Insurers Expand Primary Care: an Argument for Obama’s Plan

Imagine appointments with your primary care doctor that last 30 minutes—or longer. What if you could e-mail her when you need a prescription refill? If you have a two-minute question, she encourages you to call; she or a nurse practitioner will come to the phone. If they’re busy, they’ll return your call within a few hours.

A recent story in the Seattle Post-Intelligencer offers hope for primary care by focusing on an innovative program at Group Health Cooperative, a nonprofit health care system headquartered in the state of Washington. Under the new program, patients see their doctors less often, but when they do, it is a meaningful encounter.  And in between appointments, doctors are paid to communicate with patients in other ways.

A multi-specialty integrated health care system, Group Health, like Kaiser Permanente, provides both healthcare and insurance. Group Health’s doctors work on salary, so there are no financial incentives to “do more.” And because Group Health is both the insurer and the caregiver, the payer and the health care provider are not adversaries: they are on the same team. 

By creating its own small revolution in primary care, GroupHealth is demonstrating that private sector insurers can be part of the solution to our healthcare crisis.  In this case, the key is paying doctors for the time they spend e-mailing patients, returning phone calls, and doing research on their behalf. Because doctors are on salary, they are paid for everything they do—not just for the number of patients they manage to “see” in a given day.

In a two-year experiment, Group Health is encouraging doctors to spend more time in face-to face appointments with patients.  Given the finite number of hours on a physicians’ calendar, this means seeing patients less frequently. But doctors also keep in touch with patients by phone and e-mail.

As a result, a doctor like Dr. Patricia Boika can spend a half hour, or more, with the patient she sees.  Before she became part of this program, “The practice had become a dismal treadmill, with too many patients and not enough time, double-bookings and harried visits, and paperwork lugged home every night,” Boika, who has been a family doctor for 28 years, told the Post-Intelligencer.

"’It was an assembly line of people she recalls. ‘You were just slammed. You had to tell yourself, “It's really OK to take one minute to go to the bathroom.”

“But, these days,” the paper observes, “Boiko, who practices at Group Health Cooperative's Factoria center, does medicine the way she intended.”

Group Health has found its medical home pilot project in Factoria so successful that it is rolling the idea out to all 26 of its medical centers.

 “A similar concept will guide a new family-medicine residency clinic that Swedish Medical Center is opening next year in Ballard,” the Intelligencer reports. “Like Group Health, it will allot 30 to 60 minutes for a visit, instead of 15 minutes.

“And while some family doctors oversee 2,000 to 2,500 patients, doctors at the new clinic will have a panel of only 1,700 to 1,800 patients.”

"’It almost sounds impossible,’” Carol Cordy, Swedish's medical and residency-site director of the new clinic told the newspaper. “‘How can you see 10 patients a day instead of 25, and still make ends meet?’"

“That is the question,” the paper adds. “The challenge for medical-home advocates is the country's fee-for-service system, which pays doctors for visits and procedures, but not for phone calls, e-mails or time to research a condition.

“There's this motivation to see more patients so you make more money,” Cordy confides.

But Swedish Medical Center, which uses outside insurers, has found a group willing to pay a monthly fee for each patient rather than fee-for-service.  Again, payers and providers are collaborating.

Maybe this can happen only in what some healthcare reformers describe as “Canada South”:  the Northwest (running from Washington and Oregon across to Iowa) and Northern New England (Maine, Vermont and New Hampshire.)  But I like to think that the rest of the country can catch on to the idea that healthcare is not a competitive sport.  It should be a team effort.

What the Best Private Insurers Bring to the Party

Many single-payer advocates believe that private insurers should not be included in national health reform: a government program that some call “Medicare –for- All” should provide all coverage.  This, they say, is the only way to deliver effective, affordable care.

But I am impressed by the “hybrid” plans that both president-elect Barack Obama and Senate Finance Chairman Max Baucus have proposed—plans that include both a public sector option and private insurers.  Here it is worth noting that the hybrid model is the norm in most of Europe, where the cost of healthcare is much lower, and outcomes are generally better than in the U.S.  Only the U.K. and Canada offer a pure “single-payer” system and there is no evidence that their health care systems are superior.

As the Seattle Post-Intelligencer piece suggests, the best private sector insurers can bring innovative solutions to the table. Of course there is no reason why the government cannot run equally imaginative pilot projects.  In fact, Medicare already is investigating alternative ways to pay providers. But keeping honest insurers in the mix should ensure greater variety.

Moreover, a system that includes both private sector and public sector insurers guards against the danger that, with a changing of the guard in Washington, a single-payer system could become something quite different from the program that today’s healthcare reformers envision.

Lessons Learned From PBS

Here I think of PBS. In theory, PBS was supposed to be “the people’s television.” And in many ways, for many years, it was—and sometimes still is. But compare PBS’ programming to the best of HBO.  PBS has been captured by conservative forces that would never air programs like Deadwood or The Wire–television dramas that have taken the norm to a level of acting, writing and political thinking that rivals the best films.  Ultimately HBO became the network which offered programming that you won’t see on commercial television.

For news, compare PBS to BBC. Frontline still does some excellent programming and Bill Moyers remains the Ted Kennedy of PBS. But you only have to look at the folks raising funds on televisoin during the network’s membership drives to realize that these are not disruptive innovators.

Just as PBS was co-opted by politics, a single-payer healthcare system could become a political football.  Imagine that, in a backlash against the Obama administration, Jeb Bush is elected president in 2016. Clinging to his coattails, a horde of conservative Congressmen come to Washington. (If you think this couldn’t happen, remember how surprised you were when [name your least favorite politician] was re-elected.)

If we had a single-payer system, today’s health care reformers might be astonished by just how quickly its priorities could be re-aligned.  Conservatives in Congress might well slash subsidies while creating a “consumer-driven” single-payer system that leaves Americans free to choose (or forced to choose) the healthcare they can afford from a menu of policies.  This could mean unlimited end-of-life care for those who can afford gilt-edged insurance—and Medicaid -for-all for the rest of us.  Some conservatives might even call for a vote on whether abortion should still be covered.

At that point, many Americans would be grateful to have alternatives to government insurance. No doubt, insurers such as Kaiser and Group Health would step up the plate.  Let me be clear:  I deeply believe that healthcare is a public good—and that government should be the guardian of the public good.  But this is true only when we have good government.  As recent experience demonstrates, this is not something we can count on.

National Health Reform—No Single Solution    

In addition, the more I think about it, the more I realize that unrolling national health reform will be a process that will require many experiments.   Some will succeed; some will fail.  Disruptive innovation calls for a variety of players thinking outside of the box.

After all, this is a big country and I’m becoming convinced that what works in one region may not work in another.  The basics of universal coverage should be uniform. Everywhere, we must have patient-centered healthcare based on medical evidence. Coverage should be equitable, and providers should be paid for value, not the volume of what they do.  That said, healthcare for all could take many forms, just as it does in Europe.

