Yes, it's the insurance and drug companies, but it's the health systems also!

Much of the focus in discussions about the high (extremely high!) cost of the US healthcare system is on administrative costs (over 34%, per Annals of Internal Medicine article by Himmelstein, Campbell and Woolhandler)[i] and the profits taken by insurance companies and drug companies. This is totally right on, and are major reasons why a single-payer #Medicare4All system would save enough money to not only cover the tens of millions of Americans who currently do not have health insurance, but to provide decent, comprehensive coverage to the majority of Americans who have inadequate health insurance. This, of course, includes those who have marginal health insurance (like Blake Collie, an 8 year old boy with a cerebral aneurysm, whose parent bought a Christian insurance plan that was all they could afford, but would not pay for the treatment; the advice was “trust in God”), and those who have Medicaid, now aggressively being cut back, especially with new Trump Administration policies that allow states to slash it. And all the rest of us who pay large premiums but only find out what our insurance doesn’t cover and what our co-pays will be when we get sick. And then we get sicker.

In addition, we have Medicare Advantage (MA, also known as Medicare Part C) a deal which essentially can make a Medicare patient (for a little extra premium) an HMO patient.  For the patient this comes with the typical HMO advantages (such as vision and hearing and other coverages, and usually drug coverage so you don’t need a separate Part D insurance plan, and often little or no co-pay) and disadvantages (limited networks of doctors and hospitals, often poor out-of-area coverage), but it has real negative impact on the health system. MA programs get special treatment from the Center for Medicare and Medicaid Services (CMS), including a big increase in payments if they can demonstrate, with all the wizardry, bells-and-whistles, and large staff combing and padding the Electronic Health Record (EHR) that their patients are sicker. In fact, they are demonstrably less sick than traditional Medicare patients; indeed, the older and sicker MA patients are encouraged, subtly or not, to transfer to traditional Medicare. A recent article by Richard Kronick on the Health Affairs blog demonstrates that MA programs are being overpaid by $200 Billion. This is real money, and it is not by accident, as discussed by Don McCanne in his Quote of the Day.

But the less-discussed contributor to our high health costs are the hospitals and health systems that make big money. This is true even when those health systems are ostensibly not-for-profit. The for-profit hospitals and health systems are at least open about it, and they pay taxes. Non-profits do not pay shareholders, and also do not pay taxes. The presumed reason for this is because of the public service that they provide to their communities. But while this may be true of many small-town and rural hospitals, which are also in the most danger of closing and leaving their communities bereft of hospital care, it is often not at all the case for large urban health systems. They make money. For example, an interview on the NPR program “1A”, otherwise focused on the Peak Health System in Summit County, CO that has had some success in reducing costs in that rural tourist county, the Colorado insurance commissioner Michael Conway discusses the proposal for a “public option” in his state and notes that asking hospitals to give back a little is not too much for the urban hospitals making $2 billion a year (about 28 min in).

And, since they do not have shareholders to pay, the health systems reinvest most of the money they make into expanding hospital services or building new buildings. This could seem like a good thing, except that the choice of what services to expand is often (usually) based not on what services the community needs most, but what services will – make them more money! And, also, hopefully make them more desirable destinations for high-margin services than the other urban hospital systems with which they compete. So if, as is usually the case, cancer care and heart disease care and orthopedic care are big money-makers, they build fancy new cancer hospitals and heart hospitals and orthopedic hospitals to try to draw well-insured patients away from their competitors. Thus, we get redundancy and overcapacity in these high-end services in competitive cities, with each shiny new cancer center seeking to lure patients from the one that’s a few years older across town.

Meanwhile, these urban communities do have other, less lucrative, needs that are scarcely ever the target of major investment. In a rational system, the money made on those “profitable” services could be used to invest in and subsidize lower-profit (or in some cases money-losing) services that are in great demand in the community. These certainly include primary care, mental health/behavioral care, drug addiction treatment, and virtually any care delivered to poor or uninsured people. A reasonable health system would just subsidize this care, and not bill and dun people repeatedly for money that they do not have, and cannot and will not pay, ruining their credit, attaching their wages, and challenging their ability to pay for other things, like shelter, food, and clothing.

