The ACA is Constitutional, but it is no Panacea

As the SCOTUS ruling on the ACA reverberates down through the ranks and implications become better understood, many problems will remain. Controversy will continue around the dominance of insurance companies and the cost to the public. The ACA may limit the profits by requiring insurance companies to spend 85% of your premium on healthcare, but they still retain a firm hand and today’s Wall Street reaction (Health insurers up) means they see it the same way.

Many people talk about reducing healthcare costs through a competitive market. The problem is the healthcare market would be better described as a manipulated marketplace. ACA provisions will make an incremental step in the right direction, but it will not fix the problem The entire market is opaque and dominated by cost shifting. If some people don’t pay their fair share, others must make up for it. In the simplest form, this might mean you pay a little extra at the local Walmart to make up for losses from shoplifting. In healthcare, it rises to epic proportions and the effects.

Here is an example of how this works in my field of emergency medicine. Let’s look at a sample of typical real-world bills, covered costs and payments. If you have had any recent medical care, this may look a bit familiar. You have surely seen those hospital bills for thousands somehow reduce to a few hundred dollars by insurance discounts.

Payments for the same type visit by different payers (insurance companies, Medicare, Medicaid or individuals) will vary immensely. Medicare patients represent about 30% of patients in a typical ER. The feds will pay about $170 under Medicare (varies by region) for high level physician services (for the sickest patients). That sum will come in a little below the actual cost or what a retail store might call a reasonable retail price. That cost includes physician reimbursement, plus the cost of malpractice, health and business insurance and typical business expenses, another 10 plus percent to cover the cost of billing, and the burden of cost shifting. Since Medicare pays less than that, some cost shifting will have to applied to the remaining 70% of patients.

For a typical practice, another 20% of patients will be Medicaid. State Medicaid rates for emergency physicians vary tremendously from merely below Medicare to outright abusive exploitation. Some states will pay less than $50, others over a $100. For many years in NJ, I received $12 per patient visit regardless of the service provided.

They get away with this because emergency physicians cannot opt out of Medicaid. The law requires they provide care to all comers in the ER. Obviously, the difference between the cost of care and payments will be even larger for Medicaid patients resulting in even larger cost shifting that is added to the cost shifting from the Medicare patients. This leaves a large burden on the shoulders of those remaining patients.

Patients covered by Insurance will comprise another 30 percent of visits. Insurance companies work hard to avoid paying for cost shifting. In hospitals and regions where they dominate the market and have the necessary leverage, they may pay Medicare rates or even less. Mostly, they pay about 150% Medicare if they have contracts. Most insured patients will be treated in places where their insurance is “accepted”. This means discounted contractual rates will prevail for those patients, although the actual payment may be have to be paid as a deductible by the patient.

This leaves a small group of patients, who are uninsured, or who seek care in a hospital where the physicians are not contracted. These visits will bear the full burden of all the other cost shifting. Insurance companies deal with these high costs shifts by passing the cost through to the those who buy the insurance. This is a major cause of the high cost of insurance, the need to pay for not just your care but those not paying a fair share. Realize that the insurance company executives are just fine with this as it justifies increasing premiums. The “bill” generated for the above visit may be anything from perhaps $350 to as much as a $1000. Yet in a fair and transparent system devoid the system costs, the cost might be under $100. (that is why socialized medicine is so much cheaper).

That bill is only the beginning as it only covers the physician charges. Hospital billing practices are exponentially worse. Their billings profiles are nothing less than insane. The hospital will bill charges for the ER usage(room, nurse & supplies), x-rays, labs, drugs, etc. The total emergency “charges” can easily top $10,000 although the cost of providing such care might only be $500 (again devoid system costs). The problem is unlike Walmart that increased its price to account for shoplifting to all of its paying customers, hospitals must collect all their cost shift from only about 10% of payers. Therefore, they may send bills totaling $10,000 knowing the amount of the bill is irrelevant to contracted payers and will only apply to  non-contracted patients. Mostly they only collect from patients with non-contracted insurance companies. However, caught in this mess will be uninsured patients who become responsible for the whole bill.  In many or most cases this places insurmountable debt on those who can’t afford insurance making medical debt the number one cause for bankruptcy fillings. Also lost in this conversation is the coercion to buy insurance at whatever price to avoid such a fate.