While large, integrated, multi-specialty centers work well in Western states, fully- funded, well-staffed community clinics might prove better suited to densely populated cities on the East Coast.  Ideally, these clinics would offer services eighteen hours a day, seven days a week. In addition to primary care they would offer specialty care ranging from cardiology to obstetrics, ophthalmology, gynecology, pediatrics and physical therapy—as well as counseling services for those addicted to tobacco, alcohol or drugs. 

Today, both affluent and low-income patients find themselves in the ER when they can’t get an appointment with a doctor.  A neighborhood clinic that is staffed with M.D.s and nurse-practitioners could keep patients out of ERs, while providing the disease management and preventive services that we associate with a “medical home.”  Insurers could experiment with different payment models. Some might offer salaries that let doctors follow the Group Cooperative model; others might make monthly per- patient payments, bundling bonuses for good outcomes to be shared by everyone who saw that patient. Some private practice specialists might work part-time in the clinic; others might be paid to collaborate with the clinic’s primary care physicians, making room in their schedules to take the clinic’s referrals in a timely fashion while consulting with the clinic’s doctors to co-ordinate patient care. Finally, clinics might offer flex schedules and part-time salaries for the many physicians and RNs who do not want to work full-time. In this way, they could bring some nurses out of early retirement.

This is just one model. Imaginative insurers would find different ways of delivering care and paying for value. And this is one reason why I find the “hybrid” insurance system proposed by the new administration so appealing. As both Obama and Baucus envision it, private sector insurers would compete, on a level playing field, with a public sector “Medicare-for-All” alternative. 

Fair Competition between Public and Private Insurers

Make no mistake, leveling the playing field means regulating insurers. Private insurers should be required to insure anyone who applies, without regard to pre-existing conditions. And insurers must charge everyone in a given community—young or old, healthy or sick—the same price for a policy.  Insurers have agreed on the first point, not on the second.

This is one reason why the insurance industry is pushing for reform Now. If we forge ahead, Congress won’t have time to work out the details of regulating the industry and requiring fair pricing. 

But Congress must pause and fight this battle. If insurers are allowed to charge sicker, older customers more, many sick patients will find their premiums unaffordable. At that point, either we follow Massachusetts’ example, and “exempt” some of our oldest and sickest citizens from universal coverage—or taxpayers pick up the tab in the form of exorbitant subsidies.  This is not how insurance is supposed to work.  Insurance is about spreading risk. In this case, rather than letting insurers set prices for sicker patients we should insist that they charge everyone in a community the same premium, spreading  the cost of caring for the old and the sick through the insurance pool, just as we do with Medicare. (Meanwhile, the government would provide subsidies for those who cannot afford the community rate.)

Fair competition between the private sector and the public sector also means that all insurers must offer coverage that meets the high standard set by the Medicare-for- alternative.  No more surprises in the fine print. Policies would cover surgery and rehab after surgery, pregnancy and all complications during pregnancy.

Alternatively, Congress could give everyone a voucher which entitles them to the same high quality, comprehensive insurance. Individuals would pay nothing for the voucher; the cost would be financed collectively, through our taxes.  I have written about this plan on HealthBeat  here and, here).

Again, it will take time to consider the alternatives. Congress must not let the insurance lobby hi-jack the process. Insurers are hungry for 45 million new customers, many coming to the market with a government subsidy in hand.  But we need to ensure that they receive equitable, effective care at a reasonable price.

If Congress sets strict rules, some insurers may decide that they do not want to play the game.  Those who rely on “cherry-picking” healthy patients to stay in business—while selling many of them skimpy policies filled with holes—won’t be able to survive in a market where they have to compete on a level field. But others, that are able to compete on quality, will stick around and add value to the system.

The Rules of the New Administration’s Proposals

Many voters still seem hazy on the details of the president-elect Obama’s proposal for healthcare reform.  Somehow the campaign never managed to spell out how his plan works—presumably because strategists who are more interested in politics than policy believed that voters wouldn’t be interested in the wonky details.

But now that various group are proposing their own quick fix, “magic bullet” solutions, it is imperative that the public understand the president-elect’s hybrid plan.

Here are the rules of the game:

• Employees who have employer-based private-sector insurance can keep the insurance that they know. (It would be a shame to force anyone to give up Group Health.)

• Meanwhile, the self-employed, the unemployed, and those working for an employer who does not offer insurance will be able to buy insurance through a National Health Insurance Exchange ) where they can choose between private sector and public sector options. Small employers also will be able to go to the Exchange to buy subsidized insurance for their employees. Some small employers will be exempt, but their employees will have access to the Exchange.

• Large and medium-sized employers will be asked to either “play” or “pay.”  They can choose between offering insurance to their employees (playing), or contributing a percentage of payroll into a common pool that helps fund universal coverage (paying)
  
• If the “Medicare-for-All” public sector insurance is able to offer better coverage for less—as many hope—some employers may well decide that, rather than “playing” (and continuing to try to oversee private health insurance for their employees) they would rather “pay.”   In that case, their employees would be free to go the Exchange where they can choose between private and public plans.  If the public sector plan proves popular, no doubt many employees will lobby their employers for this alternative.

In this way, the nation might well move from employer-based insurance to a system where employees choose their own insurance.  But under the administration’s plan, this would happen only if employers and employees choose to give up employer-sponsored insurance, not as the result of a government edict.

In the end, National Health Reform cannot be imposed on the nation, deus ex machina. Considering the options, experimenting with alternatives, battling the lobbyists—all of this will be part of a lengthy, sometimes bloody, often difficult political process.  As the latest Congressional Budget Office report makes clear, there will be many trade-offs. “Cost-containment lite proposals will not be enough.”

No doubt more than one piece of legislation will be required.  Those who want to move quickly would like to side-step the hard decisions.  Lobbyists, in particular, would like to skip over discussions about cost-cutting and regulation.

But as David Mechanic points out in The Truth About Health Care:  “At some point we as a nation will have to decide whether we wish to design our health  care  system primarily  to  satisfy  those who profit  from it  or  to protect  the health and welfare of all Americans.” 

That time has come.

Comments

[le flohic]

Hello from France,

what is important finaly, is the price for health paid by the nation, and the results.

Finally , it' allways the consumer that is paying for health :

- paying through social fees on salaries in Europe (and through individual insurance)

- paying through national taxes in UK for NHS or sweden

- and in USA , when the cost is paid by companies , it's finally lowering capacities for better salaries

From the payement system is depending quality, and global coverage of population.

In "beveridge" countries, they spend nearly 8% GDP and all the population is covered.

But pharmaceutical and insurance companies make much less profits.

so i think it's possible to do much better, with less money, but for american health, not for bizness !

