Kickbacks, corruption, and graft are not models for efficiency in health care

‘The Trump administration has labored zealously to cut federal regulations, but its latest move has still astonished some experts on health care: It has asked for recommendations to relax rules that prohibit kickbacks and other payments intended to influence care for people on Medicare or Medicaid.’

So begins the article ‘Trump Administration Invites Health Care Industry to Help Rewrite Ban on Kickbacks’ by Robert Pear in the NY Times, November 24, 2018. The next sentence provides the ostensible motivation for the rule change: ‘The goal is to open pathways for doctors and hospitals to work together to improve care and save money,’ but the sentence immediately after goes to the meat of the issue: ‘The challenge will be to accomplish that without also increasing the risk of fraud.’

The reason that there are anti-kickback laws in any industry is, of course, to prevent fraud. It is bad enough when we discover that a supposed impartial reviewer of a film or a book, or an item we may want to purchase like a car or a computer, is in fact being paid by one manufacturer to recommend their product. It is even worse if it turns out that the product that they are recommending is us, and that someone that we have trusted with our lives and our health, like a doctor, is being paid to send us to a particular lab or x-ray facility or hospital or specialist. Maybe the one we are being referred to is the best one, but it is hard to trust that if we discover that the doctor has a financial interest in that facility, or is receiving a kickback for those referrals. Most people are afraid of this and thus support anti-kickback laws; the exception is always those within the industry who stand to benefit. Surprise! And, it should be noted, it seems to be a core part of the business model of the Trump Organization.

But what about that middle sentence? The one that says that ‘the goal is to open pathways for doctors and hospitals to work together to improve care and save money’? Isn’t that a worthwhile goal? And both the American Medical Association (AMA) and American Hospital Association (AHA) are supporting the proposals. Am I saying that they are crooks or corrupt? Doesn’t it make sense that there can be not only savings but enhanced quality from the efficiencies that can come from such arrangements? How can we realize the efficiencies if doctors and hospitals are prevented from coordination of care?

The answer, as I see it, is “yes, but..”. There should not be unreasonable restrictions to care coordination, provided that they are upfront and obvious to the consumers (patients) such as in health maintenance organizations (HMOs) and the like which use limited panels of doctors, or public hospitals where care is often provided by employed physicians. The core issue, in health care, is to ensure that these arrangements are truly for the benefit of the health of patients, and not mainly to make more money for the providers. When your physician, Dr. Smith, refers you to a particular specialist (Dr. Jones) because they know them and think they are smart, competent and do good work even though another physician across town may have better results by some measures, it may be good or bad but it is honestly being done by Dr. Smith for your benefit. But if you discover that Dr. Jones is paying Dr. Smith for referrals, you might well be chary of the motivation.

There are several important things to remember in this discussion:

1.     Not everyone is, or is likely to become, a crook. There are many, maybe most, individual health care providers (like doctors) who actually care more about people’s heath than profit. There are even some institutional health care providers, hospitals and health systems, that may.

2.     There will always be people and institutions who “push the envelope”, and game the system. They will do everything that is legal, even if it violates the spirit and intent of the law, if it makes them more money. “Give them an inch and they’ll take a mile”.

3.     The looser the rules, the more these people and institutions will game it. There is no reason to suspect that money-grubbing cheaters will be satisfied if given a little more. Think about those (maybe me and you) who routinely feel ok about driving 5-10 MPH above the speed limit on a highway. If the speed limit is 65, we may drive 70 or 75. But if it is 75, we drive 80 or more. Raising the limit on what constitutes corruption will not obviate it.

4.     Carrots don’t work very well to change such behavior, although sticks might work a little better.

Don McCanne recently discussed a study from RAND called ‘Effects of Health Care Payment Models on Physician Practice in the United States’ which described the many different models being employed by various health systems and physician groups in the US, but alertly appened a reference to a NY Times article on October 27, 2018 by Alfie Kohn titled ‘Science Confirms It: People Are Not Pets: Research on the efficacy of rewards tells us that we can’t bribe others into doing what we want’. It reviews the psychological science that there is a difference ‘between intrinsic motivation (wanting to do something for its own sake) and extrinsic motivation (for example, doing something in order to snag a goody). The first is the best predictor of high-quality achievement, and it can actually be undermined by the second. Moreover, when you promise people a reward, they often perform more poorly as a result.’ Indeed, Kohn shows that sticks are not that effective either at changing behavior; I advocate them to some degree because at least they can put the biggest violators in jail!

