Thursday, May 09, 2013

Gross Disparities In Costs Of Common Medical Procedures At Hospitals May Fuel Demand For Single-Payer National Health Insurance In The United States

I have always opposed what is called "socialized medicine". I have traditionally favored the free market as the best source for solutions to most economic problems. But now I'm seriously warming up to the idea of single-payer national health insurance. And it's not just the complexities and expenses of Obamacare that are responsible. Two media stories published this week expose gross disparities in the costs of common medical procedures at various hospitals. These disparities are irrational, indefensible, and unsustainable.

On May 8th, 2013, The Week published an article entitled "Why a joint replacement costs $30,000 in one hospital and $160,000 in another", which has spawned a robust discussion on the F2 Anonboard. The Washington Post has also published a similar article. The Week points out that if you need a lower joint replacement, Sibley Memorial Hospital in Washington D.C. will charge you or your insurance provider an average of $30,000, while across town at George Washington University, the same procedure will cost $69,000. Out of town? The Las Colinas Medical Center near Dallas will charge you $160,832.

That would be like the McDonald's at Northern Lights and Arctic Blvd. charging $3.50 for a Big Mac while the McDonald's at the nearby Midtown Walmart charges $7.50 for the same Big Mac, or the McDonald's on Geist Road in Fairbanks charging $19. Irrational and unsustainable; it does not cost five times more to make a Big Mac in Fairbanks than it does in Anchorage. This is why the price of a Big Mac is similar regardless of which McDonald's you visit anywhere on the Alaska road system.

Here's the litany of excuses offered by the industry to explain the current variations:

-- Hospitals counter that people rarely pay the amount listed on the chargemaster, a database every hospital comes up with that lists the price of every procedure.
-- Some hospitals have higher overhead than others, especially a facility that serves a low-income population or that provides training to medical students.
-- Hospitals charge premium prices to uninsured patients to compensate for more limited profits from privately-insured or publicly-insured patients.

Other factors include the fact that most hospitals do not publicly advertise their prices because private insurers don't want to be embarrassed by their failure to negotiate lower prices than their competitors, as well as treatment given to illegal immigrants who don't have insurance and can't afford to pay full prices. Some hospitals end up writing off bills to illegal immigrants and gouge uninsured American patients to make up the difference. Liability and malpractice insurance charges to medical providers also have an inflationary effect. Furthermore, insured patients don't have an incentive to do comparison shopping because filing claims are often a mere formality thanks to pre-negotiated prices by private and public insurance providers. The bottom line: Hospitals don't have a full range of incentives to keep prices low.

Alaska Dispatch also exposes the same problem here in the Last Frontier. In a May 8th article entitled "Huge discrepancies in medical charges found -- in Alaska and nationwide", in which they also link to a Medicare Provider Charge database released by the White House, Alaska Dispatch reports that a respiratory illness requiring four days on a ventilator, if treated at Providence Alaska Medical Center, costs about $155,000. But the same treatment at the Alaska Native Medical Center costs $72,000, more than 50 percent cheaper. Meanwhile, a spinal fusion at Alaska Regional Hospital costs about $152,000, while at Providence, it's about $79,000. All three hospitals are within a few miles of each other in Anchorage. Outside of Alaska, that same spinal fusion procedure can range from $21,000 in Maryland to $471,120 in New Jersey. Even Bruce Lamoureux of Providence Health and Services calls it indefensible, saying “What you are seeing in these numbers is years and years of unusual actions by hospitals, health systems and physicians in order to secure reimbursement”.



Can such a system actually be reformed, or must it be rebuilt? The private sector has showed that it is unwilling to police itself. Obamacare merely applies bandaids to what has become a sucking chest wound. Consequently, it's time to consider what has been heretofore consider unthinkable, particularly by conservatives. Single-payer national health insurance. OMG, you say! My taxes might have to help pay for your medical procedure, you shriek! Well, guess what? Approximately 47 percent of my property taxes goes towards a school district whose services and facilities I don't use, but you don't hear me shrieking about it. In fact, not only have I voted in favor of two-thirds of the school bonds on the ballot during the past 20 years, but I have actually promoted most of the school bonds on this blog. This is because I perceive that public education is in the community interest, requiring community involvement.

