Even those with medical insurance are feeling pinched by rising medical costs (unless you just don't get sick).
Since the recession of 2001, the employee’s average cost of an annual health care premium for family coverage has nearly doubled — to $3,300, up from $1,800 — while incomes have come nowhere close to keeping up. Factor in other out-of-pocket medical costs, and the portion of the average American household’s income that goes toward health care has risen about 12 percent, according to the consulting and accounting firm Deloitte, and is now approaching one-fifth of the average household’s spending.
In a recent survey by Deloitte’s health research center, only 7 percent of people said they felt financially prepared for their future health care needs.
My own take on it is that you have to get rich in order to be able to handle a severe future health problem. The more you can save up the better.
An interesting graph of consumer spending on food, housing, medical care, and clothing from 1929 till today shows that medical care now surpasses each of those other 3 categories in percentage of consumer income spent on it. Clothing and shoes have declined from over 10% to 3.6%. Food has declined from 30% in the 1950s to 13.1%. Housing is now at 14.4%. But medical care has risen from a few percent to 16.6%, surpassing the other 3 categories.
Part of this change is due to more treatments becoming available. The article relays the anecdote of a guy spending $400 per month on drugs for congestive heart failure. Well, those drugs didn't exist 40-50-60 years ago. You just got various maladies, suffered without treatment, and died.
Another change: declining costs for food and clothing freed up money to spend on other things even as incomes rose. People spend more on medical care because they have the money to spend.
The desire on the part of everyone to get the best health care possible is probably the strongest force pushing for a bigger welfare state today. Demographic trends in the US seem likely to intensify that push as a growing lower class of lower IQ people can't earn enough to pay for the time of much higher IQ medical services providers. Taxes end up as the tool by which the lower IQ folks get the buying power to get time from higher IQ people.
One of the reasons I expect US economic growth to slow stems from a growing use of taxes to shift more higher IQ people into service provider jobs for lower IQ people. People who provide services are not available to do research, product design, factory design, product development, and other work that creates new sources of wealth. This is probably one of the reasons why Smart Fraction Theory (and its refinement) seems to work.
We need to automate the provision of medical services so that higher IQ people spend less time delivering services and more time developing new products and services.
Update: The amount American consumers spend on energy is now about half what they spend on food. Consumers are going to have to trade off. Eat meat or drive a big car and go on long trips?
In the past three months, average consumer spending on energy came to $663 billion, or 6.5 percent of total consumer spending, according to Moody's Economy.com. A year ago, it represented 5.8 percent and in 2002, it was 4.1 percent of their spending. "If gasoline breaks through $4 a gallon by Memorial Day, that would mean spending on gasoline would have risen by $100 billion since the beginning of the year, or roughly the size of the tax rebate checks going out," says Mr. Zandi. "The rebate checks are going to pay for filling up our tank."
How will people weigh medical spending versus gasoline? Gasoline seems easier to cut back on. Get a smaller car. Take fewer optional driving trips
As bad as medical costs have gotten my guess is that energy costs will grow more rapidly.
With the price shock of 2007-08, spending on energy as a share of wage income has shot up above 6%, topping the 1974-75 and 1990-91 shocks to be the worst since the 1980-81 runup. Comparing the additional cost of energy to income growth (especially sluggish in recent years), the current shock is far worse than any of the three prior ones, Mr. Carson says.
Another $750 billion per year is like fighting 5 Iraq wars at once. Big money. Will younger folks agree to the taxes to fund it?
The federal government will spend twice as much on health care in 2017 as it did in 2007, as costs keep going up and as Boomers enroll in Medicare. The toll: federal outlays for Medicare and Medicaid will hit $1.5 trillion, up from $750 billion last year, according to an estimate published today in Health Affairs.
Somehow this huge increase in tax-funded spending just isn't enough for the Democrats.
The estimates don’t take into account the expanded role the feds would play under the Democratic presidential candidates health care proposals, which would cost about $100 billion a year, the WSJ notes. But once you’re at $1.5 trillion, the leap to $1.6 trillion doesn’t seem so vast.
Once you are at $1.5 trillion politicians will lose the ability to increase spending without increasing taxes.
The medical portion of the US economy will reach nearly 1 out of 5 dollars spent.
The outlook for national health spending calls for continued steady growth. Spending growth is projected to be 6.7 percent in 2007, similar to its rate in 2006. Average annual growth over the projection period is expected to be 6.7 percent. Slower growth in private spending toward the end of the period is expected to be offset by stronger growth in public spending. The health share of gross domestic product (GDP) is expected to increase to 16.3 percent in 2007 and then rise throughout the projection period, reaching 19.5 percent of GDP by 2017.
Taxpayers will pay more in taxes to fund all this. You looking forward to a decline in your living standard?
This projection is based on a US economic growth rate in the next 10 years that seems overly optimistic.
"At the same time, we are expecting economic growth to slow to an average annual rate of 4.7 percent. As a result, the combination of steady health spending growth and slowing economic growth will lead to the health care part of gross domestic product rising to nearly 20 percent by 2017, nearly one-fifth of the economy, Sisko said.
A slower growth rate in the total economy would cause a same dollar amount of increased medical care spending to take up a far larger percentage of the economy.
You can view side-by-side medical spending proposals of Hillary Clinton, Barack Obama, and other candidates.
A federal survey shows that 27 percent of adults without insurance saw a dentist in 2004, down from 29 percent in 1996, when dental fees were significantly lower, even after adjusting for inflation. For adults with private insurance, the rate was virtually unchanged, at 57 percent, up from 56 percent. Since 1990, the number of dentists in the United States has been roughly flat, about 150,000 to 160,000, while the population has risen about 22 percent. In addition, more dentists are working part time.
Notice the point above about more dentists working part time. That's probably at least in part due to a rising number of women working as dentists. Women work fewer hours than men on average. So when the number of training slots remains the same but more slots are given to women the effect is to decrease the supply of workers available.
Curiously, for those men who still manage to win a slot in dental school the effect is to raise their income. So the men who don't make it into dentistry make less money than they would have but the men who still manage to win a spot in a dental school make more. Yet another reason why inequality is rising. It really pays to be a winner. Try to avoid losing.
The inflation-adjusted cost of dentistry is rising.
Partly as a result, dental fees have risen much faster than inflation. In real dollars, the cost of the average dental procedure rose 25 percent from 1996 to 2004. The average American adult patient now spends roughly $600 annually on dental care, with insurance picking up about half the tab.
Dentists’ incomes have grown faster than that of the typical American and the incomes of medical doctors. Formerly poor relations to physicians, American dentists in general practice made an average salary of $185,000 in 2004, the most recent data available. That figure is similar to what non-specialist doctors make, but dentists work far fewer hours.
Since fewer dentists are getting trained now than in the early 1980s (a decline of over 20%) the number of dentists will actually decrease in coming years as many practicing dentists retire. So if you are thinking about getting dental work done best to get it done sooner. It will probably cost less now than in a few years from now. Another alternative is to get dental work done in another country if you have any plans for travel to countries with lower dental costs.
The article reports that pediatricians are applying flouride varnish to baby teeth so that poor parents can avoid the need to see dentists. Great idea. Avoiding cavities is the best outcome. Also, we could make much more use of cheaper dental technicians like other countries do.
Outside the United States, more than 50 countries, including some western European nations, now allow technicians called dental therapists to drill and fill cavities, usually in children.
One does not need all the knowledge of a dentist to do the drilling and filling of cavities. A dental caries vaccine would be a great way to cut the need for dentistry as well.
This is like Jason and Friday the 13th. Last time around Hillary Rodham Clinton and Ira Magaziner had secret meetings and cooked up a monstrous unwise proposal to restructure American health care on a massive scale. Well, she's back.
