The CEA has just issued a report on health care, yes another report with the same data just put on different pdf files. The CEA report starts with saying:
"The inefficiencies behind the empirical estimates have been widely reported. Among the
most frequently cited are:
"The inefficiencies behind the empirical estimates have been widely reported. Among the
most frequently cited are:
- We spend a substantial amount on high cost, low-value treatments.
- Patients obtain too little of certain types of care that are effective and of high value.
- Patients frequently do not receive care in the most cost-effective setting.
- There is extensive variation in the quality of care provided to patients.
- There are many preventable medical errors that lead to worse outcomes and higher costs.
- Our system is complex and we have high administrative costs."
The report goes on to detail the above in some manner:
"Provider incentives. Most provider payment systems are fee-for-service, which creates
financial incentives for doctors and hospitals to focus on the volume of services that they deliver rather than the quality, cost, or efficiency of care delivery. In general, payment systems do not reward higher quality and value. In some cases, they reward poor quality of care by paying for the costs associated with additional medical care necessary to fix errors that could have been prevented."
This assumes that the providers are continually making mistakes. It further assumes that the providers are deliberately making errors to benefit themselves. In reality the provider has been pushed to the wall in by processing as many patients as possible to meet the limited reimbursements that they receive and then having to see the patient again. This statement denies patient fault. First patients do not always tell their physician everything and often tell the physician the wrong thing. Second patients do not comply with good health habits. Morbidly obese patients will undoubtedly come down with Type 2 Diabetes and a plethora of other ailments and they in almost all cases will just want more medication and more care rather than taking responsibility for their health. One need look no further that the CEA itself for examples of this unacceptable behavior! One should not throw stones in a glass house!
"Limited financial incentives for consumers. While health insurance provides valuable
financial protection against high costs associated with medical treatment, current benefit designs often blunt consumer sensitivity with respect to prices, quality, and choice of care setting. There is well documented evidence that individuals respond to lower cost-sharing by using more care, as well as more expensive care, when they do not face the full price of their decisions at the point of utilization.."
I agree, the patient must have some "skin in the game". Medicare patients do, they often spend more for their health care than does Medicare itself. Remember that Medicare does not provide for full reimbursement, thus a Medicare patient on a fixed income is often a judicious user of health care. In contrast a UAW retiree who has a UAW pension and health care plan with 100% coverage now guaranteed by the US Government could give a damn! We just created a monster in that group thanks to the Government. We can reduce some of this by taxing medical benefits, and by treating medical insurance as we do auto insurance, I will leave that for another day however.
"Pricing of medical treatment. There are relatively few forces in health care markets that lead to price reductions in the way that we observe price reductions in other sectors of the economy when new technologies are introduced and diffused. Many administered pricing systems, such as those used by Medicare and some private plans, are slow to adjust for productivity improvement or decreasing marginal costs of production that come as new medical procedures are routinized and providers acquire experience. One example of this is CT scan technology, whereby a procedure on an older 8- or 16-slice machine may be reimbursed at a similar rate as one on a newer 32- or 64-slice model..."
Unfortunately the pricing is determined by the Government and not the provider. The provider must follow the rules as dictated by the Government and in turn the third party insurers. As to CAT scans, the problem is not the equipment it is the overhead costs and the radiologist costs. The cost allocation of the CAT scan capital plant is de minimus compared to the other costs. I did this analysis over twenty years ago, and nothing much has changed. It applies to all imaging studies. Thus the CEA report here is just plain wrong but the principle is correct.
"Fragmentation. Within the United States, patients receive care from a variety of independent and often competing organizations. Poor information flows across provider organizations and misaligned incentives can lead to higher utilization and costs, as well as poorer health outcomes. There is some evidence that vertically integrated provider systems (such as Kaiser Permanente, Geisinger, and Mayo Health System) can better manage costs and coordinate high-value treatment plans with patients, resulting in higher quality of care. Fragmentation of the system also leads to higher administrative costs. Because there is a lack of standardization around billing systems, forms, and benefit designs, additional personnel are needed in hospitals and physicians offices to handle administrative functions for different payers..."
Yes, the overhead has exploded and yes health care in the world of the private practitioner has exploded with overhead. Forty years ago I could have started a simple Internal Medicine practice with a nurse and office manager. Now I would need six people! The billing alone is a nightmare. There is a continuing battle between the insurers and the practice with denial and delay which is just another form of denial! But wait, are hospitals any more efficient, I think not. In fact when you add the union costs and overhead they become more expensive. The solution, fix the billing system, it is easy and we have provided options in our many reports.
