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Physicians, Business, Professional and Information Technology Communities
Networking to Restore Accountability in HealthCare & Medical Practice
Tuesday, February 25, 2003
The Economics of Medical Care
George Yossif, MD, PhD, a psychiatrist, writes an essay in
Politicized Medicine. The opening paragraph succinctly places the
past decade of managed care and managed competition in perspective. “In
voluntary markets, private medicine included, the key knowledge necessary for
trade is conveyed by freely fluctuating prices. The price system conveys
knowledge of the personal and subjective utilities of the supply and demand of
various commodities and services, which cannot be compared otherwise. Demand for
ordinary medical care in voluntary markets is highly elastic and medical care by
physicians is largely optional, except for some categories of life-threatening
conditions, few in number and low in incidence, sometimes known as
‘catastrophic illness.’ As history shows, medical care in essentially
voluntary markets tends to be accessible and affordable. Sustained price
inflation in medical care is always a result of direct or indirect political
intervention. The lately much-touted competition between providers is not the
genuine competitive bidding for the satisfaction of the actual consumer of care,
the patient, as a free market would have it. On the contrary, this politically
created competition will further enhance and centralize the bureaucratic
controls on medical care, thus compounding, instead of reducing, the
inflationary effects of the multiple and pervasive political interventions
already in operation.”
How Does That Work in the Real World?
According to a report in the Sacramento Bee,
CalPERS, the California Public Employees’ Retirement System paid Tenet
Healthcare nearly 50 percent more than it spent at other hospital chains each
time members of the pension fund’s self insured health plans were hospitalized
last year. A hearing was scheduled with the California legislature. No
alternative or corrective approach was suggested.
As Yossif contends, restoring the voluntary market would make health care accessible and affordable while the direct or indirect political intervention will cause sustained price inflation. For example, Tenet Hospital in Redding, California, could not have gouged the insurance program for years without anyone noticing if the voluntary market were restored.
Really? Aren’t You Dreaming? Let’s Get Real.
In today’s health insurance environment, the insurance
carrier pays for 100 percent of a “take it or leave it” coercively
negotiated hospital charge with allowances for “outliers.” In this case the
Tenet charges were $15,213 per hospital stay. However, this was a 50 percent
increase over the $10,326 average for CalPERS. The patient pays
essentially nothing (a $50 to $100 fixed co-pay has no effect on either hospital
charges or patient utilization). The average length of stay (LOS) was not given
in the report. For our example, we’ll assume a five-day LOS at $3,000 per day
for Tenet instead of the $2,000 per day average for CalPERS.
It’s Not Just a CalPERS Problem–It’s Any Third
Party Payer Problem
MedicalTuesday has previously highlighted the
Medicare allegations of overcharging and over-utilizing cardiac catheterizations
and cardiac surgery at Tenet hospitals. The Sacramento Bee reports
that payment to Tenet was three times as high for cardiac surgery, and
utilization was also three times as high as that found in other hospitals in
California. It is now reported that neurosurgical and gynecologic procedures
were twice as high at Tenet hospitals than at the average California hospital.
It also appears that “stop-loss payments for off-the-charts high” outlier
charges average 25 percent of admissions at Tenet while only three percent in
the average California hospital.
The Army of Medical Reviewers Can’t Control the
Problem
At the back desk of every hospital nursing station
throughout America is a battalion of nurses and other reviewers who pour over
patient charts in order to evaluate necessity of care, to recommend items for
nonpayment to the insurance company (sometimes making the entire hospitalization
non-reimbursable), and to facilitate an early discharge. There are reviewers for
Medicare, Medicaid, Blue Cross/Blue Shield, private insurers, HMOs, IPAs and
essentially all third-party payers, and they are referred to as the “Cops in
White.” These nurses started wearing street clothes so they wouldn’t be
mistaken by doctors as clinical nurses who take care of patients. By some
estimates, this infantry of reviewers and the departments in each organization
they represent adds 10 percent to 20 percent or more to the cost of health
care–perhaps exceeding the savings in early discharges?
