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More costly doesn’t mean better

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More costly doesn’t mean better

By Bev Jordan
The News & Advance (Lynchburg, Va.), Letters, Sept. 9, 2014

A study of hospital administrative costs in eight nations published Sept. 8 in Health Affairs finds that hospital bureaucracy consumed 25.3 percent of hospital budgets in the United States in 2011, twice as much as any other nation. The study is the first across multiple nations with widely varying health systems. It was carried out by teams from the U.S., the U.K., France, Germany and the Netherlands. Costs were lowest (about 12 percent) in Scotland and Canada, both of which have single-payer systems. Data covered virtually all hospitals in each nation. Administrative spending totaled $667 per capita in the U.S., $158 in Canada, $164 in Scotland, $211 in Wales, $225 in England and $325 in the Netherlands. French and German costs were about 40 percent lower than in the U.S.

The study found no evidence that high U.S. costs translated into better care or yielded any other benefits.

High costs can be attributed to (1) complexity of billing a multiplicity of insurers with varying pay rates, rules, documentations and (2) the entrepreneurial imperative of hospitals to amass profits (or, for nonprofits, surpluses) in order to fund modernization and essential upgrades. This has reduced hospitals efficiency, driving them to divert personnel and dollars to marketing, cherry-picking profitable patients and services, and to expensive computer systems and consultants to “game” the payment system.

“We’re squandering $150 billion a year on hospital bureaucracy,” said lead author Dr. David Himmelstein, a professor at the CUNY/Hunter College of Public Health and lecturer at Harvard Medical School. “And $300 billion more is wasted each year on insurance companies’ overhead and the paperwork they inflict on doctors.”

He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Another senior author said, “For three decades our policy makers have pushed market-oriented strategies that have turned health care into a business. As a result, Americans have the world’s costliest health care, and our life expectancy is years shorter than in most wealthy nations.”

Quality health care is a right that no one should be denied. The Affordable Health Care Act is a small step in that direction and our Republican Virginia lawmakers need to realize this and side with the people and the medical professionals, rather than the bureaucrats.

This information may be accessed through the website of Physicians for a National Health Program, www.pnhp.org.

Bev Jordan resides in Lynchburg.

http://www.newsadvance.com/opinion/letters_to_editor/letters-to-the-editor-for-tuesday-september/article_a6776262-3791-11e4-8d52-001a4bcf6878.html

‘Market forces’ create bloated hospital bureaucracies: international study

By Markus Mannheim
The Canberra Times (Australia), Sept. 9, 2014

United States hospitals spend a quarter of their budgets on administration, more than twice as much as some other countries, an international study has found.

Meanwhile, separate data suggests Australian public hospitals may be only marginally more efficient than American hospitals.

The latest issue of Health Affairs journal reported on the eight-nation study, which found “bureaucracy” – e.g. central administration, IT and marketing – took up 25.3 per cent of US hospital budgets in 2011.

By comparison, administrative costs were only about 12 per cent in Scotland and Canada, countries with simpler, publicly funded health systems.

Hospitals in nations with some elements of private funding, such as Germany and France, had intermediate administrative expenses, while those shifting to “market-oriented payment systems”, such as the Netherlands (19.8 per cent), faced costs closer to the US’s.

The study attributed the high costs of the mostly private US system to the complexity of billing, given the need to deal with a wide range of health insurers and payments.

However, it also said the “entrepreneurial imperative” to make a profit undermined efficiency, by encouraging hospitals to “divert personnel and dollars to marketing, to cherry-picking profitable patients and services (and avoiding unprofitable ones), and to expensive computer systems and consultants to game the payment system”.

Lead author Professor David Himmelstein, of Hunter College’s school of urban public health, said US hospitals wasted $US300 billion a year on insurance companies’ overheads “and the paperwork they inflict on doctors”.

Another author, Steffie Woolhandler, said the result of America’s market-oriented healthcare policies had created “the world’s costliest healthcare, and our life expectancy is years shorter than in most other wealthy nations”.

“It’s time to admit that, when it comes to caring for sick people, markets don’t work.”

Australian hospitals were not included in the international study.

However, Independent Hospital Pricing Authority data published this year shows overheads made up 22.7 per cent of the costs faced by Australian public hospitals in 2011-12.

A spokeswoman for the authority said this amount was “not the same as administrative costs as described in the study by Himmelstein et al, and direct comparison should not be made to the figures quoted in the study”.

The national commission of audit warned earlier this year that hospital expenses were “one of the fastest-growing areas of government spending“, with budgets expected to grow by 10.4 per cent a year over the next decade.

Markus Mannheim is public service editor at The Canberra Times.

http://www.canberratimes.com.au/national/health/market-forces-create-bloated-hospital-bureaucracies-international-study-20140909-10ee1w.html#ixzz3CpRdgB6E

Fix Mental Health with Universal Medicare

PNHP note: The following article was updated in an article with the same title in Social Justice Solutions in December 2016. You can view the updated article here.

By F. Douglas Stephenson
Health News Florida, Sept. 8, 2014

One reliable indicator of health care quality in any nation is life expectancy. Unfortunately, life expectancy in the United States ranks in the bottom quartile of a list of 229 industrialized nations, according to the Organization for Economic Cooperation and Development.