Imagine if BJ’s or Sam’s Club could arrange for prices in your local grocery to rise 10 times. Everyone would flock for memberships. That is what we have in the Healthcare marketplace. No, healthcare it is worse. To improve this analogy, the big box stores would also have to sell their memberships at a huge discount to wealthy members of country clubs, while doubling prices to average local residents. This is what insurance companies have traditionally done. Discounts to big employers. Higher rates to small businesses, and nothing short of grotesque exploitation of individuals. Individuals in most markets have no options to cover pre-existing conditions. They are generally offered limited coverage, with large deductibles, low lifetime limits, and loads of exclusions, at astronomical prices. It has also created a huge scam opportunity to sell “insurance” that pays for essentially nothing. Offers for cheap insurance abound. Most provide little or no protection. The myth of cheap insurance from buying across state lines has mostly to do with offers to buy worthless coverage in states without regulations to prevent such unethical business practices.

Yes, the ACA is a huge step in the right direction. It is also likely to shine a light onto other inherent problems in the system. America has now recognized healthcare as a right and can now begin the larger process of fixing the problem. My prediction is that it won’t be too long until it is recognized that we can only reach our goals with a single payer system.

BigPharma Strikes again… and again

Link

In Documents on Pain Drug, Signs of Doubt and Deception (click for full article)

A research director for Pfizer was positively buoyant after reading that an important medical conference had just featured a study claiming that the new arthritis drug Celebrex was safer on the stomach than more established drugs. “They swallowed our story, hook, line and sinker,” he wrote in an e-mail to a colleague.

There is a school of thought in medicine that goes “You don’t want to be the first or last to jump on the bandwagon of new dugs or treatments”. This is in large part due, not to the original reason the statement was offered, but to deception of the part of researchers and their employers or sponsors, i.e. BigPharma.

When I first learned this “rule” in pharmacy college, the concern was speculation about the possibility of unknown or less common problems that would only surface after the use of the drug or treatment became more widespread.

Sure we knew that the drug representatives frequenting physician offices would downplay any such possibilities and put the best light on their products, but we did not think that data was fudged. Cherry-picked a bit sure, but not outright deceptive. We thought drug reps purposely lived in the safe harbor of gray data that was open to some “interpretation” and walked the line allowing a walk back if overtly contradictory evidence surfaced.

The “new” reality is different however. I say “new” only because the reality of deceptive corporate policy as part of “business as usual” has only recently been accepted. IT has likely been this way forever. Drug companies spend huge sums developing and testing new drugs. They want a return on that investment.

In this case, Pfizer was faced with the choice of being honest and losing any advantage the drug might enjoy in the marketplace versus lying and enjoying dominance in a huge market.

I personally came to terms with this overt dishonesty fairly early in my career as a physician.During pharmacy school, I learned that pharmacists have much more education on drugs than physicians, by a wide margin. In the real world, most physicians get the bulk of their education about the evolving drug market from drug reps, not independent legitimate educational sources.  (New drugs are released at a rate of almost 1 per week.)

Once in practice, the stream of drug reps pushing their wears is never ending. Their “educational sessions” always came with freebies, food, gifts, outings etc. Even free starters packs of drugs for patients to get them hooked on the most expensive version of what was out there.Visits to my office were always a bit challenging to the reps as I critically reviewed their references and challenged their conclusions. The success I had over the years in shooting down the materials presented cemented in my mind the new reality that I speak of. Drug Rep visits were a rehearsed dog-and-pony show, which had no ethical boundaries in its preparation. Many of the drug reps were much too unsophisticated to even know they were speaking garbage. Many were nurses who have even less real pharmacology background. And virtually no experience in scientific review of study methodologies and critique. The companies provided a script. They learned it, assumed they were given honest data, representative studies, and legitimate conclusions to present. BUT IT JUST WAS NOT TRUE.

In this case, they were promoting a drug for one of America’s largest markets, arthritic pain, without the very serious known side-effects of stomach bleeding and ulcers. All of its competitors in that market had that downside. This was obviously a huge step forward that potentially offered real benefits to patients. It was promoted that way.  And physicians believed it and in many practices literally stopped prescribing all competitors. What a coup. Just one problem, it was all a lie, and they knew it. As the article states “They swallowed our story, hook, line and sinker,” the head researcher wrote in an e-mail to a colleague.

