I incidentally saw the Ellen DeGeneris “I’m Gay” Time magazine cover this afternoon on Twitter. In the top right hand corner of the cover is a header for a backlash against HMO practices story. That sent me down a rabbit hole. Cost control is hard. Cost control is predicated on either doing less or paying less. Doing less can be done by either a strict form of no, or generating a healthier population. “No” produces far more immediate results and more importantly results that can be captured by the nay-sayer. Population health management through improved vaccination or preventative care or whatever else may bend the long run cost curve but those efforts are seldom captured within the first eighteen to thirty six months. Paying less can be achieved by either rate setting efforts like paying providers only Medicare rates or shifting utilization from high cost hospitals to low cost hospitals or from low cost hospitals to out-patient community based clinics.
No matter what effort is made, cost control means someone is making less money or someone is out of a job. This is tough.
And as I stayed in the rabbit warren, I read this New York Times article from 1996 on HMO practices that highlights the struggle:
Although managed-care companies insist that capitation is not designed to deny medically necessary care, the practice stirs strong emotions. In Oregon, Dr. Gordon Miller, a Salem ophthalmologist, is gathering signatures for a voter initiative seeking to outlaw capitation….
12 states guarantee a patient’s right to go directly to certain types of specialists without first getting approval from a primary care physician, who insurers call a “gatekeeper.”…
The California Nurses Association’s ballot proposal and a separate initiative sponsored by the Service Employees International Union would prohibit rules that prevent doctors from criticizing health maintenance organizations….
Ophthalmology is effectively a license to print money. It is one of the ROAD specialties where reimbursement has not matched productivity gains. It is a chronic target of incremental variable cost control for insurers. It is also a specialty that leans Republican. On the other hand, the CNA and SEIU are core Democratic supporting groups. Their interest is maximize healthcare spend to maximize healthcare industry employment. Cost control costs their members jobs and wages. Finally, patients don’t want to be told no so they try to avoid gatekeepers.
We could go through this article and do minor re-writes, changing names and dates, and this piece could be pitched today.
Cost control is hard. Yhere are very concentrated benefits to decreasing the percentage of GDP spent on healthcare for a given quality and outcome level. There are numerous well organized and well trusted groups who would see a lot of pain. This pains would promote them to scream in public if healthcare costs stabilized as a function of GDP and then declined on a demographic adjusted basis. Concentrated pain beats diffuse theoretical benefits almost every day of the week in American politics.
Yarrow
Your last paragraph is one long sentence and I’m having a little trouble understanding it. Are you saying that if healthcare spending as a percentage of GDP stabilized and decreased, even if for a specific specialty (ophthalmology, for example), that well organized and trusted groups would scream about it because they don’t want to lose money? Bottom line: Doctors, hospitals, other health related groups don’t want to lose money and are well connected enough to raise a big fuss and possibly stop it?
David Anderson
@Yarrow: Rewritten — and you’re right
StringOnAStick
And there’s the rub: the only way to keep the well connected providers happy is to limit who gets care, and in the US that means coming up with a way to insure that poor people don’t get care. The ACA tried to seriously change that calculus, and that’s why the rethugs and their rich funders want it to die, along with anyone too poor to afford health insurance. As who constitutes “too poor to afford health insurance” keeps climbing higher into the middle class, more people are impacted. I suppose the question is if we can overcome the class differences to come up with something that helps us all, not just the better off. Then again, Price et. al. are planning to kill Medicare and SS so they don’t want anyone below the 1% will be able to grow old anyway.
Europe suffered horribly in WWII, but in the aftermath they got various universal coverage systems that are still there today, while we have a party committed to the only form of Darwinism they believe in: be rich or die.
? Martin
Yes. We’re talking about enough money to easily justify campaign contributions enough to elect a president. And understand that in most states, the insurance commissioner’s main job is to protect the state insurance and network interests, to maintain those local monopolies. They put pressure on many levels of the system.