Many of these same 29 nations also increased their investment in mental health services while, during the same period, the U.S. slashed its expenditures for psychiatric and mental health services.

Mentally ill patients have been dumped into our communities poorly prepared for them. Thousands of the mentally ill have joined the street people in many of our cities, and, reminiscent of Elizabethan England, the county jail has become the primary community facility for housing most mentally ill people in the United States.

Over 45 million U.S. citizens now lack any kind of health insurance, and millions more have very inadequate coverage in the policies they now carry. Among these with incomes below the federal poverty line, a third had no health insurance. Statistics show that among Americans who are inadequately insured, a significant number are sicker and die younger than those who have insurance.

It is no mystery why this is happening in this country. Because the insurance industry so thoroughly dominates our health care system, the basic concept, purpose and system of health insurance is defined by them. The U.S. subscribes to a business model of health insurance that defines insurers as commercial entities. Private insurers maximize profits by mainly limiting benefits or by not covering people with health problems. Like all businesses, their goal is to make money.

Under the business model, the greed of casual inhumanity is built in and the common good of the citizens and nation is ignored; excluding the poor, the aged, the disabled and the mentally ill is sound business policy, since it maximizes profit.

In most other developed countries, however, the aim of health insurance is simply to promote a social service for universal access to affordable health care for all citizens, and not to generate profits for stockholders, CEOs and other private business entities. The U.S. is the only advanced country in the world with a health care system based on avoiding sick people.

Mental health treatment services in general and talk therapy in particular have been negatively affected by insurance and drug company domination of the U.S. health care system. Talk therapy includes psychotherapy, psychoanalysis, counseling, marriage therapy, family therapy, group therapy, psycho-educational groups, addiction treatment groups and programs, parent training groups, anger management programs and many others.

There are dozens of effective means to deal with human distress that involve talk between qualified professionals and people seeking help. Talk therapy is not one-size-fits-all. It is focused on emotional problems in relationship with oneself or others.

Insurers, with their focus on profit, seek to spend as little as possible on your mental health care. Talk therapy sessions have been drastically cut by insurers. Privacy has been invaded and is no longer assured. Your choice of therapist is no longer under your control.

Likewise, drug companies with profit motive want to sell you drugs. Drugs and insurance companies with profit motive want to sell you drugs. Drug and insurance companies often view talk therapy and qualified practitioners as a threat to their control over the health care system. These companies insist that mental health problems are due to “biological imbalances” which require only expensive medications.

A systematic campaign to discredit the value and competence of talk therapists exists when drug and insurance companies assert, for example, that most types of long-term therapies are not “evidence based.” Insurance coverage for talk therapy has in fact steeply declined since the mid-1980s, from 6 percent to 2 percent of all insurance payments. People seeking talk therapy increasingly must pay for those services out of pocket.

Many people with emotional and psychological problems make good progress with talk therapy or with a combination of talk therapy and medication. While drugs can indeed by helpful, they alone do not “cure” emotional distress and sometimes have uncomfortable side effects. Certainly, there are biological aspects to many emotional and psychological problems, but biology is not the only cause (or cure) for these conditions.

Consumers of health care services do not have to be intimidated into accepting inadequate mental health treatment. Citizens have a right to demand effective clinical service. Tell your health care plan that you want adequate access to qualified talk therapists if you have emotional, addiction or marriage and family problems. Let your employer or human resource department know that you want a solid mental health benefit that includes comprehensive talk therapy services.

We now have over two decades of experience with the conversion of mental health care into a business. Our health care is being rationed, its care guidelines determined by profitability and secrecy decided in private corporate boardrooms.

To realize large profits demanded by Wall Street investors, our health system must attract the healthy and turn away the sick, disabled, the poor, many of the old, and the mentally ill. A 1997 study by the New England Journal of Medicine showed that a large number of Medicare HMOs engaged in favorable selection by “cherry picking” healthier individuals. Since 1987, the number of uninsured in the U.S. has grown by a million each year.

Our mental health care system needs to get private health insurance out of it. Little of value is offered by private insurance when 15 percent to 25 percent of the health care dollar is skimmed off for profit and overhead. If, for example, the existing Medicare program is now extended to all citizens (and not only to those 65 years and older) universal coverage or “Medicare for all,” for both mental and physical health is possible while strongly containing costs.

The transition to full enrollment in Medicare, for example, could be achieved by gradually dropping the eligibility age over five to ten years. Any losses in phasing out private health insurance industry jobs could be will offset by job gains in other American industries, especially since they would no longer by saddled with such high health insurance costs, as is now the case.

Medicare is much more efficient than private insurance, with overhead now less than 4 percent. More importantly, it cannot deny care to those who need it the most, and administration by a single-payer public entity makes controlling costs more possible.

Nobel Prize recipient Bernard Lown, M.D., of the Harvard School of Public Health sums it up nicely: “One may only hope that Winston Churchill’s quip will soon be realized: ‘You can always count on Americans to do the right thing, after they have tried everything else.’ The United States has tried any number of bad solutions for providing its people with health care. Long overdue is the recognition that medicine is a necessary social service that should be accessible to all citizens.”

F. Douglas Stephenson, LCSW, LMFT, BCD, is a graduate of The University of Chicago and was a faculty member in the Department of Psychiatry, University of Florida. He is a retired psychotherapist who practiced in Alachua and Citrus Counties.