Bureaucracies and Third Party Payers Can Never Be
Sure Who’s in Charge
In the afore mentioned report, CalPERS has paid the excess
for more than a year. The report mentions the legislative hearing and that
everyone seems to be blaming everyone else. Professor Glenn Melnick, a professor
of health policy at the University of Southern California, stated, “It’s
shocking that Blue Cross and CalPERS have not caught this sooner and done
something to stop Tenet from gaming the system.” Blue Cross spokesman Michael
Chee countered that the insurer has no control over how often CalPERS members
seek hospital care. “They pay us to use our network of hospitals at the rates
we negotiate, but we do not have any involvement in the medical care CalPERS
members receive.” I’m sure that after months of litigation, each side with
their team of attorneys, charging more per day than the hospitalization costs,
will never be able to determine who’s in charge.
The Medical MarketPlace Would Solve the Problem by
the Second Day of Gouging
MedicalTuesday’s position, from anecdotal
observations pending further actuarial analysis, is that a 10 percent co-payment
on the hospital bill returns hospital care to the voluntary free market and puts
the patient in charge. In this case if the patient had to pay 10 percent of the
hospital charges, he/she becomes aware of the charges at the end of the first
day. The patient, or the patient’s family, compares this cost with the charges
at another hospital in Redding, California, and find that the charges at the
competition is $2000 per day as opposed to the daily $3,000 the patient is being
charged. Thus the co-payment of $300 per day instead of $200 per day will
immediately put things into focus. Currently there is no daily co-payment.
Therefore, no one cares which hospital is used. Hospital charges are irrelevant
to the patient. But with a daily percentage co-payment, the patient will dial the
business office of Tenet Hospital before noon on the second day demanding that
they either meet the competition or order an ambulance to transfer him to the
hospital that charges $1,000 less a day or on average, $5,000 less per admission
saving the patient $500 of co-payment. The gouging stops within 48 hours in the
free Medical MarketPlace and not years downstream. Thus Dr Yossif is correct.
It’s the bureaucracy that causes price inflation. The Medical MarketPlace with
competitive bidding for the patient, reduces the cost of medical care to the
lowest possible denominator. And the war zone between hospital, carrier,
patients, physicians and other providers disappears. All players are friendly
again instead of adversaries.
The Galen Institute, a Not-For-Profit Health and Tax
Policy Research Organization
This week we heard from Grace-Marie Turner, Founder of
The Galen Institute, who announced the launch of a new “Center for
Consumer Driven Health Care” and named Greg Scandlen as its
director. She states the time is ripe to focus clearly on the growing movement
to empower consumers in health care. She states that Greg Scandlen is
uniquely qualified because of his extensive experience in both health policy and
the health insurance marketplace. Ms Turner writes a weekly Health Policy
Newsletter to which you may subscribe by sending an email to her at gracemarie@galen.org.
Her letter stated the following: “For decades, consumers have had less freedom
and fewer choices in purchasing health care than in virtually any other sector
of the American economy. For those with health coverage, choices are often
limited and dictated by either public or private sector bureaucracies. Consumers
have seldom known the full cost of their health care, making it virtually
impossible for a true market to function. After years of an intense national
debate over health care reform, politicians at all levels of government have
produced many counterproductive and even harmful attempts at solutions. Many
were based on an erroneous premise that ‘health care is different and too
important to be left to the individual.’ We believe that health care decisions
are too important not to be left to the individual. There are many serious
health care problems that must be attended to: how to provide access to
prescription drugs for senior citizens, coverage for the uninsured, and health
security for pre-retirees. There is a right way and a wrong way to achieve each
of these goals - our challenge is to point the right way.” MedicalTuesday
welcomes Grace-Marie Turner and the Galen Institute into our Tuesday gathering
of concerned individuals and institutions working towards a patient centered
Medical MarketPlace.
Greg Scandlen Reminds Us That Universal Health
Proposals Are Not Dead Yet
Greg in his Consumers Choice Matters reports: Business
Insurance has an article by Judy Greenwald that shows some ideas will
never die. Despite losing by four to one in the recent elections in Oregon, the
Single Payer folks have a zombie-like ability to rise from the dead. The article
repeats some of the tired old slogans -- "the United States is the only
industrialized nation in the world that does not guarantee health care to all
its citizens." (Yeah, and the Soviets "guaranteed" everyone bread
- they just didn't say when.) The article looks at some of the activities going
on in Oregon, California, Maryland, Illinois, and Maine. See: www.businessinsurance.com/cgi-bin/article.pl?articleId=12323&a=a&bt=universal
health care
Physicians Should Be Like Mules.
