no co-pays or deductibles.”  Allocation of resources based on a region’s need, that is a good idea, but let us makes sure we tell people what that means, like traveling an extra ten miles for that MRI.  Annual budgets for health care facilities; this is a biggy. What happens when the budget allocation is reached?  Can you say long delays in receiving care; can you say rationing or being forced to go to a facility within budget that is a few miles further away?  Negotiated providers’ fees, been their done that, that is why a benefit is in or out of network, unless of course every doctor in the state is forced to accept a designated fee and cannot be outside the government plan.  Not sending patients to hospitals that are more distant because a closer one is not in network and that happens how often. Here is a thought, the one in network is a cheaper and that is why it matters.

“Who will run the health care system under the Minnesota Health Plan?

The MHP is governed by a public board appointed by locally elected county commissioners from every region of the state.  The board will include health care providers and consumers.

The MHP Board runs the MHP and negotiates doctor fees and hospital budgets. It is responsible for health planning and the distribution of expensive technology, as well as working with the University, other higher education institutions, and local communities to ensure sufficient providers in every community.  The budget for health care is set through a democratic and transparent process.”

Observation: This budget process is probably the most disturbing of all the principles of this and similar proposals.  It sounds good; the state will never pay more than X in a year after the budget is established and future budgets will not increase by more than Y percentage.  Look at how that works in Canada.  Does democratic mean that when limits are reached care that cannot be provided will be democratically denied?  On the other hand, how does the state control the increases in health care costs projected for the following year or in reality are they simply ignored, or fees cut, or additional technology denied or cost sharing increased?  Just tell people how that works.

“How is the MHP paid for?

Revenues for the MN Health Plan would come from the same sources they do now – government, businesses and individuals.  Individual and business contributions to the fund (premiums) are based on ability to pay.  There are no co-pays or deductibles.

Currently, government is the largest payer of health care services.  Individuals are asked to pay an ever-increasing amount in the form of premiums, co-pays, and deductibles – if they have insurance.  Those without insurance and those who are underinsured face devastating medical bills.  For most individuals the premium payment for the MN Health Plan would be less than they are paying in premiums to insurance companies, co-pays at the clinic, and deductibles of the insurance company.”

Observation: Based on ability to pay; some people pay very little or nothing perhaps, no co-pays or deductibles, no direct patient involvement in cost or the frequency of services, no disincentives to over utilize, in fact, quite the contrary. That means that costs will not be controlled or some oversight body will control utilization-meaning rationing.  Most individuals will pay less than they are currently paying; where does the rest of the money come from?  Oh, I get it from the administrative savings taken from insurance companies (and replaced by a government bureaucracy). However, 70 million Americans are covered by employer-based self-insured plans and I suspect that at least some in Minnesota. Those plans have low administrative costs based on fixed per member per month costs and those administrators are without any incentive to deny legitimate claims and still they struggle with controlling costs.

“Is the Minnesota Health Plan socialized medicine?

No. Socialized medicine is a system where the government employs all healthcare providers.  In the MHP, like in Medicare, health care is publicly financed but delivered through existing doctors, clinics and hospitals.

Some opponents claim that under a single plan, the government will make the medical decisions. But in the MHP, medical decisions are left to the patient and doctor. Under the Minnesota Health Plan, doctors and hospitals that are in the private sector remain in the private sector.”

Observation:  You see leaving medical decisions to the patient and doctor cannot work.  It did not work with HMOs, it does not work with fee-for-service and it will certainly not work in a government-based system.  That implies that whatever the doctor orders or the patient requests of the doctor is covered and paid in full, that means that the issue of medical necessity cannot apply, that means that there can be no monitor to assure quality care and it means that over or under (mostly over) utilization will be rampant. These words sound good when selling something because they resonate with patients, but they do not work when trying to operate an “affordable” health plan.  We hold Medicare up as a model of efficiency, yet in testimony before Congress in 1997, an HHS Assistant Inspector General summarized the problem of fraud this way: “One source of vulnerability is the design of the benefit categories and reimbursement criteria themselves. Our audits, investigations, and evaluations often reveal patterns of unintended incentives, inherently ineffective controls, poorly defined eligibility criteria, excessive reimbursement rates, unmeasurable outcomes, baselines premised on inaccurate assumptions, and other such design weaknesses.” 

