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I usually do not write about health policy in the U.S. because it is somewhat outside of my area of expertise, but I have been thinking about the issues with health care reform this year and thought I would provide some analysis.  Watching the news, there seems to be a lot of resistance to health care reform this year.  The cost for reform is one of the big stumbling blocks – given the actual price tag to the country that was floated by the various agencies charged with analyzing such things.  However, if you think about it, our current, unreformed system of health care results in the insured paying for more than their own care.

For one, let’s talk about the uninsured.  There are approximately 50 million Americans that lack health coverage today in the U.S.  This does not mean that this people do not get any health care.  To the contrary, well over 10 million Americans get health care from Federally Qualified Health Centers (FQHCs), a significant proportion of which are people without health insurance.  In addition, there are a substantial number of other health care entities that provide health care to the uninsured at low or no cost, but are not yet federally qualified to do so.  FQHCs are funded by the federal government today, at a cost of about $2 billion.  We taxpayers pay for this.  We are subsidizing this care today.  Other entities that provide free or subsidized care do so through private grants, which some of us subsidize today through charitable donations, the United Way, or so forth.

Second, some have been claiming that health reform in the U.S. will just lead to a lot of people waiting around to get health care.  At least in Maryland, by law, emergency rooms are required to treat whoever shows up in them, whether the patient is having a cardiac arrest or just has the flu.  (See Md. Health-General Code Ann. 19-3a-02(b)(2)(vi) for freestanding emergency centers).  Because of this, there are a fair number of patients that present to the ER who are uninsured.  As an aside, economically speaking, emergency rooms tend to be loss leaders for the inpatient facilities to which they are attached.  What this means is that the ER’s costs are not fully borne by the ER revenue stream from patients and insurers; much of the cost is actually covered by the patients that the ER can admit to the main hospital after initial workup and treatment by the ER physician.  However, that also means that uninsured patients who present to the ER for a non-emergency health condition pass costs along to the main hospital which must be covered by inpatient operations, and by extension to those of us that are insured and go to that hospital.

For example, an uninsured patient that presents with the flu at the ER is treated and sent home.  They may pay little or nothing for the visit, but the visit actually costs $800.  The hospital covers this cost by charging a bit more for every patient who is actually admitted on a per day basis (or other costs that are charged in units).  Some admitted patients won’t be able to pay either, so those that can also end up paying a bit more to cover uninsured admitted patients and uninsured ER-only patients.  So if you have private insurance today, your rates are set in part based on the actual costs of providing health care to uninsured patients who can’t afford to pay on their own, because the hospital has to pass the costs of treating these patients to someone who can pay the hospital.

If health reform meant that everyone would now go to their local ER, regardless of what the condition or illness was, this would be a bad idea.  Any time that I have been to an emergency room, there is a queue; the waiting room is always full no matter the time or the season.  However, if health reform actually could redirect patients that do not have emergency health issues to an alternate resource that they could actually afford and would see them, this would help improve an existing “wait problem” for care today, while simultaneously reducing the actual costs borne by hospitals for non-emergent ER visits (which should mean that we can pay less per visit to the inpatient section of the hospital).

And speaking of waiting around – the truth is that even insured people tend to wait for health resources to be available under the current U.S. system of care delivery.  Many doctors have 3-6 week lead times for scheduling in advance, their schedules are crowded with overbooks and double books, they often run late because of inefficiencies with the schedule and with administrative tasks; in short, competent physicians usually have too much demand for their services.  This causes queuing.  Health reform may not really be able to address this problem head on.  Part of it is a technology issue; there could probably be developed a more sophisticated scheduling algorithm that would help to improve scheduling patients for care delivery, and allow for overflow to other providers, etc.  But part of the problem is insufficient health care delivery points on the map.  We apparently need more physicians to treat us.