A MedicalTuesday devotee suggests that physicians
become more like the mules that refused to move. Like physicians, they were
beaten savagely. Finally the farmer built a fire and the mules moved a few
paces–just enough to get themselves out of the fire and the wagon over it. The
wagon burned, the grain burned and the farmer was ruined. Without the wagon, the
mules were free again. She states that she has gotten the government out of her
office so that she is free again to serve her patients.
Medical Gluttony or Unnecessary Medical Care
A 40-year-old male patient with asthma was seen after a
motor vehicle accident (MVA). He had several sore muscles. Although he had no
medical insurance, he wanted physical therapy which would be paid by the medical
coverage in his auto insurance. I agreed with two weeks physical therapy, three
visits per week. He was immediately issued a TENS pain management unit and told
it was his to keep. The physical therapist told him they would bill his
insurance $400 for the unit and treated him twice as long as prescribed. After
that time, an authorization request came for me to authorize the four weeks of
treatment and prescribe the TENS unit for billing purposes. With approximately
20 million MVAs in the US per year, we can safely assume that at least 10
million people would have a sore muscle or two and have some reason to benefit
from physical therapy. If they were all distributed a $400 TENS unit, that would
be $4 Billion in largely unnecessary health care costs. An outpatient co-payment
of 30 percent on the $400 would have produced at least a 50 percent to 90
percent reduction in health care costs without even one “cop in white”
reviewing the record.
The MedicalTuesday Network Recommends the Following
in Restoring Accountability in Government and Society:
• The National Center for Policy Analysis, John C
Goodman, PhD, President, issues a weekly Health Policy Digest which
is a health summary of the full NCPA daily report. You may log on to NCPA (www.ncpa.org)
and register to received one or more of these reports.
• The Mercatus Center at George Mason University
is a strong advocate for accountability in government. Nobel Laureate Vernon
L Smith, PhD, has recently joined its Economics faculty. Last week we heard
from Dr Paul Edwards, President, introducing J C Watts, as a
Distinguished Visiting Scholar after eight years in Congress. He joins Lawrence
Kudlow, of Kudlow & Cramer on CNBC, a Distinguished Scholar, and Maurice
McTigue, QSO, also a Distinguished Visiting Scholar, who was instrumental in
revolutionizing the way government did business in New Zealand from 1984 to
1994. By looking at how effective every single government program was in
achieving the required results, New Zealand went from having the most socialized
and highly-regulated economy of any western-style democracy, to having the
freest, reducing the cost of government from nearly half the GDP to slightly
over a quarter of the GDP. He is optimistic about making the same progress in
the US. The Mercatus Center recently published a pamphlet, “A Day in the
Life of a Regulated American Family,” that documents the costs of $8,000
the average American family pays per year to meet government regulations. (So
you thought July 4, Independence Day was the day you start working for yourself
having paid your tax obligations? Well try Labor Day, The First Monday in
September, as the day we begin laboring for ourselves having completed our
financial servitude to the government.) Please log on at www.mercatus.org
to read the government accountability reports and information on Dr Smith’s
economic experiments that help us understand health care issues. You can also
register to receive updates.
• Greg Scandlen, whose research at the NCPA we
used frequently over the past year from his Health Policy Comments, has been
named the Director of a new “Center for Consumer Driven Health Care” at the
Galen Institute and has a New Weekly Health Care News Letter: Consumer Choice
Matters. Please subscribe to this very informative and well outlined health
care newsletter by logging on to www.galen.org.
The first entry to this week’s Consumer Choice Matters is copied above
and the entire issue can be found at http://www.galen.org/happenings/ccm021803.html.
• The Galen Institute, Grace-Marie Turner President
and Founder, has a weekly Health Policy Newsletter to which you may
subscribe by sending an email to gracemarie@galen.org.