What was the budget for this again?

Today fraud under Medicare is estimated to be at least $60 billion a year.  Medicare is in the process of adding investigators meaning they need to increase administrative costs, justifiably so.  Fraud is so rampant in a government program simply because it is so large and bureaucratic it is easier to accomplish fraud and harder to detect.  When dealing with government money it is easy to rationalize cheating a little (you know like on income taxes).

We tend to develop a mindset for what we receive from government programs as being “free.” So perhaps we have our illusive definition of “affordable,” it free!

Everyone would like to have it and politicians have no trouble promising it, but exactly what is “affordable” health care?

Does affordable mean I can afford to pay the premiums for coverage, or does it mean that those premiums should not increase more rapidly than say core inflation?  Does it mean that what I pay in premiums is based on my income, or my health status?

Perhaps affordable health care means that my out of pocket costs are minimal or nonexistent.  Should I pay a deductible before I am reimbursed for my expenses, should that deducible apply to outpatient services (the fastest growing and most profitable segment of the health care economy) or in-patient hospitalization or both?  Should there be a limit on what I and my family pay each year for health care, as they say in the business, an out of pocket limit, typically $3,000 to $10,000 per year.  Is such a limit affordable?

Does affordable mean only what I pay directly in the form of premiums and out of pocket costs or does it include a myriad taxes?  If I am on Medicare I pay only 25% of the cost of Part B (and now Part D if I choose), I pay nothing for Part A hospital services, but the rest of America pays 1.45% of its total income to supplement my coverage, but even that is not enough.  In 1965, the Medicare Part B deductible was $50.00 per year that at the time equaled 45% of the Part B charges; eventually the $100 deducible equaled only 3% of Part B charges.  Today the deductible is $135, but simply applying general inflation since 1965, the deductible should be $337.79 so someone has decided that keeping up with inflation (never mind health care inflation) is not affordable.

Workers who do have employer based health care coverage pay on average 25% to 30% of the cost in premiums plus substantial out of pocket costs, and many pay considerably more.  These contribution levels are rarely reflective of income level, so cost sharing is regressive in most cases, but “affordable”?

Let me make this simple, should Americans pay a set percentage of their income on health care related expenses, what percentage is that and how should that be done? 

Should the cost of coverage be minimal with the emphasis on out of pocket costs skewed toward encouraging more efficient utilization of health care, in other words use more services pay more, take better care of your health, pay less, avoid a specialist when not really necessary, pay less, ask about the need for that second MRI, pay less.  When cost sharing is based primarily on having people pay higher premiums the incentive to care about the efficiency of medical expenses is greatly diminished.  Ask anyone who has health benefit premiums how much is deducted from their pay and likely they will not be able to tell you, but ask them how much the office visit co-pay is and it is a different story.  Moreover, while we are on office visits, does a $15, $20 or greater co-pay per visit make going to the doctor affordable?  There have been many union work stoppages related to a $5.00 increase in co-pay or a 5% increase in premiums. Medicare (or perhaps our legislators) does not seem to agree with this.  While the Part B deductible is artificially low, the monthly premium, which adjusted for inflation from 1965, should be $20.27 is much higher at $96.40 or more, but of course, one must assume that the original $3.00 was realistic when Medicare was enacted.

So, do we know how to define affordable health care?  I cannot say that we do, but that is the point, neither can anyone else, yet is does not stop the term from being used freely when describing any effort to change the US health care system.  Beware the Trojan horse of health care; affordability is lurking within expanded coverage.

Did you ever ask yourself as the government aims to provide “affordable” health care for all Americans, why it can’t control the cost of Medicare?  A new report says the Medicare fund for hospital care will be depleted in 2017, two years ahead of previous predictions. The new deficit is after Medicare cut payments to physicians by 21%, cuts that Congress has not previously allowed.  Medicare Part B premiums are expected to increase by 8% in 2010 and 15% in 2011 to cope with a portion of the Medicare cost problem.  That’s not good news for Americans with Medicare because at the same time low inflation indicates there will be no increase in Social Security benefits in 2010 or 2011.  The AARP must be delighted. 