Dr Le Flohic Y

[Jorge Lopez]

To go back to an earlier post: 30 minutes or more with a provider? I'm not sure I see the point of that. I'm not sure your average generalist knows that much. I would much rather have a choice of less time at a better price.

Also, I'm troubled by the way you seem to idealize Kaiser (here and in your very interesting book). I've heard too many unpleasant stories of undertreatment and mistreatment there. And the fact that salaried doctors can take time to do research is no reason that they will, especially at the bottom of the market. Kaiser patients often have no other choice of provider in anywhere near that price-range.

[Patrick Schoenfelder]

Maggie --

I can believe the new numbers you put up for self-referral in imaging, especially factoring in behavior in the bad behavior belt that the Dartmouth Atlas shows extending across the nation coast to coast in the Sunbelt and up the East Coast to the Northeast.

Ezra Klein posts a new link to an article by Uwe Reinhardt about "doctors who cost too much" from the NYT. It is excellent. Reinhardt suggests creation of a national EMR and then using the EMR to police orders for procedures, drugs, and supplies to seek more rational behavior. The article is great, partly because it is exactly what I think should be done. Here's the link for everybody:

http://economix.blogs.nytimes.com/2009/01/02/us-health-care-costs-part-vii-reining-in-doctors-who-cost-too-much/#more-681

I think that creation and installation of a national EMR, with the requirement that the systems be able to communicate with each other across the whole of the US, would be an excellent use of economic stimulus dollars -- around 50 to 60 billion of them -- that would more than pay for itself once installed, and would help all sorts of good things to happen in health care, including what Reinhardt proposes.

Meanwhile, there is news on Klein and elsewhere that Sanjay Gupta will be appointed surgeon general, and will be given special portfolio to work on health care reform issues. That's very good news. He would be my second choice for the job, trailing Atul Gawande by a nose.

[Barry Carol]

Maggie,

Regarding the efficiency of medium size and large group practices, I was referring to economies of scale as it affects practice expenses per physician. I think you are using it to mean medical inputs (utilization) per patient relative to medical outcomes.

[Maggie Mahar]

Patrick, Barry and Hipparchia--

Patrick I agree with you; government can change cultures.

If we hadn't had a strong push from government, discrimination against
minorities minoritites would remain where it was in the 1950s.

In health care, Medicare can move mountains. In the near future, it is likely to begin experimenting with paying more for teamwork and better outcomes, bundling payments to all of the doctors, nurses and hospital involved in an episode of care, and letting the virtual team
share in the savings when
collaboration leads to better outcomes at a lower cost.

On the explosion in diagnostic imaging-- I understand the distinction you are making. And I am talking about an epidemic of self-referral within a doctor's office. For example: "Between 1998 and 2002, cardiologists recorded a 78% increase in the use of these frequently self-referred procedures [diagnostic imaging], compared with 2% growth for procedures performed by radiologists . . ."http://www.diagnosticimaging.com/dimag/legacy/techfocus/inreview2004/index.html.

A California study published in Health Affairs shows that back in 2004 "Nearly 33 percent of providers who submitted bills for magnetic resonance imaging (MRI) scans, 22 percent of those who submitted bills for computed tomography (CT) scans . . were self-referrals. http://content.healthaffairs.org/cgi/content/full/26/3/w415?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&author1=Jean+Mitchell&andorexacttitle=and&andorexacttitleabs=and&andorexactfulltext=and&searchid=1&FIRSTINDEX=0&sortspec=relevance&resourcetype=HWCIT
And the practice has soared since then.

From MedSolutions, May 2007: " While the total number of imaging procedures nationally grew by about 40 percent from 2000-2005, it is projected to grow by another 26 percent by 2008, when almost half a billion procedures will be done each year. MRI use will grow by 133 percent and CT use by 122 percent . . .Instances of in-office imaging continue to grow as physician groups look to expand sources of practice revenue, and in some instances physicians may order a study on virtually every patient that comes into the office. . . .Two other recent investigations showed that self-referral leads to higher imaging-related costs for outpatient care for a variety of clinical presentations.[14] These higher costs are related to the fact that self-referring physicians utilize imaging more than radiologist-referring physicians and self-referring physicians charge more than radiologists in comparable clinical settings. Of these two influences, the differences in utilization contribute most to the higher costs. However, the study confirms that physician payments also contribute to the higher costs that self-referral imposes.http://www.medsolutions.com/press34.htm.

This is a huge national problem.

Hipparchia--
I'm glad you read the book!
I agree with you that for-profit hospitals charge more, do less charity care and generally have poorer outcomes than not-for-profits.

And Money-Driven Medicine could indeed be used as an argument for single-payer--or at the very least as an argument for non-profit healthcare.

The major problem with single-payer is that the majority of people in this country have employer-based insurance; their employer pays a large chunk of the premium (particiularly true for more affluent employees) and they don't want to give it up for a governement-run plan.

There is also the danger that a bad government would do a terrible job of running healthcare. (Imagine what would have happened if we had single-payer when GWB came to office. If Congress couldn't /wouldn't stop him from launching a war on a lie, and destroying agencies that should have helped New Orleans, would they have stopped him from destorying a health care system? I doubt it.

In 8 years an administrtion and a Congress controlled by conservatives did a great deal of damage. Thank god they didn't have sole control over heatlhcare.

But I would like to see the private sector part of healthcare be not-for-profit private sector. And I believe that if the indusrance industry is regulated and forced to compete with Medicare-for-all on a level playing field, many if not most for-profit insurers will drop out of the game, while more not-for-profit insurers may well spring up.

Barry--
I don't know what you read, but there is abundant research showing that larger multi-specialty centers are sigificantly more efficient, and typically provide better outcomes at a lower cost. (See www.dartmouthatlas.org on this)

[Patrick Schoenfelder]

Barry –

“How do you change the culture of medical practice, not just within a high utilization individual practice but across an entire high utilization geographic region?”

My response is that the best, most proven way is through the power of the government, which is a major reason I have a fondness for public insurance solutions.

Although the government cannot change what is in the hearts and minds of men (and women,) it can change the external way they behave regardless of their hearts and minds, and over time changes in the external way they behave comes to effect their hearts and minds, or at least the hearts and minds of the next generation.

When I was young, women were systematically excluded from most important positions in the US. Then the laws changed, and the government and the courts enforced those laws. People still have unreasonable bias against women in many situations, and women still suffer from the effects of that bias, but the landscape for women is very different than 40 years ago. More than half the seats in law school, business school, and med school are occupied by women. Women are becoming common in jobs they previously rarely if ever got, and a few women have advanced to high leadership positions. People my son and daughter’s age find this normal. People of their children’s generation will find it so normal that they will be puzzled that it used to be different, much as we are puzzled by ideas like debtors’ prison and hanging for stealing food.

