• People Talk and My Ear Bleeds


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    Tuesday, November 29, 2005

    Rising Healthcare Costs

    Last month’s issue of Forbes highlights a growing problem in medicine—excessive compensation. What should we do, if anything, to people profiting generously from a $2 trillion dollar healthcare system with costs spiraling out of hand? For example, one New York lawyer works about 40 cases of birthing malpractice a year. He charges routinely that mistakes made during the birth caused a baby’s situation, such as cerebral palsy. Usually, insurance companies settle out of court. In one case mentioned in the article, he made over $10 million for the baby’s parents, took $1.4 million for himself, and then asked the judge to up his cut to $2.2 million citing long hours and complexity of the case—even though both arguments are expressedly forbidden as ways to improve payment in New York’s sliding scale method.

    Today more than a quarter of all Americans are uninsured. I am one of them. My employer offers no coverage, even though I work 40 hours a week. My wife, still a student, gets minimal coverage. This topic has engendered discussion from the white house to my interviews at medical school, as doctors and politicians alike try to grasp the gravity of the situation and direction reform must take. What should we do? A couple weeks ago, in Massachusetts, the House of Representatives passed a version of a bill put forward by Gov. Mitt Romney. It still needs approval by the State Senate before it becomes law. This bill would require employers to provide minimal coverage for workers.

    But on the flip side, surveys show that at least 70,000-90,000 people in Massachusetts make more than three times the poverty level and do not have coverage. These individuals obviously choose not to, because monetarily it is well within their ability. The proposed bill would also require people above the poverty line to have some form of medical coverage. Problem solved, right? Wrong.

    The “taxachusetts” bill (as a Bostonian called his state when I was talking to him on the subway), provides a viable way for the government to help curb the rising number of uninsured. I think it might be the best plan I’ve heard of so far, but that doesn’t make it the right way of dealing with the problem.

    I work with Buruli ulcer. It is a disease endemic in West Africa and Northern Australia. The bacteria enter through a cut in the skin, then causes a bump to form. Eventually that bump opens into a painless skin lesion (ulcer) that gradually gets bigger until it may cover up to 70% of the body. Eventually, the immune system gets a hold of this bug, and the lesions scar over; often resulting in contracture deformities.

    If a doctor put a bandaid on the bump or small lesion then nothing would happen. It might protect the lesion from secondary infections, but not stop its growth or eventual scarring. The only way to treat the disease (since antibiotics do not work) is to cut out the bump before a lesion is formed and stitch up the skin, or cut away the lesion and use skin grafts to fill it back.

    I have a feeling America’s heathcare system is a large nodule about to ulcerate. Public policy initiatives, although great bandaids, are not surgical excisions and will not stop the progression of the ulcer. The heart of the healthcare matter, is two issues. 1) litigation causes huge costs to hospitals and doctors that are passed down to consumers, and 2) as medicine gets more advanced costs rise to pay for the increasingly complex procedures and research.

    If America’s lawmakers and policy wizards can strike to the heart of these two issues, the cost of managed healthcare will decrease, and more people will be able to afford health insurance.

    Attacking these two issues also allows us to bypass the horrid idea of standardizing healthcare like Canada and Great Britain. My coworker Mike’s sister lives in Britain, and when she needed an MRI, she had to wait months because of the waiting list. In medicine, hours and days can mean the difference between life and death, let alone months. Socialized medicine brings medicine down to the lowest level of service possible, because it does not allow for prompt and efficient care, nor give incentives to healthcare workers to enter medicine and succeed. With socialized medicine comes standardized salaries, and the decreased pay will dissuade more prospective doctors from joining the profession. Hence, a lower caliber doctor will practice, and he or she will have less incentive to work their hardest to save a patient because the return on such sacrifice is less, and often futile when a patient must wait long periods for critical tests or treatments.

    So how do we deal with the problems? First, we need better tort reform. My grandfather died due to malpractice. I know it happens, acutely. However, many lawsuits, like Mr. Moore’s cerebral palsy lawsuit, are frivolous. An overabundance of information shows that nothing in the birthing process can cause cerebral palsy, but insurance companies settle out of court because it’s less costly then waging legal war, and the cost is passed on to you and me. All states should pass laws limiting damages juries can award, as well as payment lawyers can make from a verdict. Also, physicians need to create a contractual relationship with the patient that says something to this effect:

    “You, the patient, contract with me, the physician, to provide your healthcare. By signing this contract you acknowledge that there are many physicians and you have chosen me to direct your care of your own free will and knowledge. You consent to all treatments I deem necessary except those that are expressedly forbidden by your faith or creed, and if you refuse tests and procedures forbidden by your faith or creed, you take full legal, ethical, and physical responsibility for the outcome of the whole course of treatment. Also, you acknowledge that human error is part of the fallible nature of man and if you feel that I did not perform to the best of my ability and this caused undue harm to the outcome of the course of treatment, you agree to settle such grievance outside of court via arbitration.”

