By Tom Brown
On May 19, 2010, Dr. Basil Papaharis, President and Managing Director Soundview Associates, gave a presentation to the Wilton, CT Lunch Bunch on a Physicians View of the Health Care System. I have added a few comments where I thought it appropriate,
As he said, we have a broken or at least very inefficient system, since we:
spend 17% of GDP on health care in the US. This is roughly double what other developed countries spend.
Yet we have a worse outcome if you compare life span and infant mortality,
have a greater incidence of curable disease than other developed countries,
spend 50 to 90% in the last months of an individual's life, raising the argument that we spend too much on terminal patients and
spend 25 to 50% on treatments that are unnecessary or more costly than other equally effective available treatments.
To understand this you need to know and understand the principal players in healthcare, namely the patients, providers, drug companies, insurance companies and the government.
To begin with the patients....
They are overweight, in many cases morbidly obese. That in itself leads to many cases of diabetes, cardiovascular disease, cancer and joint replacements. And they smoke.
They are demanding of medicines for everything, especially when insurance pays. There is an unintended consequence that Medicare patients do not take their medicine during the coverage gap from the drug payment plans and suffer or worsen accordingly.
But ironically they are resistant to taking vaccines, which leads to a resurgence of diseases thought to be eradicated.
Then the providers...
There are of course specialists and primary care providers as well as hospitals. There are 3 to 4 specialists for every primary care provider, which is the reverse of most other developed countries. Specialists apply the state of the art from their specialty to the patients. Primary care doctors, for the most part, successfully, try to recommend the most cost effective remedies and preventive practices or treatments for their patients.
There is lots of excessive, expensive imaging, recommended for defensive reasons, and certainly for profit when the emergency room is involved.
There is no standard of treatment for a given condition and each physician does his or her own thing.
It should be said in passing that hospitals are required to 'stabilize' all persons needing treatment, irrespective of their ability to pay. The effect of this on total health costs is not known, except that it is one of the reasons that hospitals charge private patients, including those with private health insurance more than is ultimately received from public reimbursement for the uninsured, Medicaid and Medicare.
And the drug companies...
They have very high R&D costs, often on new substitutes for old treatments. They have 21 years of patent protection on new drugs during which time they can charge what the market will bear. It is well known that prices vary by country. There are obviously some miracle drugs and cures thanks to drug companies.
The approval processes that they are subject to are certainly arduous, but seemingly most oriented to not harming people, somewhat oriented to helping at least some cases and not really concerned whether a treatment is really worth it to society.
Then come the insurance companies...
People that are not retired and also working usually have insurance with a private company. That company has priced its program to each company according to the age mix of its employees rates it has negotiated with providers and services that are mandated or that its employees want. Such programs are tax deductible so that they are government subsidized. Companies have good risk pools for the insurance companies with mostly healthy people and a mix of ages below retirement age.
People that are self employed or unemployed have difficulty getting individual insurance as they are of unknown risk at best or high risk. They would like to buy insurance only after they need it. They are not good business for the insurance companies
There is also insurance for Medicare recipients which is partially paid for by a subsidy from Medicare.
Insurance companies want to not pay claims.
And the government.
State governments regulate insurance companies and run the Medicaid programs in their state to meet federal standards. Medicaid is the mostly free health insurance for very poor people. It is very costly and growing as medical costs grow and the population of poor people increases. It is co-funded by state and federal governments.
The federal government besides setting standards and co-funding Medicaid, runs the Medicare program. Medicare is available to all people at age 65. It is very costly and growing as medical costs grow and the population of retired people grows. It is commonly believed to be funded by payroll taxes, but in fact only the hospital care is so funded in part by payroll taxes and the other parts are funded in part by Medicare recipients. The balance comes from the general fund of the federal government and relatively small copays by recipients. Provider reimbursement for Medicare recipients is mandated by the government at very low levels. Probably the "squeeze" is ill advised as a cost control.
And finally the lawyers.
Lawsuits are an issue, but hardly the biggest issue. And in the view of Dr P, the main issues are punitive damages and jury trials, both being relatively easy to correct.
Another issue out there is medical records. Electronic medical records are useful but not the biggest issue. Ironically there are several providers of the software and they are incompatible with each other without software translators. Dr P's firm has a system best for them but not compatible with the local hospital.
So there are lots of things wrong
Obama care has possibly solved some problems and created others.
--it has dealt with the right of access
--it has dealt with the donut hole in Medicare drug plans
--it will exacerbate the shortage of primary care doctors
--it will sharply increase demand and do almost nothing to reduce costs
These are the major issues in the view of Dr. P, but shared by most I'd think.