WASHINGTON, Sept. 15 — Senator Hillary Rodham Clinton on Monday will lay out a plan to secure health insurance for all Americans while severely limiting the ability of insurers to deny coverage or charge higher premiums to people with chronic illnesses and other medical problems, her aides and advisers say.
If government subsidizes health insurance purchases by poor people then fewer small companies will offer medical insurance and will instead expect government will provide coverage.
A big difference from last time: She's proposing to build on the existing system of insuring Americans -- a mix of private coverage and government-subsidized care -- not remake it altogether.
Still, Mrs. Clinton's plan, described by people familiar with it, would involve sweeping change. It would create new federal subsidies to aid those who couldn't afford the required health coverage. And it would impose new mandates on large employers to provide health coverage or help pay for it.
But look at it on the bright side. Hillary's proposal might cost less than the Iraq war.
The price tag for the Clinton plan will be closer to Obama's $50 billion to $65 billion estimate than Edwards' $90 billion to $125 billion plan, sources said.
It's not clear if Clinton will finance her proposal by repealing the Bush administration's tax cuts for the wealthy, as Edwards and Obama have proposed. On the campaign trail, Clinton has hinted that she would save money by fostering efficiencies and squeezing savings from .insurers and drug companies.
If insurers are prevented from denying coverage to those with existing conditions then we'll enter a new era in which insurers try to avoid getting applications for medical insurance from people who are sick. Oops, we disconnected our phone number. Oops our web site is down. Oops we moved out of areas that have lots of sick people. Ooops, we don't advertise in areas which have lots of sick people.
But maybe Red Hillary isn't as dangerous now as she used to be. We can hope that perhaps pharma companies which have been trying to buy her influence have at least partially succeeded.
One former insurance company executive recalled Clinton summoning top drug company executives to the White House for a dressing-down. "She storms into the meeting and 'The days of profiteering in the pharmaceutical industry are over!'" the lobbyist recalled. "There were no handshakes, no 'How was your flight' ... It was ugly, nasty. From that point on I knew her plan was dead."
Clinton, who says she still bears "the scars" from the experience, is a less fearsome figure these days. Since being elected to the Senate, she's enjoyed a good relationship with in-state drug companies such as Pfizer and has delivered federal funding to the hospitals she once demonized. Her rhetoric, particularly against Big Pharma, can still be fierce, but her pariahs are now patrons: The industry .contributed more than $850,000 to her re-election campaign, the second highest level of .contributions to any senator.
Has the comrade reformed? Has she embraced Perestroika? Somehow I doubt it. She still seems angry deep down. She might take out her frustrations with Bill on us. If only the woman could get laid regularly maybe she could lighten up.
She sounds like she has her long knives out for the insurance companies.
"Nobody is going to be surprised when I unroll my coverage plan that I intend to dramatically rein in the influence of the insurance companies because, frankly, I think they have worked to the detriment of our economy and our health care system," Clinton told interviewer Charlie Rose during an Internet forum co-sponsored by Slate and The Huffington Post earlier this week.
Those evil insurance companies. Well okay, they are not saints. But keep in mind some of the other reasons why we have problems with health care finance:
What I worry: If the US government requires some minimal mandatory level of medical insurance then whatever they define as a minimum becomes something that everyone must have, not just the poor uninsured of today. That could result in more unnecessary and even harmful treatments. Economist Robin Hanson argues that we could cut the total amount of health care in half with little harm to health.
Regions that paid more to have patients stay in intensive care rooms for one more day during their last six months of life were estimated, at a 2% significance level, to make patients live roughly forty fewer days, even after controlling for: individual age, gender, and race; zipcode urbanity, education, poverty, income, disability, and marital and employment status; and hospital-area illness rates. This same study, using the same controls, also estimated that a region spending $1,000 more overall in the last six months of life gave local patients somewhere between a gain of five days of life and a loss of twenty days of life (95% confidence interval). (I’m using a fifty days lost per 1% added mortality rule of thumb.)
Read Hanson's full article for information about health care spending efficacy.
Update: Arnold Kling argues that insurance should only cover higher cost and more rare treatments.
Real insurance would pay for treatments that are unavoidable, prohibitively expensive, or for illnesses that occur relatively rarely. Instead, insulation reimburses even relatively low-cost services, such as a test for strep throat or a new pair of eyeglasses. Insulation pays for treatment even if it is commonplace or discretionary.
...
The problem with insulation is that it is not a sustainable form of health care finance. Individuals, employers, and government are all under stress.
Washington, D.C. – Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year but still higher than the increase in workers’ wages (3.7 percent) or the overall inflation rate (2.6 percent), according to the 2007 Employer Health Benefits Survey released today by the Kaiser Family Foundation and Health Research and Educational Trust. Key findings from the survey were also published today in the journal Health Affairs.
The 6.1 percent average increase this year was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent.
The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy.
“We’re seeing some moderation in health-cost increases, but premiums for family coverage now top $12,000 annually,” Kaiser President and CEO Drew E. Altman, Ph.D. said. “Every year health insurance becomes less affordable for families and businesses. Over the past six years, the amount families pay out of pocket for their share of premiums has increased by about $1,500.”
On page 97 of the full report a table shows that deductibles are rising. See page 101 as well. Also see page 112 for a table which shows that copays for doctor visits are rising as well. In a nutshell, employers are reducing premium price rises by shifting more costs onto employees.
The shifting of costs onto employees will reduce the demand for medical services and drugs. The medical cost growth at a rate more rapid than general economic growth has got to stop sooner or later. But when?
Medicine is deficient in how practitioners are incentivized to improve quality. Buyers lack information. There aren't just a few providers with consumers guides to quality ratings as is the case with cars for example. If you get prostate cancer find a surgeon who has done 250+ prostate cancer operations.
Andrew Vickers, Ph.D., of Memorial Sloan-Kettering Cancer Center in New York and colleagues analyzed data from 72 surgeons at four institutions and 7,765 of their prostate cancer patients treated with radical prostatectomies between 1987 and 2003. They measured surgeons’ experience by the number of times they had performed the procedure before each operation.
More surgical experience was associated with a greater likelihood that the patient’s cancer would not return after their operation. The learning curve for this procedure was very steep—there was dramatic improvement in patient outcomes as surgeons’ experience increased up to 250 operations, after which increasing experience had little influence on cancer recurrence. Patients treated by inexperienced surgeons (for example, those with 10 prior operations) were nearly 70% more likely to have evidence of recurrence of their prostate cancer within five years than those whose surgeons had performed 250 operations (17.9% vs. 10.7%).
Our medical industry ought to measure outcomes for all surgeons and other medical practitioners and publish track records. We ought to be able to pay more to get treated by doctors who score higher success rates.
An industry with big incentives to improve quality will find ways to produce better outcomes. Overall quality will rise.
Government subsidies that cut health insurance premium prices in half for people without insurance would reduce the number of uninsured Americans by just 3 percent, according to a RAND Corporation study issued today.
The study by the nonprofit research organization contradicts suggestions by some that large numbers of people without health insurance would sign up for coverage if government provided subsidies or tax credits to reduce the cost of health insurance.
An estimated 45 million Americans don't have health insurance. Most of these people are in low- and moderate-income families where no one gets the insurance from his or her job, but family income is too high to qualify for Medicaid, the health insurance program for the poor.
"Insurance policy prices aren't going to be the tool that solves the problem of the uninsured," said M. Susan Marquis, senior economist with RAND and one of the study's authors. "Price is not the only barrier people face in deciding whether to purchase insurance. A lot of people who don't have insurance are young and healthy and would rather spend their money on something else."