Third, there are a fair number of U.S. personal bankruptcies each year (granting that the rates have been higher than normal this year because of the recession).  Lack of insurance and a large, unpaid medical bill are a primary cause of personal bankruptcies.  On the surface, if you haven’t filed bankruptcy yourself you might think that this has no effect on you.  But bankruptcy is a bad thing generally.  For one thing, the person who files for protection and has a $100,000 medical bill they have no hope of paying is injured because the cost to them for credit post-bankruptcy is considerably higher than pre-bankruptcy.  In addition, a bankruptcy will limit the person’s job opportunities, will probably prevent them from gaining security clearance for sensitive jobs in the government, and otherwise limits their economic productivity within the U.S. economy, all of which is bad for the economy and for all of us.

But, in addition, that bankrupt’s medical bills are very unlikely to be paid through the bankruptcy proceeding.  The hospital is likely an unsecured creditor, and they are at the end of the line with their hand out to the bankruptcy trustee.  That “bad debt” is a cost to the medical provider, who will pass it along to patients in the future that will pay for medical care in the form of slightly higher unit costs.

The more bankruptcy filings, the more unsecured creditors that aren’t made whole who are health care providers, the higher the costs of care for everybody else.  So again, us taxpayers are by and large the same people who actually end up paying the medical bills of the bankrupt, either out of our own pockets when we go to the hospital, or through higher health insurance premiums that our employers pass on to us each year, or through our taxes (think Medicaid and Medicare, both of which pay for inpatient stays, both of which are paid for by taxes, and both of which are billed at increasing rates by hospitals, in part to cover overall costs of providing care to patients without insurance who lead to bad debt for the hospital).

Fourth, there was this whole “death panels” claim about health reform, whereby the government was going to establish panels that would deny care to the elderly because they were too expensive.  Of course, this is silly.  If we were going to have such things, we would have a better name for them (maybe, “end of life decision making committee” or better yet “pull the plug on granny committee”, or something else that would be more catchy and might be more alliterative).  But, really, this is tied into the idea that the government, through health reform, would stop a person’s doctor from treating the patient appropriately, perhaps because of cost, or just because the government bureaucrat was a nasty person.  The whole matter is rather bizarre.

But, it also doesn’t speak to what goes on today.  For example, there are committees that determine the priority and qualifications for patients to receive replacement organs because there is a long line and a short supply of organs available.  Plenty of patients die each year for lack of an available replacement organ that was needed.  (See this article for 2008 statistics on this issue)  I don’t know that we call the committees “death panels,” but it is a classic example of a pre-existing queue that results in health care rationing.

Health insurance companies also make decisions about what they will pay for and what they will not.  As far as I know, health insurers don’t decide to pull the plug on the elderly per se, but health plans do make choices for their insured patients about what services the patients will pay for out of pocket (or not receive at all if too expensive for the patient), what drugs are on and off the formulary (you may have to take the generic version of a pill, even if you’d rather take the brand name, for example), along with a host of other choices made ultimately to reduce overall costs to the plan.  In our market system, I suppose you can change plans if you choose to, but because your health plan is often tied to your employer, that would usually mean changing jobs – which is not a very practical way to change your health plan.

So, this whole “death panels” thing is really about trying to “ration” care to patients so that more people get the basics, most likely at the expense of others that can pay for optional services.  I’m sure that isn’t very palatable to patients with the means to pay for their thirteenth tummy tuck, but this is also, more or less, the status quo.  Health care is rationed today by our insurers for most Americans.  If health reform led to a more rational way to provide basic health care to more Americans, it would be the right thing.

And here is the other side to this: let’s say that we did institute a governmental body that would “ration” care.  Such an entity is governed directly by the U.S. constitution and federal law.  Do you really think that such a group would implement the “no life support for patients over 75” rule?  Really?