• Martin Masse, director of the Montreal Economic
Institute, is the publisher of the webzine: Le Québécois Libre.
Please log on at www.quebecoislibre.org/apmasse.htm
to review his free market-based articles, some will allow you to brush up on
your French You may register to receive copies of his webzine on a regular
basis.
• The Ludwig von Mises Institute, Lew Rockwell,
President, is a rich source of free market materials, probably the best
daily course in economics we’ve seen. If you read these essays on a daily
basis, it would probably be equivalent to taking Economics 11 and 51 in college
with considerably less bias. Please log on at www.mises.org
to obtain the foundation’s daily reports. You may also log onto Lew’s
premier free market site at www.lewrockwell.com
to read some of his lectures to medical groups such as how state medicine
subsidizes illness.
• Hillsdale College, the premier institution for
producing graduates that understand Free Market accountability, receives no
federal subsidies which places them at a monetary disadvantage to all other
colleges and universities. They recognize that the price of freedom is never
cheap. You may log on to www.hillsdale.edu
to register and receive Imprimis, the national speech digest that
reaches over one million readers each month. Last month Imprimis
featured Charles Krauthammer, MD, a psychiatrist at Mass General prior to
becoming a journalist in Washington, DC, and is a member of President Bush’s Council
on Bioethics.
• Robert Cihak, MD, writes an informative Medicine
Man column which has recently moved from WorldNetDaily to NewsMax.
Please log on at http://www.newsmax.com/pundits/Medicine_Men.shtml
or subscribe by sending Bob an email at rcihak@techline.com
You may read his current column at http://newsmax.com/archives/articles/2003/2/11/125226.shtml
MedicalTuesday Supports These Efforts in Restoring
the Doctor & Patient Relationship:
• PATMOS EmergiClinic - www.emergiclinic.com
where Robert Berry, MD, an emergency physician and internist, provides
prompt care for many of the injuries and illnesses treated in Emergency Rooms at
a fraction of their cost as well as an internal medicine practice;
• Dennis Gabos, MD, President of the Society for the
Education of Physicians and Patients (SEPP) www.sepp.net
for making efforts in Protecting, Preserving, and Promoting, the Rights,
Freedoms and Responsibilities of Patients and Health Care Professionals, with a
special page for our colleagues in nursing;
• Drs David MacDonald and Vern Cherewatenko for
their success in restoring private based medical practice which has grown
internationally through their SimpleCare model network, www.simplecare.com;
Dr Dave has also partnered with Ron Kirkpatrick to start the Liberty Health
Group (www.LibertyHealthGroup.com)
to assist physicians by helping them control their medical benefit costs for
their staff and patients. He says, “More importantly, we educate and empower
their employees and patients regarding the benefits of payment at the time of
service.” He is available to speak to your group on a consultative basis. You
may contact him at DrDave@LibertyHealthGroup.com.
• HealIndiana as a supporter of market-based
medicine, www.HealIndiana.org;
• The Association of American Physicians &
Surgeons, (www.AAPSonline.org) The Voice
for Private Physicians Since 1943, representing physicians in their
struggles against bureaucratic medicine and loss of medical privacy. The monthly
AAPS News for March written by the Executive Director, Jane Orient, MD,
is must reading. She points out the government’s attempt to delay the
bankruptcy of Medicare involves not only fee cuts for physician’s future
services, but retroactive “recovery” of payments made for services rendered
years previously which is far more vicious. With penalties of up to $11,000 per
line of claim, Medicare’s best targets, one at a time, are highly productive
physicians over the ago of 50, who are terrified of spending years in prison
with racketeers and thugs and have assets to pay huge settlements. A claim for a
visit which may require 10 lines of code, for which the physician may have
received less than $100, will provide a large infusion of over $100,000 to keep
Medicare solvent for a few years longer. The AAPS has documented fines as large
as $10 million against physicians for code discrepancies which have been made
into a violation in legal retrospect.
Stay Tuned to the MedicalTuesday.network and Have
Your Friends Do the Same
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and your name will be sorrowfully removed.
Del Meyer
Del Meyer, MD, CEO & Founder
DelMeyer@MedicalTuesday.net
www.MedicalTuesday.net