(Editor’s note: This column first appeared in the Citrus County Chronicle; its author has asked that it also be published in Health News Florida.)

http://health.wusf.usf.edu/post/fix-mental-health-universal-medicare

Why U.S. hospital administrative costs are among the highest in the world: 7 things to know

By Helen Adamopoulos
Becker’s Hospital Review, Sept. 8, 2014

An analysis of eight countries with various types of healthcare systems has found the U.S. has the highest hospital administrative costs, according to a study published in Health Affairs.

Researchers analyzed data from Canada, England, Scotland, Wales, France, Germany, the Netherlands and the U.S. Administrative costs made up 25.3 percent of total hospital spending in the U.S., more than any of the other countries studied and more than twice the percentages for Canada and Scotland, which had the lowest administrative expenditures. Here are seven things to know about hospital administrative costs in the U.S. and why they’re significantly higher than other countries’ spending.

1. Differences in hospital administrative spending become more pronounced when examined as a percentage of gross domestic product or dollars per capita. In that form, administration costs ranged from 0.41 percent of GDP or $158 per capita in Canada to 1.43 percent of GDP or $667 per capita in the U.S., according to the study.

2. Within the U.S., for-profit hospitals also had greater administrative costs (27.2 percent of hospital spending) compared with their nonprofit (25 percent) and public (22.8 percent) counterparts. Furthermore, teaching hospitals (which are rarely for-profit) and rural hospitals also had below average administrative costs, at 23.6 percent and 24.7 percent of spending respectively.

3. U.S. hospital administrative costs aren’t just high; they’re also increasing. Administrative spending rose from 23.5 percent of total hospital spending in 2000 to 25.3 percent in 2011. By contrast, hospital administrative costs in Canada fell from 12.9 percent in 1999 to 12.4 percent in 2011.

4. Various factors and differences between the healthcare systems in the countries studied contribute to administrative cost disparities, according to the study. For instance, in nations where hospital administrators have few responsibilities aside from procuring and coordinating the facilities, supplies and personnel necessary to deliver quality care, administration only takes up about 12 percent of total hospital spending.

5. Hospital payment, billing and financing have a significant influence on administrative costs. In Canada, Scotland and Wales, hospitals receive global, lump-sum budgets, which means procuring operating funds doesn’t require much administrative work. By contrast, in countries where hospitals conduct per-patient (or diagnosis-related group-based) billing, hospitals need additional clerical and management workers, in addition to specialized IT systems, according to the study. Countries such as the U.S. and Netherlands must also negotiate payment rates with multiple payers with differing billing procedures and documentation requirements, driving up administrative spending.

6. Furthermore, the way hospitals get capital funding also impacts costs, according to the study. For example, hospitals in Scotland and Canada — with the lowest administrative costs — receive funding through a combination of direct government grants and separate global operating budgets. Despite more complicated per-patient billing, hospitals in France and Germany also have relatively low administrative costs because a large amount of their capital funding comes from direct government grants. Meanwhile, in countries like the U.S., surpluses from day-to-day operations account for most hospital capital funding. “In such healthcare systems, the need to accumulate capital funds for modernization and expansion stimulates administrators to undertake the additional work that is needed to identify and pursue profit opportunities,” the researchers write.

7. The researchers concluded that reforming the U.S. healthcare system to a single-payer model would result in significant administrative savings. Reducing U.S. administrative spending to the level of Canada or Scotland per capita in 2011 would have saved $158 billion or $156 billion, respectively.

http://www.beckershospitalreview.com/finance/why-u-s-hospital-administrative-costs-are-among-the-highest-in-the-world-7-things-to-know.html

Time to hold private Medicare Advantage plans accountable

By Miranda Rosenberg, MS2
Palm Beach Post, Sept. 2, 2014

In 2004, only about 5.3 million Medicare enrollees participated in a Medicare Advantage plan. Now, that number has nearly tripled to 15.7 million. Payments to Medicare Advantage plans account for nearly a third of total Medicare spending today.

These plans were introduced with the false assumption that private insurers would provide Medicare-level coverage for less money than the federal government. It has not happened. Instead today the federal government pays private insurers more than it pays to cover equivalent patients under the traditional fee-for-service Medicare program.

Meanwhile, private Medicare plans have used sophisticated methods to attract the healthiest Medicare patients and discourage less healthy patients from enrolling.

The Patient Protection and Affordable Care Act aims to save the federal government money by bringing Medicare Advantage reimbursements in line with fee-for-service Medicare expenditures. Private insurers are actively fighting these reimbursement reductions, and are asking the federal government for more money in order to continue to provide their programs. They blame financial pressures from the Affordable Care Act for their recent narrowing of physician networks, but evidence suggests otherwise.

A recent study from the Wharton School of Business at the University of Pennsylvania examined how much patients benefit when Medicare Advantage programs receive higher reimbursements. Researchers found that when reimbursements rose, insurance company profits increased, and more companies were willing to offer comparable insurance products. Patient benefits and quality of care, however, remained unchanged. Seniors did not see lower monthly premiums, lower copays or easier access to more doctors, diagnostic tests and treatments.

