Over the past 11 months, I have interviewed dozens of people and had rewarding opportunities to speak with community audiences about healthcare. As I have spoken with groups about this issue, I have been amazed that when we connect as citizens the media noise and the political rhetoric disintegrates. Healthcare is an issue we all care about and we all want clear answers. Therefore, for the next few weeks I will be doing a series called “Concerns from the Community”. These are questions and concerns raised to me by people I have met through speaking engagements, e-mails, phone calls and my Facebook page.  |
| Mike of Lebanon County |
Mike is a Lebanon County resident that met Congressman Jim Gerlach at a community event at Lebanon Valley Agricultural Center. The two men were discussing the contributions to the rising cost of healthcare, a reality that we all agree on. Between 1980 and 2010, healthcare expenditures have ballooned 10 times. What we don't necessarily agree on is ...WHY?
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| Congressman Gerlach |
The Congressman alleged that in order to curtail healthcare costs, we need “tort reform”, curtailing law suits against doctors and therefore causing doctors to practice what has come to be called “defensive medicine”. This position states that doctors may order extra, and possibly unnecessary, tests in order to prevent being sued. This was a common statement heard during the healthcare debates that consumed the years 2008-2010. Mike on the other hand contended that it was overspending on administrative costs (dealing with insurance) that were the primary inflater of healthcare spending.
The reality: They are both correct. Mike however, is a little more correct. According to a study published in Health Affairs in 2010, 2.4% of all healthcare spending can be attributed to liability or tort. Administrative costs however are larger. According to the Kaiser Family Foundation, administrative costs are cited as being one of the larger drivers of costs at 7% (1% of which is for government programs and 6% for private insurance).
While this is an important discussion to have between a congressman and citizen, let’s look
at the most critical drivers of healthcare costs. These being the impacts of a rapidly aging population, rising rates of chronic disease, rapid development of advanced equipment and the rise in the use of prescription drugs. In other words, we are getting older, sicker and require a lot more expensive healthcare practices than past generations.
The PPACA includes many cost containment measures. The first addressing Mike’s concern at the consumer level is the Medical Loss Ratio (MLR). This provision states that 85% of a patient’s healthcare premiums need to go to actual medical care and not administrative costs. Currently, on the individual insurance market, only 43% of plans meet MLR. Second, the health insurance exchanges/marketplaces, where individuals who don’t receive employer sponsored insurance as well as small businesses can purchase insurance, will create greater transparency of prices and more competition.
Finally, many strategies are in place at looking at the ways that doctors are paid. For example, some strategies look at offering incentives for keeping patients well through more patient centered care, often referred to as a “medical home”. The basic principle is to focus on wellness, prevention and methods to keep patients out of a costly hospital stay where patients are at a higher rate of complicating conditions by infection. The idea is to veer away from the "fee for service" model we currently utilize. TR Reid highlights these measures in his recent documentary US Healthcare: The Good News and illustrates many of the findings from Dartmouth’s infamous Atlas Study.
While the PPACA has been a big step in improving access to healthcare for millions, offering much needed consumer protections, and takes some steps towards reigning in costs, there is one major factor it does not address. This is the fact that in the United States we have no price controls on healthcare services and we pay more for almost every major procedure than any other developed nation in the world according to a recent study done by the International Federation of Health Plans. For example, an MRI in the United States costs $1080 and in France it is under $300.
So while Mike, The Congressman and the rest of us begin to wrap our heads around the PPACA, keep in mind that this challenge is far from over. All we can hope is that in the next round we have learned from our experience to turn down the noise and set aside the political games in order to actually get something done.
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| Spending on Healthcare in the US |