The Pear article on kickbacks, trying to describe what its supporters see as the good side of loosening restrictions on them, says: ‘‘Federal law generally prevents insurers and health care providers from offering free or discounted goods and services to Medicare and Medicaid patients if the gifts are likely to influence a patient’s choice of a particular provider. Hospital executives say the law creates potential problems when they want to offer social services, free meals, transportation vouchers or housing assistance to patients in the community. Likewise, drug companies say they want to provide financial assistance to Medicare patients who cannot afford their share of the bill for expensive medicines.’ First of all, this is not “likewise”; drug companies who want new customers (and fend off efforts to regulate prices) are different from a hospital or provider offering free or discounted services; extra benefits to attract patients (as opposed to, say, free lunches to attact doctors) are quite different,  provided that these are really free, and the cost is not passed on to Medicare or Medicaid!

There is, in fact, a difference between ‘coordinated care’ and ‘graft’.

Pear also writes ‘‘The Justice Department in April accused Insys Therapeutics of paying kickbacks to induce doctors to prescribe its powerful opioid painkiller for their patients. The company said in August that it had reached an agreement in principle to settle the case by paying the government $150 million. The line between patient assistance and marketing tactics is sometimes vague.’

Vague? This is not vague at all. Creating efficiencies to improve care to patients, and reduce costs, especially to patients, is fine. Kickbacks and graft are not.

We have a bill! The GOP's plan to cut taxes on the rich and health care for the rest of us

Every day it gets more difficult to write about the new “American Health Care Act” (AHCA) that has been introduced in the House of Representatives by Speaker Paul Ryan because every day there is so much more news about it, and so much more criticism of it that appears in the press. Even before its introduction, the bill was attacked for being likely to significantly increase the number of uninsured Americans while providing windfall tax cuts for the wealthiest.

It did not disappoint. Consistent with predictions, the nonpartisan Congressional Budget Office (CBO) estimates that initially 14 million people will lose coverage, with the number rising to 24 million in 10 years. These estimates are discussed in detail, and clarified, in “Deciphering CBO estimates” at the Kaiser Health News site. The largest number of people who will lose coverage will do so because of the changes – but let’s call them what they are, “cuts” – to federal funding of Medicaid (discussed by the Health Affairs blog), which would shift costs to the states, most of which will be unable or unwilling to absorb these costs. The 31 states that have expanded Medicaid to all those under 138% of the federal poverty level  under the Affordable Care Act (ACA) will be faced with having to fund a lot more from their own coffers; poor people in the states that have not expanded Medicaid eligibility will continue uncovered. The other group that will lose coverage will be those who have bought subsidized insurance on the ACA-created marketplaces and who will no longer be able to afford the premiums. Yes, the new GOP plan calls for tax credits to help pay premiums, but they will be far less than under the ACA and far from enough to cover the actual cost.

This change will have the biggest impact on the older, sicker poor who are not yet eligible for Medicare (and, while I we will not address it here, the GOP leadership certainly has plans for cutting Medicare!), whose premiums will go up because of two important changes the AHCA will make. It will end the “individual mandate” of ACA, so that those who feel that they do not need health insurance can pass on buying it, which means the pool of insured will lose those healthier people and have a pool more skewed to those who are sicker and will actually use health care. This will tend to drive premiums up for them, and the AHCA also allows insurers to charge 5 times as much to older people as younger. As reported by Thomas Kaplan and Robert Pear in the NY Times on March 13, 2017

Under current law, in 2026, a single 21-year-old earning $26,500 with an insurance policy that costs $5,100 a year would get a tax credit of $3,400 and would have to pay $1,700 of the premium. Under the Republican bill, that person’s share of the cost would drop to $1,450.

By contrast, a 64-year-old earning the same amount would fare much worse. That person’s $15,300 health plan would be offset by a $13,600 tax credit under current law, leaving the consumer responsible for $1,700. Under the Republican plan, health insurers would be free to charge older people more, raising that person’s premium to $19,500. But the tax credit would be only $4,900, and that person’s share of the premium would then be $14,600.

That’s a bite! And, ironically, as pointed out by Noam Levey in the Los Angeles Times (March 12, 2017), it will hurt Trump/GOP voters more than Democratic voters, because those Trump voters – and the counties and states which went for Trump in which they live -- are more likely to be in this older, sicker, group. This group of Republican voters did not like Obamacare because the premiums, co-pays, and deductibles were going too high and the coverage was not always great, especially for the plans they could afford. Trump, and the GOP, promised them high-quality, affordable coverage. These folks believed them. They voted for them. And they are not going to get it, certainly not from the AHCA. Levey notes that “…In nearly 1,500 counties nationwide, such a person stands to lose more than $6,000 a year in federal insurance subsidies. Ninety percent of those counties backed Trump…[a]nd 68 of the 70 counties where these consumers would suffer the largest losses supported Trump in November.” What can you do. Politicians lie. This one was a whopper.

