Tag Archives: health care

The Wide Disparity of Pricing for Healthcare Services is Just a Taste of the Problems Yet to Come

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This past week, ABC News reported on the practice of the Northside Hospital System in Atlanta of charging outrageous prices for their services. They cited the bill of one patient where they did a line by line analysis of charges. What they found were many examples of line items for which the patient was charged exorbitant prices for things that the hospital could purchase through its suppliers for a tiny fraction of the cost. One of the most glaring examples was a pill for which the patient was charged several hundred dollars in spite of the fact that the hospital could purchase it for less than a nickel.

Hospitals across the country engage in such pricing strategies, to one degree or another, in order to make up for losses as a result of low reimbursement rates by health insurance, managed care companies, Medicare, and Medicaid and also as the result of the cost of doing business in a dysfunctional system.

This practice is considered a strategy of necessity by providers of many healthcare services simply because that is the way the fee-for-service, zero-sum billing game has evolved. Payers establish reimbursement rates that enable them to stay in business, which means making a profit. And, do not be confused by hospitals that claim to be not-for-profit for even these providers must be able make money if they want to stay in business. The only differences are the uses of the profits and the bank accounts into which the dollars must inevitably be deposited.

Every billable medical or hospital procedure results in high-stakes competition to determine where those dollars will end up. Health insurance, managed care companies and other payers set reimbursement rates and also make providers jump through hoops as part of the claims processing strategy to look for any reason to justify denial of the claim. This forces providers to develop coding and billing strategies to optimize their revenue generation and also requires them to file and refile claims. It is a zero-sum game in which there are winners and losers in the competition for each and every healthcare dollar, not counting the patients who almost always are losers in the billing game.

What charges are not reimbursed by the various third-party payers are then billed to patients. Some of the money is eventually collected and much of it must be written off. Families burdened by outrageous medical and hospital bills is the single greatest cause for most of our nation’s personal bankruptcies. The write-offs necessitate new and more innovative charging and billing strategies. It is a vicious circle that drives up the cost of care enormously. Although we have seen some improvement, in recent years, in the rate of increase of aggregate healthcare costs, for at least two full generation the rates of increase have been substantially higher than the Consumer Price Index (CPI). There have been many years when the rate of increase has been double- or triple the rate of the CPI. Higher costs require providers to increase prices, which requires insurers to increase premiums on a merry-go-round that is anything but merry to the patients.

When we think about the number of healthcare dollars that never end up in the hands of providers of actual medical, hospital, or ancillary care, it can be a staggering amount. The insurance, managed care, and government payers always underestimate the percentage of dollars that are allocated to the administration process relative to those spent on direct care to patients. That cost is not just the cost of doing business for the private and public payers (which for the private payers must include profits) it also includes every dollar spent by providers for the purpose of coding, billing, claims processing, and management of receivables.

It truly is an outrageous process but it is the inevitable companion to the practice of fee-for-service (FFS) medicine in a market driven by health insurers and other third-party payers and processors.

The process is so complex that, in spite of claims on the part of health insurance and managed companies to the contrary, there is no accountability. Incompetent and inefficient providers pay no penalty for their poor performance and both the best and the worst providers survive no matter what the level of patient satisfaction.

Free market forces, in the true sense of the concept simply do not function in healthcare.

The biggest problems in healthcare in America, whether speaking of quality, cost, or access are the inevitable outcomes of a system driven by health insurance, Managed, care and other third-party providers; both public or private.

That Obamacare or, more correctly, the Affordable Care Act, (or more appropriately the Affordable Health Insurance Act) commits us to a health-insurance driven market is a recipe for continuing and escalating disaster. The motivation of Obama and the members of congress who finally chose to act was admirable if misguided. We have tried to fix a system driven by forces that even our smartest people seem unable to comprehend with a solution that can only aggravate an already tragic reality.

It is, truly, a national embarrassment that so many citizens of what we consider to be the richest and most powerful nation in the history of the world must deal with illness and injury of themselves and their families without access to what we also describe as the highest quality healthcare on the planet.

What makes the situation most ludicrous is that it is our stubbornness and our prejudices that keep us from embracing a solution that will provide comprehensive healthcare and prescription drugs to every single American man, woman, and child, without relying on socialized medicine, at a cost that will save the American people trillions of dollars.

My book, Radical Surgery: Reconstructing the American Health Care System, lays out a healthcare plan that will give us everything we need, at a reasonable cost, without any of the things that the American people seem to fear, pathologically.

Don’t believe me? Check it out!

Are Free Market Forces Good for Healthcare?

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Contrary to popular belief, the problems with the American Health Care System are not the result of market forces run amok. In fact, just the opposite is true. The American health care system languishes because the forces of the free market are unable to exert their influence. Imagine, if you will, how our free market system would look if it functioned like our health care system.

Imagine that you are sitting at home, watching television, and something feels out of sync. You can’t put your finger on what it is you are feeling but it is nagging at you and keeping you out of sorts. After a few days, the problem seems to be worsening and you are really beginning to worry. Finally, you pick up the phone and place a call to your local retail professional and make an appointment.