To summarize, the U.S. spends about 16% of GDP on health care, which is substantially more than most other places in the world.  Approximately $2.4 trillion (that is trillion with a “t”) is spent each year on this, or the total economic output of Italy.  And ultimately, this money comes out of the pockets of those who can actually afford to pay for health care.  By design, that means that those who can’t afford health care are being subsidized today by those that can.  The challenge for health reform is to do a better job at cost redistribution than our present system, either by spreading out costs over a much larger pool (such as all 300 million Americans, rather than over the much smaller pools of employer-sponsored health plans today), increasing efficient delivery of health care (through technology that saves time or increases accuracy and reduces risk of harm), and/or perhaps encouraging more supply of health care  providers to help meet the existing demand for services.

We’ll see what happens.  Stay tuned for developments.

Can Health IT save us from ourselves?  See the Yahoo Article on another assessment of health care spending in the U.S. and how much money is wasted in service delivery costs.  According to this article, about 1/2 of the spending of the U.S. on health care is wasted in inefficient use of resources.  Now, if you read the article, you will note that the top 8 items on their list only add up to about $600 billion, where the claim is that $1.2 trillion is lost (and you would think that a bunch of accountants could add, so maybe the journalists misread the fine print on the analysis), but even if you accept that much as the cost of inefficiency, that is more than it costs for the Medicare program in the U.S.

One of the big items on the list is inefficiencies with insurers who “magically deny” claims or otherwise require far too much in order for a provider to get paid appropriately.  I find it interesting that this remains on the list of problems.  In 1996, HIPAA was originally passed by Congress.  Part of HIPAA was to mandate that, through regulation, standards be developed for the electronic transfer of information between insurers and providers of health care, including claims.  The regulations eventually required that all or substantially all providers be able to submit claims electronically, which, one would expect, would be more efficient than the manual processing of paper claim forms.

So, if the auditors suggest that we still are wasting $200 billion per year on inefficient data exchanges with insurers, perhaps this deserves more focus.

Getting paid by insurers happens at the end of the process of service delivery to patients by providers.  At the beginning, patients present to the doctor’s office with a problem, see a Medical Assistant or Nurse for preliminary weights and measures (like blood pressure and weight, etc.), see the physician, CRNP or physician’s assistant, who may then refer the patient to another provider, write a prescription, make other suggestions to the patient, require that the patient get lab work to rule out certain causes, and so on.  At the conclusion of the visit, the physician will document, diagnose, and generate a financial transaction that must be processed and submitted to an insurer for payment.

The patient then will see other providers, the lab, the pharmacy, and perhaps come back for a follow-up visit with the physician.  All of the steps in the process involve data transfer between several information systems, often housed in several different facilities, with different standards and different purposes.  A key for a physician to get paid at all is to have accurate insurance information about the patient.  Surprisingly, patients are not necessarily the best source of this information.  However, insurers are apparently no better at knowing this on average.  Otherwise, it would follow that we would already have regional databases or a national database of eligibility data available for all providers.  I assert this because the standards for eligibility data have been around for a fair amount of time in the form of the ANSI X12 standard, but still there is a fair amount of lost dollars in the claims processing area of health care.

Perhaps this is so because providers want to get paid but insurers don’t have a good reason to pay them.  Insurers do benefit from holding onto capital to accrue interest on it.  The longer an insurer can do this, the more interest on the investment they collect, which goes straight to their bottom line.  ARRA’s incentive system requires that physicians meaningfully use health IT and participate in some form of a health information exchange.  But there is no comparable set of incentives for insurers to participate in HIE’s, or to incentive providers.

For example, this could be achieved by insurers preferring providers with health IT in place compared to those that don’t.  Another example would be for insurers to pay incentives to providers for a higher degree of clinical outcomes (only possible if the providers can produce useful and independently verifiable data such as lab information, which is really only possible through the use of an HIE).  The market may figure this out on its own, but I honestly doubt it.  Perhaps the feds will pick up on this market failure and intervene to start improving efficiencies in this area in either health reform now or in ARRA part II in the next several years.