--we need to get many more primary care providers and reverse the ratio of primary care to specialist
--we need to get comprehensive treatment guidelines that work and have a reasonable cost
--we need buy in to care for terminal patients to emphasize comfort not cure
--we need to lower costs for people that do not pay for their care, like Medicaid, or want to pay less for it
I'd add that:
--We need to seriously limit use of any tax favored funds, including, presently, insurance premiums for expensive or less justified procedures that cannot be made available to the general public. Obviously, anybody has the right to use their own funds to buy any treatment they want and can get providers to furnish.
--A recent NY Times op-ed piece by a medical professor and cardiologist cited estimates that Medicare spending on unnecessary, ineffective or unjustified procedures is 75 to 150 billion per year! The professor said that this cannot be fixed except by some sort of preauthorization that looks at the patients overall health and prior treatments.
Thursday, June 23, 2011
Saturday, March 12, 2011
National Deficit Reduction
(a presentation to the Wilton Lunch Bunch, a leading edge Connecticut discussion group on Jan 20, 2011)
I was attracted to an article about the US National Deficit and how to reduce it published in the Sunday NY Times in November 2010. http://graphics8.nytimes.com/packages/pdf/weekinreview/20101114-deficit-graphic.pdf
It offered modules of cost or revenue that could be moved up or down to accomplish the reduction. It also gave a target of 1.345 trillion that needed to be cut by 2020. My colleagues in the group were sufficiently impressed to invite me to present it to the group in January 2011 along with my analysis of what to do.
My remarks.
We are looking at a 1.345 trillion per year deficit.
It must be dealt with or it will get worse. Think Greece!
I submit that congress does not do this well, so we have to be able to do better. After all, congress lacks the political courage, its solutions always create unintended consequences and it always seems entangled with special interests.
There was a presidential commission appointed by President Obama that created a starting point. Then the NY Times created a work sheet from their numbers.
The worksheet is being used today for the presentation, obviously with caveats:
--it must be an incomplete list
--some of the savings claims may not be correct
--there are lead times to start up or close down any initiative
Yet it is good enough to start our work.
I will explain what I did and why, then you can make comments and ask questions.
The approach I took:
1. Look for items with real, net savings
2. Look for big items
3. Try and eliminate unproductive costs such as tax deductions and subsidies
4. Avoid increasing taxes except to right a wrong
Well, I actually reached 1.47 trillion, more that was said to be required.
--no farm subsidies saved 15bn
--10% less federal emps saved 15bn
--canceling or delaying weapons programs saved 20bn
--less nuclear weapons saved 40bn
--speeding up troop withdrawals from the middle east down to 60000 by 2015 saved 150bn
--medical malpractice reform saved 15bn
--having Medicare start at age 70 saved 105 bn
--cap Medicare growth at GDP growth + 1% by restructuring saved 560bn
--tighten the eligibility for social security disability saved 15bn
--slow the growth of initial Social Security payment for top earners saves 55bn
--slow annual Social Security increases with a new inflation calculation based on wages saves 80bn
--having full social security benefits start at 70 saves 245bn
--reducing the tax deduction for (employer) health insurance saves 155bn
My conclusions:
--it wasn't so hard
--it must be done carefully. We do need a military and a safety net
--taxes on business per employee should be avoided. They increased the cost of employees and the cost of doing business
--little things alone will not make it
Of course there were concerns raised. Family farmers? I think most farm subsidies go to corporate farming. Kill corporate health insurance? I think they hide issues in that they pull out of the population and cover mostly healthy people leaving sick people on their own.
For the record, the list of cuts I chose from was prepared by a bipartisan commission to reduce the deficit The sides agreed in advance that significant military cuts and repeal of Obama Health Care would be off the table.
The following spending cuts were identified. Figures in billions per year.
--15 eliminate farm subsidies*
--15 cut foreign aid in half
--15 eliminate earmarks
--15 reduce federal workforce by 10%*
--15 cut 250,000 government contractors
--15 cut civilian worker pay by 5%
--20 cancel or delay some weapons programs*
--25 reduce navy and air force fleets
--40 reduce nuclear arsenal and space-based missile spening*
--50 reduce active military personnel by 200,000 to 1.3 million
--50 reduce non-combat military compensation and overhead
--150 speed up withdrawal of troops from Iraq and Afghanistan*
--15 medical malpractice reform*
--105 increase Medicare starting age from 65 to 70*
--560 cap Medicare growth at gdp +1%*
--15 tighten eligibility for social security disability*
--55 reduce growth rate of social security benefits for high income earners*
--80 use alternate inflation measure to slow annual social security increases*
--245 raise social security retirement age to 70 from 67*
--20 to 105 exempt only first 5 million (or 3.5 million or 1 million) of estate from taxation
--25 or 45 raise capital gains and dividends tax on high income (or all) households
--95 make surtax on income above 1 million
--100 raise wage ceiling on social security tax base
--155 reduce tax deduction on employer health insurance*
--115 to 250 let Bush tax cuts expire for above 250,000 income (or all)
--55 reduce home mortgage tax deduction
--175 to 315 reduce individual and corporate tax breaks
--70 gradually increasing carbon tax
--105 risk tax on banks
--280 5% national sales tax
Others have made deficit reduction proposals that are beyond the scope of this discussion.