Instead America’s taxpayers have been footing an inflated bill. Currently, Medicare Advantage plans receive adjustments based on a patient’s health status and expected health services usage, but patients’ risk and sickness scores can be manipulated to increase private insurers’ profits. The U.S. Department of Health and Human Services recently audited six Medicare Advantage plans and found that in 2007 alone, the federal government overpaid the plans by a combined $650 million because of inflated patient risk scores.

Medicare Advantage programs cannot selectively disenroll Medicare patients, but they can drop physicians without cause. In the past 12 months, Humana and United Healthcare — two of the largest Medicare Advantage programs — dropped thousands of physicians including many of the top physicians in the country — such as practitioners at Tampa’s nationally renowned H. Lee Moffitt Cancer Center and the entire Yale Medical School faculty.

Patients with the most complicated (and expensive) illnesses often wish to continue their care with physicians they have come to trust and who are familiar with their complex medical histories. In order to stay in their care, these patients have been forced to switch back to traditional Medicare. This not only directly generated an additional financial burden on the Medicare program, but also indirectly is generating a higher reimbursement to the Medicare Advantage programs since their reimbursements are based on traditional Medicare’s expenditures on patients on comparable age.

Forty-nine years ago, President Lyndon B. Johnson signed the landmark Medicare bill in Independence, Mo. In his remarks, he referred to America’s seniors as “our prideful responsibility” and declared that they were entitled to “the best medical protection available.”

Medicare Advantage programs have tried to justify higher government reimbursements by claiming that they keep patients healthier. But if their patients appear to be healthier because they have pushed out less healthy patients, then they are not meeting their “prideful responsibility.” It is time to put private Medicare insurers at financial risk and hold them responsible for the costs of patients disenrolling from their programs.

Miranda Rosenberg is a graduate of Harvard with a major in government. She is currently a second year medical student at University Of Pennsylvania Perelman School of Medicine with a research focus on health policy.

http://www.palmbeachpost.com/news/news/opinion/commentary-time-to-hold-private-medicare-advantage/nhB6Z/

Health care in U.S. is a bureaucrat-heavy system

By Alan Bavley
The Kansas City Star, Sept. 8, 2014

Eye-popping compensation packages of hospital executives — particularly those at safety-net and nonprofit hospitals — are regular fodder for exposes and editorials.

Consider the $1.2 million that tax records show was paid to former Truman Medical Centers CEO John Bluford in salary, bonuses, benefits and deferred compensation, or the nearly $1.5 million paid to St. Luke’s Health System CEO Melinda Estes, or the $2 million paid to Children’s Mercy Hospital CEO Randall O’Donnell. Those are typical of what leaders of major U.S. hospital organizations make.

But sensational figures like these may just be a symptom. The billion-dollar problem appears to be the bloated bureaucracies of American hospitals.

A study out today in the journal Health Affairs finds that 25.3 percent of hospital expenditures in the U.S. go toward administrative costs rather than to care of patients. That’s twice the percentage that hospitals in Canada devote to administration. And it’s more than at hospitals in any of the other countries — France, Germany, the Netherlands, the United Kingdom — examined by an international team of health economists and policy experts.

If U.S. hospitals could cut administrative spending to Canadian levels, they’d save more than $150 billion, the researchers estimated.

The reason hospitals elsewhere spend so much less on administration is that their countries have nationalized health care systems, the researchers said.

U.S. hospitals must deal with myriad insurance plans that pay different amounts and use different paperwork. Hospitals need an army of clerical personnel and managers, as well as specialized IT systems, to deal with that. In the other countries the researchers studied, hospitals are paid uniform rates or get lump-sum budgets to care for patients.

Hospitals in those countries also get government grants to cover modernization and expansion. U.S. hospitals fund such projects largely through revenues of their day-to-day operations. Efforts to boost those revenues, such as creating profitable services lines, lead to further expenses.

Simplifying health care to a single-payer system could trim administrative costs of U.S. hospitals, the researchers suggest. That would be something along the lines of a Medicare program that covers everybody.

And that’s unlikely to happen. Too many sectors of the health care industry are vested in the current system. And to many, the idea of a single payer raises the specter of socialism.

America’s alternative to socialized medicine turns out to be bureaucratized medicine.

http://www.kansascity.com/news/local/news-columns-blogs/local-columnists/article1879553.html#storylink=cpy

We’re No. 1, Not In A Good Way: Highest Hospital Administrative Costs

By Alvin Tran
WBUR CommonHealth blog, Sept. 8, 2014

When it comes to hospital administrative costs, a new Health Affairs study finds, our country is No. 1 and we’re way ahead of the curve — unfortunately.

In the study, researchers analyzed hospital accounting data to compare administrative costs across eight countries: Canada, England, France, Germany, the Netherlands, Scotland, the United States and Wales. They found that administrative costs accounted for more than 25 percent of total U.S. hospital expenditures — far ahead of the pack.

“We were surprised by just how big the differences have grown. The U.S. is in another league than every other country,” said Dr. David Himmelstein, the study’s lead author and a professor at the City University of New York’s School of Public Health.

Himmelstein and his colleagues also found that countries operating under a single-payer health system, such as Canada and Scotland, had the lowest administrative spending, and calculated that the U.S. could save $150 billion a year if it had a system like theirs.

Based on Medicare Costs Report data from 2011, hospital administrative spending in the U.S. amounted to $667 per capita — more than double what the Netherlands and England spend.

