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The Continuing Explosion in Healthcare Costs

4 Mins read

First posted on The Fickenscher Files on 3/4/2013

Essential health benefits are defined, but the cost of care continues to escalate in an unchallenged fashion…

First posted on The Fickenscher Files on 3/4/2013

Essential health benefits are defined, but the cost of care continues to escalate in an unchallenged fashion…

The cost of health care is very much the topic of the day.  It seems that every time I pick up the Washington Post, New York Times or Wall Street Journal–– there’s an article about issues related to health care and most of the topics revolved around the cost of care.  One element of the Accountable Care Act which was intended to assist on the cost front relates to essential health benefits (EHB).  To that end, DHHS recently announced their definition of EHB which will allow insurers and the states to move forward in defining their health insurance programs.  These programs need to be defined soon since it is required that by October 1, 2013 that health exchanges will need to offer the plans on a comparative basis.

Under the DHHS definition, there will be three levels of plans: the bronze (lowest cost) plan, the silver and gold plans, which will provide the most comprehensive set of sets for the best value; and, the platinum (highest cost) plan, which will have no medical or drug deductibles. Some examples of copays under the program are:

  • Regular Primary Care Visits = $60/year for 3 visits per year (bronze), $45 (silver and gold); and, $25 (platinum)
  • Subsidized Primary Care Visits (for those under the poverty line) = $45 (bronze and silver), $20 (gold); and, $4 (platinum)
  • Specialty Care Visits = $70 (bronze), $65 (silver and gold); and, $50 (platinum)
  • Subsidized Specialty Care Visits = $65 (bronze), $55 (silver), $25 (gold); and, $6 (platinum)
  • Urgent Care Visits = $120 (bronze), $90 (silver and gold); and, $50 (platinum)
  • Maximum Out-of-Pocket Expenses for a Family = $12,800 (bronze, silver & gold); and, $8,000 (platinum)

There are lots more details at the DHHS website on EHB definitions and regulations.  It’s clear that the feds made the copays rather high in an effort to discourage inappropriate use of emergency rooms and urgent care centers.  And, when you cut through all of the details, a family of four with an annual income of $35,000 would pay less than $120 per month after subsidies for health care coverage; and, a family of four at $47,000, would pay $247 per month.  So, the new program should at least help the lower income families to be able to afford health insurance which has been one of the biggest obstacles in getting the population insured.  This is a big change from the current situation where consumers frequently pay high monthly rates for care and then have daily maximums related to allowable charges.  The end result is huge bills that go to consumers with few resources following their hospitalizations.

Time Magazinerecently did an expose on charges in hospitals.  Some of the examples that were highlighted include:

  • A patient diagnosed with non-Hodgkin’s lymphoma where the chemotherapy charges were $83,900 and the charges for blood and lab tests amounted to more than $15,000.  In that situation with Medicare coverage, the blood and lab tests would have cost a few hundred dollars.  Why the discrepancy?
  • Compensation for hospital leaders was also highlighted with the President of MD Anderson being paid $1,845,000 in 2012 in addition to further compensation from outside interests as a result of providing some services to a couple of pharmaceutical companies. Is this the market for not-for-profit institutions?
  • At New York City’s Memorial Sloan-Kettering Cancer Center 14 administrators are paid over $500,000 a year, including six who make over $1 million. Is it the high cost of living in New York City or is something else going on?

Healthcare costs are a real issue that we need to get a grip on if we are not going to cripple the American economy.  With healthcare now approaching 20% of the nation’s GDP, clearly the future of healthcare is driving the future of the United States.  McKinsey & Co., recently did yet another study showing that the USA spends the more on healthcare than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia. We spend about $60 billion a week on healthcare or, the cost of cleaning up after Hurricane Sandy. Another shocking statistic – we spend more every year on artificial knees and hips in the USA than Hollywood collects at the box office.

Furthermore, the healthcare industry is one of the biggest lobbying groups in Washington, D.C.  According to the Center for Responsive Politics, the healthcare industry (hospitals, doctors, nursing homes, health insurers, pharmaceutical and health-care-product companies) spent $5.36 billion since 1998 on lobbying in Washington. We like to think that it’s those defenses contractors that are spending the most on making sure our politicians make the right decisions.  But, the expenditures in healthcare lobbying dwarf the $1.53 billion spent by the defense and aerospace industries and the $1.3 billion spent by oil and gas interests over the same period – or, almost double the amount of those two industries.

And the question is – are we getting value for the dollars expended?  In 2013, it is anticipated that the U.S. will spend $2.8 trillion on health care with just under one-third paid by the federal government, or about $800 billion through the Medicare and Medicaid programs, which provides care for the poor. That $800 billion, which keeps rising far faster than inflation and the gross domestic product, is what’s driving the federal deficit. The other $2 trillion will be paid mostly by private health-insurance companies and individuals who have no insurance or who will pay some portion of the bills covered by their insurance. This is what’s increasingly burdening businesses that pay for their employees’ health insurance and forcing individuals to pay so much in out-of-pocket expenses.

I keep pointing out that there is enough money sloshing around inside the healthcare system to easily solve the problem.  The comments of Don Berwick, MD (Former Administrator for the Centers for Medicare and Medicaid Services) have been widely reported where he commented that the amount of waste in the system amounts to nearly one-third of the total healthcare expenditures.

Which leads me to my suggestion that we should begin to focus onThe 30% Solution…

= a 30% reduction in healthcare costs

= a 30% increase in healthcare outcomes and quality; and,

= a 30% enhancement in healthcare service. 

Such an initiative will require the healthcare profession to take the lead, which we have not done to date.  The American public needs us to stand up and offer the suggestions.  The knowledge for cutting the waste dramatically from the current one-third of total healthcare costs is either available or can be developed through informatics and analytics.  If we don’t solve this problem – it will be solved for us!!  Count on it.  Now is the time to step up to the plate…

The post The Continuing Explosion in Healthcare Costs appeared first on The Doctor Weighs In.

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