On the appointed day you arrive at your local mall or shopping center and you describe your symptoms to your retail professional. Your retail professional listens intently, asks a few questions, and then diagnoses your problem and offers a treatment protocol to make you feel better. Your retail professional tells you that the problem is that your home entertainment system is not meeting your minimum daily requirements. As a solution, your retail professional tells you that what you need is a new home entertainment system with state-of-the-art technology.

Now, it just so happens that you retail professional has the perfect home entertainment system to sell to you and guess what? It’s covered by your retail insurance policy. In checking your benefits it turns out that you’ve already satisfied your deductible so your insurance is going to cover eighty percent of the total cost of your new system.

What your retail professional may not explain to you is that your home entertainment system exceeds the usual and customary charges for such items so the insurance is not going cover your retail professional’s full cost. She’s not worried, however, because there are a number of accessories she can sell to you that are covered and these will more than make up for the difference.

I know this sounds a little silly, but think about how our free market economy would work if the merchants with whom we do business would decide for us what we need and how much we are going to pay, and that we would be happy to accept their decisions without question because our insurance is going to pay for the merchandise, anyway. This is exactly how the healthcare system works today and we wonder why costs continue to rise at or above the rate of the Consumer Price Index.
The problem with the American health care system is not that doctors make too much money, the problem is that the incentives in healtcare reward the wrong behavior. The problem is not that health insurance companies, managed care, Medicare or Medicaid absorb huge chunks of our health care dollar, the problem is that these entities exist at all.

Think about it for a moment. If we really want to provide universal health care what value do health insurance, managed care, Medicare and Medicaid contribute? Don’t these entities exist to restrict access to care to only those who are eligible for coverage? Don’t these entities exist to limit care to only those services that are covered by our schedule of benefits and for which we have paid?

If we want to provide comprehensive health care to all Americans we have to change the way we think about our health care system. There is a solution but it resides outside the boundaries of conventional thinking.

Visit my website atwww.melhawkinsandassociates.com and check out my book, Radical Surgery: Reconstructing the American Health Care System. In fact, tell all of your friends about it.

America: A Leadership Crisis of Great Urgency!

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During the recent crisis with Syria, the Russian government as stepped up to offer a solution. What was most interesting was that Vladimir Putin, the Russian President, chided the U.S., in response to a statement by President Obama, noting that “It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation.”

However much we might resent Putin’s audacity to say such a thing, maybe we need to stop and think about the possibility that he could be correct.

Any illusions we might have had regarding the invulnerability of the United States as the richest and most powerful nation in the world were surely shattered in the wake of Standard and Poor’s decision to downgrade our nation’s credit rating in 2011. Our inability to dictate our political and military will in the Middle East and the blatant hatred demonstrated by the people who have attacked our Embassies are examples of a recurring theme that challenges our nation’s belief in itself as somehow special.

Maybe it is time for the American people to step back and take stock of who we are and how rate when compared to other developed and developing nations in the world.

The U.S. national debt is measured in trillions of dollars, with China, the single greatest challenge to our economic supremacy, our largest creditor. Our ability to compete in the world marketplace over the next half-century is dependent on the quality of the American workforce, which, itself, is powered by the American educational system. According to The Programme for International Student Assessment (PISA), the U.S. ranks 25th in math, 17th in science, and 14th in reading out of the 34 Organization for Economic Cooperation and Development (OECD) countries.[1] That China ranks first in all three areas should strike fear, if not outright panic, in every American heart.

We are in the midst of a crisis of historic proportions in which our way of life as a people is in jeopardy. It is a crisis that cries out for positive leadership and yet our elected leaders in Washington stomp around like spoiled and stubborn children who have yet to learn how to work and play with others.

The challenges facing our nation and its people are immense. Whether our burdensome debt; an economy that is only a shadow of its former self; a natural environment that seems to be stumbling under the weight of a burgeoning population that fouls the very air that we breathe and the water we drink; a system of public education that is laden with failure; a health care system that fails to meet the needs of nearly a full third of its citizens, we place our future in jeopardy unless we meet these challenges.

We use oil, a diminishing natural resource, to fuel our demand for energy even though the future will belong to the first nation to develop reliable, alternate sources of energy whether solar, hydrogen, or nuclear fusion. Worse, we are dependent on foreign suppliers of oil that are friendly to us only as long as we are able to pay.

We are a people who have forgotten that the historical strength of our democracy has always been our rich diversity as a people living together, in harmony, under the rule of law. Today we govern ourselves with a two-party system in which loyal opposition has given way to enmity and distrust to such an extent that each side feels the other is out to destroy America.

We must understand that the problems of the Twenty-first Century are of such magnitude that the politics of the past are no longer adequate to meet our needs. We must find fresh solutions that satisfy the needs of the masses on the one hand and that foster a strong economy on the other. We need the kind of leadership that will demand that its people replace a rampant entitlement mentality with an abundance mentality centered on the belief that there is enough for everyone as long as each citizen is willing to give one hundred percent of themselves through hard work and participatory citizenship.

We need leadership that understands that we cannot preserve our nation’s status as the richest and most powerful nation in the world just because we think it is our right and privilege.