People would rather spend their money on other things and they figure if they get really sick the government will step in and help. This illustrates one moral hazard of the welfare state.
People surveyed for the RAND Health study cited numerous other factors that influenced whether they purchased individual health insurance policies, including personal attitudes toward risk, whether they believe they can get good health care without insurance, perceived difficulty in selecting a health care plan, and even a concern that insurance companies require too much personal information for individual plans compared with group insurance plans.
"One implication of our findings is that if you really do want to get to universal health insurance coverage, voluntary solutions that rely on financial incentives aren't going to get you there," Marquis said. "Government is probably going to have to mandate it."
We could reduce the ranks of the medically uninsured by deporting all the illegal aliens. Most of them are uninsured. Plus, the deportation of those illegals would reduce the cost of medical insurance for everyone else by reducing the cost shifting where medical institutions charge paying customers more to make up for the non-payers. Also, a reduction in the supply of unskilled labor would cause many employers to offer more benefits - including medical insurance - in order to attract employees.
People judge medical facilities by what the outsides look like.
Curb appeal counts in real estate. But what about in medical care facilities? Do individuals judge the quality of care and their expected comfort level by how a building looks? They do, and medical practitioners should take note.
Connecticut College Professor of Psychology Ann Devlin asked 188 individuals to view 34 slides of the exteriors of medical buildings in Connecticut, Rhode Island and Michigan and judge the quality of care they would expect to receive and the comfort level they would expect to experience in these facilities. The buildings ranged from small outpatient office buildings to large medical centers.
The appearance of medical building exteriors is indeed related to these care and expected comfort judgments.
Findings clearly showed that while respondents made both positive and negative comments for every facility, the highest quality of care ratings were for large medical facilities - such as modern hospitals.
However, while respondents rated modern, large hospitals highly, they also expressed concern that the facilities could be intimidating, cold and impersonal.
"Large medical facilities should emphasize a stepped-down quality as much as possible, so what greets the patient is on a more human scale and of a familiar architecture," Devlin said.
The lowest ratings were given for small brick buildings. In between were the ratings for traditional, converted house-style facilities. But certain aspects of these small facilities can improve the impression they make. Respondents are likely to judge small facilities, such as small brick buildings or converted houses, more positively if the facilities are landscaped and well-maintained.
To be fair to the viewers of the photos, they had no other basis on which to judge the facilities. A larger facility must attract a larger number of customers. Why would so many people use it if was not better than the smaller ones?
The problem we have is that as users of medical care we don't have much in the way of useful information for judging medical care quality of doctors and hospitals.
The Congressional Budget Office report said that for every 100 children who enroll in SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children. That's a point the Bush administration has emphasized in recent weeks as it fights Democratic efforts to triple funding for the program over the next five years.
``The uninsured are swimming around in the same pool as the insured. It's very hard to sort of reach a little net into that pool and just pick out the uninsured,'' said Peter Orszag, director of the CBO. ``You're almost inevitably going to pick up part of each.''
The bigger the public subsidies for child medical insurance become the more parents will use the government money even though they can afford to buy medical insurance out of their own pockets. This increases the tax burden on middle and upper income workers. Also, it increases government involvement in the provision of medical care and makes the medical industry more regulated in ways that likely decrease the quality of care.
The growth in the Hispanic population due to immigration will further fuel the growth of publically funded medical care. The Hispanics earn less than whites not just with the first generation of immigrants but with later generations as well. These lower income Hispanics get medical insurance at much lower rates than whites and want more medical funding from governments. So immigration feeds the growth of the welfare state.
Since Hillary Rodham Clinton’s effort to overhaul the nation’s medical system was rejected in 1994, most big employers have stayed out of the debate on health care reform.
But with their medical costs ballooning, top executives of large companies are starting to speak up again — and many are calling for a national approach to fixing health care. Few advocate a wholesale shift to government-directed medicine, but most are seeking broad changes in the employer-subsidized health system, which they regard as unsustainable in its current form.
Some of the car companies are more blunt in their calls for government funding of worker health care. They want to get out of obligations they've been forced into by the United Auto Workers (UAW) union.
Since health care costs are rising a few times faster than the rate of inflation the cost increases aren't sustainable.
In general, employers “are more interested in reform today than at any time since the Clinton effort” in the early 1990s, said Robert S. Galvin, global health care and policy director at General Electric, which provides health benefits for 460,000 employees and dependents and 240,000 retirees and dependents.
The surge of interest, Mr. Galvin said, “is driven by compounding health cost increases at three times the general inflation rate, plus the entrance of Wal-Mart and other retailers” that are beginning to feel the pain of out-of-control increases in costs.
Employers which want government help are asking at a time when rising health care costs are hitting the government just as hard. The US government is about to get hit by the perfect storm of baby boomer retirements, a dumber younger generation due to immigration, and costs for medical care per person that are rising faster than the rate of inflation.
Employers of low skilled low wage workers expect the government to subsidize their employment of low skilled workers.
“The way it’s going, there will be 75 million uninsured in another 10 years,” said James D. Sinegal, chief executive of Costco Wholesale, which subsidizes health care for 81,000 of its 100,000 workers in the United States. “The federal government has to lend some assistance.”
Most commentary on problem of unaffordable health care focus on the rising cost of health care. But they are missing something obvious: a large and growing number of people have economic value in the labor market that is so low that they can't afford modern health care. Costco Wholesale employs tens of thousands of workers who are not worth that much in the labor market. They are not skilled enough and productive enough to make their health care costs a small percentage of their income. Think about that.
The problem of a large low skilled work force is going to get worse. Over on the Audacious Epigone blog pseudonymous blogger crush41 reports on a recent study by Robert Rector of the Heritage Foundation which found that low skilled households get more from the government in benefits than they earn in total income. They don't just get more in benefits than they pay in taxes. No, it is much worse than that. Their benefits from government (that would be you, higher income taxpayer) far exceed what they earn.
Strikingly, as Chart 4 shows, low-skill households in FY 2004 had average earnings of $20,564 per household; thus, the average cost of government benefits and services received by these households not only exceeded the taxes paid by these households, but substantially exceeded the average earned income of these households.
They get $32,138 per household in benefits. But they only earn $20,564 in wages. We pay for their medical care, food stamps, education for their children (which in some jurisdictions ranges as high as $14,000 per child or more per year btw), police, fire department, etc. They can not afford the costs of the modern society all around them.
I have a few practical suggestions on immigration: First, make immigration qualifications dependent on earning power. If would be immigrants can't make at least, say, $70,000 per year (or an even higher figure) then they should be kept out. Second, deport all the illegal aliens and those legal aliens who aren't earning much money. Third, make employers of all non-citizen workers to pay medical insurance or for the foreign workers to prove they have medical insurance.
Update: From the original article above, Pitney Bowes chairman Michael J. Critelli says that wellness programs have paid off by cutting health care cost increases.
By providing clinics, exercise and other wellness programs as well as low-cost or free drugs for certain types of patients, he said, annual cost increases for Pitney Bowes employees have fallen into the low single digits over the last 15 years. That is well below the double-digit percentage increases that many companies have experienced.
But competing big companies are already free to do this. I think government could help by funding wellness program research. Get more of the results of wellness programs into the public domain so that smaller companies, government programs such as Medicare, and individuals can find out what works.
We also need much more automation of health care. Medicine is too labor intensive. Higher levels of automation could both cut costs and reduce mistakes.
Some employers are finding better ways to reduce the rate of increase in health care spending.
Employers that have done the best job of managing annual increases in health care costs are pulling out ahead of their peers, according to the findings of the 12th annual National Business Group on Health/Watson Wyatt Survey.
I wonder how much of this huge difference is due to bigger deductibles at some companies.
