By Jim Landers
Dallas Morning News, Sept. 16, 2014

WASHINGTON — Americans spend more than $9,000 apiece on health care every year. Ouch, you say. But how does it feel to know that more than $1,000 of that sum goes to administrative costs? Or that Americans spend more than $210 billion a year on the health insurance claims system?

Needless back-office spending is one of the biggest sources of waste in health care, according to health insurers, providers and academics alike.

In a recent Health Affairs article, the authors estimated that administrative expenditures account for 25.3 percent of the average American hospital’s annual spending. No other developed nation comes close. The next highest, the Netherlands, spends 19.8 percent on administration.

“It’s getting worse,” said Dr. David Himmelstein, an internist who teaches at Hunter College in New York and Harvard Medical School. Himmelstein was the lead author of the article.

“It’s because we’re running health care more and more like a business. What that means is, if you think you can make $101, it’s worth spending $100 to do it. Hospitals are saying, gee, if we hired another financial person here they might help us bring in just a little more than their salary. There’s a whole variety of games you can play.”

Any business with 25 percent of its spending going to administration should be trying to cut, not add, to that burden. Hospitals, physicians and insurers all say that’s what they’re doing.

“We’re continuously looking at administrative costs and looking for ways to reduce the costs,” Wendell Watson, director of public relations with Texas Health Resources, wrote in an email.

“Over the last 10 years, we’ve consolidated many administrative functions to gain efficiencies and economies of scale and improved our processes to reduce costs where we can.”

Texas Health Resources owns 25 hospitals in North Texas. In the 12 months ending May 31, 2013, Texas Health Presbyterian Hospital of Dallas spent $119.8 million on administrative costs, or 20.3 percent of its expenditures that year. The figures come from Medicare reports sifted by American Hospital Directory, which compiles statistics on more than 6,000 hospitals.

Much of the administrative expense in American health care is due to the complexity of billing. There are many insurance companies and hundreds of thousands more companies that self-insure their employees with their own nuanced health plans. A hospital or physician’s office has to find the policy that matches the patient and send in a bill.

Insurers, meanwhile, collect those bills and promptly slash them. Whether it is BlueCross BlueShield of Texas, Aetna, Cigna or government insurance plans like Medicare and Medicaid, the billed price usually isn’t even close to the reimbursement. There are formulas that work through negotiated discounts that determine reimbursements. Then there are the co-payments and deductibles that the patient pays.

The American Medical Association says 10 percent of these reimbursements have errors. It put out a report card last year on various insurers, working out the average cost to handle each claim. Cigna did the best. Only 5.45 percent of their claims had to be reworked, and the average cost of a reworked Cigna claim for a physician’s office was pegged at $1.25.

Chicago-based Health Care Services Corp., whose divisions include BlueCross BlueShield of Texas, scored the worst. The AMA said 14.85 percent of its claims had to be reworked, and the average cost to process them through HCSC was $3.32.

Insurers say it would help if physicians and hospitals did a better job of filing claims. Some still come on paper. And even with electronic medical records, there are problems getting providers to send in the right information.

Taxpayers have paid $27 billion to help providers get with it. Physicians, meanwhile, are complaining that these electronic records have slowed care delivery. The average doctor now spends an extra 48 minutes a day struggling with electronic health records, says the American College of Physicians.

Himmelstein argues the current system would be vastly improved if the nation went to “single payer” health insurance — one national insurance company, with standard billing procedures.

Vermont has committed to implementing such a system, which is similar to the Canadian approach. It’s not a popular system in most other parts of the country. And so administrative costs continue adding to the cost of care.

Follow Jim Landers on Twitter at @landersjim.

http://www.dallasnews.com/business/columnists/jim-landers/20140915-health-care-overhead-is-costing-us-big-bucks.ece

By Douglas Martin
The New York Times, Sept. 13, 2014

Rashi Fein, an influential economist who strove to bring ethical and humanitarian perspectives to the nation’s health care system and helped lay the intellectual groundwork for Medicare in the 1960s, died on Monday in Boston. He was 88.

The cause was melanoma, his son Alan said.

When Dr. Fein began working on health issues as a young aide in the administration of Harry S. Truman, health care accounted for about 3 percent of the American economy. By the time he weighed in as a respected elder in the field during the debate over President Obama’s health care proposals, the expenditures had risen to 18 percent, an amount roughly equal to the economy of France.

As the money Americans spent on medical care increased, so did the role of economists specializing in health issues. Dr. Fein moved between government and academia, offering research and views on issues like meeting the demand for physicians. During the administration of President Lyndon B. Johnson, he led a public-private panel to develop ideas for the Medicare legislation, which, along with Medicaid, was signed into law in 1965.