"Lack of information for providers. Medical care has become increasingly specialized and complicated, and patients do not always receive care that fully complies with current clinical guidelines. Often, it is exceedingly difficult for providers to keep up with the best available evidence regarding the clinical risks and potential health benefits of alternative treatments. In the United States, there are few coordinated efforts to objectively quantify the benefits of new devices, drugs, and procedures for diagnosing and treating diseases relative to their predecessors..."
Now this one is a real grabber! This is the CCE argument. Now that Mr US Government is running GM we can trust that Dr US Government will rewrite Harrison's and place it on the White House web site so that the best practices are handed down to all via an electronic medical record system. And we think the nut case in North Korea has a complex! Physicians are human and mistakes are made. But that is why health care is segmented. A goo Internist knows when they should pass on a neurological problem, and a gynecologists knows when to hand it over to an oncologist. Physicians do communicate and they do continue to educate themselves. The CME requirements and the re certification are only small steps in that direction.
"Lack of comprehensive performance measurement and feedback. Performance measurement provides a way for physicians to determine how well or poorly they are doing with respect to delivering recommended care, using resources, and patient outcomes. There is some evidence that when physicians receive data on their clinical performance, they change behavior in ways that can improve outcomes."
Yes indeed feedback is important. Interestingly enough there is some of that with physician reviews by patients. However a good statistical process evaluating a physician's performance would be useful if it results in both improvement of performance and in improvement of quality of service.
"Lack of information for consumers. During the past several years, there have been important investments by government and private organizations to develop better information resources for consumers. However, large gaps still exist with respect to the availability of information on the effectiveness of alternative treatment options, preventive care recommendations, physician quality, and transaction prices for specific medical services. Without this, consumers are not able to make informed decisions when they select providers and treatments—choices that may affect their out-of-pocket costs, the quality of care they receive, and their health outcomes. For example, when a patient lacks information on the number of times a provider has performed a particular procedure, he or she may choose to go to a low-volume hospital for a complex procedure..."
This is a bit of a difficult problem. Take the patient with prostate cancer. He may decide that he needs a prostatectomey and decided that the best surgeon is at Hopkins. Can he then demand that provider and at what cost. Again on the issue of prostatectomy versus watchful waiting we have argued based upon clinical data that there is truly no way to effectively assess that risks since this is a gene expression issue. The patient may have a very aggressive cancer and we may not perform the gene expression test to ascertain that fact.
The CEA then goes on and performs a back of the envelope calculation and then states:
"Provider incentives. Most provider payment systems are fee-for-service, which creates
financial incentives for doctors and hospitals to focus on the volume of services that they deliver rather than the quality, cost, or efficiency of care delivery. In general, payment systems do not reward higher quality and value. In some cases, they reward poor quality of care by paying for the costs associated with additional medical care necessary to fix errors that could have been prevented."
This assumes that the providers are continually making mistakes. It further assumes that the providers are deliberately making errors to benefit themselves. In reality the provider has been pushed to the wall in by processing as many patients as possible to meet the limited reimbursements that they receive and then having to see the patient again. This statement denies patient fault. First patients do not always tell their physician everything and often tell the physician the wrong thing. Second patients do not comply with good health habits. Morbidly obese patients will undoubtedly come down with Type 2 Diabetes and a plethora of other ailments and they in almost all cases will just want more medication and more care rather than taking responsibility for their health. One need look no further that the CEA itself for examples of this unacceptable behavior! One should not throw stones in a glass house!
"Limited financial incentives for consumers. While health insurance provides valuable
financial protection against high costs associated with medical treatment, current benefit designs often blunt consumer sensitivity with respect to prices, quality, and choice of care setting. There is well documented evidence that individuals respond to lower cost-sharing by using more care, as well as more expensive care, when they do not face the full price of their decisions at the point of utilization.."
I agree, the patient must have some "skin in the game". Medicare patients do, they often spend more for their health care than does Medicare itself. Remember that Medicare does not provide for full reimbursement, thus a Medicare patient on a fixed income is often a judicious user of health care. In contrast a UAW retiree who has a UAW pension and health care plan with 100% coverage now guaranteed by the US Government could give a damn! We just created a monster in that group thanks to the Government. We can reduce some of this by taxing medical benefits, and by treating medical insurance as we do auto insurance, I will leave that for another day however.
"Pricing of medical treatment. There are relatively few forces in health care markets that lead to price reductions in the way that we observe price reductions in other sectors of the economy when new technologies are introduced and diffused. Many administered pricing systems, such as those used by Medicare and some private plans, are slow to adjust for productivity improvement or decreasing marginal costs of production that come as new medical procedures are routinized and providers acquire experience. One example of this is CT scan technology, whereby a procedure on an older 8- or 16-slice machine may be reimbursed at a similar rate as one on a newer 32- or 64-slice model..."