"If you look at the spread between the poor performers and the best performers, the gap is increasing," said Ted Nussbaum, practicing director of health care consulting North America at Watson Wyatt Worldwide in Stamford, Conn.
The two-year average trend for the best performers in this year’s survey was just 2.5%, compared with 11% for poor performers, while in last year’s survey the differential was 3% for best performers vs. 11% for poor performers and in 2005 it was 5% for best performers vs. 15% for poor performers, Mr. Nussbaum pointed out.
Employers are offering money to do "wellness" things. I've personally seen an employer offer cash for getting screened for blood pressure, cholesterol, and some other indicators. Go to a wellness day appointment and get paid for it.
For example, best performers are 17% more likely to offer compelling financial incentives to encourage employee education and participation and 11% more likely to effectively deliver health care information, according to the survey of 573 large employers.
The aggressive companies are identifying lower cost providers. Sounds like competitive pressures at work in the medical marketplace. Imagine that.
In last year’s survey, best performers found that they could lower health care costs by encouraging employees to seek care from "high-performance networks," defined as a subset of doctors and hospitals in a particular provider network that have proved they provide consistently high quality care on a cost-effective basis.
However, this year, the best performing employers are finding not all providers in a "high-performance network" can produce the same results for all types of procedures. In other words, "quality is procedure-specific," Mr. Nussbaum explained. As a result, many best performing employers are using high-quality, cost-effective providers similar to the way they use Centers of Excellence for transplants, only to treat other conditions, he said.
The average annual cost increase for surveyed companies was 8%.
Annual cost increases for all employers remained at 8 percent for the second year in a row and are expected to stay at this level through 2008.
That's more than double the rate of inflation.
Something has got to give on rising medical costs. Medical spending has surpassed 16% of of US GDP and will consume 20% of the US GDP by 2015 if one projection by Medicare actuaries is to be believed (and it seems plausible). The pressure for cost cutting and automation is going to rise dramatically.
Specialty cardiac hospitals seem to increase the amount of cardiac treatments done in an area.
The opening of a specialty cardiac hospital is associated with an increase in the rate of coronary revascularization in a region, compared to new cardiac programs opened at general hospitals, according to a study in the March 7 issue of JAMA.
Specialty hospitals, which provide care limited to specific medical conditions or procedures, are opening at a rapid pace across the United States, according to background information in the article. Proponents argue that specialty hospitals provide higher quality health care and greater cost-efficiency by concentrating physician skills and hospital resources needed for managing complex diseases. Critics claim that specialty hospitals focus primarily on low-risk patients and provide less uncompensated care, which places competing general hospitals at significant financial risk.
"However, specialty hospitals raise an additional concern beyond their potential to simply redistribute cases within a health care market. Specialty hospitals are typically smaller than general hospitals and have high rates of physician ownership. Physician owners may have stronger financial incentives for providing services that fuel greater utilization," the authors write.
Of course physician owners have greater financial incentives. One really big problem with medicine is that patients lack the knowledge, expertise, and intellectual ability to evaluate the efficacy of treatment choices. Doctors can create work for themselves. Usually governments or insurance companies are footing the bill. So patients do not have financial incentives to take a critical look at physician recommendations for expensive procedures.
In what are called Hospital Referral Regions (HRRs) new specialty cardiac hospitals seem to raise use of the coronary revascularization procedure more than is seen when general hospitals open cardiac programs.
The researchers found that overall, rates of change for total revascularization were higher in HRRs after cardiac hospitals opened when compared with HRRs where new cardiac programs opened at general hospitals and HRRs with no new programs. "Four years after their opening, the relative increase in adjusted rates was more than 2-fold higher in HRRs where cardiac hospitals opened (19.2 percent) when compared with HRRs where new cardiac programs opened at general hospitals (6.5 percent) and HRRs with no new programs (7.4 percent)."
"Although we are unable to comment directly on the appropriateness of these procedures, these findings raise the concern that the opening of cardiac hospitals may lead to greater procedural utilization beyond the simple addition of capacity to a market. This is particularly worrisome since cardiac hospitals may not substantially improve clinical outcomes when compared with general hospitals with similar procedural volumes," the researchers write.
Within the United States the rate of use of medical care varies greatly
Medicare spending per patient varies greatly in the United States.
In some regions of the United States Medicare pays more than twice as much per person for health care as it pays in other regions. For example, age-, sex-, and race-adjusted spending for traditional, fee-for-service (FFS) Medicare in the Miami hospital referral region in 1996 was $8,414–nearly two and a half times the $3,431 spent that year in the Minneapolis region.1
Even after differences in price levels across regions are adjusted for, there are no obvious patterns that suggest why some areas spend more than others. Spending in urban areas in the Northeast tends to be higher than average, but spending in rural regions in the South and urban areas in Southern California is as high or even higher. And the dollar transfers involved are enormous. The difference in lifetime Medicare spending between a typical sixty-five-year-old in Miami and one in Minneapolis is more than $50,000, equivalent to a new Lexus GS 400 with all the trimmings.2
Lots more doctors want to live in south Florida than in Minnesota. So less unnecessary medical treatment gets done in Minnesota.
Federal number crunchers said yesterday that the new Medicare drug benefit appears to be slowing the growth in national spending on prescription medicines because the drug plans are negotiating lower prices with drug companies.
But the analysts also forecasted that overall health-care spending would continue to rise and would account for nearly 20 percent of the economy -- or more than $4 trillion a year -- by 2016. In contrast, health-care spending was about $2.1 trillion in 2006, accounting for about 16 percent of the economy. In 1985, it was just over 10 percent.
Drug spending is that part of total health spending which has the largest impact on commercial research and development funding for new treatments. I'd rather see drugs cost more than physician services or nurses cost more.
What I'd like to see: a tax on medical services, the proceeds of which would go to fund biomedical research.
The medical industry is the industry in greatest need of automation. It is going to become the largest industry if it isn't already. We have less to spend on other things because so much goes to medical care. Expert systems, robots, and other technology to cut costs and raise quality can save us huge amounts of money and raise living standards.
Anyone have any suggestions for how and what in medicine should get automated?
WASHINGTON, Jan. 20 — President Bush intends to use his State of the Union address Tuesday to tackle the rising cost of health care with a one-two punch: tax breaks to help low-income people buy health insurance and tax increases for some workers whose health plans cost significantly more than the national average.
While tax deductibility would be lowered for employees who get medical benefits from their employers it would come into existence for those who pay for their own medical insurance.
The basic concept is that employer-provided health insurance, now treated as a fringe benefit exempt from taxation, would no longer be entirely tax-free. Workers could be taxed if their coverage exceeded limits set by the government. But the government would also offer a new tax deduction for people buying health insurance on their own.
I see political problems with this proposal. On the one hand, I've worked for multi-year stretches paying my own medical insurance using after tax dollars while people in jobs with medical benefits got their medical insurance paid in pre-tax dollars. So the status quo on tax deductibility of medical insurance has always struck me as an unfairness in the labor market that works to the advantage of established companies and against individual entrepreneurs and contract workers.
Yet cutting back on the tax deductibility of existing employee medical benefits is likely to be unpopular among smarter and better paid workers who work in companies that provide better health plans. Also, on average it'll effectively be a tax on relatively higher income workers to pay for benefits for lower income workers. Since higher income workers already pay more in taxes and at higher tax rates they aren't likely to see this as fair.
President Bush will propose a tax deduction of $7,500 for individuals and $15,000 for families regardless of whether they buy their own health insurance or receive medical coverage at work.
....
Because of this, about 80 percent of people with employer-based plans will actually see their tax liability fall because their insurance policies cost less than the deduction, he said.
