After Surgery, Surprise $117,000 Medical Bill from Doctor He Didn't Know
nytimes.com
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The free market simply doesn't work when there is zero price transparency, 3rd parties are often responsible for payment, and purchasers are often in great distress right when they need to be able to negotiate.
Laissez faire market philosophy fails in this case for the same reason it fails during major crises and disasters. Purchasers are nearly powerless but have needs that they must meet immediately; vendors can price-gauge and make out like bandits. A climate of scarcity and desperation prevail over hypothetical rational actors participating in a stable market at equilibrium.
This isn't a price transparency thing either. This is about having created a culture where every doctor in the country is constantly hustling, committing borderline fraud.
Sociologically, the idea that doctors and medical care workers are always looking out for what's best for their patients helps to mask the idea that they might be doing so from a health perspective but are ignoring any other consideration. And so bringing in a friend who's also a surgeon so he can get a little kickback doesn't really raise any ethical alarms.
But this isn't the fault of the libertarians.
Government has meddled in this industry and even with the ideas that the typical Americans think about for so long that this was inevitable. Nor can government fix it now... the AMA and other quasi-unions won't stand for it. They'll negotiate.
And, as usual, our politicians will sell us down the river.
If you want to fix this (and every other problem), the answer is simple (though not particularly libertarian): outlaw all health insurance. Make everyone pay for their own care. Make them pay out of pocket.
In such a nation at that, none of these shenanigans could continue. Not that I expect anyone reading this to get it. You cry "But NoMoreNicksLeft, how could that man afford $117,000 out of pocket!"
And the answer is that he couldn't. The doctor (if he billed after the fact) might sue, but winning a lawsuit doesn't make someone magically capable of paying. If the doctor insisted on payment up front, then the man would just forgo his particular service (which, since he was unaware that he needed it and it sound like bullshit... wouldn't have mattered).
There aren't enough rich people who can afford to pay the current prices out of pocket for 100% of the doctors to continue to bill/earn what they do currently. Maybe just enough for 1% to continue like that... the other 99% are going to have to shape up, and in a hurry.
They can't hold out prices where they are now (we can't pay that out of pocket), nor can they spitefully punish us and refuse to do it at lower prices. They have bills to pay just like the rest of us, they have mortgages, they need to buy groceries, etc.
Nor will they decide to become plumbers and HVAC repairmen so that they don't have to give away their surgeries for less.
But again, this is lost on anyone I've ever explained it to. You all think it will result in millions of deaths and untold suffering.
> Laissez faire market philosophy fails
Bullshit. There hasn't been a laissez fair in the healthcare industry in the United States in 100 years.
I disagree with you 100%, and halfway think you're joking. This is one area where more government is the clear answer. How many other countries have to set a working precedent?
You seem to make this out to be an outcome of "borderline fraudulent" doctors. That you'd call out "every doctor" as committing borderline fraud shows your lack of understanding for the system as a whole, much less nuance. Do you think the high price is because doctors are looking to make enormous profits? I'm sure that's true for some, but in general that just is not the case. Who percentage of doctors do you think get fabulously wealthy, anyway? Most do fine, but after student loans are factored in it isn't the key to wealth that you think.
The high price is driven by many things, and you've focused on the one of the smallest. Your proposal is chaos, and it would turn healthcare into even more of a privilege for the wealthy than it is now (nevermind for the moment the unpredictably of care pathways that cannot be agreed to upfront).
This is because you don't have very well practiced thinking skills. The best you can manage is to be shocked at the idea, and then to refuse to think it through. Worse, you then turn around and believe that whatever dumbass projection your small mind can come up with is some sort of reasoned extrapolation of the idea.
You're barely able to anticipate how other singular individuals can and will react. Imagining millions of other people's reactions in aggregate is simply beyond your capabilities.
If everyone has to pay out of pocket, and if you're a doctor selling health care... you can either sell it at a price they can afford or you can starve. Most doctors I know don't like to starve, it conflicts with their beliefs that they're well to do.
No bank is going to loan someone $500,000 for a liver transplant either, they're not even going to loan you $20,000 for an appendectomy.
Nor can the doctor lower prices to 90% of what they are currently... when people talk about the incredibly high prices, they're not saying "it needs to be 90% of what it is now". When I say "lower" we're talking about significantly lower, something where you could hope to afford it.
But you can't see that. You're just too dim.
> You seem to make this out to be an outcome of "borderline fraudulent" doctors.
And this particular issue raised in the link, that's what it is. Some guy he never heard of shows up while he's out of it on painkillers, and then sends a $120,000 bill weeks later. The insurance company caves, pays the whole thing, letting him (and others that are aware of it) that they can continue to do this.
It's not a price transparency thing. That happens when either the company providing the service can't know beforehand how much it will cost, or refuses to estimate. But after the bill comes in, no one, not even the customer, is going to say "this price is absurd". Instead, they say "dammit, it really does cost about that much, but it hurt me because I couldn't prepare for the price".
They're saying "This price is absurd, it's unfair, and no one can even tell me what it is I'm paying for if I pay this bill".
That's fraud.
Worse, I believe that for the most part, the doctors don't even see it as fraud. They feel like they're doing what they have to earn the income they deserve, and that this is no big deal.
> shows your lack of understanding for the system as a whole
No, it proves my understanding. Fuck, you can't even be bothered to explain how it's wrong, you're just doing the "don't you dare besmirch their good name". Which might be a moving argument, if we were talking about someone specific. We're not.
And the industry itself, and this practice in particular, is rotten. It stinks.
> Do you think the high price is because doctors are looking to make enormous profits?
Fuck no, and that's horrible. These doctors aren't driving gold-plated Ferraris and buying 2000ft long mega-yachts. In some cases they feel forced to do this. In some cases, they're paying so much on the new building for their practice or whatever, that if they didn't do this they'd go under. In others lifestyle creep has them paying what they feel are reasonable prices so that the wife can go to the resort spa once a month and the kids get their cheese-tasting lessons and all that snooty shit, and it constantly costs them more even while they feel like they're treading water.