When ideas are deeply ingrained, it takes great power to overcome their effects. It will require great power to force providers to change practice patterns to more efficient and scientifically correct practices. The power of the payment system is needed, and I think that the government is in the best position to flex that power. Even if we still have a parallel private insurance system, once the government system does use its muscle for appropriate reforms of practice standards, the private insurers will fall quickly into line, as they always do.

[Patrick Schoenfelder]

Maggie --

I will concede that being a Minnesotan may be coloring my views of medicine -- a local politician who is involved in health care issues once told me that if the entire US would run health care like it is run in Minnesota it would solve the US health care crisis -- and overstatement based partly on pride in his own role in Minnesota health care, but with some truth.

I do keep in contact with many people in imaging around the country however. My discusions (and believe me we discuss this frequently) with them make me wonder about the article you cite and whether it makes a distiction between imaging occuring in places like free standing imaging centers run by radiologists (which take money out of the pockets of hospitals but otherwise function solely on referral just like hospital centers,) imaging centers owned and run by large group practices (like Mayo) and by HMO's (which again function more like hospital centers in terms of referral and ordering patterns, and again siphon money out of hospital budgets,) and the imaging performed in offices of doctors who are not radiologists (which sometimes is planned purely as an income center for the doctors in the practice.) In Minnesota, especially in larger urban areas, choice one and choice two are common, and choice three less common although not unheard of. My conversations with imaging people from other states leads me to believe that although choice three is more common in some areas, it is less common than choice one or two or than hospital based imaging. As it happens I don't have close contact with anyone in the NYC area or LA or Florida, so I cannot comment on those places other than to say they do have a reputation for greater entreprenuership by doctors, but I do know people in Chicago, San Francisco, Seattle, Portland, St. Louis, Kansas City, Des Moines, Arizona, Texas, Denver, Detroit,Pittsburgh, and several other places.

In general, I would suggest that in using the term "imaging done in doctors' offices" it is very important to make the distinction between imaging done in offices of doctors who are not imagers and who are sometimes motivated by purely profit considerations and who are in a situation where self-referral is part of the equation and imaging done at places like Kaiser, Group Health, Mayo, or large free standing imaging centers owned by hospitals, radiologists, group practices, and so on where self referral and profits for referring doctors are not a consideration.

I suspect that if only the imaging in offices that are not imaging centers and involving self referral and profit for the doctors ordering the tests is considered, that it accounts for less than 20% of imaging spending, especially if the very limited imaging appropriately performed by some specialties such as ultrasound by gynecologists is excluded as well.

I would certainly suggest that the self-referral imaging be carefully evaluated by payers with an eye on eliminating studies motivated by self dealing.

I remain convinced that the imaging explosion is due to patterns of increased use of imaging independent of any financial reward for the providers ordering the exams.

[hipparchia]

Hmmm, embedding links doesn't seem to work here, trying again...

For-profit vs NFP hospitals:
http://www.correntewire.com/letter_port_huron_times_herald_medicare_works#comment-131059

[hipparchia]

Maggie,

I took the weekend to hunt down and read your book, since it was already on my list of books to read. It's a terrific resource, thanks for writing it.

Your book is also the single best argument I've run into for switching to single payer and converting all the hospitals to non-profit [this is not an isolated incidence, it's the norm]. I'll be using it for that when I talk to people about HR 676.

[hipparchia]

Patrick,

I'm quite the good little capitalist myself, of the self-employed, independent-contractor persuasion, so philosophically I prefer fee-for-service. As a practical matter too, the best care I've gotten -- not too much, not too little -- has largely come from fee-for-service providers.

It's true that an NHS would probably be the cheapest to run, but saving those dollars isn't a high priority on my list, especially since, as you say, we'd have to come up with beaucoup $$ to buy up all the infrastructure.

What I like about nationalizing the entire system is the possibility that it would be easier get more doctors and hospitals in underserved areas, it would be easier to track [and get rid of or fix] truly bad doctors and hospitals, and it would be easier to address the income disparity between specialists and generalists, in large part because it would all be on public record.

It's a bit more difficult and expensive to do these things in a privately-delivered system, but I haven't got a strong preference for either way, so you don't have to worry about me showing up on your doorstep some morning to inform you that overnight you've been transformed into a government employee.

I would, however, like to see all those things addressed.

[Barry Carol]

“The difference is less how the physicians are paid and more in the culture of medicine they practice in.”

How do you change the culture of medical practice, not just within a high utilization individual practice but across an entire high utilization geographic region? An independent Federal Health Board with the power to compel payers to not cover or pay for cost-ineffective drugs, devices and procedures should be a breeze compared to changing medical practice culture, especially in the absence of coverage and payment reform.

Separately, Patrick’s comments about higher costs (and charges) in larger group practices are consistent with a blog post I remember reading a couple of years ago from a doctor who claimed that economies of scale in the purchase of equipment and supplies, insurance, etc. and the ability to more easily afford electronic records disappeared once the practice grew beyond five or six doctors because of the need for greater administrative complexities like the need to hire a practice manager and the like. While doctors’ time can be leveraged to some extent by judicious use of techs, NP’s, PA’s and other physician extenders, the benefits from that leverage are probably not much different if the practice has six doctors or sixty or six hundred.

The market power of the much larger groups, as he said, also gives them the ability to extract higher payments from payers which drives up costs for the healthcare system. Obviously, if the practice takes in more revenue because it has the market power to increase its charges relative to smaller competitors, it can compensate its physicians more generously whether they are working on a salaried or a fee for service basis.

[Maggie Mahar]

Patrick--

On the "Imaging Explosion" and the role of self-referring doctors who recommend imaging and do it in their offices:

Today, I happened to run into this while working on something else: "From 2000 to 2006 spending on diagnostic imaging doubled, from $7 billion to $14 billion. BY 2006,
TWO-THIRDS OF DIAGNOSTIC IMAGING WAS DONE IN DOCTORS' OFFICES.
These doctors owned the imaging equipment and made huge profits on using it, in large part because Medicare opays for imaging in doctors' offices assuming that the equipment is in use only 25% of the time. IN fact, reserach shows that doctors manage to keep this euqipment in use 50% to 75% of the time. (So Medicare should be paying much less)

Perhaps the fact that you are in Minnesota skews your vision--in a very positive way, I should add.. Healthcare in Minnesota is so different from most of the nation.It might be compared to the criminal law system in Texas--also an outlier, though in a much less positive way.

Living in NYC, I see the darker side of healthcare in America.

More importantly, the nationwide research confirms what Alain Enthoven says in that NYT
op-ed: by and large , when compared to large multi-specialty groups where docs are on salary, fee-for-service in the U.S. leads to more expensive, less effective care. I'm guessing you've read the most recent Dartmouth research--if not see www.dartmouthatlas.com

[Patrick Schoenfelder]

The Imaging Explosion:

My main experience with doctors owning imaging equipment is very limited, mostly with orthopedists and others owning simple x-ray machines, gynecologists with ultrasound equipment, and various primary care people installing mammogram machines. Overall, I don’t think that any of that has added much to costs, and that the installation of mammogram machines in primary care offices – if used by qualified techs and if images are interpreted by qualified readers, both of which are usually forced by regulations – has actually been a benefit in extending appropriate use of mammography.