But those who have very high monthly premiums (say $1000 per month - and this does occur) are at higher risk due to a pre-existing condition would pay more taxes under this scheme.
Of course the medical expenses of the lower income workers are already being borne by higher income workers . Currently higher income workers pay taxes to fund Medicaid and other programs that pay the medical expenses of less skilled, less intelligent, and lower income workers. Also, hospitals and other medical providers raise rates on services charged to insured patients in order to get the money to pay for those who do not pay their medical bills. If you have medical insurance for a family it probably costs nearly $1000 a year more in order to pay for the medical expenses of poor people.
The medical costs problem is a result of a few trends. One is the aging of the population. More people are old and with assorted illnesses. Another is technological advance. Diseases with no treatment are cheap to treat. But we have many more treatments and so more expenses. A third is growth of the population of lower intelligence and lower skilled workers who aren't worth enough on the labor market to cause employers to offer them medical insurance.
All these problems make each other worse in a serious negative synergy that keeps building in a vicious cycle. As more people lose medical insurance the health care providers shift more of their costs onto those who are still covered and that drives up medical insurance premiums. The higher insurance premiums cause more employers to drop medical insurance as a benefit for their employees. Also, as the population ages and Medicare costs for the old rise the federal government cuts back on payments to hospitals and doctors for services provided. Again, the providers raise prices with the privately insured but in this case they do so to make up for lower payments from treating old folks. So up go private medical insurance premiums even higher.
As well paid workers shrink as a percentage of the total population and low skilled immigrant groups and old folks rise as percentages of the total population the medical costs problem will keep getting bigger and bigger. Part of this worsening problem shows up as growth in the cost of Medicare. Part shows up as higher costs for Medicaid. But rising health insurance premiums also are partially a result of both the aging and dumbing of the US population.
In a way Bush's proposal amounts to moving the chairs around on the deck of the Titanic. We need more radical changes in policy to address the medical costs problem. First off, we can't prevent the aging of the population yet. But we can stop letting in immigrants who aren't going to become high wage earners and deport the illegal aliens who are already here. We need a First World population to support First World levels of medical care and other services.
Second, we might gain advantages of greater market forces in health care if tax advantages that now flow toward paying health insurance premiums instead flowed to a combination of health savings accounts and higher deductible insurance premiums. Higher deductibles would give buyers a bigger incentive to be frugal in their use of health services and drugs. Under current tax law the structure of tax advantaged medical spending accounts only works for highly predictable medical expenses because the money has to get spent by the nd of the year. Unless one is a non-employee with a Health Savings Account there's no way to put away money pre-tax to save for unpredictable illnesses.
Third, the US government should offer prizes for innovations that allow medical cost reductions. For example, how about multi-million dollar prizes for robots that can do various types of surgeries?
Fourth, the US National Institutes of Health or Medicare should fund a lot more clinical trials that compare existing standard treatments against less expensive and less frequently used treatments. Find out where medical practitioners are choosing more expensive treatments because specialists want more revenue.
Fifth, at some point we are going to have to address the practice of providing unlimited medical care for those who have incurable diseases. The huge costs racked up in the final few months of life are paid for by taxpayers. Lots of treatments tried at that stage provide little or no benefit at enormous cost. Those treatments are hard to justify. We are going to reach a point with a swelling populaton of retirees makes the current practice unsustainable.
Sixth, while technology currently drives up costs that will not always be the case. Eventually stem cell therapies, gene therapies, and other rejuvenation therapies will so reduce the incidence of diseases that medical costs will drop. If we push biotechnology ahead faster we will sooner reach the point when medical costs drop.
The profit motive is not entirely compatible with optimal delivery of medical care.
BOSTON-December 11, 2006 - Patients are more likely to receive high quality of care in not-for-profit hospitals and in hospitals with more registered nurses and advanced technology, reports a comprehensive Harvard Medical School (HMS) analysis published in the Dec. 11 Archives of Internal Medicine.
Anyone surprised? I'm not. Quality of care is hard for patients to measure. So the market is not very good at rewarding those who deliver higher quality care. The profit motive is not sufficiently well disciplined by the market in the medical marketplace.
Bruce Landon, MD, MBA, associate professor of health care policy at HMS, and colleagues found that overall, not-for-profit hospitals consistently performed better than for-profit hospitals when it came to delivering high-quality care for three common medical conditions: congestive heart failure (CHF); heart attack (acute myocardial infarction, AMI); and pneumonia. Hospitals with higher registered nurse staffing levels, more advanced technology, and federal or military designation all had high performance.
"Our study is the first to comprehensively examine the characteristics of hospitals that are associated with higher quality of care for these three important medical conditions," said Landon, who is also an associate professor of medicine at HMS and Beth Israel Deaconess Medical Center.
This study assessed the quality of care for CHF, AMI, and pneumonia in more than 4,000 hospitals in the U.S. that reported data to the Joint Commission on Accreditation of Healthcare Organizations or the Center for Medicare and Medicaid Services. Since the Medicare Modernization Act of 2003, hospitals have been required to report their performance on 10 measures in the areas of CHF, AMI, and pneumonia in order to receive their full Medicare payment update. The study also examined what hospital characteristics (such as ownership, size, location, teaching status, and proportion of Medicare or Medicaid admissions) were associated with high-quality performance.
Non-profits and military hospitals scored highest.
Overall, 76 percent of patients hospitalized with CHF, AMI, or pneumonia received recommended care. To assess this, Landon and colleagues evaluated how many patients received appropriate care across all of the measures for the three medical conditions.
Not-for-profit hospitals consistently performed better than for-profit hospitals for each condition, and federal and military hospitals had the highest performance.
A Congressional alliance called "The Promise Keepers" have caused a huge surge in spending for the Veterans Administration in the last several years. I suspect the huge piles of dollars spent on the VA have caused some of the high performance reported here.
I suspect that VA doctors might be more amenable than more independent private practice doctors to attempts by administrators to encourage the following of best practices. A lot of best practices (e.g. give aspirin to heart attack patients) are not difficult to understand. But they require discipline and a willingness to follow checklists.
"Because a large portion of federal and military hospitals are part of the Veterans Health Administration, this suggests that lessons learned from their decade-long experience in quality improvement deserves further study," said Landon. "It seems likely that the information technology and computerized reporting systems at the VA contributed to their high performance."
Hospitals with lots of poor patients deliver lousier care. It pays to live in affluent areas so that your hospitals have lots of paying customers.
Hospitals that served greater proportions of Medicaid patients had low quality of care across all conditions studied. Hospitals in the Midwest and Northeast, not in rural areas, had better performance, as did hospitals with more advanced technology available.
We'll get better care when computers track care and provide more guidance on what are best practices and when they are being followed.
WASHINGTON, DC – State revenues increased faster than Medicaid spending for the first time since 1998, according to a new 50-state survey released today by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured (KCMU). The survey finds that an improved economy combined with the implementation of the new Medicare prescription drug benefit has contributed to a 2.8 percent growth rate in Medicaid spending for state fiscal year (FY) 2006 – the lowest rate of growth in a decade and the fourth consecutive year in which Medicaid spending growth has slowed. (See Figure 1 below.)
There's an interesting graph at the URL showing that in 2002 Medicaid costs grew 12.4% while state revenues declined 7.8%. State revenues also declined in 2003. Hard years for the states.
Medicaid is one of the government programs that subsidize employers who use low skilled imimgrants - both illegal and legal - as well as the children and grandchildren of those immigrants. The market price of labor understates the real cost of low priced labor for this and other reasons (e.g. schools, prisons, police).
Growth in employment helped reduce the growth in demand for Medicaid.