This can't be justification for any reasonable person.
> Who percentage of doctors do you think get fabulously wealthy, anyway?
They don't have to, fool. This can happen even while they feel like they're just a bit into the upper part of the middle class.
> The high price is driven by many things
None of which you understand. You're incapable of it.
I understand it perfectly, and I've proposed a single simple solution for it (even if it is politically unviable).
> The high price is driven by many things, and you've focused on the one of the smallest.
Yes, I have. I've found the one tiny piece that if removed, the entire logjam goes away. It all unravels with this. Outcomes would be better for everyone (well, except all the health insurance workers who would be unemployed).
> Your proposal is chaos,
Possibly. But we've already seen what your non-chaos looks like, and it's strangling everyone.
In such a nation at that, none of these shenanigans could continue. Not that I expect anyone reading this to get it. You cry "But NoMoreNicksLeft, how could that man afford $117,000 out of pocket!"
And the poor couldn't afford healthcare anymore. Even if it is a well-justified $10,000 surgery. Most people cannot pay this out of their pocket.
In the Western European countries where healthcare does actually work and is affordable for everyone, it is strongly regulated and continually fine-tuned to find and eliminate spots where the system is abused. E.g. for years in the Netherlands doctors would prefer some expensive medicines when there are cheap alternatives, because their manufacturer gave them nice bonuses. The state outlawed such practices. Moreover, in cases where it is shown that there are medicines from different manufacturers with an equal amount of relevant substances, insurance companies now only prescribe the most affordable one.
Anyway, I have lived in two countries where there is strongly government regulated healthcare (The Netherlands and Germany) and never had any qualms about the systems. I have also seen people close to me with small health problems to various forms of cancer, and for no one this was ever a financial problem. Luckily.
A free market healthcare system assumes people would be getting back at least 7.5% of their salary every year, if not more.
"Anyway, I have lived in two countries where there is strongly government regulated healthcare (The Netherlands and Germany) and never had any qualms about the systems. I have also seen people close to me with small health problems to various forms of cancer, and for no one this was ever a financial problem. Luckily."
As someone who has sold both pharmaceuticals and medical devices to European hospitals/health agencies, I can tell you that the dirty secret behind all fully socialized systems is rationing. There is literally a quota of, say pacemakers, for example, that can be purchased in Germany every year.
That doesn't work for various reasons:
- People will spend the money and won't have enough savings to save their medical bill.
- There is an economic crisis and people use their savings for covering their mortgage payments.
- Most importantly: for some people the medical bills will be higher than they could set aside at that point in their life or at all in the case of a chronic condition or e.g. a form of cancer that is very expensive to treat.
There is literally a quota of, say pacemakers, for example, that can be purchased in Germany every year.
Germany apparently has quota, but they are budgeting and adjusted to the need. Again, I know of no cases in my wider circle of family, friends, and acquaintances where they could not get some important medical condition treated and with nearly full coverage of insurance.
In the nineties, we had inefficiencies in The Netherlands that sometimes resulted in long waiting lists. These issues have been resolved at the beginning of the century... Through government interference.
You might also want to check on research, which shows time and again that countries with universal insurance outperform the US, both on quality and cost per citizen. E.g.:
http://www.commonwealthfund.org/~/media/files/publications/f...
There is a frequent misperception that trade-offs between universal coverage and timely access to specialized services are inevitable; however, the Netherlands, U.K., and Germany provide universal coverage with low out-of-pocket costs while maintaining quick access to specialty services.
Have you considered the possibility that you aren't explaining it very well?
Have you considered the possibility that it's not a very good idea?
How then do you expect humanity (mere chimps to you) to accept or implement those ideas? Charm perhaps?
True. But why did health care turn away from a completely free-market approach? Why does almost every other industrialized society now support some sort of single-payer system, at least for those who cannot afford private boutique care?
The answer is simple: as a society, we do not accept the results of a truly free-market health care system. 100 years ago, it was accepted that you could become ill at any point in your life, and very possibly die. Being rich was not really a lifesaver, because many if not most major disease categories were at that time untreatable, or the treatments available were palliative at best.
Now, we live in a world where we all know fully well that with enough access, many medical situations that used to be fatal are now treatable with excellent chances of full or near-full recovery. Steve Jobs gets a liver; Dick Cheney gets a heart. My wife's uncle just died of a heart condition similar to Cheney's. Somehow, there was no transplant available for him.
In this world, most people find it unacceptable that your health outcome is directly related to your wealth and social status. The world you suggest -- where everyone simply pays out of pocket -- would be socially regressive in a way that I believe is abhorrent to most civilized people, with the glaring exception of around 50% of the US voting public.
Insurance was developed as a reasonable fair-market way to ameliorate this issue of health care access disparity. If you can afford insurance -- in the US, this typically was through getting a decent job that provided a large risk pool and could therefore negotiate reasonable premiums -- you could at least theoretically rest assured that a major medical crisis would not totally bankrupt you.
But for those outside of the pool of large employers, the insurance companies started doing bad stuff (from a customer's POV) -- dropping the sick, refusing to cover previous conditions etc. In their defense, insurers had the problem that without some sort of mandate, people could just go uninsured until they got sick. So the individual market was destined to be over-represented by older, sicker people.
If you really believe in laissez faire, free-market medicine, you (as a society) have to accept the following:
* People who treat themselves like shit for years and get sick (obesity-related diabetes is a great example) can simply drop dead if they can't afford expensive care and medication.
* If some idiot on a motorcycle without a helmet spins out and breaks their skull, and is not rich, shovel his body to the side of the road, wait for him to die, and call sanitation to remove the body
* If your parents get old and sick, and they fucked up their retirement planning, slip them some clonazepam or watch them wither away painfully over a period of months or years. Be prepared for someone in the family to quit their job and become a nurse, or let Grandma wander around until she falls down and hopefully dies on the spot.