Dr. Fein, a proud liberal, regretted that Medicare did not apply to everyone, just as he was disappointed that Mr. Obama’s Affordable Care Act did not consolidate insurance payments under the federal government. A federal single-payer system, he maintained, would be more cost effective and inclusive. The Obama plan, passed by Congress, relies on private insurance.

But Dr. Fein was nonetheless satisfied with incremental progress, Dr. Ezekiel J. Emanuel, chairman of the department of medical ethics and health policy at the University of Pennsylvania, said in an interview on Thursday. He quoted Dr. Fein, a former professor of his, as saying, “Getting everybody under the tent is better than standing on principle and not getting anything.”

Dr. Fein regarded both Medicare and the Affordable Care Act as important steps toward the overriding goal of helping “the people who have the least,” Dr. Emanuel said. In his 1986 book, “Medical Care, Medical Costs: The Search for a Health Insurance Policy,” Dr. Fein wrote, “Decent people — and we are decent people — are offended by unnecessary pain and suffering; that is, by pain and suffering for which there is a treatment and for which some (who are affluent) are treated.”

Mr. Fein was born in the Bronx on Feb. 6, 1926. His father, Isaac, was a history professor whose work took him to a chain of cities in the United States and Canada, including Winnipeg, Manitoba; and Bridgeport, Conn. His mother, the former Chaya Wertheim, was a schoolteacher.

Mr. Fein’s son Alan said his father and his father’s younger brother, Leonard — who went on to found organizations to combat hunger — had gotten their zeal for social justice from their parents.

“My preference for a universal insurance program derives from my image of a just society,” Dr. Fein wrote in his 1986 book. “It is an image based on a broadly defined concept of justice and liberty, nurtured by stories my parents told me, the books they encouraged me to read, and the values they expressed. To them, liberty meant more than political freedom; it also meant freedom from destitution — in Roosevelt’s phrase, ‘freedom from want.’ ”

After graduating from Central High School in Bridgeport, Dr. Fein was a Navy radar technician during World War II. He went on to earn a bachelor’s degree in economics and a doctorate in political economy from Johns Hopkins University.

In 1952, he took a teaching post at the University of North Carolina at Chapel Hill, while working on a Truman administration commission charged with exploring the possibilities for national health insurance.

Six years later, he led a study by the federal Joint Commission on Mental Illness and Health, which estimated that mental illness cost the United States $3 billion a year ($24.7 billion in today’s dollars) in treatment costs and lost work years, a small fraction of the estimated costs today.

In 1961, Dr. Fein became a senior staff member on the Council of Economic Advisers under President John F. Kennedy. He studied education issues in addition to helping to write legislation for Medicare. He moved on to the Brookings Institution as a senior fellow in 1963 and remained with it while directing the Medicare panel for Johnson, Kennedy’s successor.

After leaving Brookings, Dr. Fein was a professor of economics at the Kennedy School of Government and the Medical School of Harvard University. He retired in 1999.

In addition to his son Alan, Dr. Fein is survived by his wife of 65 years, the former Ruth Judith Breslau; another son, Michael; a daughter, Karen Fein; and four grandchildren. Another daughter, Bena Fein, died in 1995. Dr. Fein’s brother, Leonard, died in August.

Dr. Fein spoke of the importance of language in describing health care, deriding the term “death panels” that some opponents used in the debate over the Affordable Care Act.

“A new language is infecting the culture of American medicine,” he wrote in The New England Journal of Medicine in 1982. “It is the language of the marketplace, of the tradesman, and of the cost accountant. It is a language that depersonalizes both patients and physicians and describes medical care as just another commodity. It is a language that is dangerous.”

A version of this article appears in print on September 14, 2014, on page A26 of the New York edition with the headline: Rashi Fein, 88, Economist Who Urged Medicare, Dies.

By Sarah Kliff
Vox, September 15, 2014

America spends a lot of money on the paperwork that makes hospitals run— $218 billion per year, to be exact. That works out to 1.43 percent of the entire American economy is spent on hospitals’ administrative costs. Of every $100 spent in America, that means $1.43 is going toward the billing specialists and schedulers that make hospitals here work.

Hospital administration has grown as a percent of the economy over the past decade, from 0.9 percent in 2000 to 1.43 percent in 2012, a new paper in the journal Health Affairs shows.

To put this in a bit of context: America spends twice as much on hospital administration as it does on the entire food budget. For what we pay for hospital paperwork, we could pay for all professional American sports three times over (they had a budget of $61 billion this year, according to PriceWaterhouseCooper).