Positive economic conditions also contributed to a slowdown in Medicaid enrollment growth, which in turn helped reduce spending growth. The 1.6 percent enrollment growth for FY 2006 is the lowest rate since 1999 – nearly half the 3 percent growth predicted by Medicaid officials for the year. “When the economy improves, it is natural for Medicaid spending and enrollment growth to subside because fewer people turn to the program for assistance,” said Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of KCMU. “But with the continued growth in the uninsured population, Medicaid remains on the frontlines for coverage for low-income children and adults.” Looking forward to FY 2007, the survey finds a handful of states (5) plan to restrict eligibility while over half (26) plan to restore cuts from previous years, expand to new populations, or make positive changes to Medicaid’s application and enrollment process. Additionally, states are contemplating new options and implementing new requirements created by the passage of the Deficit Reduction Act (DRA) this year, although few have used the flexibility to change benefits and cost sharing requirements for FY 2007.
Medicaid is one of the unfunded entitlements that the US federal government forces on the states. Part of the Medicare drug benefit cost was also foisted on the states. I'm amazed I've never read this before.
The budget survey of state officials, conducted by KCMU and Health Management Associates for the sixth consecutive year, found that the spending growth of 2.8 percent would have been even lower (1.7 percent) had states not been required to finance a portion of the new Medicare prescription drug benefit via what is known as a clawback payment.
In 2007 Medicaid costs will grow more rapidly and likely once again outpace state tax revenue growth.
Despite the slowed growth, state Medicaid officials indicate that growing health care costs and the erosion of employer-sponsored health coverage are two reasons that overall pressure to constrain Medicaid spending has not subsided. In fact, based on budgets states adopted for FY 2007, Medicaid spending growth is projected to increase to 5 percent next year.
When the US goes into its next recession the gap between Medicaid cost growth and revenue growth will probably match the 2002 pattern. A downturn will lead employers both to lay off and also to cut medical benefits for those employees they keep. The trend of medical costs rising faster than inflation is going to end up hollowing out other functions of government while also driving up taxes.
The rise in the number of medically uninsured does not just increase the cost of government programs for the poor. Medical uninsurance also causes rising cost shifts onto the medically insured. This is one reason why raises haven't kept up with inflation for many workers. Employers are instead spending more on medical insurance. Immigrants have especially high rates of medical uninsurance. The lower skill level of illegal immigrants especially drives up the number of medically uninsured. We pay for this while a small fraction of the business owners derive big benefits at our expense.
Dying is expensive but how expensive depends on where you live.
If you are dying in Miami, the last six months of your life might well look like this: You'll see doctors, mostly specialists, 46 times; spend more than six days in an intensive care unit and stand a 27% chance of dying in a hospital ICU. The tab for your doctor and hospital care will run just over $23,000.
But spend those last six months in Portland, Ore., and you'll go to the doctor 18 times, half of those visits with your primary care doctor, spend one day in intensive care and stand a 13% chance of dying in an ICU. You'll likely die at home, with the support of a hospice program. Total tab: slightly more than $14,000.
Why do some people spend a lot of time in an ICU dying? I had an example of how this happens explained to me by a hospice nurse (and my meeting with her was not the least bit casual or accidental either): If you have relative who has, say, metastatic bone cancer and they have a heart attack you might think to call for paramedics. Mistake. What will the paramedics do? Cardiopulmonary resuscitation. That'll break some rib bones (brittle from the cancer) and then they'll rush your elderly injured dying relative to the hospital to be treated for heart and bone breaks. But recovery is not possible. Once on life support they'll last maybe days or even weeks or months longer. Tens of thousands of dollars will flow from the US Treasury into coffers of the hospital and various consulting physicians of an assortment of specialties. Your relative will end life with lots of inserted tubes and a respirator and surrounded by strangers.
People worry about the cost of health care. Well, is the three and a half times higher cost of final days in New York City buying anything over the costs of Wichita Falls?
Portland and Miami reflect that tremendous variation among regions. The most expensive city out of 309 hospital referral regions is Manhattan, at a cost of $35,838 for the last six months; the least expensive is Wichita Falls, Texas, at $10,913.
Estimates show that about 27% of Medicare's annual $327 billion budget goes to care for patients in their final year of life.
That $88 billion spent in the final year of life is about three times what the US National Institutes of Health spend on research to find real effective cures that will some day prevent those killer diseases from making those final years into final years. Effective cures will be far cheaper than ineffective treatments too. Stem cell therapy will be cheaper than open heart surgery and nursing care for stroke victims. Gene therapy and immunotherapy that cure cancer will be cheaper than radiation, chemo, and surgery for cancer.
Are you a business operator in shock over rising medical insurance quotes? Some companies are looking at sending employees to India to cost costs on expensive operations. The United Steel Workers union blocked Carl Garrett's trip from North Carolina to India to receive shoulder surgery.
Garrett's trip was intended to be a test case for Blue Ridge Paper's plan to offer its employees and their dependents the option of seeking medical care overseas beginning in 2007. For several years, the company failed in its attempt to obtain discounts from healthcare providers for its 5,000 covered workers.
The self-insured company decided to contract with IndUShealth, a Raleigh, N.C., firm that sends patients to Indian hospitals for major savings compared with American hospital care.
Garrett quickly volunteered, mostly for the financial incentive. The operations he was scheduled to have would have cost $20,000 in India compared with about $100,000 in the US. The trip was expected to save the company $50,000, and he was being given a share of the company's total savings. Aside from not retiring in medical debt, Garrett was eager for the opportunity to see the Taj Mahal as part of a two-day tour before his procedure.
But the plan alarmed the USW. "We made it clear that if healthcare was going to be resolved, it would be resolved by modifying the system in the US, not by offshoring or exporting our own people [to receive medical care]," says union representative Stan Johnson, who stepped in to stop Garrett's trip. The USW has more than 850,000 members.
The USW fears that trips abroad to receive medical treatments will become mandatory. This fear seems plausible for some procedures. The article quotes a TowersPerrin study that found American corporations are cutting annual raises by 1% in order to pay increased health care costs.
A trip all the way to India can be a grueling ordeal. Depending on where you are going in India the trip could involve as many as 4 flights over 24 hours or longer. For some types of illness that'd be hard, even hazardous to one's health. For example, the time sitting in an airplane would put one at risk of blood clots and for people with circulatory problems the risk would be much greater. But for other problems the trip could be fun. Mr. Garrett was looking forward to sightseeing while there.
Washington, D.C. – Premiums for employer-sponsored health coverage rose an average 7.7 percent in 2006, less than the 9.2 percent increase recorded in 2005 and the recent peak of 13.9 percent in 2003, according to the 2006 Employer Health Benefits Survey released today by the Kaiser Family Foundation and the Health Research and Educational Trust (HRET). Key findings from the survey were also published today as a Health Affairs Web Exclusive.
This year’s survey recorded the slowest rate of premium growth since 2000, though premiums still increased more than twice as fast as workers’ wages (3.8 percent) and overall inflation (3.5 percent). Premiums have increased 87 percent over the past six years. Family health coverage now costs an average $11,480 annually, with workers paying an average of $2,973 toward those premiums, about $1,354 more than in 2000.
“While premiums didn’t rise as fast as they have in recent years, working people don’t feel like they are getting any relief at all because their premiums have been rising so much faster than their paychecks,” said Foundation President and CEO Drew E. Altman, Ph.D.” To working people and business owners a reduction in an already very high rate of increase just means you’re still paying more.”
The bigger health care costs get the greater the lengths companies will go to control them. Send people abroad to save $50,000 on expensive procedures? From the perspective of business owners, sure, why not?
I am surprised to learn that employer use of high deductible Health Savings Accounts (HSAs) has not grown much.