That was basically where everyone was throughout most of history. Only difference is, now we know it can be better. But in a ruthlessly free-market society, only the rich and well-connected would ever have a chance of getting the best possible care.
Also, you can make the argument that free markets over time tend toward cronyism and corporate welfare. That's what happens when there are no checks on the power of corporations and no limits on how money can influence politics.
Yeah... not so much. I appreciate their donations to the Cato Institute and other liberty-facing organizations, but they fund crony capitalism and modern conservatism, which is to say they love to privatize gains and socialize costs. That's hardly libertarian. That's, well... American.
Hard-core communists are just as silly.
Sadly, hospitals are not legally allowed to compete on price. Or compete on service. Or compete at all. You generally can't make a new hospital or expand an old one unless you can convince regulators that doing so won't hurt any existing players. Which means the existing players have no incentive to improve.
Open the market to competition, and we would see vast improvement over the status quo.
It seems this bill did exactly the opposite of what it intended to.
https://en.wikipedia.org/wiki/Bootleggers_and_Baptists
The real question is, who were the "baptists" in this coalition? Were there any non-doctors who honestly believed having too much capacity would make prices go up? And if there were, where did these people learn economics? :-)
Brief summary:
http://www.forbes.com/sites/paulhsieh/2013/11/17/the-only-ob...
I don't consider myself libertarian, but facts should be straight on this issue.
For example, Medicare would have paid only 1% for the assistant's work; that's the market rate that they set. This has all sorts of implications... I assume doctors must have some reason to accept those rates, other than out of some ethical responsibility. It sounds like private insurers are hugely subsidizing Medicare by paying 100x the price. If everyone paid the same rate, Medicare would have to pay a lot more, or there would be a lot less of these procedures.
On the other hand, anyone who actually pays that list price is giving the doctor a gift. If they explained the median price patients pay the doctor out-of-pocket, I wonder if the examples would line up.
It is interesting to read about some patients who went to extraordinary means to discover ahead of time what their costs would be, only to be basically assaulted with an outrageous bill in the end. For a planned procedure and even for an emergency, I think the doctor performing the work should find a way to work with their patient's insurance plan. And insurance plans should have reasonable coverage and customary payment terms which are accepted. The doctors shouldn't get to fleece the insurance companies either.
The level of price discrimination is completely out of control, but I think the legal framework is in place, right now, to protect patients and insurers both from these bills. It's a tax on the rich and middle class, since the doctors collect some small fraction of total billings. It's like a lose-lose double lottery.
More like they are billed 100x the price, negotiate down to 10x the price in general, and otherwise default to a point where the business collects .85x the price.
> For example, Medicare would have paid only 1% for the assistant's work... It sounds like private insurers are hugely subsidizing Medicare by paying 100x the price.
I don't think they're sensationalizing the numbers.
Private insurers are not paying 100x Medicare. They pay negotiated rates to in-network professionals, which is typically 20-100x lower than the list price.
But doctors and companies are being creative, and using out-of-network services as a cover-up, so the private insurances can't enforce their negotiated rates. In some cases it's better to just settle with doctors, to avoid lawsuits and problems with patients' employers. But this rewards the bad behavior.
With layers and more layers of companies, hospitals, consultants and lawyers, all trying to maximize their revenue targets, it's not a surprise that we're seeing six-digit bills for an assistant surgeon. The system is completely broken.
Until we have a complete reform, and more strict laws like New York's Surprise Bill Law [1], I'm afraid we'll see more cases like this.
The only solution is to (try to) stay healthy. If you can.
[1] http://www.nyacp.org/files/public/169463_Health_Alert_3JUNE2...
I was at one point presented with the option of either paying between 30-150.000USD for having a stage one melanoma removed or wait a year until the pre-existing condition clause was canceled out.
Luckily I found another way but I have the resources to do so and I almost got screwed both financially and literally.
What I don't understand is why the US doesn't adopt something like in Switzerland which have universal healthcare but it's privately insured. http://en.wikipedia.org/wiki/Health_care_in_Switzerland
Steven Brill, in Time, wrote an excellent article on just that topic. The subscriber access is at http://time.com/198/bitter-pill-why-medical-bills-are-killin... while a no cost version is at http://www.uta.edu/faculty/story/2311/Misc/2013,2,26,Medical... .
See also an interview with him at http://www.pbs.org/newshour/bb/health-jan-june13-healthcare_... .
Brill's thesis is that with most medical care it is impossible to do the comparison shopping that you emphasize should be possible "even in an emergency."
You hypothesize that "private insurers are hugely subsidizing Medicare by paying 100x the price." As http://www.medscape.com/viewarticle/521175_2 comments, "U.S. hospitals now receive abut [sic] 31 percent of their net revenues from Medicare." Moreover, if you start to read about the US system you would realize that Medicare is prevented, by US law, from negotiating drug prices. Private insurers, on the other hand, can do so. The Brill piece covers that detail. Since your hypothesis doesn't match reality, it must be incorrect.
I am not well informed of this topic, and my knowledge is mostly limited to the popular press. I cannot therefore point to any critical research. There was a recent posting here on HN, at https://news.ycombinator.com/item?id=8304019 , concerning "The Cost of My Mother’s Cardiac Care in the United States and India."
The actual article is at http://www.annfammed.org/content/12/5/470.long , which starts "When my mother fell ill while visiting me in the United States, I had the opportunity to compare costs of surgical cardiac care in the United States and India. I faced challenges in making well-informed decisions in the United States due to the lack of cost transparency and the minimal flexibility offered in choice of care, whereas in India costs are readily available and allow most people to freely choose their preferred type of care."
It sounds like you are saying that NYT should, in every piece about a topic, give the full details to justify its arguments. That's not how newspapers work. They often give many different pieces; some of which examine the situation, and others which help flesh out details. This is one of the latter. You are supposed to read the newspaper over time to get a better sense of the whole.