But privately-run health systems almost never work this way (even if “non-profit”) because their boards like them to make money. And reward them for making money. An article in GQ in April, 2019, reports that CEO salaries at our big health system are doing very well indeed; at the 62 largest, the 2018 salary averaged $18 million! The other “C-suite” executives (COO, CFO, CMO, etc.) are also very well paid; it would not be rare for a major hospital system to have 10 executives making over $1M a year. These CEOs are sometimes doctors, but often accountants or MBAs – basically they run their hospitals as a business, and often have no other context to relate to. When thinking about community benefit, they think of “community” as the “community of well-insured”, the “community of suburbanites”, and of course, especially the “community of potential donors” (cool that they can even get people to give them money and take a tax write-off!). They almost never think of the “community of need”. They are sometimes briefly interested as long as government will give them money for helping the needy, but return-on-investment (ROI) is always measured in dollars, not population health.

This is what happens when the private sector is given control of an industry; they pursue their own benefit. It is unconscionable that we do this in areas like health care which are needed by everyone. Virtually all decisions are made with their eyes on the bottom line. Is CMS going to pay for more residents? Let’s get more cardiology fellows to do procedures and make us money, not more family medicine residents who will go out and meet the needs of people, even if not in our hospital.

There are people who are concerned about government-run health care, and this spills over to their concern about government-financed health care, such as Medicare for All. The problem is that there is a status quo, and that status quo is destructive to the health of our people.

It needs to change.

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[i] Himmelstein DU, Campbell T, Woolhandler S, “Health Care Administrative Costs in the United States and Canada,

2017”, Ann Int Med, doi:10.7326/M19-2818, published online Jan 7, 2020.

Why can't the US have health coverage for everyone? We CAN!

Every other wealthy country in the world has long since figured out how to provide health coverage to its entire population. Every one. And yet this is still controversial in the United States, as continues to be illustrated by the recent Democratic debates.

Every one of those Organization for Economic Cooperation and Development (OECD) countries has better health outcomes than the US as result of covering everyone. The health outcomes are not always terrific, but better, as a population, than ours. There are two components to how healthcare is provided; one is how it is distributed (very inequitably in the US and much more equitably in the other countries) and how well it is funded. The second might depend upon a nation’s resources, the first upon its values. Some of these other countries should, and could, increase their health funding (e.g., Canada) but the fact remains that they are doing better because they distribute it better. And, even when well-funded, a national health plan costs less – far less, in every other country – than we spend in the US.

So we have the money, and we are ostensibly spending it on health care. Indeed, if we count not only the direct public expenditures by governments (federal, state, local) for their employees and for Medicare and Medicaid and S-CHIP and other programs, but also the income foregone by government because the health insurance premiums paid by employers (although not by employees) are tax-exempt, it is about 60% of our health expenditures. In other words the US spends more PUBLIC money than other countries spend altogether. Another way of thinking about it is that we are paying for a national health program but not getting it.

So why does this continue to be controversial? Why do the majority of Democratic presidential candidates not support it? Why do there continue to be questions from moderators at the last debate asking Sen. Sanders how much it would cost and how it would be paid for? One possible answer is that these candidates and questioners are ignorant of the facts, and ignore those repeated time and time again by both Sen. Sanders and Sen. Warren, explaining that we are already spending more than it would cost for Medicare for All. The other possibility is that it is part of a concerted campaign to obfuscate and lie about the issue to protect wealthy and powerful interests.

