Category Archives: Healthcare

Who Pays for Health Care?

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An interesting piece at the Atlantic Wire shows the change in who pays for health care services (hospital care, physician and clinical services, prescription drugs, etc.) from 1960 to 2010. In 1960 a far higher percentage of the payments were out-of-pocket and a lower percentage came from private insurance, Medicare and Medicaid. In 2010 a much smaller percentage was paid out-of-pocket and, with the exception of dental services and "other medical products", the vast majority was paid by private insurance, Medicare and Medicaid. 

That's interesting in and of itself, but what's downright unbelievable is the change in the amount spent on health care each year that's shown in the article. In 1960 the total amount spent was $23.4 billion and in 2010 it was $2,186 billion or a 93.4-fold increase. Of course there are more people in America in 2010 so a good question would be, "What's the per-capita increase in health care spending?"

The answer is that in 1960 the per capita spending was $147 and in 2010 it was $8,402 – a 57-fold increase. To give you an idea of how big a jump that is you need only note that the buying power of $1 in 1960 was the same as $7.35 in 2010. In other words health care spending literally exploded; if it had been even roughly analogous to inflation the per capita spending would be more like $1,080 than $8,402.

Some thoughts to ponder as you digest this information:

  • Would spending be lower if end consumers had to pay more out of pocket?
  • Would pricing transparency be greater without insurers playing middle man?
  • How much of the cost is due to the inefficiencies of the health care system? 
  • How much less would the spending be if doctors didn't have to employ multiple people simply to handle billing insurers?
  • If you added in the cost of health insurance that doesn't get directly applied to paying for health care services – many years we pay more in premiums than get spent on health care services – what would the annual spending be? 
  • It's interesting to note that where the money was spent – the percentage spent on hospital care, physician and clinical service, prescription drugs – is almost exactly identical in 2010 to where it was in 1960. Doesn't that seem to indicate that the entire system is screwed up, not just hospitals or pharmaceuticals?

The health care industry is facing some signicant changes thanks to "Obamacare," but it remains to be seen whether or not those changes will rein in costs. It's hard to imagine the health care system getting any less efficient, but then again in 1960 it was hard to imagine a man walking on the moon within a decade. 

Perfect Timing in the News

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Today the Winston-Salem Journal published the last article in a three-part series on the two major nonprofit health care systems in the Winston-Salem area, Novant and Wake Forest Baptist Medical Center, and this particular installment focused on executive compensation. Here's an excerpt from the article:

Dr. Roy Poses, a clinical associate professor of medicine at Brown University and former physician at three academic medical centers, writes a blog called "Health Care Renewal" in which he frequently tackles the issue of executive compensation…

"The same rationales are cited to justify their treatment — executives are said to have very difficult jobs, and competitive pay is necessary to hire the brilliant people required.

"Left unsaid, however, is how difficult these managerial positions are in comparison to the demanding work and sometimes life-or-death responsibilities of health professionals, how brilliant executives are in comparison to such well-trained professionals, and why the executives deserve competitive pay when other employees may be laid off." (Emphasis mine).

Later in the morning Novant made the following announcement:

Carl Armato, president and chief executive of Novant, said in a memo to employees that the system is eliminating 82 management positions and 207 staff positions, effective immediately. The majority of the eliminated positions are in Novant's Winston-Salem and Charlotte markets…

Armato said there are four main reasons behind the decision.

"We all know there's a national mandate to lower what our nation spends on health care and to make care more affordable," Armato said…

"The poor economy has clearly changed people's behaviors and they are using fewer health-care services, including elective surgeries and outpatient testing, such as diagnostic imaging."

Armato said Medicaid and Medicare reimbursement for services "is dramatically declining. Put simply, we are being paid less for our services and this trend will unfortunately not improve.

"The amount of charity care we provide has increased 200 percent over the past five years.

Pretty nice juxtaposition huh?

Question: If you had to guess, what would you say the odds are that Mr. Amato showed some leadership by taking a voluntary reduction in pay, or even a pay freeze, before deciding to seriously screw with 289 people's lives by laying them off? 