While there is substantial debate about consumer-driven health care, the survey finds modest enrollment in consumer-driven plans, with 2.7 million workers in high-deductible plans with a savings option, including those that qualify for Health Savings Accounts (HSAs). About 4 percent of covered workers are enrolled in such plans, a rate statistically no different from last year. Relatively few firms that offer other types of health insurance say that they are “very likely” to adopt high-deductible plans that qualify for an HSA (4 percent) or that are associated with a Health Reimbursement Arrangement (6 percent) in the next year.
My guess is that as costs continue to rise and employers get higher and higher quotes from insurance providers employers will eventually take a much more serious look at high deductible HSAs.
How have employers slowed their own premium payments growth? By shifting costs onto employees.
Workers’ contributions toward premiums. On average, workers are paying $259 more this year than they did last year toward the cost of family health coverage.Workers at small firms (with three to 199 employees) on average contribute significantly more to their premiums ($3,550 for family coverage) than workers at larger companies ($2,658 for family coverage). On average, workers this year are paying about 16 percent of premiums for single coverage and 27 percent of premiums for family coverage, with their employers paying the rest. That share is essentially unchanged in recent years.
The employees are paying a lot of those costs in after-tax dollars. So every dollar saved by employers costs more than a dollar to employees. Given the lower raises and the higher cost of out-of-pocket medical expenses what is the end result for the average American worker's buying power for non-medical purposes? Is the average worker experiencing a decline in money available to spend on non-medical purposes? Or at least is that happening to older age brackets?
Retailing giant Wal-Mart Stores Inc., known for forcing prices down to dominate nearly every market it enters, said yesterday that it would sell nearly 300 generic drugs for $4 per prescription, whether or not a customer has insurance.
Using its might as the nation's largest retailer and its legendary ability to force suppliers to cut prices to the bone, the company will begin the $4 price program in its 65 stores in the Tampa area today, in all of Florida in January, and in as many other states as possible by the end of 2007. The $4 is for a typical monthly supply of medicine, and included on the Wal-Mart list are generic versions of many popular prescription drugs, including the antibiotic amoxicillin and the heart and blood-pressure treatment lisinopril, sold under the brand names Prinivil and Zestril.
Wal-Mart might be doing this as a loss leader They aren't going to discount most generics or drugs that are still under patent. People who get all their prescriptions filled at once will pay for non-discount drugs as well. Plus, Wal-Mart gets people to walk all the way to the back of their stores to get the prescriptions. So they can sell people as they pass through other departments.
If you want to see the list of drugs go to the Wal-Mart press release and then page down to the bottom where you'll see a "List of available $4 generic drugs" which is a pop-up to select a PDF file to view or download. You'll need Adobe Acrobat Reader (a free download) to view the list.
Shares of generic drug makers took hits in the stock market.
Shares of generic-drugmaker stocks also sank on Sept. 21. Barr Pharmaceuticals (BRL) lost 1.1%, to trade at $51.95 per share, Watson Pharmaceuticals (WPI) fell 1.4%, to $26.22, and Mylan Laboratories (MYL) declined by 2%, to $20.15. Dr. Reddy's Laboratories (RDY) edged slightly lower, to $16.24 per share.
"Although this program, if spread nationwide, would exert pressure on generic pricing trends, we think its overall impact would likely be limited, since it would probably affect less than 20% of all generic drugs sold, and impact mostly older, already deeply discounted products," says S&P equity analyst Herman Saftlas.
Wal-Mart gets absolutely great publicity from this move.
Quickest on the draw after Wal-Mart's bombshell was Target Inc., which announced early Friday that it would match Wal-Mart's dramatic price cuts at all its pharmacies in the Tampa Bay area, including Sarasota and Manatee counties.
That is the precise battleground that Wal-Mart established this week for its rollout.
If you use prescription drugs do not assume just because Wal-Mart is cheap on these 300 that it will be cheapest on other drugs. Shop around. Use the internet to compare prices.
Expect more uniform drug pricing as a result.
"I think you're going to see very simplified pricing for generics in most places now," said Richard D. Hastings, an analyst with New York-based Bernard Sands. "You're not going to be seeing $10 here and $16 there and $20 over there" for the same generic drug -- a pricing spread that frequently occurs now.
Although the pilot program, involving mostly heart, diabetes and asthma medications, will be limited initially to the Tampa, Fla. area, Wal-Mart officials say they plan to expand to "as many states as possible" next year.
These are older generics and so do not include some of the better newer generic drugs.
"It is not as significant as it first seems, in our opinion," Joseph Agnese, an analyst at Standard & Poors, told the Times.
Most of the drugs on Wal-Mart's list are older generics that are relatively inexpensive already, Stephen Schondelmeyer, professor of pharmaceutical economics at the University of Minnesota, told the Chicago Tribune.
But this will exert pricing pressure on some of the generics which are not on Wal-Mart's list.
Every year more drug patents expire and the drugs go generic. The size of the super cheap list will probably expand beyond this initial 300. At such low prices a lot of health plans are going to push the cheapest drugs on their patients.
Physician incomes are falling.
WASHINGTON, DC—In sharp contrast to other professionals, physicians' net income from the practice of medicine declined about 7 percent between 1995 and 2003 after adjusting for inflation, according to a national study released today by the Center for Studying Health System Change (HSC).
"The downward trend in real incomes since the mid-1990s likely is an important driver of growing physician unwillingness to provide such pro bono work as charity care and serving on hospital committees," said Paul B. Ginsburg, Ph.D., coauthor of the study and president of HSC, a nonpartisan policy research organization funded principally by The Robert Wood Johnson Foundation.
The decline in physicians' real income stands in sharp contrast to the wage trends for other professionals who saw about a 7 percent increase between 1995 and 2003 after adjusting for inflation, the study found.
Among different types of physicians, primary care physicians fared the worst with a 10.2 percent decline in real income between 1995 and 2003, while surgeons' real income declined by 8.2 percent. But medical specialists' real income essentially remained unchanged.
Actually, the specialists saw a decline of 2.1% according the full report linked below.
Despite the downward trend in real incomes, medicine overall remains one of the most well-paid professions in the United States: At least half of all patient care physicians earned more than $170,000 in 2003, and physician average net income was about $203,000, the study found. Although surgical specialists have lost ground to inflation since the mid-1990s, they remain the highest earning of all physicians, with average incomes of $272,000 in 2003—29 percent higher than medical specialists and 86 percent higher than primary care physicians.
Physicians work long hours. But how many weeks do they take off per year? Or how many hours do they work totally per year? I want to calculate their hourly income. Hard to do without that information.
This result is inconvenient for socialists. Doctors aren't the big beneficiaries of increases in medical spending.
From the body of the report (which, btw, has some neat graphs and tables worth looking at):
Flat or declining fees from both public and private payers appear to be a major factor underlying declining or stagnating real incomes for physicians. Medicare payment rate increases for physician services amounted to 13 percent from 1995 to 2003,4 lagging substantially behind inflation, which totaled 21 percent during this eight-year period.
While Medicare fees have declined in real terms since the mid-1990s, the trend for private insurer payments to physicians has lagged even more: In 1995, commercial fees were 1.43 times Medicare fees on average; by 2003 this fee ratio had fallen to 1.23.5 And Medicaid fees have always been much lower than Medicare fees, so despite the fact that Medicaid payment rates rose relative to Medicare and grew faster than inflation from 1998 to 2003, increased Medicaid fees would not have been enough to produce substantial income gains for most physicians.6 One likely exception would be primary care physicians with substantial Medicaid patient panels, especially those practicing in states—such as New York and South Carolina—that started with low Medicaid fee levels and increased them the most aggressively.