What is the reason for this? Many of Congress’ and Washington’s leading “conservatives” say that they believe that the role of government should be as close to zero as possible, and certainly think that the government has no business being involved in the insurance marketplace to ensure that people without resources have health coverage; to them, the AHCA is too much like the ACA in that it actually makes some effort to help some people, if weakly. There are a few of these “conservatives”, in and out of Congress, who really believe this and act on such beliefs. Uniformly, they are not poor, are not close to poor, and are not likely to be negatively affected. There is a much larger contingent that only believe government should not help most people. They support legislation that benefits rich people, like the AHCA, which uses the money it will save (and the CBO says that it will reduce the deficit over 10 years by $337 billion) to give tax cuts, not evenly distributed, but very much skewed to the highest incomes. This is where the [mean] rich people come in; they fund the Congresspersons, and this is what they want. Rep. Michael Burgess (R, TX), Chairman of the Energy and Commerce subcommittee on health, is quoted in the Times on March 11 (“The GOP’s high-risk strategy for health law repeal”) as saying “If you ask someone to give up something, there will be resentment,” and he is correct. That it is regular people who are being asked to give up something by Mr. Burgess and his colleagues, so that his rich patrons can save even more on their taxes, is something he doesn’t focus on.

One of the most iconic differences between ACA and AHCA focuses on equity: the subsidies (and tax credits for those who paid taxes) under ACA were tiered to income. The tax credits that replace subsidies under AHCA are tiered to age. Of course, as I have noted, older people are more likely to be sick, but they are not all of the same need; some older people have lots of money, and some have none. The same is true for younger people, including those with medical need. In any case, the tax credits in AHCA will not, as demonstrated above, be sufficient for those without significant other resources to buy health coverage, even if they are in the more-highly-subsidized older group. The Times’ Alan Rappeport reports on March 16, “One certainty in health bill: tax cuts for the wealthy”, with 40% of the cuts going to the top 1%, and the bill providing the necessary basis for further tax cuts for the rich. Rappeport quotes Mike Mulvaney, the White House budget director: “We promised at the outset that we were going to repeal all of the taxes. Who cares if someone else benefits?” Well, maybe the people who will suffer for their benefit? The same issue of the Times contains a brief and informative piece by Mr. Pear, “Putting Republicans’ plan on the Obamacare scale”, examining the criticisms of ACA and how the AHCA solves them (or not).

President Trump apparently feels conflicted; he promised the repeal of ACA, and the Congress wants to do that. He also knows that any plan that comes out that does this will be called “Trumpcare”, just as the ACA was called “Obamacare”. Enough Republican senators are concerned that the House’s AHCA will make it too hard for too many people to afford insurance that they might vote against it, so “Mr. Trump was left to strike a balance between siding with House Republicans while also distancing himself from the details, with top aides conceding that the legislation needed modifications before it could pass the full Congress,” (”G.O.P. Senators Suggest Changes for Health Care Bill Offered by House” NY Times, March 14).

For the rest of us, it is an impending disaster.

Doctors' incomes and patient coverage: both need to be more equal

On Sunday, January 18, 2014, the New York Times ran another stellar front-page piece by Elisabeth Rosenthal addressing the fact that, as the title states clearly, Patients’ Costs Skyrocket; Specialists’ Incomes Soar. It continues, with detailed documentation, her explanation of how providers – in this case doctors, and in particular the most highly paid subspecialists -- game the system of insurance reimbursement to maximize their income, and how patients pay the price. She focuses particularly on dermatologists, whose combination of high income and low workload makes them the exemplar of what medical students call the “ROAD”, the specialties of radiology, ophthalmology, anesthesiology, and dermatology, all of which are known for having high income/work-hours ratios.

Rosenthal addresses in particular a kind of dermatologic surgery called Mohs surgery, which commands a high price. Mohs surgery is very good for its ability to identify margins of a skin cancer and leave less of a scar, but it can be, and often is, overused at high cost. She cites a particular case of a woman who had a small basal cell cancer (the kind that almost never metastasizes and is often simply excised) removed from over her cheekbone and had a bill of over $25,000. “Her bills included $1,833 for the Mohs surgery, $14,407 for the plastic surgeon, $1,000 for the anesthesiologist, and $8,774 for the hospital charges.” The plastic surgeon, by the way, was called in – along with the anesthesiologist – to close the small lesion from the excision that the dermatologist was unwilling to do.