I have no doubt that entrepreneurial physicians can and do exploit imaging to increase their incomes, especially on the coasts and in the Sunbelt. Living in Minnesota, where Garrison Keillor would tell us that all the physicians, like all the children, are above average, I have less experience with that. This is something that obviously needs controls from payers of all sorts.

However, I don’t think the explosion of imaging is due to entrepreneurs either in whole or even in large part. Imaging has exploded everywhere, including in places I work where the only machines are owned by health care systems, at the Mayo Clinic, at HMO’s where there is actually a disincentive to increase imaging, and just about every place else. In one hospital I know about, the demand for high tech imaging has actually driven the hospital imaging department from profitability to deficit, since although they felt forced to upgrade to costly state of the art CT and MRI equipment with 24 hour availability in order to be seen as appropriately equipped by patients and doctors, they could not get the volume out of their small town (14,500 people) to allow them to be profitable.

The explosion of imaging is driven by the demand for imaging, which in turn is driven by changes in practice patterns of providers and by demand by patients. In fact, there is an interesting article from last week’s NEJM (“Culture Shock — Patient as Icon, Icon as Patient”) making the blog rounds right now suggesting that in the age of imaging, sophisticated labs (another cost explosion,) electronic monitoring (ditto,) and other technical innovations, the physical exam and its cousin the careful complete history are becoming obsolete. Working in departments where the cynical phrase “CT ordered in lieu of history and physical” is a frequent grim joke, I am not surprised to see others suggesting the same thing.

Fee for service vs. salary vs. prospective payment:

1.) Although HMO’s originally could outcompete fee for service on a cost basis, the cost saving changes they introduced became so widespread in health care that almost always they end up struggling to compete with private insurers using fee for service providers. This is true almost everywhere. They maintain market share by promoting what they advertise is superior service, not lower costs. The impact of the desire for a cure extends both to fee for service and prospective payment systems. Like I said, you cannot be the HMO that will not let people get MRI’s or you will soon lose your market share. In MRI and CT, HMO’s actually compete not by decreasing utilization, but by burning MRI and CT machines they own themselves 24/7, helped by the fact they do not have to make allowance for emergency procedures that disrupt scheduling and are dealing with a captive patient population that cannot hang up the phone and call elsewhere for an appointment at a better time. Friends of mine enrolled in HMO’s tell me about getting scheduled outpatient MRI’s at 3 AM Sunday morning.
2.) I have spent half my career in group practices where providers were salaried and half out in private practice. The group practices almost always had higher costs than private practice because of higher overheads for office space, higher administration costs due to large and highly paid administrative staffs, a much slower and less efficient process of making changes in practice, and very inefficient billing operations with much slower times to collection and much higher error rates (one place I worked, a nationally renowned center, did a study while I was there that demonstrated that they lost 1 in 7 bills in the department I worked.) In fact, at least in this area of the country, large group practices have charges considerably higher than smaller practices, partly because they can. Large groups can and do negotiate fees with private insurers, who must negotiate because of the market penetration and control the large groups have. Small practices can’t do that. At one meeting about health care I attended a representative of one of the state’s largest private insurers lamented that one large group was insisting on a payment rate of 250% of Medicare. There are a number of news articles out there right now about the efforts of Partners Health Care in Massachusetts to use their market muscle to extract additional payments from insurers compared with other smaller players.
3.) Unfortunately, there is overtreatment at facilities where doctors are on salary as well. The salaried physicians at health care groups in Massachusetts and in California cost a lot more than the salaried physicians at the Mayo Clinic, who in turn cost more than the fee for service physicians who compete with them in out state Minnesota and Iowa, who are also much more cost effective than fee for service or salaried physicians elsewhere. The difference is less how the physicians are paid and more in the culture of medicine they practice in. The study you are referring to actually compares mostly salaried group practices in various parts of the country (NYC and Miami being exceptions because they don’t really have any large salaried groups,) not fee for service vs. salary. The fact that Mayo tops the list for cost effectiveness is due to the fact that salaried physicians at Mayo are less likely to order some types of expensive procedures than their salaried compatriots in Boston or in Cleveland, not due to the fact that they are salaried per se. Let me say again, it is the culture, not the pay system.
4.) I have a lot less objection to paying physicians salaries in the setting of a fee for service system than I do to paying for health care by prospective payment. Experience has led me to believe that salaried settings suffer greater expenses paying underproducers and have to make up for that with either lower salaries for everyone or higher charges, but overall they still are in the business of providing health care. Prospective payment systems are in the business of NOT providing health care; they make their profits by decreasing the amount of health care they dispense. Some of those decreases are warranted, others not so much. The problem is that while fee for service does create a potential conflict of interest causing increased health care utilization, prospective payment plans create a potential conflict of interest leading to decreased health care, and unfortunately not always in a good way. I am well aware that there are some very good HMO’s around the country, including Kaiser, Group Health of Puget Sound, Health Partners in Minneapolis, and others, that provide excellent care, but excesses of HMO’s have made the term HMO into an obscenity for many if not most Americans. The failure of HillaryCare was due, at least in part, to the fact that it envisioned putting as many Americans as possible into HMO’s, giving the opposition a rallying cry for their attacks on the program. Any health care reform proposal that starts out by suggesting that everyone should end up in HMO’s or HMO-like prospective payment systems will fail, since the public quite clearly does not want that.
5.) The performance of Medicare Advantage has shown HMO’s cannot outcompete fee for service. (And yes, I know that for marketing purposes Medicare Advantage providers often offer gym memberships and other trinkets bought in mass purchases at low prices as incentives to join, but there is no question that for the results they can provide, Medicare Advantage providers, including almost all HMO’s and many large group practices, cost more for the same effectiveness than fee for service providers cost in Medicare A and B.)
6.) In the end, if we got everything else on the health care wish list, including real universal coverage, offer of a public insurance alternative, and a strong independent Health Care Board to introduce and enforce appropriate practice standards, I would be willing to give up fee for service. I just think that where there is actual evidence, as opposed to well argued theoretical conjecture, fee for service backed by strong practice standards is usually shown to be cheaper, not more expensive, than the alternatives, simply because you pay only for what you get.

Now, I will fight no more forever about fee for service vs. other payment systems, at least on this thread.

[Maggie Mahar]

Patrick--
When you look at the explosion in diagnostic imaging, you will find a major spike among doctors who have installed imaging equipment in their offices. These doctors are both prescribing and doing the imaging--profiting from their recommendation.