In the report's figure 1 they show "Professional/Technical Workers" gaining 6.9% in income from 1995 to 2003. So the decline in income for physicians is even more dramatic when compared to incomes of other knowledge workers.
Total medical spending in inflation-adjusted dollars is growing quite rapidly. But that money is not going toward higher physician incomes. At the same time, US federal, state, and local governments are shifting the costs of the uninsured onto the backs of the insured. Physicians are less inclined to treat people for free because they have to do more paying treatments to make up for lower payments per treatment.
The medically uninsured portion of the population is rising. The biggest cause of this trend is the importation of large numbers of low skilled Hispanics. Hispanics are medically uninsured at two and a half times the rate of whites. You pay for this in two ways: more in taxes to fund government health care programs and more for medical insuranance to pay for the cost-shifiting that governments force on hospitals.
The New York Times reports that many doctors are trying to make their services more customer friendly - it is a about time!
Professional societies for family doctors and internists are urging their members to break with tradition by making it easier to schedule appointments — or even making appointments unnecessary in the case of walk-in patients who need immediate attention.
"It's a big trend," said Amanda Denning, a spokeswoman for the American Academy of Family Physicians, which has about 94,000 members.
The academy is spending $8 million on consultants who visit doctors nationwide to suggest improvements in patient care. The advice is meant to "keep them from going to an in-store clinic," Ms. Denning said, while also benefiting doctors by making office procedures more efficient.
The rise in co-pay requirements in medical plans has people looking harder for cheap physicians.
According to various polls, cost is a high priority for most patients. "People will change physicians for differentials of $10 or $15 in a co-pay," said Dr. Anne B. Francis, a pediatrician in Rochester and spokeswoman for the American Academy of Pediatrics.
But convenience also ranks high. That is one reason about 20,000 of the 59,000 actively practicing members of the American Academy of Family Physicians now use electronic health records. Being highly computerized can let doctors offer Web-based scheduling that enables patients to book their own appointments.
The decline in physician income does not appear to be due to a drop in demand. A new report by the CDC National Center for Health Statistics finds that in a 10 year period ending in 2004 the frequency of visits to physicians increased by 19% per person.
Americans made more than 1.1 billion visits a year to doctors' offices and hospital emergency and outpatient departments in 2004, up by 31% in the last 10 years. A portion of this increase is due to an 11% rise in population during that period. This was accompanied by a 19% increase in utilization per person. The increase in the visit rate per person among persons 65 years and over (26%) was higher than among persons under age 65 years (16%).
That averages out to 3.8 visits per person.
This article has some neat charts at the bottom. Suggest you click thru and give them a look. Note that visits for diabetes are the biggest increase with 117% more visits. This could be due to more treatment options and an aging population increasing the incidence of type II age-associated insulin resistant diabetes. Also, visits for spinal cord problems are up 94%. How come?
People wait over three quarters of an hour on average in emergency rooms. This is the result of the uninsured going to emergency rooms for care. The wait times amount to rationing by queue line length.
There was no change in the average time a patient spent face-to-face with a physician in office settings (Figure 4). The amount of time a patient waited before seeing a physician in the emergency department increased from 38.0 minutes in 1997 (first year collected) to 47.4 minutes in 2004.
How much of the increase in visits to doctor's offices is due to an aging population? How much is due to rising affluence? How much due to increased numbers of treatments available? Oh, and how much due to more plastic surgery and other treatments that enhance appearances?
Mountlake Terrace, WA. (May 31, 2006) – On top of their own employees' growing healthcare costs, Washington employers paid more than $1 billion in 2004 to cover shortfalls incurred by hospitals and physicians serving Medicare and Medicaid patients, according to an analysis released today by Premera Blue Cross.
“Some call it Medicare and Medicaid cost-shifting; others call it a hidden tax,” said Gubby Barlow, Premera CEO. “By any name, it’s a billion-dollar burden for Washington employers and policyholders, and that burden is growing every year. It threatens to undermine efforts by employers, employees and health care providers to moderate the growing costs of medical care.”
In 2004, this hidden tax cost Washington employers an average of $902 per family health insurance contract -- 13 percent of all commercial hospital and physician costs.
Nearly a third of medical insurance price increases comes from cost shifting.
Premera estimates that Medicare and Medicaid cost-shifting, not employees’ medical care, accounted for 29.9 percent of the increase in employee hospital costs paid by Washington employers in 2004.
“This growing trend has serious implications for the affordability of private insurance, and employee wages,” said Steve Leahy, president of the Greater Seattle Chamber of Commerce, which employs about 32 people and represents 2500 businesses in the Puget Sound area. “We simply cannot sustain this cost-shift without serious long-term repercussions.”
If you are an employee who gets medical insurance from your employer you see some of this cost shifting in the form of rising deductibles and a reduced set of covered conditions. But some of the costs come in the form of smaller salary increases. These are all forms of hidden taxes. Governments require hospitals and other health care providers to provide care and then make you pay for it.
This trend is being driven by a few factors:
The cost shifting feeds on itself. As medical insurance costs rise in reaction to cost shifting more people go without medical insurance. Therefore their medical care ends up showing up as costs for those still insured, raising rates still higher, and driving still more off of paid private medical insurance. Could this trend progress so far that purchase of medical insurance becomes rare? Health care costs have already reached 16% of GDP and continue to rise much faster than overall inflation. Medical costs are projected to reach 18.7% of the US economy by 2014.
The analysis was done by an actuarial firm.
Premera commissioned the May 2006 report, titled Payment Level Comparison between Public Programs and Commercial Health Plans for Washington State Hospitals and Physicians, from Milliman Inc., an internationally recognized consulting and actuarial firm.
The analysis shows that employers have faced increasing impact from government program hospital losses since 1997 when hospital profit margins on Medicare business began declining.
Washington patient related hospital margins on Medicare business fell from a 2.9 percent gain in 1997 to a 15.4 percent loss in 2004. During the same period, Washington hospitals increased their profit margins on the commercial (employer-provided) segment of their business from just over 5 percent to 16.4 percent.
Economic analyses of the long term viability of Medicare and Medicaid paint an overly rosy picture. Costs of these programs have been reduced by cost shfiting in recent years. But while governments can manage to do some cost shifting they will reach a point where the shifting does not work any more. Too many people will abandon private insurance. Some will travel abroad to receive medical care from facilities that do not have to accept underpaying patients.
In 2004, Washington hospitals lost $622 million for care delivered to patients with Medicare and Medicaid coverage. In contrast, the same hospitals earned $845 million for care delivered to patients with employer-provided health care coverage. The overall patient-related gain for Washington hospitals was $222 million, or about 2.4 percent.
Washington physicians experience a significant payment gap between Medicare/Medicaid and private sector patient care as well.
According to the Milliman study, Medicare pays physicians 20 to 26 percent less than commercial insurers in King County, and 25 to 31 percent less elsewhere in the state. Medicaid pays 31 to 36 percent less than commercial insurers for children's office visits; 50 to 54 percent less for adult office visits; 11 to 18 percent less for maternity services; and 55 to 58 percent less for other medical services.
In all, Premera estimates nearly $1.4 billion in medical care costs -- $738 million in hospital costs and $620 million in physician costs -- were shifted to Washington employers and other commercial customers in 2004 as physicians and hospitals charged higher commercial rates to offset payment shortfalls from Medicaid and Medicare.
What is scary about this situation is that it is a trend and the trend looks set to continue for decades to come. The aging and dumbing down of the population will both continue. The aged and lower classes will vote for making the productive pay more.
You can read the full report: Payment Level Comparison Between Public Programs and Commercial Health Plans for Washington State Hospitals and Physicians" (PDF).
A previous study I linked to reported that costs of the medi