This makes the United States different from most other countries. In 11 countries that this Health Affairsarticle looked at, hospitals usually put about 12 percent of their budget toward administrative activities. But in the United States, hospitals spend a full quarter of their funds on filing the necessary paperwork to make sure that surgeries happen and patients get scheduled.

This reflects something particular about the American health care system — namely, it’s a complex mess. Most other countries have some central agency that sets a national price for every procedure, from a heart transplant to an MRI. But that’s not how the United States works. Here, we have thousands of health insurance companies that each negotiate their own prices. For a hospital contracting with a dozen health plans — each charging a different price for an MRI, and anything else — that necessitates a whole bunch of paperwork.

There are, of course, trade-offs with a system like this. If the government sets the price too low — pays less, for example, for an MRI than hospitals would accept — that could restrict access to needed medicine. In that case, patients have little mode of recourse; they can’t switch to another plan, because there’s only one game in town.

You can learn more about how that system works, and its trade-offs, in the video below. Then read about Vermont’s plan to sharply reduce administrative costs by switching to a single-payer plan (and the massive obstacles the state faces) here.

http://www.vox.com/2014/9/15/6151861/1-43-of-every-100-in-america-towards-hospital-paperwork

By Dr. Steffie Woolhandler
Modern Healthcare, September 13, 2014

When I was a kid in Shreveport, La., my father was chief of radiology at the local hospital. He also ran the hospital and supervised the cafeteria. Today he’d be the COO.

Now hospital administration takes a village. And that’s not a good thing.

Hospital administration cost the U.S. $215 billion in 2011. Other nations administer modern, first-class hospitals for far less. 

A study by our international team just published in Health Affairs found that administration consumed 25.3% of U.S. hospital budgets—1.43% of GDP (up from 0.98% in 2000), or $667 per capita. Canada spent $158, Scotland $164, England $225 and The Netherlands $325. If U.S. hospitals ran as efficiently as Canada’s or Scotland’s, the average family of four would save $2,000 annually on health costs. 

Not surprisingly, administrative costs were highest where hospitals must cope with a multitude of insurers, with varying copayments, rates and regulations. Canada and Scotland—where costs are lowest—have single-payer systems that pay hospitals a lump-sum budget, the way we fund fire stations. And like fire departments, their hospitals don’t collect from each victim of misfortune.

But payment complexity isn’t the only cost driver. Canadian and Scottish hospital administrators don’t have to play financial games that generate profits. Government grants, rather than capital markets or accumulated surpluses, fund new buildings and equipment. Even in Germany and France—which have multi-payer systems—administrative costs remain modest because government grants fund most hospital capital.

In contrast, as England has forced hospitals to seek profits in an increasingly market-oriented system, administrative costs have soared. And administrative costs in the Netherlands, which is implementing radical market-based reforms, are second only to ours.

Our findings challenge conventional wisdom that market discipline leads to hospital efficiency. Within the U.S., for-profit hospitals spend less than not-for-profits on clinical personnel like nurses, yet have higher total and administrative costs. Internationally, hospital efficiency is best in nations shunning market forces.

Accountable care organizations that force hospitals to behave like insurance companies won’t streamline administration. But a single-payer reform could realize vast savings on administration and redirect them to improved coverage and care. 

Dr. Steffie Woolhandler is a co-founder of Physicians for a National Health Program and a professor at the City University of New York’s School of Public Health at Hunter College.

By Ralph Nader
The Nader Page, Sept. 12, 2014

It is remarkable what very profitable drug companies—as they merge into fewer giant multinationals—continue to get away with by way of crony capitalism. Despite frequent exposure of misdeeds, the army of drug company lobbyists in Washington continues to gain political influence and rake in corporate welfare at the expense of taxpayers. The drug industry goes beyond crony capitalism when it then charges Americans the highest drug prices in the world.

Here is a short list of the honey pot produced by the lobbying muscle of the $300 billion a year pharmaceutical industry. It receives billions of dollars in tax credits for doing research and development that it should be doing anyway. Some companies reaped billions of dollars in revenues when they were granted exclusive rights to market a drug, such as Taxol, developed by the government’s National Institutes of Health (NIH). These corporations turn around and gouge patients without any price controls or royalties to NIH. (See http://keionline.org/ for more information.)

The pharmaceutical industry spends far more on marketing and advertising to physicians and patients than what it spends on research and development. More drug industry funds go to influencing politicians to prevent the implementation of price restraints on its staggering markups.