Also, someone sent me this op-ed calling for an end to fee-for-service payments by Alain Enthoven in the NYT, Dec. 27.http://www.nytimes.com/2008/12/28/opinion/28enthoven.html?_r=1&scp=2&sq=Enthoven&st=cse

It's quite well-argued.

My point is not that most doctors CONSCIOUSLY "do more" in order to raise their incomes, but the fee-for-service system nevertheless creates a built-in conflict of interest. The doctor makes more if he
does more tests and treatments--even though we know that in regions of the country where doctors practice more conservative medicine, outcomes are no worse and often are better.

In another post on this thread you talk about doctors' and patients' desire for a "cure"--their resistance to the idea that a disease is chronic.
You're entiretly right--and this desire to cure is all wrapped up with the notion that doctors should "do something" with the fee-for-service providing the needed financial incentive. It's difficult to separate the motives, but the end result is overtreatment.

In other countries that use the fee-for-service model there is often a cap on how much a doctor can make: there may be a limit on how many procedures he can do in a given year; there may be a global cap that affects his hospital--in any case his income is rarely open-ended, which is why hard-working Eurpean doctors who see a great many patients stlll rarely wind up earning $3 or $4 million.

And we know there is less overtreatment at multi-specialty medical centers where doctors work on salary--compared to clear overtreatment in places like NYC where so many doctors work solo or in small practices, seeing as many patients as they can as quickly as they can.

(I once sat in a dermatologists waiting room for an hour while his clerical people searched for my file. I clocked him seeing a patient every 3 minutes. You undress and sit in a little room until he bursts in, with a nurse in tow--he looks at your problem, quickly diagnoses it, cuts off any questions, tells the nurse to zap you with X or Y and give you a prescription for Z--and he's gone! White coat flying behind him.

[Patrick Schoenfelder]

Barry --

I agree with your concerns about politicizing health care -- although it already is very politicized (which is the answer to why appropriate decreases of fees are slow to happen. HCFA and its successors are pressured by politics and slow to react, and private insurers, as is their usual practice, follow Medicare.) Maggie's concerns about the impact of an anti-government administration are another side of the same coin.

That is why Daschle's proposal to isolate health care from congress using a device similar to the Federal Reserve Board is so interesting. If the political will could be found to create such an entity, it would then be protected from interference in the future by its charter and structure.

Daschle actually feels that in the end congress might prefer to get out of the business of fine tuning health care. He feels that both conservatives and liberals would prefer that solution in order to avoid being incessantly bogged down in considerations they understood poorly and which were fraught with political danger -- especially if a universal health care program was established and the already heightened interest of seniors in health care politics extended to all Americans.

Don't know if he is right about feeling that something like that could pass, but he does have a long career of experience in understanding how congress is likely to behave.

[Barry Carol]

“This is why I am so strongly in favor of a National Health Board to set practice standards -- and of course why almost all foreign systems have adopted strong standards board approaches. That approach could not only save hundreds of billions of dollars, but would give providers cover to allow practice of scientifically correct care, both in terms of patient demand and of malpractice fears.”

Patrick – I’m with you 1,000% on this one. I wonder what would happen, though, if MedPAC or a newly created Federal Health Board recommended against paying for a given procedure but the Congress, influenced by lobbyists, required CMS to continue to pay for it anyway. The FHB, in theory, should provide both the political cover and moral authority for private insurers to refuse to cover it. Ideally, the enabling legislation should probably explicitly prohibit CMS from covering and paying for anything the FHB finds not cost-effective.

I also wonder why, under CMS’ current process, it takes so long to lower fees for procedures that come to take much less time due to both newer techniques and doctors progressing down the learning curve as they accumulate more experience than they did when first introduced.

[Patrick Schoenfelder]

Barry --

I agree that there is probably not a lot of demand on the part of patients for endoscopy. The demand for endoscopy is fueled by clinicians reacting to research findings and to some extent to malpractice fears. There is a reaction to colonoscopy going on in the literature right now, but I suspect in the end it will shake out in endoscopy's favor, although it may be accompanied by recommendations or requirements that the doctors performing endoscopy undergo a more thorough training, have more experience, and document that training and experience in order to be paid. I also think there will be downward pressure on endoscopy fees, as the procedures have come to take much less time than they did when fees were set.

Angiography is another story. Despite the pain and risk involved, I think there is a strong patient demand for angiography, especially in areas where it is closely related to interventions and surgery. The desire of patients to seek "curative" options is very, very high in US medicine, along with resistance to medical management of diseases as "chronic" conditions. The belief in these "curative" procedures is also very strong both in physicians performing them and in clinicians referring patients to them. There is strong resistance to information from high quality research that indicates that medical treatments may not only be equal to interventions and surgery, but actually superior. I have seen articles suggesting that changing the practice of management of coronary artery disease to comply with best scientific evidence would save as much as $70 billion a year in the US while improving results.

Angiography and intervention are not alone in this. Experts also suggest that the diagnosis and management of back pain costs $70 billion more than it would if we used best proven approaches. A health system CEO told me recently that he and his staff were well aware of the facts about back pain management, but did not dare to take any steps, through standards or even through staff education, because patients would simply go somewhere else. This reflects the popular observation from a few years back that you did not dare become known as the HMO or insurance program that would not let people get MRI's, because your market share would collapse.

This is why I am so strongly in favor of a National Health Board to set practice standards -- and of course why almost all foreigh systems have adopted strong standards board approaches. That approach could not only save hundreds of billions of dollars, but would give providers cover to allow practice of scientifically correct care, both in terms of patient demand and of malpractice fears.

Block grants or other prospective payment plans are another approach to these problems, but I prefer using fee for service and practice standards. Block grants encourage general rationing of health care and do not guarentee that cuts will be applied where they are most appropriate, but rather where they are easiest to accomplish and sell. Practice standards accompanied by payment changes in a fee for service system apply the rationing directly to areas where it is most needed, helping providers and patients to make decisions that are best for health care in the long run.

[Barry Carol]

Maggie -- I’m actually optimistic that we will get substantive healthcare reform this time around, at least with respect to universal coverage. I’m concerned, however, about an attitude that exists among many that we can spend virtually unlimited amounts of money, at least for awhile, on anything we want because, after all, we just authorized $700 billion to fix the banking system of which half has already been committed. Hopefully, we will also get the payment reform that either stops paying for cost-ineffective drugs, devices and procedures or at least exposes patients to far more of the cost.

I do not think we are likely to embrace other aspects of European safety nets including free college tuition, more generous social security than we have, more generous disability coverage, and more rigidity in the labor markets including far longer and more generous unemployment benefits and generally making it very difficult to lay people off during business downturns. While taxes are virtually certain to go up for the top 20%-30% of the income distribution especially, I doubt that they will approach European levels as measured by the total tax burden as a percentage of gross income. We are not likely, for example, to pay anywhere near $7-$9 per gallon for gasoline despite concerns about global warming and the need to rebuild our infrastructure. If we do get a VAT eventually, the rate probably won’t be close to the high teen percentage rates and even higher that prevail throughout Europe. So, substantive healthcare reform, probably. Will the upper half of the income distribution start singing Solidarity Forever? I doubt it.