Otherwise, you need to look towards the specialist literature, like review papers on the economics of the US health system, to get the answers you're looking for.
BTW, you like the word "should" - you used it three times. The many observations show that the US health care system isn't the way you think it should be. There is no legal framework like what you asserted. This suggests you are basing your opinions more on wishful thinking, rather than trying to understand what is actually a quite complex and well-discussed issue. I hope those links I gave help provide a beginning for you.
The article went on to say how Dr. Mu, despite his title as Chief of Neurosurgery, does "probably not very lucrative" work due to low Medicaid rates. So this is a case where private insurance is subsidizing the public system.
Cost shifting is well known in the industry. The 30% of the revenue paid by Medicare corresponds to significantly more than 30% of the services/cost. Operating a hospital is analogous to operating an airline, where you can sell 30% of seats at a price that would be grossly unprofitable if the whole plane sold that way. My hypothesis is that as more care becomes public, the price per procedure that Medicare (or whatever it's called then) will be dramatically higher, because there won't be anyone left to shift the costs onto.
I was able to find some data which demonstrates this; 'Aggregate Hospital Payment-to-Cost Ratios for Private Payers, Medicare, and Medicaid, 1992 - 2012' - http://www.aha.org/research/reports/tw/chartbook/2014/chart4.... There's a subtle point that this data hides, that the article shows, which is although private payments exceed costs, in aggregate, by ~150%, the billing is highly selective. So some private payers may pay close to the Medicare rate (85% of cost) where some private payers are paying 10,000% the cost, like in the case in the article with Dr. Mu.
It's exactly this highly selective billing which I think people should be protected from. Both from an Dr/ethical standpoint, to the necessary legislation which could more clearly protect against this, rather than relying on more general statutes.
I don't really care to discuss "how newspapers work" but I do think while NYT is trying to tell a story about an industry, all I hear is anecdotes. Anecdotes are important, but in a story about industry billing practices, I also need to know if these anecdotes are crazy outliers, or everyday occurrences. You need to anchor your anecdotes with something if you want to tell a story bigger than the anecdote -- I think that's basic reporting, but yes, perhaps too much to expect.
Is that the line "If the surgery had been for a Medicare patient, the assistant would have been permitted to bill only 16 percent of the primary surgeon’s fee"?
If so, Dr. Mu received the $117,000 as a private check from Mr. Drier, and not from a private insurance company. There's nothing which says that Dr. Mu wouldn't have accepted the lower Medicare rate, or that someone else would have been the assistant if Dr. Mu's primary interest was the extra income, or that a private insurance company would had other preconditions in place to prevent a $117,000 bill. It's hard to have an idea in part because Dr. Mu did not respond.
The only other 100x I can find is the out-of-network vs. in-network bills for a muscle and skin graft. But that's not the Medicare rate.
"Probably not very lucrative" is quite far from "subsidizing the public system." If the doctor makes $120K/year with Medicare patients only, and $500K/year with only non-Medicare patients, and the hospital is profitable both ways, then where's the subsidy? While an extra $380K/year is very lucrative.
If what you are saying is true, then there should be a mass wave of hospitals and doctors which don't accept Medicare. While some hospitals and clinics don't accept Medicare, they are relatively few. In fact, hospitals and medical centers will advertise that they accept Medicare. For example, this billboard for a clinic - http://www.yourwestvalley.com/topstory/article_73ac64db-fc44... .
It's very hard for me to accept that the payment-to-cost ratio chart you linked to is meaningful. That appears to be the average cost across everyone. A better chart would be the cost of Medicare treatment vs. the reimbursement by Medicare, and the same for the private insurers. Otherwise, this could be showing that Medicare does a better job of cost containment than private insurers, so that private insurers end up paying for more medically needless but profitable procedures than Medicare. (For example, http://content.healthaffairs.org/content/22/2/230.full argues that Medicare is better at cost containment than private insurers.)
Instead, I find papers like "How Much Do Hospitals Cost Shift? A Review of the Evidence" at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3160596/ more persuasive than that chart.
> Most of the analyses and commentary based on descriptive, industrywide hospital payment-to-cost margins by payer provide a false impression that cost shifting is a large and pervasive phenomenon. More careful theoretical and empirical examinations suggest that cost shifting can and has occurred, but usually at a relatively low rate. Margin changes also are strongly influenced by the evolution of hospital and health plan market structures and changes in underlying costs.
Regarding newspapers, I'm saying that you are getting peeved because you don't understand how newspapers work. The old phrases are "if it bleeds, it leads" and "When a dog bites a man, that is not news, because it happens so often. But if a man bites a dog, that is news." and "You never read about a plane that did not crash."
People read a newspaper in part because they want crazy outliers. The good papers try to fit it in a larger context, biased of course by the overall ideology of the editors and writers. (Eg, the WSJ is pro-market.) But complaining about the lack of complete context and details in a newspaper article is like complaining that the sky is blue.
"When Mr. Drier complained to his insurer, Anthem Blue Cross Blue Shield, that he should not have to pay the out-of-network assistant surgeon, Anthem agreed it was not his responsibility. Instead, the company cut a check to Dr. Mu for $116,862, the full amount."
"If the surgery had been for a Medicare patient, the assistant would have been permitted to bill only 16 percent of the primary surgeon’s fee. With current Medicare rates, that would have been about $800, less than 1 percent of what Dr. Mu was paid."
So at least we should agree that this is a perfect example of cost shifting / price gauging.
> If the doctor makes $120K/year with Medicare patients only, and $500K/year with only non-Medicare patients, and the hospital is profitable both ways, then where's the subsidy? While an extra $380K/year is very lucrative. If what you are saying is true, then, there should be a mass wave of hospitals and doctors which don't accept Medicare
Well, that's the very definition of subsidy, so I don't know quite how to respond. Where's the subsidy? Right there! Very few people become chief neurosurgeons for $120k per year. A lot more become chief neurosurgeons for $500k per year.