Let us start with the first. Maybe they are just ignorant of the facts, or maybe they are too stupid to understand them (I doubt that). Sanders responded to a questioner that the cost of a national health insurance system, Medicare for All, that covers everyone in the US for everything (including things that we don’t get now with most health insurances, like hearing aids and glasses ), with no out-of-pocket costs for co-pays or deductibles, will cost less than we are currently spending. This is made possible by re-directing those dollars currently being ostensibly spent on health care and actually spending them on health care, rather than on administrative costs and profit for health insurance companies, pharmaceutical companies, and some big health care providers. A new article in the Annals of Internal Medicine, “Health Care Administrative Costs in the United States and Canada,

2017” by Himmelstein, Campbell, and Woolhandler (Ann Intern Med. doi:10.7326/M19-2818, online publication January 7, 2020), shows that:

U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada: $844 versus $146 on insurers' overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians' insurance-related costs.

This represents 31% of all US health care costs, twice the rate of administrative costs in Canada. Since they excluded some areas that are accounted for differently in Canada, it is likely an underestimate. They add that “Of the 3.2-percentage point increase in administration's share of U.S. health expenditures since 1999, 2.4 percentage points was due to growth in private insurers' overhead, mostly because of high overhead in their Medicare and Medicaid managed-care plans.” These are the Medicare (and Medicaid) managed-care plans that the Trump administration lauds as the best part of Medicare, as I noted in a quote from CMS administrator Seema Verma in “Scamming Medicare: It's the providers and insurers, not the patients!” on December 22, 2019. Another very recent piece, a systematic review of studies on the cost and financing of single-payer health care in the US, “Projected costs of single-payer healthcare financing in the United States: A systematic review of economic analyses” published in PLOS One by Cai, et al. “found a high degree of analytic consensus for the fiscal feasibility of a single-payer approach in the US.” (PLOS Medicine | https://doi.org/10.1371/journal.pmed.1003013 January 15, 2020).

So the other explanation, the more likely explanation since these people are not, in fact, stupid and probably not at this point ignorant, is willfully ignoring the facts because they threaten a status quo that is extremely lucrative for a lot of big companies, insurance companies and pharmaceutical companies especially, and a lot of big providers, hospitals and health systems. (This includes those that are ostensibly “non-profit”, which means that they don’t pay shareholders – and don’t pay taxes! – but doesn’t keep them from making lots of money which they invest back into the services that will make them more money – e.g., orthopedics, cardiology, cancer, ICUs -- rather than those the community as a whole really needs but are not money makers – e.g., mental health, primary care, etc. -- and paying their C-suite executives salaries in the millions!) These companies are absolutely not interested in losing this money, and they are big contributors to politicians.

This is abetted, indeed stimulated, by a tremendous disinformation campaign by insurance companies, following upon the model developed by car companies and cigarette manufacturers. The most obvious is the perversion of the language of “choice”, exposed by former health insurance executive Wendell Potter in the New York Times on January 14, 2020. When they say “choice” they mean choice of insurance plan. In addition to the fact that most Americans are limited to a choice between one or two plans that their employer offers, people don’t care about choosing their insurance company (“I’m an Aetna guy!” “I love CIGNA!”); they care about choosing their doctors and other providers and hospitals – the very things that the private health insurance industry restricts!

But could we not, somehow, keep private insurance as an option, as suggested by most of the Democratic candidates and pundits? A qualified yes. In countries that do this, say Switzerland, there are private insurance companies but they are highly regulated. ALL have to provide the SAME coverage and ALL have to charge the SAME price. How do they compete? Wait for it -- on customer service!! Are US insurance companies ready to do this?

To a disturbing degree, people are swayed by these lies. Sometimes you hear the myth that goes something like “Americans don’t have a sense of social responsibility like people in ‘X’ do”, but they do. As Cai points out, “Public support for provision of universal health coverage through a plan like Medicare for All is as high as 70%, but falls when costs are emphasized,” even though almost all Americans would pay less for much more – and critically, all Americans would be covered. What is unacceptable is that the “responsible” media and (hopefully, if we’re going to vote for them) “responsible” politicians, in the debates and in their coverage, repeat these lies.