The cases that Rosenthal documents are typical enough that they cannot be  called “abuses” because they are the norm; it is, of course, the entire system that is the abuse. It would be absurd if it were not so real, if it didn’t skew the entire health care system away from primary care and toward specialties where enormous incomes are made by billing – and collecting – for each single activity. Rosenthal describes the RUC, the AMA-convened body that makes “recommendations” to Medicare about the relative value (and thus payment) for procedures, as well as for other forms of patient care -- such as listening to you, examining you, thinking about your problem, making a diagnosis, and recommending treatment -- which are well undervalued compared to procedures. I discussed the RUC, and what I consider its outrageous behavior, in Changes in the RUC: None.. How come we let a bunch of self-interested doctors decide what they get paid?, July 21, 2013, and earlier in  Outing the RUC: Medicare reimbursement and Primary Care, February 2, 2011, but Rosenthal does an excellent job of describing its perverse incentives. Given that Medicare takes the RUC’s recommendations 95% of the time, and that most insurers base their payments on Medicare’s, the RUC, which is heavily stacked against primary care, essentially sets doctors’ reimbursement. And this is not to the benefit of patients, either financially or medically.

In another article, Rules for Equal Coverage by Employers Remain Elusive Under Health Law, buried much farther inside the paper but also very important, Robert Pear describes the fact that the Obama administration has chosen to not (yet) enforce rules which allow companies to offer discriminatory levels of coverage to some employees than to others; generally, “better” coverage to executives than to line workers. There is already a ban on such discrimination in companies that are self-insured, but the Affordable Care Act (ACA) extended this to those who purchase coverage from insurance companies. The possibilities for discrimination are illustrated by the things that are forbidden; for example, covering only executives and not others, paying the full cost of executives’ premiums while making lower-paid workers pay for a portion of their benefits, or offering different terms for coverage of the dependents of executives and other workers.

Of course, the companies (read: the executives who run the companies and stand to benefit from discriminatory practices) disagree. Pear quotes Kathryn Wilber, from the American Benefits Council “which represents many Fortune 500 companies” as saying “Employers should be permitted to provide lower-cost coverage to employees who may not be able to afford the comprehensive coverage being provided to other employee groups,” which, of course, would not be an issue if the company paid for comprehensive coverage for all employees. The one “benefit” that may be excluded from the non-discrimination rules are “certain types of executive physicals”, which is ironic because there is no data that these benefit most people, including executives, but rather increase both the cost of care and the risk (in follow-up tests for false positives) to the patient. Certainly there are some occupations where the risk of something going wrong is high enough that it exceeds the risk of harm, changing the harm/benefit ratio -- airplane pilots for example, or possibly those who drive buses full of school children. But virtually no corporate executives are in this group.

The reason companies want differential benefits is primarily to save money by not offering good coverage to the majority of their employees, and also as a “perk” that they can offer to their executives. It is presented as parallel to other market goods, the difference between “serviceable” and “excellent”. This is even carried over in the metaphor to describe the low-copay plans that the ACA was going to tax, “Cadillac” plans, when everyone knows that a Chevy is just as good at getting you where you want to go, just not in such luxurious circumstances. But this is a lousy metaphor for health care, and confuses two benefits. One, which is the intent of the “Cadillac policy” tax, is whether individuals have to make co-pays or have co-insurance, or have limits on their benefits, or not. This is financial, and is very important. The other, however, is whether some people have coverage that gets them better health care. This is not OK. Obviously, they come together at some point since health care that is unaffordable to a person is unavailable to them, even when it is necessary. Conversely, for those executive physicals, providing a “benefit” that the individual does not have to pay for encourages them to seek unnecessary, and sometimes potentially harmful, care.

It may be that there are certain kinds of “health care” that are in fact reasonable to treat as elective consumer goods which a company might offer to some employees and not others; cosmetic surgery is the classic example (or non-medically-necessary contact lenses or radial keratotomy [Lasik®]; see Rand Paul on health policy: small brain and no heart, September 1, 2013). There also may be some employees for whom the harm/benefit ratio makes certain services of value when it does not for others (the comprehensive exams, “physicals”, for pilots, or Pap smears for women but not men). But, overall, coverage that does not include all necessary care for everyone is inappropriate. In addition, coverage of unnecessary care is as well. It is not Cadillacs vs. Chevies, or Volkwagens vs. Mercedes; it is making sure that everyone is covered for their health care needs. Like every other OECD country does. Like we could do if everyone was in Medicare.

Then instead of buying their executives “Cadillac health plans” to demonstrate how important they are, these companies can just buy them Cadillacs. 

Medicaid expansion will leave out many of the poorest: What is wrong with this picture?

In States’ Policies on Health Care Exclude Some of the Poorest, in the New York Times on May 25, 2013, Robert Pear describes how this bizarre situation has come to pass. Basically, it is because the programs established by the Affordable Care Act (ACA) of insurance exchanges and federal subsidies for low-income people, via tax credits, was never the ACA’s plan for the lowest-income Americans. They were supposed to be covered by expansion of the Medicaid program, a federal-state partnership that covers some poor people and varies widely, both in terms of who is covered and what that coverage consists of, from state to state. Recognizing that, coming out of the “Great Recession”, many states were strapped for money, the ACA also included a provision that the first 3 years of the expansion would be paid entirely by the federal government, and that the feds would pay 90% of the cost thereafter.