Dunning the Sick

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Whenever I hear people debating health care reform or talk about "Obamacare" I almost invariably hear the statement, "Well, even with the system today everyone is able to get medical care – hospitals aren't allowed to deny anyone care." I've always thought that to be a dumb argument because it seems like it's an incredibly inefficient and expensive way to provide health care to those who can't afford it, and reading this article on collection agencies working in hospitals seems to support the argument that it is indeed supremely stupid and expensive:

Still, hospitals are in a bind. The more than 5,000 community hospitals in the United States provided $39.3 billion in uncompensated care — predominately unpaid patient debts or charity care — in 2010, up 16 percent from 2007, the hospital association estimated.

So it's no surprise that hospitals would try to recoup some of their money through collection agencies. Unfortunately, the tactics at least one of these agencies is using seem to be encroaching on the health care delivered by the hospitals:

Collection activities extended from obstetrics to the emergency room. In July 2010, an Accretive manager told staff members at Fairview that they should “get cracking on labor and delivery,” since there is a “good chunk to be collected there,” according to company e-mails.

Employees were told to stall patients entering the emergency room until they had agreed to pay a previous balance, according to the documents. Employees in the emergency room, for example, were told to ask incoming patients first for a credit card payment. If that failed, employees were told to say, “If you have your checkbook in your car I will be happy to wait for you,” internal documents show…

Patients with outstanding balances were closely tracked by Accretive staff members, who listed them on “stop lists,” internal documents show. In March 2011, doctors at Fairview complained that such strong-arm tactics were discouraging patients from seeking lifesaving treatments, but Accretive officials dismissed the complaints as “country club talk,” the documents show.

Nah, we don't need no stinking health care reform.

Make Sure to Tell Your Ambulance Driver to Head to the High Rent Hospital

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From the Freakonomics blog:

Both strategies show that higher-cost hospitals have significantly lower one-year mortality rates compared to lower-cost hospitals. We find that common indicators of hospital quality, such as indicators for “appropriate care” for heart attacks, are generally not associated with better patient outcomes. On the other hand, we find that measures of “leading edge” hospitals, such as teaching hospitals and hospitals that quickly adopt the latest technologies, are associated with better outcomes, but have little impact on the estimated mortality-hospital cost relationship. We also find that hospital procedure intensity is a key determinant of the mortality-cost relationship, suggesting that treatment intensity, and not differences in quality reflected in prices, drives much of our findings. The evidence also suggests that there are diminishing returns to hospital spending and treatment intensity.

Basically what they're saying is that if you go to the budget hospital you're likely screwed.

The Other 20%

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Unless you're one of the lucky few who's always had "Cadillac" health insurance through your employer you know how much impact it has on your life. Heck, even if you've always had "Cadillac" health insurance you've probably thought about how much impact it has because you've likely said something like this to yourself: "Man this job is an endless procession of soul-sucking days with absolutely no redeeming value. I'd quit, but damn those health benefits are great." *

Since our mid-20s my wife and I have always been highly attuned to the cost of health insurance because we've always either been self-employed or worked for companies that couldn't afford great benefits. With the exception of the jobs we had when we first got married in '92 we've always had to pay a huge chunk of our health insurance premiums which has translated into a monthly expense ranging between roughly $500 and $1000, and quite frankly we've known plenty of folks who have had it worse. Still we've always managed to keep our insurance, although it often required some sacrifice. Keep in mind, that's just the premiums. To paraphrase former US Senator Dirksen, add your $35 office visit co-pay here, your $20 prescription co-pay there, and pretty soon you're talking about real money.

But what about those people who just can't swing the health insurance? The level of angst they experience over the health care/insurance issue is on a whole other level and is nicely captured in this blog post written by a Scientific American writer living in Cateret County, NC. His son contracted pneumonia, but because they had no health insurance they didn't take him to the doctor immediately because they thought it was the flu and tried to treat it with over-the-counter medication. Eventually they made their way to urgent care, and then the hospital, and thankfully his son is recovering. Still it really is a must-read because he does a great job of providing insight into the reasons behind being uninsured, some common misperceptions about the uninsured, and Catch-22 the uninsured find themselves in. Here's a sample:

But recently my mindset has become affected by our position. I tell my kids not to do things that I certainly enjoyed doing as a kid, like don’t climb high on trees, run a little slower on the trail, watch out for roots and stones! It’s not just the usual parental concern either. I’m consciously thinking “oh my god, I cannot afford to fix them if they get broke!”.