We are like a baseball or football team that has been in first place for so long we have forgotten what it took to rise to the top and we have become complacent. Right now, people of other nations, with China and Russia leading the way, are working hard to challenge our nation’s status. Just as importantly, the children of China and other nations are working hard to gain what they believe is an educational advantage that will seal the deal for their people and economy in the Twenty-first Century and beyond. That they are outperforming American children by a wide margin is simply unacceptable and we must answer the bell.

It is unreasonable to think that one nation will be able to dominate the future the way America has dominated the past but if we want a place at the head table, we have to elevate our game. To do so, we must reunite as a people and demand the best from ourselves, from our fellow Americans, from our children, and from our political leadership. We can ill afford to waste a minute let alone a generation.

Stand up, toe the mark, and get moving while we can still see the coat tails of our competitors. We need positive leadership and it must start with each and every one of us. That means me and it means you!

Act Now and Save $15 Trillion ($15,000,000,000,000)

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Let us forget, for just a moment, the debate about the Affordable Care Act or, as most of us would call it, the Obamacare Act, and focus, instead, on the issue of providing universal healthcare (translated to mean comprehensive healthcare for all American citizens and legal aliens).
No matter how we feel about Obamacare, we certainly would agree that the Affordable Care Act will not provide access to healthcare for every single American. The absolute most the Affordable Care Act will do is to make it easier for more Americans to purchase health insurance coverage. There also seem to be few illusions that Obamacare is going to cost less than what healthcare in America cost before implementation of the Affordable Care Act. Many will suggest that it will, in fact, cost more than what we have spent in years past.
The real question we should be asking, however, is “why are we unable to provide comprehensive healthcare and prescription drugs to every single American Citizen and legal alien?” In other words, why are we unable to provide universal healthcare?
For the moment, I want to forget about all of the altruistic reasons as to why the richest and most powerful nation in the world should have a healthcare system that meets the needs of all Americans, like virtually every other developed nation? I want to forget about these things because no one really seems to care.
We seem more concerned with rejecting the concept of socialized medicine than we care about all of the men, women, and children in the United States who are unable to gain access to and afford the medical care they require.
The fact is that the vast majority of Americans are unable to distinguish between the concepts of universal healthcare and socialized medicine. These to concepts are, in the minds of these people, synonymous. I suggest to you that it is this inability to differentiate the concept of universal healthcare and socialized medicine that is at the root of the entire problems with the American healthcare system.
Since no one seems to care about the suffering that so many Americans are made to endure, let us focus on the one issue about which everyone seems to care and that is the cost of health care in America.
From 2001 through 2011, the total annual healthcare expenditures of the U.S. grew from $1.2 Trillion to $2.8 Trillion. This represents an average increase of 8.8 percent per year. If that trend continues from 2012 to 2022, our annual healthcare expenditures will increase from $2.8 Trillion in 2011 to just under $7.1 Trillion in 2022. For the eleven calendar-year period from the end of 2011 until the end of 2022, we will have spent just under $56 Trillion on healthcare. Mind boggling, is it not?
In 2001, I wrote a book entitled, Radical Surgery: Reconstructing the American Health Care System, in which I proposed a healthcare solution that would provide universal healthcare without socialized medicine. In other words, I wrote that we could provide comprehensive healthcare and prescription drugs to all Americans and legal aliens without relying on government. Let me say it differently in order to alleviate any confusion. I proposed a way in which we could give every American access to whatever healthcare they required but that would involve neither federal nor state government in the healthcare delivery or decision-making process.
One of the features of this new system was a mechanism that would allow us to control the increases in the cost of care so that costs would rise no faster than increases in the Consumer Price Index (CPI). At that time I projected that the CPI would grow at a rate of 5 percent per year. At that rate, I suggested that healthcare expenditures would have risen to $1.86 Trillion by 2010. Had we been able to hold the increase in annual healthcare costs to 5 percent per year we would have saved an aggregate amount of $3 Trillion over the ten year period. Pretty significant savings, wouldn’t you say?
In fact, the actuall CPI growth during that same period was an average of 2.7 percent per year. Had we been able to control the rise in healthcare expenditures to actual inflation rates, costs would have grown only to $1.55 Trillion resulting in an aggregate savings over the decade of just under $4.5 Trillion. Even more impressive, don’t you think.
Now, let us assume that the actual rate of increase in healthcare costs between now and 2022 would remain the same as the previous ten year period (8.8 percent). In that case healthcare costs will rise to a staggering $7.086 Trillion by the end of 2022.
If, however, we were to implement the healthcare proposal presented in Radical Surgery: Reconstructing the American Health Care System, and inflation would continue to increase at the rate of 2.7 percent per year as it did over the last decade, our annual healthcare expenditures would rise to only $3.9 Trillion. Under this scenario, the aggregate saving in healthcare costs over the ten year period from 2013 to 2022, compared with the projected 8.8 percent per year increase, would be $14.9 Trillion dollars.
Forget altruism, just give me the money!
The question for the reader is a simple one. Can the American people afford to spend an extra $15 Trillion over the next decade for a healthcare system that will continue to leave a significant percentage of the American population with inadequate access to healthcare?