As Dr. Marcia Angell, the former editor of the New England Journal of Medicine wrote in her book, “The Truth About the Drug Companies,” “only a small fraction of its drugs are truly new; most are simply ‘me too’ variations on older drugs.” Dr. Angell charges that the industry is “primarily a marketing machine to sell drugs of dubious benefits, using its wealth and power to co-opt every institution that might stand in its way, including the U.S. Congress, the Food and Drug Administration, academic medical centers and the medical profession itself.” By the way, the drug industry is required by law to fund a large portion of the FDA’s drug review budget, which contributes to this weak regulatory oversight.

Katharine Greider points out in her book “The Big Fix: How the Pharmaceutical Industry Rips off American Consumers” that “Other countries move to control prices and sharply limit advertising.” This does not happen in the U.S. where many patients confront a “pay or die” system.

In recent years this stark choice has made headlines. New drugs, like Sovaldi for treating Hepatitis C, are costing consumers or taxpayers $84,000 for a full course of treatment or $1,000 a pill per day! The same drug treatment, according to the Washington Post, costs “$57,000 in Britain and just $900 in Egypt.” Other so-called “break-through” drugs are costing patients over $100,000 each a year and driving frantic health insurers and Medicaid managers up the wall.

Will competition bring prices down? Wall Street pharmaceutical analyst, Tim Anderson at Sanford C. Bernstein & Company, explains that this is not the case in a recent New York Times article. “He said that drug companies, while not colluding, ‘have all looked at each other and said, ‘None of us needs to compete on price if we just hold the line.’” The cause of competition was not helped when the drug company lobbyists used their campaign contributions and influence on Congress in 2003 to brazenly prohibit Uncle Sam from negotiating prices for the gigantic Medicare drug benefit program.

The financial rip-offs aren’t the only problems with the out-of-control drug industry. Federal law requires all approved drugs to be both “safe and effective.” The actual record has been shocking. The Public Citizen Health Research Group published three books – “Pills That Don’t Work” (1981), “Over The Counter Pills That Don’t Work” (1983), and “Worst Pills, Best Pills: A Consumer’s Guide to Avoiding Drug-Induced Death or Illness” (2005) – documenting hundreds of prescription and over-the-counter drugs that were not effective for their advertised purposes or had harmful side effects. Wide exposure to these findings, especially on the “Phil Donahue Show,” helped get many of these so-called medicines off the market.

Over the years, the government has fined drug companies billions of dollars for pushing unapproved uses of drugs. More perilously, drugs get approved prematurely and result in mass sickness and fatalities. This human toll takes an estimated 100,000 deaths a year in the U.S. from adverse effects of such drugs. For example, the drug Vioxx, sold by Merck & Co., Inc., as an anti-inflammatory drug, stayed on the market from 1999 to 2004 despite documented cardiovascular risks. According to the well-regarded medical journal Lancet, an estimated 88,000 Americans had heart attacks from taking Vioxx and 38,000 of them died.

Bextra, sold by Pfizer, Inc., another anti-inflammatory analgesic drug was approved by the FDA in 2001, and was then removed in 2005 because of concerns about increased risk of heart attacks and strokes, as well as serious, sometimes fatal skin reactions.

Rezulin, made by Parke-Davis/Warner Lambert, was approved by the FDA in 1997 and withdrawn in 2000 because the drug caused liver toxicity, having been linked to 63 liver-failure deaths.

Meridia, a weight-loss drug sold by Abbott Laboratories, was withdrawn by the company after thirteen years of sales because studies demonstrated that it increased the risk of adverse cardiovascular episodes, such as heart attacks, strokes and cardiac arrest.

These illustrations come from Public Citizen’s Health Research Group whose newsletter “Worst Pills, Best Pills News” has been reliably reporting these avoidable tragedies for many years.

There are other human and economic costs of the drug industry’s relentless sales pressure. Antibiotic resistance has been building up for half a century due to massive overuse of antibiotics both in humans and in edible farm animals. As a result, there are now lethal infections for which existing antibiotics are ineffective. And, inadequate warning labels have led to the misprescription of drugs and the use of drug combinations that have dangerous interactions.

Congress used to regularly investigate the drug companies when Senators like Estes Kefauver (D-Tenn.) and Gaylord Nelson (D-Wis.) were on Capitol Hill. Silence is now the norm. Even the drug company practice – to seek even more profits – of importing about eighty percent of the ingredients in our medicines from China and India, where public inspection regulations can be weak and the FDA has few inspectors, does not command the attention of our congressional representatives. About 100 Americans died in 2008 from a contaminated blood thinner called heparin imported from China.

So, next time you hear the talking heads from corporatist think tanks such as the American Enterprise Institute or the Heritage Foundation or their corporate allies demand “de-regulation,” consider what an inadequately regulated drug industry has already inflicted on millions of Americans.

https://blog.nader.org/2014/09/12/the-havoc-of-the-unrestrained-drug-industry/