The truth was that Celebrex was no better at protecting the stomach from serious complications than other drugs. It was just a new, very expensive option, still under patent, with no benefit over older dirt cheap drugs like ibuprofen. Oh, and it also is associated with increased risk of cardiovascular death and they sort of knew that too. It took years for that part of the story to emerge.

Healthcare system is cash cow being bled, not just milked

Aside

This is one of those eye-popping graphics. Just consider the some of the implications of this data. I should make a list, but it would be too long. The Healthcare system is not just being milked as a cash cow, it is being bled by the extraordinary greed of he corporate establishment. Sure there is plenty of fraud and abuse, and plenty of inefficiency, but that pales in comparison to the built-in syphoning of mega$$$ by health insurance & BigPharma for shareholder payouts and ridiculous executive compensation packages. Not to mention the conversion of hospitals and other medical services from providers of care to public for-profit companies. Not even the not-for-profits have escaped the “become a business and prosper” mentality. The community hospital where I spent my career got infected with that mentality. Unfortunately, they picked bad investments (it was a healthcare institution, after all, not a venture capital group) . It cost them control and the hospital was acquired by a larger system. Business has bled this this cow to the absolute edge. If Americans want healthcare, we will likely eventually end up with single payer because we HAVE to, just too bad we have to suffer so long to get there. But until there is no more blood to suck, we are stuck.

Fraud in Medicaid?…not so much where you think

Recently, I commented on the over attention to fraud and abuse as “the problem” with health care spending. So the big players in healthcare managed to sidestep closer scrutiny by diverting attention to “stopping abuse” as opposed to real reform. The politicians got to feel good(or maybe just got to think they look good) by doing “something”, while the regulars continued their daily exploitation of the system. The feds spend $102M to recoup $20M. Now it is good to rid the system of fraud and abuse, but the business types will recognize the terrible “return on investment”. The loss, of course, is only on the part of the feds. The auditors made out just fine.  [ http://www.washingtonpost.com/national/gao-report-feds-spent-102m-on-medicaid-fraud-contracts-but-only-identified-20m/2012/06/14/gJQACAzJdV_story.html ]
Did you know the Auditors are actually part of the establishment exploiting the system. This is just one more way to wring dollars from the feds. The expenditures will be chalked up to another cost of healthcare that people say can’t afford. More to the point is where the auditors find most of their “fraud”. I am involved in reimbursement issue reviews at the national level for emergency medicine. I can tell you the dollars being spent are not going to look for fraud in many places everyone knows it exists because the most successful scammers are much harder to find and prosecute. Rather, the time and money goes into a cat and mouse games with legitimate providers quibbling over whether billing follows published rules. The rules are vague. Some might cynically say they are vague to allow for just this type of payer abuse. I know of insurance companies filing large claims for fraud against Emergency groups for over billing visits. One challenge claimed the group never saw visits at the highest level, essentially NEVER saw really sick patients, (the average ER sees about 40% of its patients in this category). I was involved with a larger groups hit with such charges of abuse but appealed and prevailed in every one of hundreds of challenged bills. However, many smaller groups don’t have the resources to fight and just “settle” by paying something to get them off their backs under threat of further charges and extrapolation of audit findings to years of charges that could put them at risk of bankruptcy. The auditors see this extortion as easy money collection. I would have categorized the audits themselves as abuse.
Now at this point you might say “wait weren’t we discussing federal Medicare, not private insurance”. Well yes, but guess who the auditors are. They are offshoots of the same group. You see while government may be responsible of for the actual dollars for Medicare costs, they subcontract the administration of these claims to private insurers. Yes, Medicare will dish out some very lucrative contracts for administration of claims payment to the very same insurance companies who look for every possible way possible to get more of the $3 trillion in healthcare cost that the nation spends. Is this really what you want?
By the way if you think this is bad, consider while the rules for coding visits under Medicare are vague, private insurance companies are permitted to have their own rules, which they can change as they like, and never disclose their policies to the providers. They also are permitted (in most states) to decide what and how much to pay in almost any way they please. I once was brought to task by my hospital because they wanted me to me to sign contracts with Blue Cross and also US Healthcare. I refused because of abusive contract language and “black box” clauses that subjected us to changes without notice and coding criteria deemed propriety and therefore not open to disclosure. I refused. In the long run it did not help my standing with administration, on the other hand, they eventually adopted my position and also opted out of these contracts. (after I left).