This is the luxury gap between the between the 20% of nonelderly americans who are uninsured and the rest. The luxury is, of course, being able to just walk into a doctor’s office and see them at the appropriate times. It is easy to discount this minority since most are at or near the poverty line. But many of the uninsured are like myself and just can’t seem to make the numbers work for a family of four each month by adding on private individual (i.e. non-group discounted) health insurance. Especially when you factor in the myriad other insurances we already pay: renter’s or home, wind and hail, flood, car, life, etc. It’s not that we are irresponsible, but the numbers. just. don’t. work…

Most of the uninsured in this country aren’t lazy, freeloading hobos who don’t wanna work. They span a wide variety of demographics. As a 30 something, white male with advanced college degree who works full time as a self-employed consultant and writer are you surprised that I cannot afford health insurance for my family? In fact, the majority of uninsured are in my age range and are full or part time workers earning incomes above 100% the federal poverty level. The fact of the matter for many of the uninsured is that employment-sponsored coverage has been in decline due to the escalating costs of health care. Employers can’t remain competitive and pay double the costs they were paying a decade ago for insuring their workers. An October 2011 report from the Kaiser Commission on Medicaid and the Uninsured found that

“Job-based coverage has been gradually declining since 2000, even during years when the economy was stronger and growth in health insurance premiums was slowing.  From 2007 to 2010, the percentage of the nonelderly population with employer-sponsored coverage declined by approximately 5%.[…] Even when workers can afford coverage for themselves, the cost of health insurance for their families is often prohibitive. Employees in firms with many low-wage workers are typically asked to contribute a larger share of the insurance premium than employees of firms with fewer low-wage workers (38% vs. 27% of the premium costs for family coverage). Declines in dependent coverage accounted for more than half of the recent decline in employer-sponsored insurance.”

Uninsured people look just like everyone else. They might look like they can easily afford the premiums and in fact might earn salaries similar to yours. But every family’s situations and employment-based coverage options are unique and this goes far beyond stereotypes of the “working poor”. My son could have suffocated from his pneumonia had we not sucked it up and rushed him to the hospital on Tuesday morning. If we were able to see a doctor a day earlier, he perhaps could have been treated at home as an outpatient with antibiotics. I don’t know what our final bill will be when we leave tomorrow morning, right now I don’t care. All I know is my son got better under the supervision of a wonderful team of nurses and pediatricians. My community has income-based charity care which will hopefully reduce our bill to a much more manageable sum. All minor details when the stakes are as high as your children’s lives. Plus, we can sleep in beds without motors.

*I firmly believe that if you took concerns about health coverage off of the table you'd see an explosion in entrepreneurialism. Soooo many people who hate their jobs/companies would strike out on their own to create something they've dreamed about, or they'd jump ship to someone else's enterpreneurial firm. Sure I could be wrong, but how many people do you know who've stuck with a job simply to keep their benefits? See what I mean? 

More Employers Questioning Need to Offer Health Insurance

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Some of the insights shared at a recent Winston-Salem Chamber of Commerce meeting about the state of the health care industry won't shock anyone who’s been paying attention the last few years:

Keith Kiser, a senior vice president for BB&T Insurance Services, said his group is fielding more questions from employers about the justification for providing health insurance to employees, besides as a carrot to hire and retain quality workers.

“Chief executives and chief financial officers are fully engaged in these conversations these days,” Kiser said, considering the cost of providing health insurance typically ranging from $8,000 to $10,000 for each employee.

The 2011 Kaiser Family Foundation study on employer health benefits, out in September, found 99 percent of large companies — 200 or more workers — offer health benefits, but only 48 percent of those with three to nine employees do and 59 percent of those with 3 to 199 workers do.

Three-quarters of small firms (3-199 employees) not offering health benefits believed their employees would prefer a $2 an hour increase in wages rather than health insurance, Kaiser said.

Kiser said the reality that 1 in 5 consumer dollars goes to health-care costs “does keep you awake a night.”

This trend will likely get more prominent as the new federal health regulations, aka Obamacare, go into effect:

The federal health-care overhaul will allow employers to stop providing health insurance — beginning in 2014 — with their employees going into a government-controlled exchange.

However, employers with 50 or more workers that don’t offer coverage will be required to pay $2,000 for each full-time employee in its full-time work force. The fee begins if at least one employee enrolls in a plan through a health-insurance exchange and receives a federal subsidy. Two part-time workers are considered as one full-time employee.