As I a said, running a hospital has massive fixed costs, so like an airline, taking on patients which pay 85% of cost is still better for the bottom line, as long as your hospital is running below capacity. So Medicare is an overall good deal for the hospital, even though it pays below cost, as long as it doesn't exceed a certain percentage of the overall patient population. If the patient population was entirely Medicare, then the hospital would not be profitable.
> "It's very hard for me to accept that the payment-to-cost ratio chart you linked to is meaningful. That appears to be the average cost across everyone. A better chart would be the cost of Medicare treatment vs. the reimbursement by Medicare, and the same for the private insurers."
The better chart you ask for--the cost of Medicare treatment vs. the reimbursement by Medicare, and the same for the private insurers--is exactly what this chart shows. It shows separately for Medicare, Medicaid, and Private Insurance, what percent of the cost of the procedures is actually paid. Medicare has lately been covering 89% of costs, while private insurance has ballooned to 150% of cost. Here's the full set of charts; http://www.aha.org/research/reports/tw/chartbook/ch4.shtml
> Otherwise, this could be showing that Medicare does a better job of cost containment than private insurers, so that private insurers end up paying for more medically needless but profitable procedures than Medicare.
Quite clearly Medicare does a fantastic job of containing its costs. You can strike the "medically needless" part from that, since I think it's unsupported. Private insurers absolutely pay for more profitable procedures, as indicated by the chart; private insurance pays 150% of cost overall. But obviously ACA legislation setting a lower payment rate does not inherently make the procedures being paid for actually cost less to perform. But it does certainly force the hospital to search for ways to make up the difference.
> Instead, I find papers like "How Much Do Hospitals Cost Shift? A Review of the Evidence
I'm somewhat confused by this paper, since it reads like an op-ed. After a bit a searching, it appears Frakt has quite a few editorials claiming hospitals lack the market power to meaningfully shift costs to private insurers, despite abundant and uncontroversial data showing Medicare pays below cost.
Frakt himself has the following to say, quite amusingly, in a editorial titled 'The End of Hospital Cost Shifting and the Quest for Hospital Productivity';
"The ACA will permanently reduce the Medicare payments hospitals would otherwise receive. Its ‘productivity adjustment’ will scale payments downward by the average rate at which private nonfarm businesses’ productivity increases. That rate has been estimated to be 1.1 percentage points per year…Actuaries for [CMS] have estimated that by year 2040, Medicare payment rates to hospitals will be half those of the commercial market, and lower still thereafter."
That's payments rates not total payments. I trust the CMS to know exactly how much it's underpaying. http://www.cms.gov/Research-Statistics-Data-and-Systems/Stat...
I didn't know that the ACA puts downward pressure on rates equal to the average rate at which private nonfarm business productivity increases. Since that productivity rate increases significantly higher than the historical productivity gains in healthcare, and is expected to do so for some time, CMS states this will require new legislation to fix, or else payment rates will be so low as to significantly effect availability and quality of services. That's pretty scary, to have built a failure mode like that into the system.
You are correct. I misread it.
I agree that it's price gouging.
"that's the very definition of subsidy,"
A broad definition of subsidy could include a bribe. For example, one interpretation is that people won't become chief neurosurgeons unless you bribe them. In any case, it was an example to illustrate the difference between subsidize and not very lucrative. I'll change the numbers to $500,000 with only Medicare patients (this is about what they make in the UK, so surely enough that people will decide to be chief neurosurgeons) and $3,000,000 with only non-Medicare patients - a very lucrative income indeed.
I see that part of my confusion in understanding the topic is that there are multiple definitions of "cost-shift". In economics - I earlier quoted from an economics paper - it's a "dynamic response by hospitals to a reduction in Medicare payments, in the form of a fully or partially compensating increase in prices charged to private insurers. In the policy debate over Medicare payments, however, cost shifting is defined broadly as payments that fall short of the costs incurred by hospitals in the treatment of Medicare beneficiaries, as measured through negative hospital margins on those patients." (Quote from http://content.healthaffairs.org/content/30/7/1265.long )
I was talking about the former, which excludes price discrimination. The chart you link to shows the latter, which is a broader category. Indeed, the paper I just referenced, titled "Hospitals Respond To Medicare Payment Shortfalls By Both Shifting Costs And Cutting Them, Based On Market Concentration" goes into the details. It's quite a lovely paper.
> [Abstract:] The study presents empirical evidence that, faced with shortfalls between Medicare payments and projected costs, hospitals in concentrated markets focus on raising prices to private insurers, while hospitals in competitive markets focus on cutting costs.
> ... Payment rates from Medicare to hospitals have lagged behind the growth in hospital costs over recent years, leading to negative hospital profit margins on publicly insured patients.1,2 These negative Medicare margins have reignited the long-standing debate over whether the public insurance program is partially responsible for the high prices charged to private insurers, as hospitals seek to offset losses on one set of patients with profits from another.3–7
> Recently, however, the Medicare Payment Advisory Commission (MedPAC) staff has proposed an alternative explanation for negative Medicare margins, one that reverses the direction of causality and interprets Medicare payment slowdowns as a means toward the reduction of hospital costs rather than a shifting of costs from public to private payers.8
As I understand it, the MedPAC model gives an explanation of why the chart you pointed out isn't an example of cost shifting in the economics sense of subsidy. The paper then assesses the viability of the two models and finds they are complementary strategies. The key factor to choose one over the other is the "degree of concentration or competition in the local hospital market."
I liked the observation about the non-economic factors that go into raising revenue rather than lowering cost:
> It generally is more desirable, from a hospital management perspective, to increase revenues than to reduce costs, because the former merely alienates insurers, but the latter alienates employees, physicians, and potential patients. The cost-shift perspective highlights the revenue-enhancement hospital response to Medicare payment shortfalls.