This, however, was not sufficient inducement for many states to agree to expand Medicaid. They might have if the Supreme Court decision that found the ACA constitutional had not excluded one provision – that, unless the states’ expanded Medicaid they would lose all their current Medicaid funding. The result was the decision in many states to not participate in Medicaid expansion, thus effectively leaving out the mechanism for covering the poorest; tax credits were designed to provide subsidies for those who earned from the poverty level to 4 times the poverty level ($11,490 to $45,960 for a single person) with Medicaid expansion covering those below it. However, many states (virtually all Republican-controlled, although not all those that are Republican controlled) have opted out of this program, leaving those below the poverty level uncovered. The head of the Louisiana Primary Care Association notes that “If the breadwinner in a family of four works full time at a job that pays $14 an hour and the family has no other income, he or she will be eligible for insurance subsidies. But if they make $10 an hour, they will not be eligible for anything.”

 While these states may not have more than half the country’s total population, they do, according to the Times, have more than half the uninsured (they include Texas, the nation’s second most populous state, which has an uninsured rate of about 30%, and Florida, the fourth most-populous, whose legislature has decided not to expand Medicaid despite the support of Republican governor Rick Scott for expansion).  “The Congressional Budget Office estimates that 25 million people will gain insurance under the new health care law. Researchers at the Urban Institute estimate that 5.7 million uninsured adults with incomes below the poverty level could also gain coverage except that they live in states that are not expanding Medicaid.”

The state “featured” in Pear’s article is my home state of Kansas, possibly because of the willingness of the state’s insurance commissioner, Sandy Praeger (pictured here with Secretary of Health and Human Services Kathleen Sebelius, who, the Times does not indicate, was formerly Governor of Kansas, and, before that, Praeger’s predecessor as insurance commissioner), to discuss the situation. Kansas, historically not one of the more generous states for Medicaid, “…provides no coverage for able-bodied childless adults. And adults with dependent children are generally ineligible if their income exceeds 32 percent of the poverty level.” Thus, Ms. Praeger said, “In most cases, she said, adults with incomes from 32 percent to 100 percent of the poverty level ($6,250 to $19,530 for a family of three) ‘will have no assistance.’ They will see advertisements promoting new insurance options, but in most cases will not learn that they are ineligible until they apply.” Whoops. Gotta fix that.

Or not. There is no plan, in Kansas, Texas, Florida, or any of the other states not opting for Medicaid expansion to help to cover these people. Most of the arguments you will hear against doing so cite “costs too much money”, but this is, simply, baloney. The governors and legislatures currently running these states do not, actually, believe in covering anyone (except, of course, themselves and their friends). They believe this is “socialism”. What they believe in is cutting taxes, particularly on the wealthiest individuals and corporations, which Kansas has  aggressively done since Governor Brownback was elected in 2010. The ostensible argument, from the governor, is that low taxes will lead to greater business growth, which will benefit the economy, and help to balance the budget. The first is your basic “trickle down”, proved wrong in every instance since it was first made popular in the 1980s, and the second is a negative tautology – even if business does grow, the extremely low tax rates will make balancing the budget very hard. Indeed, this year Governor Brownback is stumping the state to drum up support for not cutting the higher education budget, but this seems to be falling on deaf ears in the legislature, which sees such spending cuts as yet another opportunity to cut taxes.

Praeger, as insurance commissioner, does not make the decision about Medicaid expansion, but her office is responsible for informing the public about its opportunities to gain insurance on the exchanges (that will be federally-run, because Kansas has also opted out of running its own) and also informing those “poorest of the poor” that the ads for coverage will not be for them. It is obvious that she feels very badly about it; this former state senator and mayor of Lawrence, and former chair of the National Association of Insurance Commissioners (NAIC) is a person with a heart and a concern for people (yes, Virginia, there are Republicans with a heart, and Kansas used to be full of them!). The insurance commissioner does make some decisions; Sebelius, in 2002, blocked the sale of Blue Cross/Blue Shield of Kansas to the for-profit Anthem, stating it would not be in the best interest of the people of Kansas. Many credit that very popular decision for helping her to win the governorship later that year (yes, Virginia, we sometimes elected Democrats as governor!).

It is way too early to know how these decisions will affect elections at either the state or national level. The Times article indicates that “Administration officials said they worried that frustrated consumers might blame President Obama rather than Republicans like Gov. Rick Perry of Texas and Gov. Bobby Jindal of Louisiana [and one might add Kansas], who have resisted the expansion of Medicaid.” However, and very unfortunately, the poorest of the poor do not vote in high numbers. Perhaps the opposite will happen, with those slightly more well-off, who vote at slightly higher rates, crediting the Obama administration for their new coverage, and blaming the state governors and legislatures.