Unfortunately the pricing is determined by the Government and not the provider. The provider must follow the rules as dictated by the Government and in turn the third party insurers. As to CAT scans, the problem is not the equipment it is the overhead costs and the radiologist costs. The cost allocation of the CAT scan capital plant is de minimus compared to the other costs. I did this analysis over twenty years ago, and nothing much has changed. It applies to all imaging studies. Thus the CEA report here is just plain wrong but the principle is correct.
"Fragmentation. Within the United States, patients receive care from a variety of independent and often competing organizations. Poor information flows across provider organizations and misaligned incentives can lead to higher utilization and costs, as well as poorer health outcomes. There is some evidence that vertically integrated provider systems (such as Kaiser Permanente, Geisinger, and Mayo Health System) can better manage costs and coordinate high-value treatment plans with patients, resulting in higher quality of care. Fragmentation of the system also leads to higher administrative costs. Because there is a lack of standardization around billing systems, forms, and benefit designs, additional personnel are needed in hospitals and physicians offices to handle administrative functions for different payers..."
Yes, the overhead has exploded and yes health care in the world of the private practitioner has exploded with overhead. Forty years ago I could have started a simple Internal Medicine practice with a nurse and office manager. Now I would need six people! The billing alone is a nightmare. There is a continuing battle between the insurers and the practice with denial and delay which is just another form of denial! But wait, are hospitals any more efficient, I think not. In fact when you add the union costs and overhead they become more expensive. The solution, fix the billing system, it is easy and we have provided options in our many reports.
"Lack of information for providers. Medical care has become increasingly specialized and complicated, and patients do not always receive care that fully complies with current clinical guidelines. Often, it is exceedingly difficult for providers to keep up with the best available evidence regarding the clinical risks and potential health benefits of alternative treatments. In the United States, there are few coordinated efforts to objectively quantify the benefits of new devices, drugs, and procedures for diagnosing and treating diseases relative to their predecessors..."
Now this one is a real grabber! This is the CCE argument. Now that Mr US Government is running GM we can trust that Dr US Government will rewrite Harrison's and place it on the White House web site so that the best practices are handed down to all via an electronic medical record system. And we think the nut case in North Korea has a complex! Physicians are human and mistakes are made. But that is why health care is segmented. A goo Internist knows when they should pass on a neurological problem, and a gynecologists knows when to hand it over to an oncologist. Physicians do communicate and they do continue to educate themselves. The CME requirements and the re certification are only small steps in that direction.
"Lack of comprehensive performance measurement and feedback. Performance measurement provides a way for physicians to determine how well or poorly they are doing with respect to delivering recommended care, using resources, and patient outcomes. There is some evidence that when physicians receive data on their clinical performance, they change behavior in ways that can improve outcomes."
Yes indeed feedback is important. Interestingly enough there is some of that with physician reviews by patients. However a good statistical process evaluating a physician's performance would be useful if it results in both improvement of performance and in improvement of quality of service.
"Lack of information for consumers. During the past several years, there have been important investments by government and private organizations to develop better information resources for consumers. However, large gaps still exist with respect to the availability of information on the effectiveness of alternative treatment options, preventive care recommendations, physician quality, and transaction prices for specific medical services. Without this, consumers are not able to make informed decisions when they select providers and treatments—choices that may affect their out-of-pocket costs, the quality of care they receive, and their health outcomes. For example, when a patient lacks information on the number of times a provider has performed a particular procedure, he or she may choose to go to a low-volume hospital for a complex procedure..."
This is a bit of a difficult problem. Take the patient with prostate cancer. He may decide that he needs a prostatectomey and decided that the best surgeon is at Hopkins. Can he then demand that provider and at what cost. Again on the issue of prostatectomy versus watchful waiting we have argued based upon clinical data that there is truly no way to effectively assess that risks since this is a gene expression issue. The patient may have a very aggressive cancer and we may not perform the gene expression test to ascertain that fact.
The CEA then goes on and performs a back of the envelope calculation and then states:
- Improved Efficiency Raises Standards of Living
- Slower Cost Growth Would Prevent Disastrous Budgetary Consequences and Raise National Saving
- Slower Cost Growth Would Lower Unemployment in the Short and Medium Runs
The level of analysis to reach these conclusions is rudimentary at best. They are self serving most likely and they will be harmful at worst.
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