It is extremely difficult to advance a policy that would remove revenues from an entire industry. The petroleum industry may tolerate policies that hurt them on oil provided they can offset that through natural gas. And that there would be winners and losers within that industry isn’t problematic, so long as the industry as a whole doesn’t shrink. In order to really get health spending in line, you either need to shrink key subindustries (eliminate insurance by going to single payer, etc.) or stagnate them for a really long time. That’s why the ACA was constructed the way it was. Getting buy-in from insurers was important because it was going to hurt most other layers of the health care stack, and they needed some part of the industry to support this. Insurers were a good choice because their relatively small profit margins meant that there wasn’t nearly as much money to be saved there compared to device makers, drug companies, care groups, etc.
At some point, you have to pay doctors less, and that’s a tough sell to a group that people inherently trust more than politicians, and who have both the money and public goodwill to win the argument.
gene108
Damn, I remember, when Ellen came out. ABC was under pressure to cancel her show, because she’s openly gay.
Now, a celebrity coming out as gay, would – maybe – warrant a blurb in People, if they are famous enough.
gene108
Your idea of bloat and excessive spending is my job!
Big problem with tackling healthcare costs in this country.
Fair Economist
Doing better can improve costs too. Finding the most effective treatment, curing diseases rather than maintenance treatment, and prevention all (usually) improve costs as well as outcomes. Admittedly, improving treatment is often hard.
? Martin
@Fair Economist: Not that hard, but it does shift where that spending goes. Preventing expensive surgeries is great unless you are a hospital or surgeon, in which case it’s (economically) terrible.
Brachiator
@? Martin:
Industry segments and entire industries shrink all the time. The complication comes when lobbyists and other groups try to use government to pick winners and losers, even though sometimes this cannot be avoided.
Also, in from some perspectives, what is required to provide good health care is separate from the question of controlling costs. And there are times when it may cost extra to generate a healthier population.
Capri
Ophthalmologists are a special case – as a specialty they are very political; I once heard that their PAC was second only to the AMA’s in size of all physicians’ groups. This is because they constantly feel threatened by optometrists who they see as horning into their territory. They pay politicians a lot of money so that optometrists are banned by various states’ practice acts from doing stuff they are capable of doing, As one might imagine, if you are paying politicians to carve out your little piece of pie to protect, you tend to lean Republican..
jl
@Fair Economist: thanks. I was going to make a comment like that. Maybe a better title for the post would be ‘Less is less (for some influential constituencies) in the battle for expenditure control’. Much of what we call ‘costs’ in US health care are really transfer payments and monopoly rents, that the US and state governments, and private trade and professional associations, eagerly enforce.
I’m not sure the opposition is as unified as insurance oligarch Mayhew and some commenters think. Primary care docs are no longer vastly overpaid compared to other high income industrial economies. Specialists are, and specialists have a lot of influence over coding and reimbursement rules that drive high expenditures to specialists and over treatment by specialists. The AMA seems to be conflicted and tied in knots about this, and has initiated several programs at cross purposes with each other. Their recent attempts to get more new docs and more favorable reimbursement for primary care haven’t done much, and becoming a specialist is still favored career path for most new docs. But, from my personal experience with recent medical school students and graduates, there is increasing resentment against specialist rule. However, these people have to pay their medical school bills… so the idealistic dream of being a primary care doc who can make a good living keeping their patients healthy at something less than an exorbitant cost may have to fall by the wayside for many of them.
But, a primary doc’s life is getting closer and closer to that of skilled nursing staff in some ways. So, there will be growing pressure against the status quo.
Yarrow
@David Anderson: Thanks!
I wonder how invested doctors and other associated medical groups, especially pharma, are in people actually becoming/being well. Pharma loves it when people take daily medications. That’s guaranteed income. Doctors don’t want something like diet and exercise (or some other thing people can do on their own) to fix people because then they won’t come back in to be treated and be sources of income.
All that is one of the reasons that dermatology is such a competitive specialty. Along with the big attraction of having no call, the doctors can do a lot of cosmetic procedures that aren’t covered by insurance. Big money.