The economic model of Frakt and others, which says that in a competitive marketplace there is no cost-shifting in the subsidy sense is not new, so you needn't track down more from that author to investigate any specifically unusual personal bias. See for example http://www.ebri.org/pdf/briefspdf/1296ib.pdf for a similar paper from 1996, which says:
"Rather than cost shifting [in the subsidy sense], the existing evidence points to hospital competition limiting the provider's ability to raise prices. Whatever market power hospitals once enjoyed is disappearing—and with it the ability to cost shift."
Under this model, the payment shortfall charts are actually a measure of how competitive the hospital environment is.
I read some of the CMS paper you linked to. It comments how "When the Medicare inpatient hospital prospective payment system was introduced in 1984, Congress applied reductions of 0.4 to 3.8 percentage points to the annual payment updates for most of the first 20 years of operation without causing hospital bankruptcies or withdrawal from the Medicare market."
I think that's a very good indicator, though perhaps not the best socially. I therefore think it's odd that they use "Hospitals have been pushing back in recent years against payment reductions aimed at further reducing inefficiency, a signal that much of the achievable gains may have already been made" as a more recent indicator. I know from the 1996 paper that there was a large debate on the topic already in the 1990s, so how does the Office of the Actuary judge if the pushback now is stronger and more meaningful then 20 years ago. Shouldn't they be using the same measure? Has there been an increase in the number withdrawals from the Medicare market?
In any case, I agree with the overall tone of the paper. I agree that there will have to be changes in the Medicare system some time in the next 50 years. I don't agree that the lack of a perpetually effective system is of great concern. If we could do that, we wouldn't need any legislative branch.
The article makes it sound like a doctor walked in to ask "How are you feeling?" and then charged $20,000 for doing so.
I've had a few private operations quoted in Australia and the full cost of the operation is usually in the $500-$2000 range. Even a pregnancy through a private hospital was quoted to us at about $4000. (Although we ended up having our first baby delivered for free through a public hospital, which was fantastic.)
The US desperately needs to walk back the amount their doctors are paid.
It would have happened, why would you doubt it?
It would have been like he was called in just in case any issue came up. The doctor walks in and asks the most obvious question to the patient "How are you feeling?".
The operation ends without needing any inputs from him. But regardless he would have billed the patient for his time.
The attitude is, he wouldn't have given any inputs but he did give them their time, which would otherwise be used else where to make the same money so you have to pay even if the actual value added by him was zero.
So it's kinda strange to hear from famous US people that they "found an awesome doctor". I would prefer to find an awesome clinic, and have multiple doctors to discuss my case. That happens, of course, but money keeps that from being natural routine here.
Thank you for clarifying this.
In fact, I remember when I was preparing to apply for med school in Canada/Ontario, I had to read a number of articles, journals, and books about medical ethics, and one thing that stood out was the consistent push to have future physicians account for the impact of their decisions on the system as a whole. So not only was it imperative to promote patient health, but it was also important to balance that with the overall cost. A good example is a simple blood test. A full spectrum blood test may help identify potential problems in a patient, but it costs OHIP a lot of money to run those tests (especially since they're done in private for-profit labs). That's why your family doctor should really only order the required tests.
The "single payer" has a hell of a lot more leverage than individuals in the US which, as far as I can tell, don't need to consent in any way (hell, they can even explicitly refuse to consent) and get stuck with the bill regardless. That trick wouldn't work so well on an organization the size of the government.
If you ask me, the answer is to stop conducting these services as fee-for-service. Pay physicians a salary. Pay them well, but keep costs somewhat fixed.
You need organizations like Cochrane or NICE to provide evidence based guidance.
I could maybe believe "one and only way of solving this problem without challenging preconceptions and accepting some nuance into free market ideology".
As an aside, I'm really glad Google is getting back into the field with Calico because cheap long tail health care (an obvious externality of the idea) is the ultimate positive use case / justification for their company's total information awareness philosophy / strategy.
" Insurance experts say surgeons and assistants sometimes share proceeds from operations, but Dr. Tindel’s office says he and Dr. Mu do not. Dr. Mu’s office did not respond to requests for comment."
before you talk to anybody in a medical building yell "Are you in my network!?!?!"
If you're building a house you don't start by saying «let's build a house» and then wait for bills from various contractors you've never met to arrive once the house is built. That would be considered crazy.
Why is it acceptable in health care? What prevents praticians from establishing a budget? What prevents patients from demanding one?
.. like promoting and charging for unnecessary and damaging surgery on baby boys, robbing them of bodily integrity and killing ~200 infants a year from complications.
Government-negotiated rates places the pricing totally outside the realm of necessity or reality and makes it a purely political matter, and politics is a messy, fickle thing built on personal favors and tit-for-tat. Not having your political activity interpreted as corruption or bribery mostly depends on not pissing off someone with more power than you.
Health care costs so much because of the insurance leech. The only way to restore sanity is to restore real competition and make the consumer pay directly. Doctors will have to charge reasonable fees to the patients, suppliers and vendors will have to charge reasonable fees to the doctors, etc. It will break the cycle of exorbitant cost in health care. That may be, in some senses, a painful transition, but it's the only sustainable thing in the long term. The cycle will not be broken by saying "Wow, health care sure costs a lot of money. Let's just get the government to print some extra cash and take care of that for us."
Insurance is typically a highly regulated industry because when insurance is involved, people get screwed. The incentives are misaligned; the insurance company only makes money when they don't give you what you're paying for. Insurance only works in events that are very unlikely. It's extremely likely that everyone will go to the doctor or need medical assistance. Insurance is a very, very bad model for this service.
You might want to read how England does it. A national organisation (NICE) gives guidance about what care pathways and treatment should look like. Local CCGs (clinical commissioning groups) decide what they're goong to pay for.
Your description isn't even close to reality in England.
>Groups will have, in addition to GPs, at least one registered nurse and a doctor who is a secondary care specialist.