We also sometimes hear the question “what will all those people who work for insurance companies do if they are closed down?” It is a legitimate one, and one for which the Medicare for All bills prescribe retraining, but the real issue is why is this asked only for this industry and never about workers who lose their jobs because companies relocate their manufacturing and services overseas? Why is the cost never an issue when we are talking about military expenditures (not for pay for personnel, no, but for incredibly expensive and profitable armaments), but only when we are talking about people’s health?

Americans as a whole pay a huge amount for health care, in premiums paid by individuals and their employers, in tax dollars for Medicare and Medicaid, and in out-of-pocket co-pays, deductibles, and huge drug costs. What we get are some people with good coverage, most people with mediocre coverage, and a lot of people with poor or no coverage. Every "scandal" about someone getting a $100,000 bill from an out-of-network doctor at an in-network hospital, about a $30,000 / month medication, about denial of necessary care, is not fluke but a built-in part of our crazy non-system.  Medicare for All, as in the Sanders Senate bill (S.1129) and the Jayapal House bill (HR.1384) will cover EVERYONE for EVERYTHING.

Let’s do it. Now. And let’s have our media and politicians stop repeating the insurance-company funded lies about it.

Scamming Medicare: It's the providers and insurers, not the patients!

I have often written about universal health care and favored a single-payer system, or, in its current incarnation, Medicare for All. I still do and will have some more to say about it in a bit, but wanted to begin by providing some recent examples of the outrageous abuses of our non-system of health care. More important, abuses of the people who are supposed to be receiving health care. Actually, it is not so much that these are examples of new practices, but rather that there have been important recent articles exposing them.

In “Where the frauds are all legal” on December 7, 2019 in the NY Times, Elisabeth Rosenthal, an opinion writer, physician, and editor of Kaiser Health News, describes exactly that. Dr. Rosenthal has often written on the same theme, notably in a wonderful book that I have recommended before, “An American sickness: how healthcare became big business and how you can take it back”, but this recent article was precipitated by the experience of her husband following a serious bicycle accident. Dr. Rosenthal describes a number of scams (and they are scams, even if they are legal) perpetrated by the hospital, and gives them cute and memorable names; it is good enough to summarize here.

1.      Medical Swag, such as charging $319 for a plastic brace that was in place for an hour (and you may or may not get to keep it!) and other such goodies, “…like the sling you can buy at Walgreens for $15 but for which you or your insurer get a bill for $120 after it is given to you at urgent care.”

2.      The Cover Charge. This was the $7143.99 “trauma activation fee” charged by the hospital. This was in addition to whatever else was charged by physicians, for x-rays, labs and medical equipment. ‘Trauma activation fees have been allowed since 2002, after 9/11, when the Trauma Center Association of America, an industry group, convinced regulators that they needed to be compensated for maintaining a state of “readiness.”’ But, she asks, ‘Wait. Isn’t the purpose of an E.R. to be “ready”? Isn’t that why the doctors’ services and scans are billed at higher rates when they are performed in an emergency department?’ Note: Dr. Rosenthal in an emergency physician.

3.      Imposter billing. This is when the physician bills for a service that s/he didn’t provide directly, such as when it was done by a resident or PA or NP. Sometimes the physician is on site, sometimes not. But they are billed at the full physician rates. Cool beans. This is what allows some doctors to see a panel of patients in clinic while they are in the operating room at the same time!

4.      The Drive-By. Charging for full examinations (which are documented as full examinations after just a few questions – or even a phone call). Sometimes only a few questions are all that is appropriate, but you can’t – or shouldn’t – be able to bill for a physical examination!

5.      The Enforced Upgrade. Meeting someone in the ER, even for a minor problem, because the office is closed (in the specific case, the clinic the doctors used was open only 2 hours 45 minutes two days a week), causes much, much higher charges.