And, of course, this does not even take into account undocumented people living in the US, many of them the breadwinners for families that are composed of citizens, “legal” and “illegal” members.  Children who were born here are citizens (and eligible for programs such as Medicaid and the State Children’s Health Insurance Program, S-CHIP) while often their parents are eligible for nothing. This is not the way to improve health, or to foster family values. But it is consistent with another, anti-immigrant, agenda.

Other first-world countries cover everyone. Not some, many or most people. Everyone. They do it in different ways: Britain has a National Health Service, Canada a single-payer health system which is the government, Switzerland a multi-payer (private) system with a required benefits package and pricing structure. Other countries, Japan and Taiwan, France and Germany, do it differently, but they all cover everyone. We could too.

It’s sad for all of us that we won’t. And it’s life and death for the neediest.
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More data from American Medical News: Millions uninsured on patchwork Medicaid expansion map

Squeezing the needy: a truly flawed financing system for healthcare

In his always-valuable “Quote of the Day” for February 26, 2013, Don McCanne, MD, cites an article by Robert Pear in the New York Times from February 25, “States Can Cut Back on Medicaid Payments, Administration Says”. He quotes from the article that “In a brief filed with the United States Court of Appeals for the Ninth Circuit, in San Francisco, federal officials defended a decision by California to cut Medicaid payments to many providers by 10 percent…. [it] urged judges to uphold those cuts, which are being challenged by patients, doctors, dentists, hospitals, pharmacists and other health care providers in California…[who] said California’s payment rates were inadequate even before the cuts. They pointed to a federal study that said,’ “California stands out because of its very low Medicaid payment levels.’”

 A similar article that he cites from the Los Angeles Times by Anna Gorman, February 25, 2013, “Healthcare overhaul may threaten California's safety net” states that “An estimated 3 million to 4 million Californians — about 10% of the state's population — could remain uninsured even after the healthcare overhaul law takes full effect,” while at the same time the public hospitals and clinics that would provide care to those additional millions are having their funding streams from the state cut.

And this is in a state with a long history of providing care for its medically indigent by having such hospitals and clinics (unlike, oh, say, Kansas) and with a reasonably progressive Democratic governor, Jerry Brown. But it also has a huge budget deficit. At the most narrow level, the state has no choice but to spend less on the programs over which it has control, and these programs are the ones that benefit those whose low-wage jobs (or no jobs at all) make them dependent on public programs to ensure the health of their families.

The key point here is that the huge transfer of funds from the public sector to private control, as a result of tax cuts on corporations and wealthy individuals, has led to the inability for even states such as California, which arguably want to, to provide the basic health and social safety net for its most needy citizens. This is precisely the result that advocates of these programs want, to “choke” government, and precisely the impact on the poor that would be predicted. Meanwhile, at the local, state and federal level, tax “relief”, in terms of both cuts and direct giveaways to major industries, continue to support the least needy.

At the same time (February 20, 2013), Time magazine has published an amazing exposé by Steven Brill of the ridiculous over-pricing and capricious billing done by US hospitals, “Bitter Pill: Why Medical Bills are Killing Us”. It is a long and through article, citing case after case and example after example, of how the current system of billing and reimbursement in health care, and particularly in hospitals costs a fortune, is sapping the economy overall. And, of course, the burden falls hardest on those who are either uninsured or poorly insured, and are billed “list” prices, which are much higher than those paid by either public (Medicare or Medicaid) or private (eg., Blue Cross, Aetna) insurers. MUCH higher. Often dozens of times higher. A few examples that he cites:

• A troponin (blood test for a heart attack) test billed to an uninsured patient at $199. Medicare pays $14; a CBC (blood count) billed $157 when Medicare pays $11.
• A nuclear heart scan for which Medicare pays $554 billed at $8,000.
• A Medtronic spinal stimulator that lists for $19,000 from the manufacturer (if the hospital paid full list) billed to the patient for $49,000.

The article is good investigative journalism, and goes beyond such simple examples to look at the entire structure of the health system’s payment mechanism, including the incentives to do more and more (even when unnecessary or possible even harmful) expensive – and high profit – tests and procedures. It looks at enormous hospital profit margins and salaries of “C-suite” executives: “…in our largest cities, the system offers lavish paychecks even to midlevel hospital managers, like the 14 administrators at New York City’s Memorial Sloan-Kettering Cancer Center who are paid over $500,000 a year, including six who make over $1 million.” (Of course, salaries in the measly low one-digit millions pale before the incomes of those in the pharmaceutical industry!) It helps us to understand both why costs are so high and why programs that limit payment, like Medicare and Medicaid, are so hated/fear/despised by hospital administrators.