Patrick – I was interested to read your comments about imaging. When I think of imaging to mean non-invasive and relatively painless, though expensive, tests like MRI’s and CAT scans, I can easily picture your scenario playing out. There may also be a defensive medicine aspect among U.S. clinicians that won’t apply to clinicians in other countries, at least not as pervasively. For the patients, if insurance will pay for it and the radiation exposure risks are low, I can see them pushing for it. Normally, I think engaged (as opposed to passive) patients are a good thing but certainly not always. If imaging is extended to include such procedures as endoscopies, colonoscopy, angiography, etc., I don’t think patients are likely to be too quick to insist on those if the doctor doesn’t think they are necessary. I wonder how much more of these we do as compared to healthcare systems in other countries. Separately, the importance of publishing and research in advancing academic careers can certainly lead to aggressive treatment at the margin. I’m sure other countries have academic medical centers too. I wonder how doctors in those centers advance their careers and how do the rewards for doing so compare to here?

It’s a fascinating discussion at any rate.

[Patrick Schoenfelder]

I am certain that there are horror stories out there about overtreatment. However, I have to defend my fellow physicians here by saying that although overtreatment is rampant in the US and certainly harmful to patients in many circumstances and harmful economically in all, I do not think that financial incentives for providers or hospitals are the main cause of overtreatment. I think that most overtreatment occurs mostly because the people directing the overtreatment actually believe they are doing the right thing and because patients often want overtreatment ( read the NYTimes op ed piece by Susan Sontag's son demanding that oncologists provide unnecessary and dangerous overtreatment in order to give hope to patients,) and because there is a general bias in US medicine for the high tech and spectacular, strongly encouraged by "research" performed at the behest of drug and equipment suppliers and backed by the culture in academic medicine and in scholarly journals, where it is widely known that the way to advance your career is to do things that work, not to show that things don't work.

Greed by providers does exist, but outside of a few places in the country where the culture of medicine has gone off the tracks, greed is rarely the reason for overtreatment.

That said, one of the reasons that Mayo has done so well in studies of efficacy and cost effectiveness is that the culture of Mayo contains a high level of suspicion or even cynicism about following the latest fads in management or getting on board bandwagons without first checking carefully to see that things work. Part of this may be what you allude to, in that at Mayo, almost unique among high power research and referral centers, publication and research do not effect salary and rank.

Despite the common opinion amoung health care wonks, examining the effect of fee for service in the world does not lead to any evidence that it causes overuse or overtreatment. In France, Germany, Japan, Canada, Australia, and many other places the dominant fee for service payment approach does not lead to overuse. If indeed fee for service leads to overuse in the US, it is due to something unique in the US, not to an intrinsic flaw in the system itself.

I think an example might be useful here. Imaging services have been subject to explosive overuse in the US in the last few years. However, the people who benefit financially, the diagnostic radiologists, have no role in ordering imaging procedures. Imaging is ordered almost 100% by non-radiologists. I have first hand experience of radiologists repeatedly trying to talk clinicians out of ordering exams the radiologists believe are not needed, only to have the clinicians absolutely insist that they must have the exam. The reason seems to be first that many clinicians have been oversold on imaging by their own literature and training, and second that clinicians often find themselves dealing with patients who are insistant that they want the exam because of what they have heard in the media and by word of mouth. Although equipment manufacturers and their allies in academic medicine are responsible for a lot of publicity encouraging false reliance on imaging, they are not being rewarded by the fee for service system. The people who benefit from the fee for service for radiology are left standing on the sidelines, shaking their heads bemusedly while wondering what time they are going to get home that night.

[Maggie Mahar]

Barry--

When I said that well-paid employees pay less for insurance, I was not talking about better-paid vs. less-well-paid within a given firm.

In most companies, everyone pays the asme amount for the same insurance--although there are often special health care benefits after retirement for executives.

But what I was talking about is the government numbers which show that "better paid" employees (earning over $65,000) are a) more likely to work for a large company that offers health insurance and b) are more likely to have employers who pay 70% to 100% of their insurance.

These tend to be large, wealthy corporations.
On average, people who work for small companies earn lower salaries and are less likely to have benefits. If they do have health benefits their employer is less likely to pay a large chunk of the premium.

The many white collar workers who now work for corporations and earn over $65,000 will be suprised to discover that under universal coverage they are likely to be paying more than they do now--even if we squeeze out much of the waste.

If their employers drop employer-based coverage, some companies will make up the difference by raising wages for some employees that they don't want to lose.

Barry--
On the European social safety net vs. our less economic security and more inequality in the U.S., you say our culture "is what it is" and isn't going to change.

I disagree. I think we are at a turning point in American history, much like 1930, when we are about to see great change.

If this recession is as long and as deep as the economists and market-watchers who I follow think it will be, we are
going to see redistribution of income, not only through healthcare, but in other areas.

The Obama administration is already talking about putting large sums into public schools and public health. I suspect that we are going to see more govt's sponsored scholarships based on need, and fewer student loans for the upper-middle class.

In the 1920s, inequality in the U.S. reached a high--much as it did in the 1990s. If in the years to come we put money into WPA-type projects, inner cities, education, healthcare and a wide variety of social programs for the poor those gaps between the lower-middle class,the middle class and the uppper-middle class will begin to narrow.

Ultimately, we may get back to where we were in the 1950s and 1960s when white America was largely middle-class.

The Obama administation is not going to raise taxes next year --probably not the year after-- but ultimately it will raise income taxes, inheritance taxes, capital gains taxes, etc---and I wouldn't be too surprised to see a VAT somewhere down the road.

I also suspect that we will raise the amount of an individual's income that is taxed for Social Security--maybe to $250,000 or $300,000.

See tax rates at the end of the 1930s.

It's time for another pendulum swing.

Patrick--

On fee-for-servcice, I think it comes down to this:

Are we more concerned about some doctors making the same salary as others while not working as hard

OR

more concerned about many patients being over-treated becuase the financial incentives of fee-for-service encourage overtreatment (unless you have a government reducing fees every time they see an upswing in a particular treatment.)

People are killed by overtreatment. People suffer horribly while going through that 2nd or 3rd round of futile chemo.
(Monday I'm posting an open letter from ononcologist that will make you shudder.)

One of the many things I like about the Mayo clinic is the fact that after the first five years everyone in a given specialty makes the same salary. And it's significantly less that many Mayo doctors make on
the outside.

But the many docs who are happy at Mayo don't mind.

Meanwhile, medicine at Mayo is patient-centered.
This is why it costs Medicare 50% less when a
Medicare patient is treated at Mayo than when a very similar patient is treated at UCLA or many other prestigious medical centers where most doctors are working fee-for-service---and patients suffer the consequences.