On top of this news additional Medicare savings assumed by the current administration, like cutting payments to Medicare HMOs and cutting the cost of drugs under Part D of Medicare are designated not to help with the growing Medicare problem, but to offset the cost of expanded government coverage for the uninsured. Call me crazy, but isn’t this a bit like being behind on one credit card payment while charging to the limit on a second card?  Other ideas to fund expanded coverage include taxing all or a portion of the health benefits paid by employers, cutting back on flexible spending accounts and health savings accounts and new taxes on things like soda and other food that have been determined to contribute to poor health status. Perhaps we need a surtax on people with a BMI over 30. 

While there has long been talk of the efficiencies of a government run program, the simple truth is that Medicare saves money by shifting the cost burden and by raising the costs borne by beneficiaries.  To save money Medicare simply declares that a certain service is no longer covered.  For example, recently the virtual colonoscopy was dropped as a covered procedure.  Do you see where this is going?  

Today, expenses not paid by Medicare are paid by the private sector.  Common sense will tell anyone that if you cut physician fees by 21% under Medicare providers will eventually, either not participate in Medicare or more likely raise their fees to non Medicare patients, a process that has been going on for years while Medicare claims cost savings and efficiency.  A few years back the law was changed so that a person age 65 who continued to be employed with health benefits could not use Medicare but instead must continue to use the employer coverage, more cost shifting and yet another reason for employers to drop coverage.  One must ask the question, if there is a single payer system and thus no place to shift costs cut by the government, where do the cuts come from?  Some would answer that it simply means lower income for hospitals and physicians and drug companies.  Unfortunately it is not that simple.  Each aspect of the health care system is connected to accessibility, innovation, new technology, research, and the quality and quantity of health.  

The administration also hopes to lower health care costs in part through health and wellness activities.  Considering large employers have been investing tens if not hundreds of millions of dollars in that effort for years with little success in stemming the growth of health care costs, should we assume government will be more successful?  Also, savings that may be achieved are many years into the future, say when a person who is 30 today is 65. 

While Medicare and Social Security face looming financial problems, the Obama administration talks about expanding government based health care.  The lessons of the Massachusetts experiment with universal health care are simply ignored.  Massachusetts sees the problem as lack of coverage rather than costs; it expanded coverage while costs continue going through the roof. Merely bringing the uninsured under a broad government umbrella will substantially increase health care utilization and cost thereby exacerbating the problem just as the 80 million baby boomers enrolling in Medicare add stress to that program.  We can’t have it all, especially at once. 

There is no need for a crystal ball to see where this is headed.  There is no way to avoid higher and higher taxes of various types, more out of pocket costs to those who use health care services and eventually pure rationing of health care.  America had the answer in large part within its grasp twenty years ago.  It was called an HMO, especially a group or staff model HMO.  Coordinated care, efficiency, centralized medical records, one stop shopping, physicians on salary rather than with incentives to provide more (and frequently unnecessary) care, continuous peer review, it was all there and yet Americans perceived the system as withholding care, providing low quality care, limiting choice of providers and were seduced by a barrage of negative publicity and late night jokes about HMOs.  We should remember this experience as we debate how we will provide quality and “affordable” health care to all Americans.  I bristle at the word “affordable” because I have yet to hear it defined.  Forty-five years of running health benefit plans tells me that Americans view a $5.00 increase for an office visit co-pay as unaffordable. At the same time the expectation of many Americans is that they will be provided with “free” health care.  I can define free; “at no cost,” gratis”, without charge, as in Medicare and Social Security are “free.”  

Note: A new study : Why Americans pay more for health care  The United States spends more on health care than comparable countries do and more than its wealth would suggest. Here’s how—and why.  DECEMBER 2008 • Diana M. Farrell, Eric S. Jensen, and Bob Kocher Source: McKinsey Global Institute, tends to support the value of the HMO concept by noting that the largest growth in health care costs and the portion higher  than expected for the US is in outpatient care driven by use of specialists and incentives to use expensive tests and equipment, both of which were intended to be managed by the managed care concept.