The hospitals may well be taking a loss on Medicaid/Medicare reimbursement, because “Medicare takes seriously the notion that nonprofit hospitals should be paid for all their costs but actually be nonprofit after their calculation.”  But while “Hospital finance people argue vehemently that Medicare doesn’t pay enough and that they lose as much as 10% on an average Medicare patient...even if the Medicare price should be, say, 10% higher, it’s a long way from $11.02 plus 10% to $157.61.”  The thing is that they “need” to make more because, although “non-profit” they make big profits – they just don’t share them with stockholders. “…thousands of nonprofit institutions have morphed into high-profit, high-profile businesses that have the best of both worlds. They have become entities akin to low-risk, must-have public utilities that nonetheless pay their operators as if they were high-risk entrepreneurs.”

What was interesting to me is that most of the patients who received those outrageous bills above were neither unemployed nor uninsured (although the one who was uninsured had the misfortune of being 64 rather than 65, so paid the $199 for her troponin instead of Medicare paying the $14). Rather, they were employed in low wage jobs and had lousy insurance, with very low per-visit, per-year, or lifetime caps and were treated by the hospitals as if they were uninsured (“’We don’t take that kind of discount insurance’ said the woman at MD Anderson [Cancer Center]” when Stephanie Recchi called to make an appointment for Sean; they needed to come up with $48,900 cash up front – and that was just the down payment!). So all estimates about the burden on the uninsured need to be augmented by the impact on the under-insured.
Dr. McCanne’s incisive comment on the two articles notes that while “We have said over and over again that Medicaid, as a welfare program, will never have the political support to fund it adequately. The burden of the additional load of Medicaid patients will surely find the health care resources strained beyond the capacity of willing providers, especially when you consider that California already is not meeting the costs of providing care to this vulnerable population…

"Here's an amazing fact: Low income patients do not have the money to pay for health care. (What an intuitive stroke of genius!) What they need is an affordable system that removes financial barriers to care while ensuring adequate financing of our entire health care delivery system, thereby removing health system disincentives to providing essential care for this vulnerable population. Make that for all of us.”

All of the nonsensical billing and collecting issues that are so horrifyingly reported on by Brill do not need to occur. The simple answer is that there should be a single, posted, price for each item or service and everyone is billed at and pays (or their insurance pays) the same amount. This is the situation in Canada, where fees for physicians are negotiated annually with the provinces and hospitals operate within a global budget. Probably fewer millionaire hospital administrators, but of course creating them should not be the goal of the money we spend on health care.

No poorly-insured, well-insured, uninsured, Medicaid-insured or Medicare insured. Just everyone covered. Simple, clean, elegant, and effective.

Are primary care physicians fees a major contributor to the high costs of US healthcare? No.

A recent article in Health Affairs by Miriam J. Laugesen of Columbia University and Sherry A. Glied of the Department of Health and Human Services has generated a lot of attention. “Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared to Other Countries”[1] looked at the amount paid to 1) primary care physicians for office visits, and 2) orthopedic surgeons for hip replacements, in the US, and compared them to five other countries (Australia, Canada, France, Germany, and the United Kingdom). The study also looked at overall physician income in those countries, and at a variety of factors that contribute to both. These factors include the mix of public (primarily Medicare in the US) and private insurance and the ratio of what private insurance pays relative to the public payer, cost and extent of medical education, and overhead expenses. They noted the relative income of primary care physicians to orthopedists in the various countries. Their stated reason for this study is that “The differential in spending on physician services is greater than the overall difference in total health spending between the United States and other nations.”

The concept that a significant portion of the US’ extremely high health care costs is due to high physician reimbursement has long been widely accepted, but the assertion that a part of the blame lies with high primary care incomes is rather new, and is the part of this article that has engendered the most attention. Robert Pear’s NY Times piece on September 7, 2011, “Doctor Fees Major Factor in Health Costs, Study Says” and the response letter from the American Medical Association (AMA) addressed the first part (both/all specialities). The second issue, the article’s focus on the fees of primary care physicians generated pushback from the president of the American Academy of Family Physicians (AAFP), Roland Goertz, who issued strong criticism of the implication that it is primary care physicians who account for the high cost of US healthcare (AAFP President Refutes Claims That Primary Care Physician Incomes Contribute to High Health Care Costs.) More basic information on the economic issues and assumptions that inform this kind of work are described quite clearly by Uwe Reinhardt in a Times “Economix” column on September 18, 2011, “The role of prices in health care spending”.