In the Netherlands, administrative costs consumed just 19.8 percent of hospital budgets — compared to 25.3 percent in the U.S. —  and in England, just 15.5 percent.

In a phone interview, Himmelstein said American hospital administrative costs have doubled over the last decade. “We anticipate that they’ll continue to go up because we’re continuing to pursue health policies that stimulate administration,” he added.

Uwe Reinhardt, a health economist and professor at Princeton University, sees high hospital administrative costs as a moral question. “You’re pulverizing all this money on something that does not make people better — doesn’t improve their health,” he said.

Reinhardt, who said he had once believed the new federal health law would lower administrative costs, now thinks Obamacare has become too challenging and complex, especially with the addition of navigators and health exchange administrators.

“I think the administration of the American health system has outpaced our ability to cope with it. Even the best IT people cannot cope with it anymore,” he said, adding that “Obamacare, if anything, adds to the administrative overhead.”

So, does having higher administrative costs result in better patient care in the U.S.?

According to the study’s authors, the answer is no. They cited previous research that found no significant relationship between higher administrative costs and better care in the U.S.

As for potential solutions, Himmelstein, who is a cofounder of Physicians for a National Health Program, says he is in favor of switching to a single-payer health-care system. He believes the new federal health law is steering the country in the wrong direction: “It moves us to more private insurance when expanding Medicare would have been much more efficient,” he says, adding that the law created another layer of insurance bureaucracy.

“The U.S., of course, has a very complex system where there are multiple payers paying different prices for different health care services,” says Dylan Roby, an assistant professor at the UCLA Fielding School of Public Health. “The findings probably are indicative of the fact that we have a very complex and fragmented system.”

Roby, however, says that he thinks switching to a single-payer system isn’t necessarily the only solution or even the best option.

“I think there might be some sort of solution between what we have now and single payer that is still somewhat market-driven and that may come out of the ACA, if there’s political support for it,” he said.

Alvin Tran is a doctor of science student at the Harvard School of Public Health. 

http://commonhealth.wbur.org/2014/09/us-highest-hospital-administrative-costs

Time to end co-pays

They are one of many reasons that U.S. health care has the world’s highest overhead costs

By David Cay Johnston
Al Jazeera America, Sept. 8, 2014

American hospitals spend a huge and growing share of their revenue on overhead, a study published today in Health Affairs shows. Getting those costs down should be a national priority.

American hospitals on average spend 25.3 cents out of each dollar of revenue on overhead, with for-profit hospitals spending 27 percent and nonprofits a bit below the average.

By contrast, the Netherlands and England, which have the next highest overhead costs, spend 19.8 percent and 15.5 percent, respectively. Both are moving toward market-based financial models, so as with the U.S. overhead costs are likely to rise.

Compare Canada and Scotland, which have single-payer health care systems. Their hospital administrative costs are half those in America. 

The new study helps explain why for each $1 the 33 other countries with advanced economies spend per person on universal health care, the United States spends $2.64 — and yet more than one-fifth of Americans has no or poor health insurance.  A significant reason America’s health care system is so expensive and inefficient turns out to be those annoying co-pays. 

For the full article, visit http://america.aljazeera.com/opinions/2014/9/health-care-costscopaysoverhead.html.

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and editor of the new anthology “Divided: The Perils of Our Growing Inequality.”

Support Medicare for All bill, H.R. 676

By Richard A. Damon, M.D.
The Missoulian (Mont.), Letters, Sept. 5, 2014

If you experienced a time when you had no health care coverage, or tire of paying out-of-pocket costs for unpredicted illness, have been financially blindsided by an insurance company, are fed up with escalating costs, or are forced to accept unexpected premium raises in your employer-based insurance, you soon realize that this nation has not been wise in choosing our current health care reform.

Now that the Affordable Care Act is implemented and the dust is settling, you may begin to ask what can be done. If you are thoughtful and farsighted, you will see we are headed down the road of a completely market-based system of health care that basically forces purchase of private health insurance.

Market rhetoric telling how great choices are in the ACA marketplace, calling insurance plans “products” and us “consumers,“ is just rhetoric, and many are learning that having health insurance does not guarantee access to health care. In reality, hundreds of billions of dollars are being transferred to the private insurance industry to subsidize plans that leave people underinsured, unable to afford care, and at risk of financial ruin from serious accident or illness. ACA regulations are no match for insurance company strategies to find and exploit loopholes.

The underinsured continue to self-ration, delay or avoid care due to cost. Insurance enrollees cannot be dropped, but insurers can stop offering plans in non-profitable areas. Cancer centers and major medical centers are being left out of insurance networks. Remember, nations that consider health care a public good, not a commodity, have universal coverage that costs less and produces better outcomes.

Health care is a human right, but real health care reform faces barriers because legislators cave to private insurers. Medicare for all, HR 676, is a much better system.