The top executives at Blue Cross Blue Shield N.C., Novant Health Inc. and Wake Forest Baptist Medical Center said they empathize with businesses’ concerns about health-care costs since they are large employers as well as providers.

So, should you spend $8-10,000 insuring your employees or pay the government $2,000 for not insuring them?  An interesting question, especially when you consider that companies only started offering health insurance in general during World War II as a way to entice workers in a highly competitive hiring market.  It’s a relatively recent phenomenon in American history for companies to provide health insurance to their employees and over the years it became a kind of “least common denominator” in terms of employee benefits packages.  That began to change when health care costs started to explode, and now it looks like health insurance is returning to it’s original role – a very nice perk that can act as a set of “golden handcuffs” for valued employees.

No Need for Healthcare Reform? Really?

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Two months ago our daughter was in Myrtle Beach for beach week and while there make the regrettable decision to drive a jet-ski.  The result was an accident that led to a trip to the ER in an ambulance.  Initially our health insurer denied the claim because we hadn't cleared the trip to an out of network ER with them, but once we appealed and pointed out that she was already at the ER before we even knew about it they reversed the decision. That's a good thing, because if they hadn't I'd be writing this from the poorhouse.

The final bills just came in and this is what they show:

  • The original hospital bill totaled: $21,214
  • Our insurer paid $4,151
  • We owed $150
  • The ambulance ride cost over $800, mostly due to a non-resident fee imposed by the county where the accident happened.  We owed $400.

A couple of thoughts here.  Our daughter was discharged hours before we could even get to the beach.  She was in the hospital's care for maybe 2 1/2 – 3 hours, so even taking into consideration that  due to the nature of the accident they treated her in the trauma unit and ran the various MRI-type scans, how can that possibly total over $21,000?  Also, what happens to the poor schlub who doesn't have insurance?  Does $16,000 magically disappear from his bill too?

Believe me, we're very thankful for the care our daughter received.  I'm also not so bitter about the insurance premiums that are deducted from my paycheck because, frankly, our insurance is getting a workout this year.  In addition to this accident we've had a surgery and an illness in our family so we've gone from hardly ever using our insurance to being uber-users.  Of course our premiums are likely to go up again next year, but at least we aren't being bankrupted in the process (at least not yet).

Still this episode drives home the point that there are many people out there who ARE bankrupted by our health care system.  I'm not going to sit here and point the finger at any one person, company or industry, but I am going to say that anyone who thinks our health care system doesn't need fixing has a head full of rocks.  

You Know It’s Bad When the Hospital Hoses Its Own Employees

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Did anyone else appreciate the irony of Baptist Hospital having to settle a lawsuit with their employees over health benefits?  From the article:

The lawsuit said that Baptist "violated the duties, responsibilities and obligations imposed upon them as a fiduciary" under the Employee Retirement Income Security Act, or ERISA.

The lawsuit accuses Baptist of requiring employees to pay more for services rendered at the hospital through MedCost than alternative health-care plans would have, including higher co-payments and lower discounts. It also said that employees paid higher fees than those required by MedCost from other corporate clients.

You may remember that I complained about my wife's MRI at Baptist last fall, so let's just say I'm sympathetic to the employees.

Davie County Hospital Adding Sleep Lab

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Sometimes I just get confused.  I distinctly remember sitting in the public hearing the state held when it was evaluating the competing proposals for hospitals in Advance (WFU BMC) and Clemmons (Novant).  The folks at WFU-BMC made it clear that they needed to build the hospital in Advance because the Davie County Hospital in Mocksville, which they currently own and run, is antiquated and it just didn't make any sense to try and upgrade it at its current location.  Thus my confusion: if the hospital in Mocksville is such a dump then why are they opening a new sleep lab there?

Should Insurance Pay for Acupuncture or Aromatherapy?

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"Alternative medicine" is a burgeoning business and I think most people would agree that it has its share of hucksters, so the question of what types of "alternative" procedures your health insurance company should pay for is a potentially huge deal.  The Wall Street Journal has a great article about the issue, and with the incoming Obama administration putting health care reform near the top of its domestic agenda I think that the question of coverage of "alternative medicine" is going to be a potentially divisive point in the debate.

Hat tip to Ed Cone for the pointer.