So what does the Laugesen and Glied study really show? It does show that primary care physicians in the US makes more than primary care physicians in the five other countries, and in some cases a good bit more. It also shows that orthopedic surgeons in the US make a lot more than orthopedic surgeons in other countries. These differences are not due primarily to seeing more patients (patients in those other countries have more visits than do primary care physicians than those in the US, averaging 5.95 per capita per year to the US’ 3.8, and orthopedists do not do significantly more procedures) but rather to the higher fees paid by private insurance in the US.

The study also shows, very significantly, and as emphasized by Dr. Goertz, that the ratio between the income of orthopedists and primary care doctors is much higher in the US than in those other countries. This bolsters the argument that, to the extent doctors’ fees contribute to the high cost of health care in the US, it is much more because of specialist rather than primary care, reimbursement.  The authors of the study note that “Most other countries, however, have moved further away from fee-for-service

than the United States has”, and that “Where physicians may charge fees above the national schedule, the practice is consistently more common among orthopedic surgeons than among primary care

physicians, regardless of country.”

A key finding of the study that also supports Goertz’ argument is that [my bold] “Overall, fees paid by Medicare to US physicians for office visits are comparable to those paid by public insurers in several other countries, and fees paid by US private insurers are slightly higher than those paid by private insurers in other countries. In contrast, fees paid by public payers to orthopedic surgeons for hip replacements in the United States are considerably higher than comparable fees for hip replacements in other countries, and fees paid by private insurers in the United States for this service are double the fees paid in the private sector elsewhere .” This is exacerbated by the fact that “In general, Americans are very low users of office visits and relatively high users of hip replacement surgery.”

US orthopedic surgeons earned at least 50% more than those of other countries, and the ratio of primary care to orthopedist income was the lowest in the US, 42%, compared to 60% in other countries. The authors note that “The differences in incomes relative to fees provide more confidence in the overall comparability of the data. They suggest that higher US fees are a consequence not only of higher practice expenses, but also of higher rewards for the skill and time of physicians.” The authors also address the greater cost of medical education to the individual in the US, but conclude that the increased reimbursement more than compensates for this difference. Work by the Graham Center (see figure) shows that medical student specialty choice is highly tied to projected income.

One factor not addressed in most of the commentary on this article is that the authors of the study say “In the United States this definition [of primary care] includes family practice, general practice, internal medicine, obstetrics and gynecology, and pediatrics.” They do this despite the fact that “this” refers to the immediately preceding sentence, which presents the 2008 definition from the Organization for Economic Cooperation and Development (OECD) of a “primary care physician as one who does not limit practice to certain disease categories”. This definition certainly does not include obstetrics/gynecology (OB/GYN). Why, then, do they include OB/GYNs? Unsurprisingly, the answer is largely political; the argument in the US was that many women receive their “primary care” from their OB/GYN. This logic, however, is deeply flawed. To the extent that women do so, they are not receiving comprehensive primary care, because OB/GYNs care for conditions involving the reproductive system and women are more than their reproductive tracts. Lest this be seen primarily as a matter of my personal sensitivity as a family physician, there is a very important issue because including them can dramatically skew the income data. As OB/GYNs are largely surgeons, their fees and income are much higher than those of the other specialties that are actually primary care, and raise the measured income of “primary care” physicians when they are included.

Laugesen and Glied show that “US primary care physicians earn about one-third more than do their counterparts elsewhere” but that “…neither public insurance nor private insurance generalist physician fees for basic office visits are much higher in the United States than in many of the comparison countries. Instead, US primary care doctors do somewhat better overall mainly because a much larger share of their incomes is derived from private insurance. In other countries where private primary care practice is permitted, the market share of this form of practice is relatively small.” They go on to say, however, that “For orthopedic surgeons, the story is quite different. US orthopedic surgeons earn much higher incomes than do their counterparts abroad, and there are more such surgeons per capita here than almost anywhere else. In consequence, comparison countries spend only about one-quarter as much as the United States spends on orthopedic surgeons. Rates of hip replacement surgery are not higher in the United States than elsewhere, although rates of other procedures performed by orthopedic surgeons may be. Much of the difference in earnings appears to be due to differential fees. Public-sector fees for hip replacement surgery in other countries are about half as high, on average, as Medicare fees in the United States.”

Finally, the ratio of primary care physicians (essentially all general and family physicians) to specialty physicians in other countries is much higher than in the US, so this is also an area in which their costs are lower. That is, more care is provided by primary care doctors and less by more expensive (even in those countries) specialists. Thus, the problem with health costs in the US is not the high cost of primary care. It is the private for-profit marketplace and the excessive fees paid by private insurance for surgical procedures and other specialty care that drives physicians’ fees to be so much higher in the US.

Among the many other changes that we need in our health system, two important ones are increasing the percent of our physician workforce that is primary care, and creating greater equity in the reimbursement among physicians.

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[1] Health Affairs, 30, no.9 (2011):1647-1656