Dr. Richard A. Damon resides in Bozeman.

http://missoulian.com/news/opinion/mailbag/house-resolution-support-medicare-for-all-bill/article_f55f61e2-350a-11e4-be83-0019bb2963f4.html

U.S. far out in front again – in hospital administrative waste

A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far

By David U. Himmelstein, Miraya Jun, Reinhard Busse, Karine Chevreul, Alexander Geissler, Patrick Jeurissen, Sarah Thomson, Marie-Amelie Vinet and Steffie Woolhandler
Health Affairs, September 2014

Abstract

A few studies have noted the outsize administrative costs of US hospitals, but no research has compared these costs across multiple nations with various types of health care systems. We assembled a team of international health policy experts to conduct just such a challenging analysis of hospital administrative costs across eight nations: Canada, England, Scotland, Wales, France, Germany, the Netherlands, and the United States. We found that administrative costs accounted for 25.3 percent of total US hospital expenditures—a percentage that is increasing. Next highest were the Netherlands (19.8 percent) and England (15.5 percent), both of which are transitioning to market-oriented payment systems. Scotland and Canada, whose single-payer systems pay hospitals global operating budgets, with separate grants for capital, had the lowest administrative costs. Costs were intermediate in France and Germany (which bill per patient but pay separately for capital projects) and in Wales. Reducing US per capita spending for hospital administration to Scottish or Canadian levels would have saved more than $150 billion in 2011. This study suggests that the reduction of US administrative costs would best be accomplished through the use of a simpler and less market-oriented payment scheme.

From the Discussion

Hospitals’ administrative overhead varied more than twofold across the nations we studied as a share of total hospital costs and more than fourfold in absolute terms. These costs were far higher in the United States than elsewhere.

In all nations, hospital administrators must procure and coordinate the facilities, supplies, and personnel needed for good care. In nations where administrators have few responsibilities beyond these logistical matters, administration seems to require about 12 percent of hospital expenditures.

Modes of hospital payment can increase the complexity and costs associated with two additional management tasks: garnering operating funds and securing capital funds for modernization and expansion.

Garnering operating funds requires little administrative work in nations such as Canada, Scotland, and Wales, where hospitals receive global, lump-sum budgets. In contrast, per patient billing (for example, using DRGs) requires additional clerical and management personnel and special-purpose IT systems. This is true even in countries—such as France and Germany—where payment rates, documentation, and billing procedures are uniform.

Billing is even more complex in nations where each hospital must bargain over payment rates with multiple payers, whose documentation requirements and billing procedures often vary, as is the case in the United States and the Netherlands.

Differences in how hospitals obtain capital funds also appear to affect administrative costs. The combination of direct government grants for capital with separate global operating budgets—as in Scotland and Canada—was associated with the lowest administrative costs. (Wales has recently transitioned to such a system, reversing previous market reforms.) Hospitals in France and Germany, where direct government grants account for a substantial share of hospital capital funding, have relatively low administrative costs despite per patient, DRG-based billing.

Administration is costliest in nations where surpluses from day-to-day operations are the main source of hospital capital funds: the United States and, increasingly, the Netherlands and England. In such health care systems, the need to accumulate capital funds for modernization and expansion stimulates administrators to undertake the additional work that is needed to identify and pursue profit opportunities.

http://content.healthaffairs.org/content/33/9/1586.abstract

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Bureaucracy consumes one-quarter of US hospitals’ budgets, twice as much as in other nations: Health Affairs study

PNHP Press Release, September 8, 2014

A study of hospital administrative costs in eight nations published today in the September issue of Health Affairs finds that hospital bureaucracy consumed 25.3 percent of hospital budgets in the U.S. in 2011, far more than in other nations.

Administrative costs were lowest (about 12 percent) in Scotland and Canada, whose single-payer systems fund hospitals through global, lump-sum budgets, much as a fire department is funded in the U.S.

The article attributes the high administrative costs in the U.S. to two factors: (1) the complexity of billing a multiplicity of insurers with varying payment rates, rules and documentation requirements; and (2) the entrepreneurial imperative for hospitals to amass profits (or, for nonprofit hospitals, surpluses) in order to fund the modernization and upgrades essential to survival.

“We’re squandering $150 billion each year on hospital bureaucracy,” said lead author Dr. David Himmelstein, a professor at the CUNY/Hunter College School of Public Health and lecturer at Harvard Medical School. “And $300 billion more is wasted each year on insurance companies’ overhead and the paperwork they inflict on doctors.”

He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Instead, we’re layering on more bureaucracy in insurance exchanges and ‘accountable care organizations.’”

https://www.pnhp.org/news/2014/september/bureaucracy-consumes-one-quarter-of-us-hospitals’-budgets-twice-as-much-as-in-ot

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Comment:

By Don McCanne, MD

This international comparison of hospital administrative costs further documents the profound administrative waste that characterizes U.S. health care financing. This study is particularly important because it clarifies the two major factors resulting in this waste: 1) the administrative complexity of interacting with a multitude of insurers, and 2) “the entrepreneurial imperative for hospitals to amass profits or surpluses” in a system with market-driven pricing.

Although all other nations waste less than we do on administration, they do so in varying degrees. Thus we can learn lessons from them, especially the two lessons above. Extrapolating from this Health Affairs article, the solution for hospital financing is obvious: switch to single payer and use global budgets for hospitals and separate budgeting for capital improvements. But don’t stop there. Apply single payer principles to the financing of our entire health care delivery system. That would free up perhaps $400 billion or more that could be used to ensure appropriate health care for everyone.

