. . . to truly reform U.S. healthcare? This is somewhat of a rhetorical question, meaning it requires no answer because there is no answer. At least not a simple one. First you have to decide what the problem is that you’re trying to reform.
Many talk about quality, whatever that means. About 50% of Americans don’t get the healthcare that academics recommend. Is that a quality problem. Well, maybe. Depends on who defines “quality.” Traditionally, quality is defined by the customer, and academics are certainly not the customer. Not even an interested party. What about patients? They want access and lower prices. But they’re not the only customers. Those who pay for healthcare also want lower prices, but more particularly, they wan lower costs. And these are not the same. Costs are a function of price and volume, so if you can lower the volume of healthcare, you can lower costs without affecting prices. That’s what providers want. That’s the reason Congress keeps vetoing efforts to reduce Medicare payments to physicians--unit price. Physicians (and other providers) want to keep the unit price constant.
However, it’s REALLY hard to lower costs if you leave unit prices the same and don’t limit access. But access is what patients want. So now we have competing goals. Imagine that.
The Kaiser Health News
references the Contra Costa Times with an article about Tort Reform. Who wants Tort Reform? Well, Republicans, and anyone else who doesn’t want to talk about prices of individual healthcare services. Tort Reform is a good thing, and needs to be done. I would vote for it. However. it won’t affect the cost of individual healthcare services and won’t affect the amount of money the U.S. spends on healthcare every year. A distraction. Smoke an mirrors.
Here’s a test: Here are some quotes from a quality healthcare meeting advertisement I received today. Your test is to guess where the meeting is: “...standing apart from your rivals is more important than ever. . . . sharpen your competitive edge. . . . TQM, and Six Sigma. . . . improve operational process, customer service, reduce costs, and increase customer loyalty. . . . quality management principles. . . . enhance leadership skills. . . .” Give up? Well if you guessed anywhere in the U.S., you’re wrong. Kuwait
Yep. Speakers at this meeting are from Kuwait, Iran, India, and Dubai. They’re appealing to the Healthcare Tourism market. These folks are competing for U.S. patients’ money, and all those things mentioned above are important in a competitive market. But those factors are not important in the U.S. market. None of that matters here, because there is no price competition.
The U.S. healthcare market is characterized by small monopolies of local hospitals, so health insurance companies have weak bargaining power and generally pay whatever the local hospital asks. Well, it’s not quite that black and white, but this is a problem. Imagine, if you will, setting up a health insurance company in Charlottesville, VA without including the University of Virginia in your plan. You want them in? You pay their price.
So, are the insurance companies the victims of evil hospitals and large provider groups? Well hardly. When you get finished with Wall Street, focus your ire on health insurance executives and be glad you’re not married to one. I still remember the insurance company in Milwaukee that saved money by not reading PAP smears. Just marked them all “normal,” except that they weren’t all normal. The insurance company is still in business, but some of their patients are not. More recently, there’s WellPoint that stands accused of canceling insurance on women who’s mammograms came back positive. Breast cancer does cost money, you know.
Still, it’s easy to conclude that they are victims or rising healthcare costs and just charge what it takes to stay in business. In one sense, the health reform legislation is designed to put a little starch in their bargaining backbones. Maybe they’ll press a little harder at the table if there is sufficient pressure on their prices and they can’t just cancel policies on people who get sick.
So where do we save money? What about fraud and abuse? That’s a traditional Washington source for money when all else fails. Yes, there is some. There are poster child cases, particularly but not exclusively in FL. According to the Wall Street Journal, Regina Herzlinger resigned from the board at WellCare Health Plans amidst charges of accounting fraud. A million here, a million there, and pretty soon . . . . But be careful, one man’s fraud is another’s dispute over which procedure code actually applies to that patient visit.
At the end of the day, if your want to reduce healthcare costs, you have to reduce the costs of healthcare. We need to introduce efficiency into individual healthcare processes so that providers can charge less and still make a good living. And yes, it is possible, but you need a reason to try. I believe that reason will be competition, but we’re not there yet.