I was attracted to an article about the US National Deficit and how to reduce it published in the Sunday NY Times in November 2010. http://graphics8.nytimes.com/packages/pdf/weekinreview/20101114-deficit-graphic.pdf
It offered modules of cost or revenue that could be moved up or down to accomplish the reduction. It also gave a target of 1.345 trillion that needed to be cut by 2020. My colleagues in the group were sufficiently impressed to invite me to present it to the group in January 2011 along with my analysis of what to do.
My remarks.
We are looking at a 1.345 trillion per year deficit.
It must be dealt with or it will get worse. Think Greece!
I submit that congress does not do this well, so we have to be able to do better. After all, congress lacks the political courage, its solutions always create unintended consequences and it always seems entangled with special interests.
There was a presidential commission appointed by President Obama that created a starting point. Then the NY Times created a work sheet from their numbers.
The worksheet is being used today for the presentation, obviously with caveats:
--it must be an incomplete list
--some of the savings claims may not be correct
--there are lead times to start up or close down any initiative
Yet it is good enough to start our work.
I will explain what I did and why, then you can make comments and ask questions.
The approach I took:
1. Look for items with real, net savings
2. Look for big items
3. Try and eliminate unproductive costs such as tax deductions and subsidies
4. Avoid increasing taxes except to right a wrong
Well, I actually reached 1.47 trillion, more that was said to be required.
--no farm subsidies saved 15bn
--10% less federal emps saved 15bn
--canceling or delaying weapons programs saved 20bn
--less nuclear weapons saved 40bn
--speeding up troop withdrawals from the middle east down to 60000 by 2015 saved 150bn
--medical malpractice reform saved 15bn
--having Medicare start at age 70 saved 105 bn
--cap Medicare growth at GDP growth + 1% by restructuring saved 560bn
--tighten the eligibility for social security disability saved 15bn
--slow the growth of initial Social Security payment for top earners saves 55bn
--slow annual Social Security increases with a new inflation calculation based on wages saves 80bn
--having full social security benefits start at 70 saves 245bn
--reducing the tax deduction for (employer) health insurance saves 155bn
My conclusions:
--it wasn't so hard
--it must be done carefully. We do need a military and a safety net
--taxes on business per employee should be avoided. They increased the cost of employees and the cost of doing business
--little things alone will not make it
Of course there were concerns raised. Family farmers? I think most farm subsidies go to corporate farming. Kill corporate health insurance? I think they hide issues in that they pull out of the population and cover mostly healthy people leaving sick people on their own.
For the record, the list of cuts I chose from was prepared by a bipartisan commission to reduce the deficit The sides agreed in advance that significant military cuts and repeal of Obama Health Care would be off the table.
The following spending cuts were identified. Figures in billions per year.
--15 eliminate farm subsidies*
--15 cut foreign aid in half
--15 eliminate earmarks
--15 reduce federal workforce by 10%*
--15 cut 250,000 government contractors
--15 cut civilian worker pay by 5%
--20 cancel or delay some weapons programs*
--25 reduce navy and air force fleets
--40 reduce nuclear arsenal and space-based missile spening*
--50 reduce active military personnel by 200,000 to 1.3 million
--50 reduce non-combat military compensation and overhead
--150 speed up withdrawal of troops from Iraq and Afghanistan*
--15 medical malpractice reform*
--105 increase Medicare starting age from 65 to 70*
--560 cap Medicare growth at gdp +1%*
--15 tighten eligibility for social security disability*
--55 reduce growth rate of social security benefits for high income earners*
--80 use alternate inflation measure to slow annual social security increases*
--245 raise social security retirement age to 70 from 67*
--20 to 105 exempt only first 5 million (or 3.5 million or 1 million) of estate from taxation
--25 or 45 raise capital gains and dividends tax on high income (or all) households
--95 make surtax on income above 1 million
--100 raise wage ceiling on social security tax base
--155 reduce tax deduction on employer health insurance*
--115 to 250 let Bush tax cuts expire for above 250,000 income (or all)
--55 reduce home mortgage tax deduction
--175 to 315 reduce individual and corporate tax breaks
--70 gradually increasing carbon tax
--105 risk tax on banks
--280 5% national sales tax
Others have made deficit reduction proposals that are beyond the scope of this discussion.
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