Urban Institute and Bankrate on high deductibles

QuickTake: Nonelderly Workers with ESI Are Satisfied with Nonfinancial Aspects of Their Coverage but Less Satisfied with Financial Aspects

By Adele Shartzer and Sharon K. Long
Urban Institute, September 4, 2014

The Urban Institute’s Health Reform Monitoring Survey has been tracking health insurance coverage, including employer-sponsored insurance coverage (ESI), since the first quarter of 2013. This QuickTake reports on nonelderly (ages 18–64) workers’ ESI in June 2014. In June 2014, most workers (88.6 percent) were insured and, among those who were insured, most (80.7 percent) had ESI (data not shown). When asked to assess their ESI, workers were generally satisfied with their ESI in terms of available health care services, choice of doctors and other providers, and the quality of the care available under the plan; less than 5 percent of nonelderly workers with ESI coverage report being dissatisfied with any of these factors. However, satisfaction levels are much lower for the financial aspects of coverage, with workers more concerned about premiums, co-payments, and their potential financial risk from high medical bills. Nearly one in four nonelderly workers with ESI (23.4 percent) is dissatisfied with the premium they pay for coverage, and 27.2 percent are dissatisfied with the deductibles they pay when receiving care. The protection that ESI provides against high medical bills may be particularly limited for low-income nonelderly workers (those with family income at or below 138 percent of FPL): 32.1 percent of low-income workers with full-year ESI report having problems paying medical bills in the past 12 months. Overall, 14.2 percent of nonelderly workers with full-year ESI report having problems paying medical bills over the past 12 months.

http://hrms.urban.org/quicktakes/Nonelderly-workers-with-ESI.html

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How People Feel About Their Employer-Sponsored Health Plans

By Margot Sanger-Katz
The New York Times, September 4, 2014

There are new results from the Urban Institute’s Health Reform Monitoring Survey, which asked people with employer-based coverage how they liked what they had.

For people earning between 138 percent and 400 percent of the federal poverty limit, or between $33,000 to $95,000 — the income range of people who are most likely to buy insurance on the public marketplaces — more than 23 percent of workers with employer coverage reported having problems paying their medical bills in the last year. 

Sharon Long, a senior fellow at Urban, said that the results suggested that consumers might not be prepared for what happened when they combined a high-deductible insurance plan with big medical bills.

“What we’ve heard anecdotally from people with health plans is more people are signing up for high-deductible health plans and then being surprised that they have to pay the deductible,” she said. That’s a concern on the new health insurance marketplaces, too. Early evidence suggests that people tended to opt for cheaper plans, many of which came with high deductibles — meaning that the newly insured may face some of the same financial strain if they become seriously ill.

Deductibles and co-payments have been rising, as a growing number of employers embrace the idea that giving workers more of a financial stake in their medical care will help reduce overuse. “It’s been going up over the past few years,” said Gary Claxton, a director of the Health Care Marketplace Project at the Kaiser Family Foundation, which runs a comprehensive annual survey of the employer insurance market. And no one likes paying high insurance premiums or out-of-pocket costs

Over all, Ms. Long said, the rising costs of health care are likely to remain a concern for consumers, wherever they get their insurance. “I expect what we’ll see over time, unless we are able to get costs under control, is that all the cost questions are going to be an issue,” she said.

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Worried about health insurance? That’s common

By Jay MacDonald
Bankrate.com, September 4, 2014

Bankrate’s Health Insurance Pulse survey was conducted Aug. 21-24 by Princeton Survey Research Associates International.

Tom Baker, a professor of insurance law at the University of Pennsylvania Law School, points out that a majority of working adults receive their health insurance through their employer and thus have largely been spared a direct impact from the Obama health care law. But the survey’s concerned majority may partially reflect uneasiness about employer-based plans.

“There is research being done on liquidity, or ‘financial fragility,’ where they asked people if they could come up with $2,000 to pay for a major medical bill in the next month,” he says. “I think 40 percent of respondents said they either couldn’t or it would be very difficult. That suggests that people are financially fragile.”

David Cusano, a senior research fellow at Georgetown University’s Health Policy Institute in Washington, D.C., suspects some of the fear over health costs may stem from growing first-hand experience with how health insurance works.

“With the Affordable Care Act, anybody who now wants insurance can get it,” Cusano says. “The question now becomes: ‘Can I afford to use it?’ When you think about people confronting out-of-pocket maximums at around $7,000 or deductibles of $5,000 for a family, that’s a lot of money. You throw prescription drug copays into the mix, and I can see where you would be worried.”

http://www.bankrate.com/finance/insurance/health-insurance-poll-0814.aspx

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Comment:

By Don McCanne, MD

These two surveys are of people who have employer-sponsored health insurance – the very large market of health plans that was protected by the Affordable Care Act (“you can keep the insurance you have”). The most significant change in employer-sponsored plans is in the increased use of high deductibles as a means of slowing premium growth for the employers.

The trade off is that employees and their families are exposed to greater out-of-pocket costs whenever they access health care. These surveys demonstrate that this exposure is not merely theoretical but is actually creating significant financial insecurity for the insured.

But isn’t the primary purpose of insurance to relieve you of financial hardship should you have health care needs? Instead, these newer insurance product designs are increasing the risk of financial hardship, both in the employer-sponsored market, and especially, by design, in the plans offered by the ACA insurance exchanges. That is why they selected a lower actuarial value plan as the benchmark plan in the exchanges.