? Martin
I would also point out that this is where market disruption often works best. Fixing health care in the manner outlined by everyone so far is to effectively ask a lot of businesses to destroy themselves (insurers) or to get by on less money. If I asked anyone here with a job to do their job for less money, even if there was less work involved, they’d almost certainly object.
But if you find some agent that is not getting any part of this money, and ask them if they could find a way to do these services for half as much, they’d likely jump at it. Where the incumbents see a loss of hundreds of billions of dollars, these new market entrants see a gain of hundreds of billions of dollars. Invariably the incumbents often fight so hard to maintain the status quo that by the time they realize they’ve lost the fight, they’re too weak to even survive. Healthcare is a notoriously difficult industry to do that in, but there are people trying, including some people with more money than the incumbents.
? Martin
@Brachiator:
Sure, but usually due to competition or shifting needs in the market, not because a government policy sought to shrink them. Typewriters and adding machines gave way to computers, buggies to cars, etc. The dollars moved, but didn’t vanish. Consider that governments job is almost always to expand an industry – to help it make more money, not less. So to face a government effort to deliberately shrink an industry, get people to be paid less, etc. is rather unusual – particularly when the government isn’t trying to steer those dollars into any particular industry, rather they want those dollars to go into literally any other industry. At least the coal industry has the benefit of looking over at solar and seeing ‘oh, yeah, that’s where our money went’ and knowing who they are competing against. Healthcare is competing against the entire rest of the economy in this case.
jl
@Yarrow: The short-run private profit motive will produce over-treatment for symptoms and under-treatment for cure and prevention. There is some interesting economic theory and quite a bit of empirical evidence to support this. Structural factors in US health care make the problem worse. There is a lot of mutually consistent empirical evidence that lack of continuity of care increases life-cycle cost of health care substantially. The break between under and over 65 year old care is an example. When I was doing research on this issue, insurance execs and medical directors often said that somewhere between 55 and 64 they routinely under treat, since soon, their patients will be Medicare’s problem. Empirical research on the expenditure effect of this hand-off supports that anecdata.
A Medicare at 55 option could very well increase the efficiency of the US health system as well as be more equitable. Might not reduce expenditures, but will probably reduce the real economic costs of keeping people healthy latter in life. (edit: that might be too pessimistic since research says that expenditure would decrease, but observational research might not adequately adjust for effects of big expansion of Medicare to 55 for all).
The problem is that no provider can capture the full economic benefits of better health, or cure now, 10 or 20 years down the line. And for infectious disease, can’t capture the benefits of reduced spread of disease due to cure.
? Martin
@Yarrow:
Very invested, but they are also very invested in being able to pay their mortgage and send their kids to college. There’s an equilibrium point in there somewhere.
Fair Economist
@jl: The killer problem with doctor costs is that the AMA restricts doctor training too much. I’m not sure why the costs of primary care doctors is dropping, although perhaps it’s because much of their work can be done acceptably by somewhat less restricted well-trained medical workers (nurses and physician assistants). Ironically, the supply restriction doesn’t benefit doctors too much. They do make a good deal of much, but they have to endure a multiyear hazing in medical school and residency, and then work crazy hours. So they end up with low happiness and job satisfaction, especially among the well-education.
schrodingers_cat
@Fair Economist: The immigration crackdown is having a negative impact on availability of doctors. There are 7000 immigrant doctors* serving mostly rural areas of this country from the 6 countries affected by the travel ban alone.
(* Includes doctors on long term work visas like H1-B and J-1 and GC holders)
Brachiator
@? Martin: RE: Industry segments and entire industries shrink all the time.
The action of government can reflect a need or the delaying actions of interested parties.
The rise of aviation and automobiles killed passenger rail and inter-city and interstate bus travel. Massive highway and city street construction paved the way for this. And the highway construction came because of federal highway funds.
The newspaper industry is dying and ad dollars are shrinking. The music industry is doing all kinds of strange things. And part of what is happening here is the demand by consumers that they should not have to pay more than $10 a month for an infinite amount of music or entertainment. Related is the odd demand that after paying their ten bucks, they should never have to look at an ad. And of course, stores that used to sell music and video have collapsed taking all the dollars and employment with them.