Is it in the community interest for the best health insurance to be merely an employment perk available only to employees considered most valuable? Is it in the community interest to force people to choose between housing and health care? Is it in the community interest to encourage people to neglect medical anomalies in the incipient or affordable stage and wait until they're in the less affordable mature or terminal stage? Is it in the community interest to pad public health care costs with public subsidization of elective care such as contraceptives, Viagra, and sexual reassignment surgery?

The answer to all of those questions is "Hell, No!"

It's time to seriously consider joining the rest of the civilized world (and even some nations in the "less-civilized" world) and adopt a single-payer national health insurance program. However, national health insurance should not be free; to deter abuse, everyone must have some "skin in the game". National health insurance only needs to be affordable, like Canada's system. Here are some suggested attributes:

-- A basic "Chevy" package offering subsidized therapeutic, or medically-necessary care. No co-pay required. This package would be available only to American citizens; green card holders would have their home countries' insurance billed. People could purchase additional "Cadillac" plug-ins either through the public sector or private sector for elective care regimes.
-- No one would pay more than five percent of their annual income for the "Chevy" package. This means that if someone becomes unemployed and earns no income, they pay five percent of zero, or zero payment. They can still get therapeutic health care even if unemployed.
-- Implement limited asset means testing; vital assets such as one's primary residence, motor vehicle, and retirement and rainy-day accounts would be shielded. Bank accounts outside the United States would not qualify to be shielded.
-- No coverage for illegal immigrants. Illegal immigrants could get emergency care for free if they cannot pay, but must be promptly deported to their home countries once stabilized.
-- Reduce unnecessary regulation of hospitals and medical providers. In a comment to the Dispatch, Rachel Neumann notes that a lot of the expense is because of the red tape and regulations the government itself has posed on hospitals, even down to the lighting requirements.
-- Tort reform to make it harder to file nuisance lawsuits; loser pays all costs. This would reduce liability and malpractice insurance premiums levied upon medical providers.

Don't think national health insurance would work? Many Brits, Canadians, Germans, and others seem content with their systems. As a matter of fact, Alaska pollster Ivan Moore, who is a British national, discussed national health insurance in two different articles in the Anchorage Press. In a July 5th article entitled "It’s about time the U.S. caught up on health care", Moore acknowledged that the British National Health System had its deficiencies, but wrote "The NHS is funded through National Insurance, which back in my day was a 7 percent deduction on your paycheck. You paid 7 percent regardless of whether your salary was a million a year or $10,000. On an average salary of, say, $40,000 a year, you’d pay a little less than $3,000 a year in contributions, or $250 a month. If you got sick, you went to see a doctor and got taken care of, no insurance forms to fill out, no deductibles to meet, no co-pays, no concern that your insurance might not cover what you needed. You’d get looked after, then you’d go home and get better. And it was this way, regardless of whether you had a cold, or whether, in my father’s case in 1987, you needed a quadruple bypass".

In his July 12th article entitled "Why not a single-payer system?", Moore outlines his American proposal. He suggests a personal tax on income of about 2 percent, plus a payroll tax on businesses of about 6-7 percent, claiming that this would raise a sufficient amount of revenue to entirely replace the private portion of health care expenditures, and render every single person in the country covered. He says this would eliminate all out-of-pocket expenses. My only objection to this proposal is that it imposes too much of a burden upon employers, and could unnecessarily restrict hiring during good times and promote more layoffs during bad times. But it's a good starting point. Numerous other questions would have to be resolved, such as if and how we integrate Medicare and the Veterans Administration into a national insurance program.

The bottom line is that our health care system is too broken for too many people, and forcing people to buy health insurance under the current system will actually impoverish more people.

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