Reform should have been about fixing the problems with our health care financing, not making them worse. A far better system would simply provide access to health care when needed, without linking that care to specific financial transactions controlled by a third party insurance intermediary. We don’t need private insurance programs. We would do far better with prepaid health care, financed equitably through progressive tax policies.

It’s in our name. PNHP is Physicians for a National Health Program, not physicians for private health insurance.

What do health care cost trends mean for us?

National Health Expenditure Projections, 2013–23: Faster Growth Expected With Expanded Coverage And Improving Economy

By Andrea M. Sisko, Sean P. Keehan, Gigi A. Cuckler, Andrew J. Madison, Sheila D. Smith, Christian J. Wolfe, Devin A. Stone, Joseph M. Lizonitz and John A. Poisal (all affiliated with CMS Office of the Actuary)
Health Affairs, September 2014

Abstract

In 2013 health spending growth is expected to have remained slow, at 3.6 percent, as a result of the sluggish economic recovery, the effects of sequestration, and continued increases in private health insurance cost-sharing requirements. The combined effects of the Affordable Care Act’s coverage expansions, faster economic growth, and population aging are expected to fuel health spending growth this year and thereafter (5.6 percent in 2014 and 6.0 percent per year for 2015–23). However, the average rate of increase through 2023 is projected to be slower than the 7.2 percent average growth experienced during 1990–2008. Because health spending is projected to grow 1.1 percentage points faster than the average economic growth during 2013–23, the health share of the gross domestic product is expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023.

Model And Assumptions

These projections remain subject to substantial uncertainty and reflect the variable nature of future economic trends, as exemplified by the prolonged and comparatively sluggish nature of the recovery from the 2007–09 recession. In addition, the United States has experienced only the initial effects of the ACA’s coverage expansions. The impacts of reform on the behavior of consumers, insurers, employers, and providers will continue to unfold throughout the projection period and beyond. In particular, the supply-side effects of the ACA remain highly speculative and are not included in these estimates.

Conclusion

Since the end of the Great Recession in 2009, economic growth in the United States, as measured by GDP, has remained slow: just 3.9 percent per year, on average, which is well below the average rate experienced in the four years following the three previous recessions. The fact that recent health spending increases have not returned to their prerecession rates is consistent with the long-standing relationship between overall economic growth and health spending growth.

Growth rates for both the economy and health spending have been slow. However, the health share of GDP has remained relatively constant since 2009 and is expected to be 17.2 percent in 2013. Contributing to the stable share in 2013 are continued low use of medical care and provisions of both sequestration and health reform that constrain payments to Medicare providers.

The period in which health care has accounted for a stable share of economic output is projected to end in 2014, primarily because of the coverage expansions of the ACA. It is anticipated that by 2017, once the mostly one-time transition effects of expanded coverage have fully transpired, the health share of GDP will increase, albeit at a slower rate than its historical average, as an improving economy and the aging of the baby-boom generation lead to faster health spending growth.

http://content.healthaffairs.org/content/early/2014/08/27/hlthaff.2014.0560.abstract

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Comment:

Don McCanne, MD

When people ask how much the United States is spending on health care, it is the numbers from this report that are usually cited. So how much are we spending now, and what will that spending grow to a decade from now?

Projected spending for 2014:

  • National health expenditures (NHE):  $3.057 trillion
  • NHE per capita:  $17,354
  • NHE as a percent of GDP:  17.6%

Projected spending for 2023:

  • National Health expenditures (NHE):  $5.159 trillion
  • NHE per capita:  $26,691
  • NHE as a percent of GDP:  19.3%

With the Affordable Care Act (ACA) the changes in spending represent not only the usual factors that the actuaries consider each year, they also include the changes in coverage due to the establishment of the insurance exchanges and the expansion of Medicaid, along with other direct and indirect results of implementing ACA. Considering all of the variables, the actuaries once again have done a commendable job in arriving at their estimates.

Although the authors do make it clear that there is substantial uncertainty in these predictions, especially due to the variable nature of economic trends, there is one aspect that should raise our concern. Their results depend on the prediction that there will be faster growth in disposable personal income. Yet when you read the work of Thomas Piketty, Emmanuel Saez, Joseph Stiglitz, Robert Reich and others, there is a very real concern that, though the economy may continue to reward the rentiers generously, personal incomes for workers may well remain stagnant. Many will have no discretionary income and may have to continue to cut into the portions of their budgets that pay for essential needs.

This will be of particular concern because of the increases in out-of-pocket spending that will be required as more people are shifted into lower actuarial value plans with higher cost sharing, especially higher deductibles. Many policy experts believe that a significant portion of the recent slowing in health care spending has been due to the high out-of-pocket costs for upfront health care, causing patients to decline care that they should have. This is not the way we should be trying to put a lid on health care spending. People will suffer and some will die simply because of their perception that health care is personally not affordable because of the high upfront costs.

Another important consideration is that predictions of future health care spending are dependent not only on expansion of health care coverage and on the other variables, but they also are dependent on the baseline costs of the existing health care financing system. As we all know, the administratively complex multi-payer system that we have in the United States is the most expensive model of financing health care with its tremendous built in waste. If we were to change to an efficient single payer system, not only would everyone have affordable access to health care, we would not be talking about a trend in national health expenditures that in a decade will consume almost one-fifth of our gross domestic product.