Doctors and clinicians deciding just how much they're going to get paid. Not subject to any kind of market or competitive force that may work toward an equilibrium based on supply and demand. The government has said "Here's a massive amount of money, fight among yourselves about who gets how much, good luck".
Politics is very much at play here, as it is in any system where the prices are determined by committees or small groups instead of the free market. This includes the current system in the US, which is effectively controlled by a handful of paper pushers in the insurance industry, leeching billions out of our system each year without providing any value and ever-inflating the costs for the patient.
There's no reason health care has to be a distorted market. Free market principles are applicable in health care as they are in any other field. While it's true that people need medicine to survive in many cases, people also need food and groceries to survive, but we haven't had to nationalize a grocery chain heretofore. There is enough competition in the space to keep prices low. There would be ample competition in the medical space if we could break the insurance cabals that currently exist.
The powers that be rather like our current system, and they love it now that the ACA has made it a crime to not purchase their product. They would certainly also enjoy the "print money til the doctors are happy" system proposed by many left-leaning persons. The one thing they're most afraid of is the one thing that restores equilibrium and stops their ability to gouge, which is real competition and a true free market undistorted by unfair practices and insurance company leeches.
Non-catastrophic medical insurance should be outlawed and clients should have to pay their doctors directly, forcing doctors to charge a reasonable amount of money or have no clients, forcing suppliers to charge a reasonable amount of money or have no customers, forcing medical schools to charge a reasonable amount of money or have no students. We can't just keep saying "The expensive way of doing this is easy and great, so let's just have the government pay for it." Things must be self-sufficient.
How do you get to that conclusion? There is plenty of tendering happening in NHS.
> The government has said "Here's a massive amount of money, fight among yourselves about who gets how much, good luck".
> We can't just keep saying "The expensive way of doing this is easy and great, so let's just have the government pay for it." Things must be self-sufficient.
You know that the English government pays less per capita than the US government for health care and we have better health outcomes, right?
I am not competent enough to judge if the pills I purchase actually contain penicillin and only the inert ingredients listed on the label. We know from the less regulated dietary supplement industry that many manufacturers lie about the contents. I have no reason to believe that the pharmacological drug industry is fundamentally more honest.
There used to be a free market for health care. The FDA started as a political response to the adulteration and misbranding of food and drugs in that market. The early 1900 saw the rise of popular patent medicines containing radium, with so-called "radioactive quackery."
A true free market would have no restrictions on Doramad Radioactive Toothpaste, on the sale of snake oil made of petroleum, or of Bonnore's Electro Magnetic Bathing Fluid as a cure for cholera. The free market of that era produced Elixir sulfanilamide, which killed more than 100 people. The owner of the company justified it because they were "supplying a legitimate professional demand." A free market needs no more justification than that. Anything else is politics, yes?
I don't want to return to that sort of free market. What is your most convincing evidence or argument that your proposed free market will lead to an overall improvement in health consequences? Especially knowing the history of bad actors in the health care era.
You commented that "people also need food and groceries to survive, but we haven't had to nationalize a grocery chain heretofore." You omitted that we have nationalized oversight of the food production system supplying the grocery chains. Again, the FDA started because the free market system of the late 1800s couldn't handle the food safety concerns. People did die because of the adulterated food they ate.
They still do, as you know from various E. coli outbreaks, or the 2008 Chinese milk scandal with an estimated 300,000 victims.
Your argument regarding grocery chains therefore at best means that governments shouldn't own hospitals, not that the state and federal governments should get rid of the 'committees or small groups' which develop the regulations for the hospitals.
All of the examples you gave appear to assume that only the current actors - licensed doctors, regulated medicines, hospitals with government inspections - will be part of the free market system. However, an apolitical free market system must allow anyone to claim to be a doctor, anyone to claim to produce a medicine, and any barbershop, plumber, or auto shop to provide hospital services.
How does an apolitical free market prevent these known historical problems, including deaths, from becoming more common again? Why didn't the free market of the late 1800s come up with a free market solution?
My point is that politics is always at play. The only way to remove politics is to have an anarchic free market.
It's 'committees or small groups' which made it illegal to buy radium toothpaste. It's 'committees or small groups' which made it illegal to put drugs on the market without testing. It's 'committees or small groups' which put into place federal meat inspections.
Could you tell me how a free market has provisions which are more effective in terms of health outcomes, than, say, the Nordic or Japanese models? And why it was that those provisions weren't effective in the free market of the late 1800s? Since my reading of history is that the failure of free market to provide protections is what lead to the protectionist system we have today.
You're missing the operative element of my statement, which was "any system where prices are determined". It refers to the specific corruptibility of artifical governmental price fixing and its devastating effects on a free market. It is true that there will always be some element of politics affecting the marketplace, unless there is no government in place. It's OK to have a government that is interested in neutrality and takes all reasonable precautions to ensure things remain free and fair for both the supply and demand sides of the marketplace. Yes, small committees will have some decisions to make, and yes, they would also be subject to possible corruption or bribery, but as long as the government stays roughly within its provisioned and proper sphere (and it's our job to ensure they do so), it shouldn't have such painful direct ramifications.
I was going to reply with the same thing rokhayakebe did. Regulation and government still exist in a free market. If the vendor intentionally misrepresents the contents of his product, he has committed fraud and should be held criminally liable. There's nothing fundamentally incompatible about a standards and testing body and the free market.
Free markets have rules to keep the playing field even and fair, and to prevent the balance of power from tipping too far in any one direction. A market is not free if it is impossible to enter due to monopolistic forces, and a market is not free if the consumers are mislead or otherwise deprived of the information needed to make an informed purchasing decision. Free markets are not anarchy.
Of course, in practice business will spread over to the illegal marketplace. However, I think you also were excluding the illegal marketplace. Consider that if a committee or small group sets the price of wart removal to, say, $20,000, there will still be an illegal marketplace for that procedure. Vice versa, if the price of heart surgery is set to $1, then there will be no public marketplace for it, but it will still be available in the illegal marketplace.