What is sometimes more amazing to me is that the insurer paid for all these things. Part of the reason is that they have no way of knowing if these upcharges were medically necessary. Sometimes (as pointed out in Rosenthal’s book) it is because they just pass the charges on by raising their premium rates. Of course, insurers don’t pay the full charges – they pay a significant discount. Only uninsured people are expected to pay the full charge!

So these are pretty outrageous, but mostly (as the title points out) legal, if outrageous. Not, however, necessarily legal would be the overcharges and payments from Medicare to certain insurers documented in a report from the DHHS Office of the Inspector General, and covered by the Times in “Federal Watchdog Questions Billions of Dollars Paid to Private Medicare Plans” by Reed Abelson, December 12, 2019. This is a different sort of scam, perpetrated by Medicare Advantage plans. To start with, Medicare Advantage plans are something of a scam to begin with. Why? Well, on the surface, “all” they do is to essentially provide Medicare patients with the benefits of an managed care plan – indeed, often you may an additional premium on top of Medicare to the insurer and you have wrap-around HMO-type coverage. This can be really good for you as a consumer; you can get covered for vision, hearing, prescription drugs (without the need for an additional Part D plan), and copays. What makes it at its essence a scam is that the Medicare Advantage plans get higher payments for a variety of reasons than does traditional Medicare.

One reason is that they tend to enroll lower-risk patients, who cost less to care for. To some degree this is because they have the disadvantages of HMOs as well as the advantages; limited physician and hospital networks and limited portability if you are out of the geographical service area. But most of it is from the way that they are marketed. It is to these insurers’ financial advantage if as many of the high-utilizing, high-cost, older, and sicker Medicare patients are in traditional Medicare, and the ones who are younger, less-sick, and lower-utilizers – thus lower cost – are in their plans. They work hard to make this happen, When the Trump administration pushes Medicare Advantage, as when Center for Medicare and Medicaid Services (CMS) administrator Seema Verma says “What works in the Medicare program is Medicare Advantage — because plans are competing on the basis of cost and quality, driving toward value and increasing choice to beneficiaries,” it is true – but, as with any other for-profit product, it markets its advantages to those most likely to make it money.

Then there are the probably-illegal actions found in this report. Primarily, these result from “up-coding”, having administrative personnel comb the entire medical records to find things that they claim allow them to bill for higher-complexity in patients who have more diagnoses, even when the person providing the care did not address those issues. Hospitals use reviewers to upcode all the time, and sometimes it may be legitimate, in cases in which the care was provided but not completely documented. This “data-mining” approach to upcoding, however, is not. And this is not all. The Times article also notes  that ‘An earlier report from the inspector general’s office also raised concerns about Medicare Advantage, concluding last year that plans were inappropriately denying medical claims as a way to increase profits.’ The amount involved is not chump change; an additional $6.7 Billion in payments in 2017.

So no good either way, “legal” scams by providers (read mainly “hospitals”) or probably illegal scams by insurers. Both illegitimately take our money (whether paid as taxes, premiums, co-pays, etc.) and funnel it toward profit. Would a single payer, Medicare-for-All program prevent this? Yes, although it would have to be the “Improved and Expanded” Medicare called for by the current bills in the House (HR 1384) and Senate (S1129). From the patient point of view everything is covered. From the provider point of view, they would not be able to game the system by upcoding and other techniques. From the insurer point of view, they would not make so much profit.

For too long, healthcare in the US has been a struggle between insurers (who think they pay the providers too much) and providers (who think that they don’t pay enough). The interests of the actual people, patients, taxpayers, rate-payers, are lost in this struggle, crushed by the tectonic plates of those big industries. Many politicians and pundits say we can’t go against them. I say we have to. As Jim Hightower says “Who’s afraid of Medicare for All: Not ordinary Democrats or independents — just insurance companies, lobbyists, and old-line politicians”.

Time to make them put our interests first!