Some of the health care crisis is not about shifting revenues or costs. There is a central philosophical issue. There are liberals who fundamentally believe that the government should provide for health care. This obviously makes another part of the government permanent. Arch conservatives believe that should not be involved in a private or free market decision. Add to this the interests of doctors, pharma, etc, stir and you have a good mess.
A few random notes: I ran across a news item noting that the coal industry has been slowly declining since the early 1940s. Solar is just the most recent competitor.
Interesting way of looking at it, but no. Until the day that our robot overlords finally seize control, healthcare is simply a state of the environment.
dr. bloor
Just out of curiosity, do you believe this to be true of your primary care physician? If so, why do you continue to work with him/her? If not, what do you believe makes your physician substantially different from physicians as a population?
? Martin
@Brachiator:
No, I agree with that completely. However, the secondary effect of that philosophy is that (at a minimum) you are taking that role from the insurance industry and handing it to government who, because they have no real need for marketing or actuarial competition or building care networks and so on can do the job with vastly fewer people. In the end you’re taking an industry and, well, destroying it replacing it with seemingly nothing. It’s a good trade for every consumer, but from an economic point of view it’s an annihilation of jobs with the money that paid for those jobs being returned to the public not to be spent on some specific thing (gas rather than train tickets) but on literally any other thing – rent, food, clothes, etc. If you believe that there is a mandate for providing care for sick people, then the insurance industry becomes nothing but a tax that not only returns nothing to the consumer, but actually makes getting that care harder. If they lost to competition, then so be it, that’s part of capitalism that we’ve accepted, but when an elected body simply strikes you out of existence, that’s a fundamentally different thing, even if their reasoning is sound. For good or bad, the US economy does not willingly recognize by fiat decisions and this would be one. I think it’s the right thing to do, but I fully appreciate the challenge to doing it. And if liberals were really invested in seeing the idea succeed, they’d spend more time trying to find a viable avenue there which acknowledges the cultural challenges with it.
Jinchi
@gene108: I remember the black screen “Parental Advisory” they put on before every show after she came out. Apparently the idea of a gay actor was considered outrageous at the time.
workworkwork
@dr. bloor: I would disagree with this as a generality. I’m with Kaiser and they seem to be taking the wellness/preventative care route to cut costs. In addition, they seem to always be looking for ways to do more (or maintain the same level of care) at less cost.
That’s just my own experience with Kaiser Colorado. I’m sure there are Kaiser horror stories out there somewhere.
PQuincy
I do wonder how to contain the many forms of rent-seeking that are a big cost-driver in our medical provision system.
My mom’s now in Kaiser, which has done a lot to limit rents. Indeed, a health-industry guy I talked to recently said that they’re considered the cutting edge. But with a chronic condition, some of their ‘rational’ steps get very annoying. It’s HARD to reach a doctor at Kaiser. Once you get an appointment, they don’t rush (which is a sign of good management), and I don’t mind substantial waits when non-urgent issues are on the table. And using specialized clinics as the point of contact for specific chronic conditions works quite well when advice and feedback are needed. But when a patient with a chronic condition needs medical assessment, being told to go to Urgent Care is not satisfactory (especially since urgent care for cardiac patients immediately rolls over to the ER… UC doesn’t have the equipment and expertise.) In effect, Kaiser is using the ER as primary care for a chronic cardiac patient with non-urgent assessment needs, I have learned, and that doesn’t seem to make sense. Just showing: it’s HARD to design a good system while controlling costs.
I’m also flummoxed by the problem of getting good care as a non-poor family. We can actually afford quite good care. But living in a blue-collar town, I simply don’t know how to access it. Smaller physician groups are fading fast, and all of the large organizations available seem to have more or less the same approach in commodifying care, which is a challenge. And all recommended doctors in the more flexible systems seem to have long wait lists or simply don’t take any more patients.
Tripod
@jl:
Skilled nursing staff in practice are hen’s teeth (they tend to track into management). Outside of PT, most mid-tier providers are PAs, and they face the same pressures as MDs – twice the salary in derm as opposed to primary care.