    Obviously this language is just my own words, but the gist can be put into binding legal jargon. Such a disclaimer would free the doctor to pursue the course of treatment he or she feels is best for the patient and limit liability for errors.

    In addition, government subsidies for increased competition among medical technology companies will drive down costs of tests. Also, physicians need to set up advisory boards that deal with test efficacy. The Anesthesiology society of America did so in the late 1990s and malpractice insurance has only risen along with inflation since then. Test efficacy boards will determine if tests are being order too much, instruct doctors, and find machines that do not fail, or techniques that work better, to lower malpractice incidence and rates.

    Ultimately, this requires a concerted effort by both the government and physicians in tackling these two issues. Doing so will defeat the ulcer at its source, before it festers.


    MGO said...

    Lacking any hard data, I'm not really qualified to comment. Nevertheless, here's my take:

    My concern about laws requiring employers to pay for health insurance is that the regulation could have unintended consequences. My impression is that lower-paid workers will be laid off or switched to part-time with fewer hours because it's not economically feasible to pay for their insurance on top of their pay (I'm assuming here there's an exception for part time workers), or else the cost of insurance would simply be deducted out of currently uninsured workers' salaries (effectively requiring all working people to buy health insurance). Of course, for all I know, it might end up working, but that's my first impression.

    What strikes me to be the actual underlying problem - but, again, sans data - is that health insurance is paid for by employers. As a result, employees and their families usually pay a fixed copay for each service, never knowing how much the service cost the insurance company, nor how much the insurance company itself is pocketing. Since the final consumers of health care don't know what the costs are, they can't provide the market feedback that keeps the costs down in other industries.

    At the same time, from what I understand, the insurance companies exhert considerable pressure on doctors to provide health services at low cost to insurance company policyholders. Since few, if any, consumers get to doctors without first going through the insurance companies, the insurance companies can threaten to cut off the stream of patients if cost demands aren't met.

    If this is what's at work here, then what's the solution? Maybe employers can cut out the middleman by providing defined contribution, rather than defined benefit, health plans - that is to say, provide a fixed amount of money allocable to health care and spent in any way a given employee chooses, as opposed to defined benefit setup of health insurance as currently provided. [There's an analog here for retirement plans - pension plans are defined benefit, while 401k-type plans are defined contribution.] If employees each chose when and how to spend money on their healthcare, insurers would not have the upper hand, and will be forced to lower prices and become more efficient.

    Well, maybe. Maybe not. No data. Pure conjecture.

    By the way, is there a way for you to get health insurance coverage through the university since your wife's a student there? Just a thought, what with the lab and the microbes and the Bunsen burners and all of these such things.

    Triet said...

    Good points. Massachussetts wants to require that employers with over 10 employees have healthcare, but from doing more reading, the onus will be on the consumer.

    What happens is that these plans forced on the employer will dictate very high copayments, such as $250 for the first $1000 of bills, etc. If this bill becomes law, I see it as a half-step. It doesn't ultimately put the onus on the consumer and make him or her more aware, but it does help relieve some burden from employers while smacking some consumers upside the head when they see healthcare costs.

    Your idea is intriguing. It's definitely the trend that the American workplace has been moving towards. I like putting as much responsibility in the individual's hands as possible because eventually they will pressure the health industry to change. Ultimately though, this is only one step towards what I feel is the ultimate solution--changing of the healthcare industry (not the insurance industry). Until doctors figure out a better way of insulating themselves against lawsuits, become more efficient and better at policing their own malpractice claims, and bring down the cost of healthcare tests, any insurance is expensive insurance.

    One more thing--by putting the onus on consumers, perhaps campaigns by physicians to change our ultra-medicated society will work. People do not need antibiotics for the flu, or cat scans/x-rays for every pain in their joints. A culture at ease without pills for everything will demand less expensive stuff, and have less expensive insurance.

    Blue Cross of California said...

    Rising health care costs are a major problem for many and is a reason why millions lack coverage. I hope someone can work on improving our health care system.

    Triet said...

    Exactly. As one of the millions without insurance, and a matriculating medical student next year, I feel this problem acutely.

    What should be done about it? I started and ran a free ESL school for the Vietnamese in Orange County from 2000-2002. How could I, a college student with no formal ESL training, create a successful ESL school when there are many for-profit ESL schools entrenched in Little Saigon? I had to be creative and efficient. "Think outside the box," I told my teachers. We wanted to teach differently, because I felt the basic way of teaching at ESL schools was not the most effective, and being different gets you noticed. We had to be efficient, because our budget was small and staff even smaller.

    It's these two things lacking from healthcare in America today. Someone who can think outside the box and design health coverage different--maybe radically different--from the current system, and can operate efficiently throughout the country, will not only make a lot of money, but drastically lower insurance premiums for everyone.

    Also, physicians (of which I will be one, and therefore have the responsibility of) must become more efficient in diagnoses and treatments. Hospitals need to better utilize expensive equipment to maximize cost-efficiency.

    I'm definitely open to suggestions on how to do this, and I will post my ideas as they gel.