The fundamental problem is that we are not addressing the fundamental problem.  

We need an open and honest debate about why health care costs so much and why it escalates faster than almost any other service (college education may be a rival but nobody wants to talk about that either).  And no, the problem is not insurance company profits; rather it is the flaws in the health care delivery system (like hundreds of thousands of physicians in private practice operating in their own entrepreneurial silos, a fee for service structure and misplaced incentives) coupled with the demands and expectations of health care consumers.  If you buy all that and you should, peer into my crystal ball and see what will happen if the government is managing health care and determining what is and is not covered while at the same time Congress is being lobbied by the makers of MRIs, or the trial lawyers or the hospital association or anyone with a financial interest in health care.  

While we receive vague pledges from interested parties to cut costs over the next ten years, we are barraged with advertising from drug companies, hospitals, those who have invested in scanning equipment and even individual physicians on billboards.  Why in the world should any health care provider need to advertise and what it its purpose, OMG could it be to generate revenue?  I want to learn about quality and alternative care from a reliable source not via a TV or radio commercial following the one for toilet bowl cleaner. 

Until we address the cost problem and until Americans understand what it will take to solve that problem (like not always having what you want when you want it from the health care system), we are only digging a deeper hole.  The flim flam bait and switch tactics of our politicians are not helpful.  

The greatest danger in the health care debate is embracing a government program to expand coverage without concrete methods to manage costs.  That will result in costs buried forever in additional taxes, thus making the future solution not controlling costs, but raising taxes, but hey, health care would be “free.” 

And beware employers if you think you will get out from under the health benefits burden.  You may well be worse off with higher payroll taxes and the loss of control over how the money is spent coupled with a myriad of additional hidden taxes.  Just for good measure throw in more pressure on wages and demand for supplemental coverage. 

The problem is cost and all its components, including quality. Solve that and for the most part the uninsured problem is minimal because health care will truly be “affordable.”

There is a lot wrong (and right) with health care in the United States, one of the things that is wrong is patient expectations and perceptions.

Consider this real life example (a typical case).

A patient undergoes surgery and during the main procedure, the surgeon performs a secondary procedure, same incision, one use of the operating room, one anesthesia. During this procedure, the surgeon engages the services of an assistant surgeon.

When the claims are processed, only 50% of the second surgical procedure is paid and the assistant surgeon is denied.  Why, because a second procedure performed at the same time as and in conjunction with a primary procedure does not warrant a duplicate payment as if there were two separate procedures.  Why wasn’t the assistant surgeon paid, because it was not required by the hospital and because there was no indication that it was medically necessary.  All health plans, including Medicare apply a medical necessity standard.  If they didn’t costs would be more out of control than they are now.

So, what does the patient (employee) do, he blames the insurance company for not paying what the doctor charged.  He appeals the claim to a review board and it is again the denied.  In this case, the review board is a committee of the employer because this is a large self-insured plan and the “insurance company” is acting only as an administrator and has no financial stake in the payment of claims.

Nevertheless, the insurance company is the bad guy.  When the employer panel upon appeal hears the claim, an independent third party reviews the entire medical record and agrees that there is no medical necessity for the assistant surgeon and that the second procedure is merely a form of unbundling the billing. 

Oh, did I mention that neither the surgeon nor the assistant surgeon participates in any health benefit plan, often a good indication of a high fee or the practices that caused the denial of this claim.

The patient is on the hook for $6,000 and of course, he blames the insurance company and now the employer.

But what is missing, well at no time did the patient question the billing practice of the doctor, at no time was there any thought of going back to the doctor and saying what gives here, why are you charging these fees, why was an assistant surgeon necessary when no one else thinks so?

Now you know one of the fundamental problems with the health care system in the US is the failure of patients to accept responsibility or to hold health care providers accountable for their practices.  The doctor is always right and the insurance company wrong.