[Barry Carol]

Patrick,

I basically agree with everything you said in your last comment including both the need to drive waste out of our system to reduce costs and to protect every individual from catastrophic medical expenses. Indeed, I’ve said numerous times that if health insurance does nothing else, it must cover catastrophic medical expenses 100% above some reasonable out-of-pocket (OOP) maximum limit.

I’ve also noted previously that way back in 1974, shortly before President Nixon resigned, we almost got national health insurance with a deductible of between $1,000 and $1,500 per person (multiply by about 5 to covert to today’s dollars) with insurance covering medical costs above that limit. Unfortunately, organized labor overreached and killed the bill. It expected a landslide win for Democrats in the post-Watergate Congressional elections and thought it could then ram a single payer system through over Nixon’s veto. Nixon resigned in August, 1974, a severe recession set in and suddenly there was no money for any new entitlement programs. While the Democrats got their landslide, in the end, they wound up with nothing on the healthcare reform front.

The bottom line: substantive healthcare reform needs bipartisan support, and it’s not smart strategy to overreach.

[Patrick Schoenfelder]

Barry --

The problem with US health care is not just its overall cost from waste, the very uneven distribution of costs in the population. A couple with one child, low health costs, and employers that pay half of their insurance costs could spend as little as $2500 per person. If the couple had the misfortune to have a significantly premature baby, they could spend as much as $900,000 in the same year, much of it their own responsibility because of co-pays and insurance payment caps. The Europeans have developed a system where there are relatively mild variations in what individuals pay, with the system bearing the costs for people stuck with very high bills. Reform proposals like Emanuel's and Obama's envision a system that would also distribute costs much more evenly.

It is obvious to almost everyone on this blog that health care reform must contain significant cost control, since although our high costs can be born be the economy now, if they continue to rise to the level of 30% of GDP predicted by many observers, they will not longer be sustainable.

Finally, in all our discussion of the costs to high income indivuduals, it is important to note that although high income people pay the same for private insurance as low income people who are fortunate enough to get it, they pay much more for the government component of health costs. The Medicare tax of 3%, split between individual and employer, covers every last dollar of wages and salary. The coverage of Medicaid and the balance of Medicare not covered by the Medicare tax comes out of federal income tax, with the state component of Medicaid paid by state taxes. SCHIP is paid by federal and state taxes. The VA, IHS, PHS, military health care, and the various scientific institutes are all paid out of federal taxes, which in turn are paid predominately by higher income taxpayers.

In fact, Maggie's mythical couple earning $200,000 a year and getting half their health insurance paid by employers would pay at least $7000 to $8000 dollars more for health care in their and their employers contributions to taxes. Half of the $7500 per person that health care costs in the US is paid by taxes, giving a tax burden for health care of rougly $3200 for every man, woman, and child, but paid largely by higher income people.

The deal that high income people got from some reform proposal financing, whether VAT or income tax or employment tax would not be as good as our current system, but it would not be as bad as a superficial analysis neglecting the impact of taxes now. And high income people would get the same leveling of risk that everyone got, protecting them from the impact of that premature baby, the cancer treatment costing 100's of thousands, the long stay in the ICU from an auto accident or an intracranial bleed, or other catastrophe that would be so expensive that it could wipe out the resources of most people in the top 5% of income as easily as those in the bottom 30%.

[Barry Carol]

Patrick and Maggie,

Professor Uwe Reinhardt of Princeton has made the point that a wealthy society can afford to spend more for healthcare. In an earlier comment, I noted that the U.S. GDP per capita is $46,000 as compared to $32,600 in France (2007) according to the CIA’s “The World Fact Book.” If the U.S. spends 16% of GDP on healthcare, that implies $7,360 per person leaving $38,640 per person for everything else. If France spends 10% of its GDP on healthcare, that equates to $3,260 per person leaving $29,340 for everything else. While U.S. per capita healthcare spending exceeds France’s by 122.6%, per capita GDP available for everything else other than healthcare in the U.S. is still 31.7% higher than France’s.

While I personally think the U.S. healthcare system is grossly inefficient, fragmented and poorly structured and there is much that can be done to make it more efficient and cost-effective while bringing the currently uninsured into the system, the high tax, extensive social safety net model that most European countries embraced comes at a cost. In effect, Europeans (and Canadians) opted to trade greater personal economic security and less (than the U.S.) income inequality for slower secular economic growth and less economic opportunity, including the opportunity to become wealthy or at least upper middle class.

While Maggie and many others may think that life in Western Europe and Canada is less stressful and more enjoyable than in the U.S., our culture is what it is and theirs is different. I don’t think that’s likely to change, though I do expect the upper 30% of the income distribution will pay a higher percentage of their income in taxes going forward to not only pay for healthcare reform but to bring federal revenue into closer alignment with spending over the intermediate term.

[Patrick Schoenfelder]

Maggie --

I don't want to belabor this, but unfortunately in 30 years in medicine I have never seen a practice of any type or specialty where productivity did not vary by nearly 100% from the most to the least productive, and I have worked in salaried, prospective payment, and fee for service settings. The difference is that in fee for service settings the low producers cost a lot less, while in salaried or prospective payment systems they tend to cost nearly the same.

In a reformed US health care system, high income people will probably pay more for health care than now. But, depending on the financing model, the vast majority of people will pay considerably less, especially if you consider money paid for fringe benefits to be part of wages.

In the end, someplace or another people in Europe are paying less as well, since in the US we have to find the money to pay for the 16% of GDP that we spend vs the 8 to 13% they pay. Part of this is because half of US health care is already paid by the government, so the charges we all pay for health care are partly masked in our taxes of various sorts.

[Barry Carol]

“Employers pay a larger share of "better paid" employees benefits”

Maggie,

Over the course of my nearly four decade career, I’ve worked for two very large companies with many thousands of employees, a financial publishing firm with hundreds of employees, and a money management firm with hundreds of employees. To the best of my knowledge, everyone at the money management firm and the financial publisher had the same insurance coverage while, at the two large companies, there may be (I’m not sure) an ultra gold plated plan that applies to perhaps a couple of dozen senior executives at the top, though I don’t think that’s the case at my current (large company) employer.

Interestingly, way back in 1990, when I worked for the well known money management firm, low paid secretaries and other employees who made less than $30K paid either zero or $10 per month toward the cost of their very comprehensive health insurance. At the same time, analysts (including me), portfolio managers and executives who made $100K or more paid $250 per month toward the cost of our coverage which probably had a total premium cost of $8K. Remember, it was NYC and we had a considerable number of very elderly partners, some of whom incurred major league medical expenses. Anyway, the well paid people thought our much higher contribution compared to that of the low paid employees was perfectly fair and reasonable. I think more employers would be well served to consider this approach, at least for non-union personnel.