So in truth there is no such thing as a committee or small group which can absolutely set the price. That said, I, like you, am only considering the public, legal marketplace.
You say "devastating effects on a free market" like it's a universal bad thing. The things I pointed out - the regulation of food and drugs - in truth did have devastating effects on the patent medicine market. I think that's a good thing.
Government price controls on the polio vaccine, and the nearly complete eradication of that disease, caused a collapse of the iron lung manufacturing marketplace. I do not cry over that loss. I don't even think the producers of those iron lungs were seriously distressed about their economic losses.
So I absolutely agree with you that some controls can be devastating. That's, um, why the controls were put into place.
Thus, I think you need to describe specific devastating effects on a specific market, and not make a blanket statement that covers the entire market. I'm happy that the market for 9 year old coal miners has been devastated. (Yes, this was done by prohibition. We could get the same effect by fixing the price of child labor to $1 million/hour.)
"If the vendor intentionally misrepresents the contents of his product"
As I pointed out with Elixir sulfanilamide, which killed 100 people, the producer did not really misrepresent the contents of the product. Quoting from http://www.fda.gov/%20AboutFDA/WhatWeDo/History/ProductRegul... "Selling toxic drugs was, undoubtedly, bad for business and could damage a firm's reputation, but it was not illegal."
Read it, to see how difficult it was to track down the 240 gallons of toxic elixir. The only crime, by the way, was the use of the word "elixir". Had they used "solution" instead then the "FDA would have had no legal authority to ensure the recovery of the drug and many more people probably would have died."
You say "There's nothing fundamentally incompatible about a standards and testing body and the free market". Obviously the standards and testing body has to set certain rules. How are those rules determined? Aren't they equally determined by a 'committee or small group' and as corruptible as the Medicare payouts are now?
For example, various states are trying to prohibit the Constitutional right to an abortion by the round-about means of making it extremely difficult and expensive to operate a medical center which carries out abortions. This is done under the guise of improving safety standards at those centers and making sure that the women getting the abortion are fully informed of the details and have had the time to reflect on the decision.
This seems like a prime example of how a standards body can block the free market, even without price controls.
To make up an example using a less sensitive topic than abortion, consider if every purchase of a beer required sitting through a 2 hour video on the negative effects of alcohol, including video of car crashes caused by driving while intoxicated and surgical footage of liver surgery due to liver cirrhosis. It makes sure that consumers are neither mislead nor deprived of information - and yet it's a burden on the free market, no?
So I don't see the difference. One is a financial limit, another is a regulatory limit, but both are limits to a free market.
How does a free market with a standards and testing body supposed to work, and also be significantly less subject to free market manipulation than what we have now?
Lastly, you used the phrase "provisioned and proper sphere". Such a sphere is only defined by politics, because your sphere and my sphere can be very different. Consider a law like the 14th Amendment, Section 4, which says that reparations for "any claim for the loss or emancipation of any slave" were null and void. Why can't an ex-slaveholder say that taking property isn't part of the proper sphere, and insist on getting compensation? Wouldn't that be the 'neutral' position of the market?
Read to the end bro!
1. anchoring to high numbers, without contextualizing how big this issue is: "This contributes to the nation’s $2.8 trillion in annual health costs." How much does it contribute?
2. unequal metrics -- when discussing the expected charges: "Mr. Drier was prepared when the bills started arriving: $56,000 from Lenox Hill Hospital in Manhattan, $4,300 from the anesthesiologist and even $133,000 from his orthopedist, who he knew would accept a fraction of that fee." When discussing the out-of-network bills: "Two plastic surgeons billed more than $250,000 to sew up the incision, a task done by a resident during previous operations for Ms. Kaufman’s chronic neurological condition." Now we're thinking $133k isn't so bad b/c he'll only pay part of it, but the $250k is frightening because there is no mention of an expected discount. As a counterpoint, the author mentions the insurance company pays the full amount to Dr. Mu for the other anecdote in the story.
3. fearful language -- 'He was blindsided, though, by a bill of about $117,000 from an “assistant surgeon,” a Queens-based neurosurgeon whom Mr. Drier did not recall meeting.' Sounds like a 24-hour-news-cycle headline: "Patients billed by doctors while under anesthesia".
4. mentioning there are marketing firms who specialize in helping maximize billing with insurance, as if it's an unethical business. This happens every time a provider of a service or product interacts with a bureaucracy -- there is a whole layer of these services for defense contracting, for example.
5. they mention how the US has more neurosurgeons per capita, then link that (by proximity in the same paragraph) to providing motive by mentioning how neurosurgeon compensation has decreased recently. A more honest article would have given absolute numbers about how the costs of neurosurgery relate to overall health care costs, rather than making the niche appear large relative to the story, so the reader implicitly compares that impact to the $2.8 trillion number.
Medical billing is absurdly complex and byzantine. I'm don't doubt the veracity of the anecdotes, but the structure of the presentation make me suspect the intent of the author.
Agendas are a big red flag to me -- they indicate the author is trying to convince me of their P.O.V., rather than presenting the information and allowing me to make my own decision.
Sure, everything has an agenda. But structural biases such as those outlined above, serve to decrease my trust in the author.
That's all. I'm not suggesting a conspiracy. I think health care is incredibly complex, and sometimes suffers from profiteering. I also suspect that the likelihood is low to be screwed like the people covered in the article, but the structure of the article is designed to make me fearful.
When I detect an agenda to create fear, I question the motives of the author. In short, I cannot separate the useful information in the article from the author's agenda, and am forced to throw the baby out with the bath water, so to speak. (Apologies if that idiom doesn't make sense -- it just means that I have to throw the signal out with the noise because the author doesn't seem to be sufficiently unbiased.)
My critique has nothing to do with the topic (health care), and everything to do with how the author presented their case. If they were talking about how to raise tomatoes, and used similarly inconsistent / manipulative logic, I would question their agenda.
It just happens, in this case, that the topic is about a very controversial issue right now.