Just The Facts, Ma'am

So what are some of the facts regarding socialized medicine? Here are just a few facts as reported by an economic development company based in France that supports international trade. The Organization for Economic Cooperation and Development, or OECD is a 300 million dollar plus company with business interests in 30 countries.

The OECD points out some differences between the socialized healthcare system of Great Britain and that of the United States.

Great Britain's heart attack fatality rate is 20% higher than the United States.

Great Britain only does 21.3% of the cardiac catheterizations per capita than we do in the US.

Great Britain's National Institute for Health ruled that two drugs shown to increase life in breast and stomach cancer couldn’t be used.

Mortality rate due to breast cancer in Great Britain: 46%. Mortality rate due to breast cancer in the US: 25%.

Mortality rate due to prostate cancer in the US is only 19%. In England it is 56%.

Here are a few other notables from other sources.

According to Scott Atlas of the Hoover Institution, British patients wait about twice as long as Americans — sometimes more than a year — to see a specialist, have elective surgery such as hip replacement or get radiation treatment for cancer.

The rate for Colorectal cancer is 40% higher in Britain than in the US. In the US we recommend people begin screening at age 50. In the UK they begin screening at age 75.

David Gratzer, a physician and senior fellow at the Manhattan Institute, notes that a clinical oncology study of British lung cancer treatment found that 20% "of potentially curable patients became incurable on the waiting list."

Yeah! Go Socialized Medicine!!!!

Taken from: Healthcare Here and Over There, Investor's Business Daily.http://www.ibdeditorials.com/IBDArticles.aspx?id=334968219359127

The Costs of Defensive Medicine

As I mentioned in a previous blog, current Obamacare supporters refuse to consider the impact of liability reform. The President even said there would be no consideration for liability reform and none of the plans in writing now contain a word about liability reform.

The problem is, that liability reform is a major area for saving billions of dollars. For me as a practicing emergency medicine physician I see two major costs to the defensive medicine that now pervades our healthcare system. First, let me explain what is probably simple to most, but is relentlessly ignored by politicians supported by trial lawyers: why physicians practice defensive medicine.

No one wants to be sued. In some states, like Florida, three suits and you lose your license; there is a defined limit on the number of lawsuits you are allowed. Further, who wants to endure the costs in life sacrifice and money to get through medical school only to lose it all in a single settlement? A recent lawsuit paid a patient $60 million dollars when the plastic surgeon botched her thigh lift.^A Frivolous lawsuits and exorbitant awards cost providers and their insurance companies millions of dollars in insurance premiums. Those costs are forwarded on to the patients in increased healthcare costs and thus increased insurance premiums. But what does it do to the doctors? We go crazy ordering CAT scans and labs to make certain that once we are on the stand, we can say we did everything we could. Those additional studies intended to keep my colleagues and I out of the courtroom, are the heart of defensive medicine.

So, what do they cost? A single CAT Scan of the abdomen and pelvis costs the patient or insurance company anywhere from $1,000.00 to $2,700.00. A single CAT scan of the head costs around $600.00. Providers often order studies that they know, or are fairly certain would be negative when considering the clinical presentation and the physical exam. The financial costs of this are staggering.

In a recent poll of emergency physicians, 65% said that they could save over $500 per 8-hour shift by decreasing unnecessary tests as a part of their defensive practice. Another 16% felt they could save between $200 and $500 dollars.^B I run a fairly large Level 2 trauma center that will see 75,000 patients this year. I staff it with 9, 10 and 12-hour shifts a day. If we assume a conservative savings per shift of $400 dollars, less than a single CAT scan, then in my emergency department alone, stopping the defensive practice of medicine would save (365 x 9 x $400) $1,314,000.00. There are over 5,000 emergency departments in the country. And I can only speak for emergency medicine. What about surgeons? Family Medicine?

But there are other costs besides the added tests. If a patient has a lesser paying insurance company, especially the government payers like Medicare and Medicaid, many physicians will not see them because that third party payer's rate of reimbursement is so low, it does not cover the costs of practicing defensive medicine. You may have 6 neurosurgeons in town but none to remove your tumor because they don't take your insurance. The cost of defensive medicine then has to also be measured by the number of people who cannot access care. While this is mostly a human cost of people not getting care, it is often also financial because the decreased access to primary care forces people to the e.r., where care is mandated by the government despite the person's ability to pay. As I mentioned in a previous blog, the costs of unpaid e.r. visits are shifted to others increasing the cost of health insurance and further decreasing the pool of people who can afford the insurance.

Any discussion of revising healthcare in America must include the incredible costs of defensive medicine brought on by our current liability practices. The only way Obamacare supporters, funded by trial lawyers, will ever consider liability reform, is when the outcry of the American people reaches a level they can not ignore. So, do your part and pass on this blog and all others that address the issue.

Thanks, Mark

^A"Defensive Medicine is Real," Emergency Medicine Physician Monthly, volume 16, number 9, September 2009. Page 22.

^B"What Emergency Physicians think about health care reform," Emergency Medicine Physician Monthly, volume 16, number 9, September 2009. Page 24.

Fixing Healthcare is just a SNAP

Many people seem to think that the problem with healthcare is going to be fixed by the government. Most people who think this way look at the problems now and attribute them to failure of the free market to appropriately allocate resources. Unfortunately, like the housing crisis, healthcare’s problems are caused by the government’s intrusions. As lending institutions were forced to loan to higher risk people, the derivative was formed to spread the risk. Those derivatives led to massive bank failures and thus the financial crash. The free market was adjusted in housing as the government forced changes in the supply demand equation.

Healthcare is not that different. Healthcare has not been a free market since the 60’s, when the federal government got into the health insurance business through the formation of Medicare and Medicaid. These entities set the price for medical care much like rent controls set the price for housing (please see my blog below “Healthcare and Rent Control: What Happens when Government Sets the Price,” Monday, May 18, 2009). The consequences of government intrusion and destruction of the healthcare free market has been profound.

Medicare is typically 30 - 50 % of hospital inpatient business. In the Emergency Department, Medicare is often as high as 40 % of the total visits. The government significantly underpays for services. For example, in cardiac bypass surgery, one of the most invasive operations a person can have, Medicare pays the surgeon $1,800.00 dollars for the procedure and all in hospital care, as well as the follow up visit. For the doctor, who pays malpractice insurrance, office operating expenses, staff salaries, etc, this amount hardly makes him any profit. A new transmission in your car can cost more than that.

The surgeon, like all other physicians then shifts the cost to other private insurance companies. The physician sets a price that is often very high, knowing Medicare will only pay a certain amount, and hoping private insurance will pay the new price. This altered market price was paid by the insurance companies for some years. They opted instead to increase premiums for health insurance. This shifted the market significantly and altered the costs of health insurance dramatically. Any adjustment up in the cost of health insurance leads to fewer people able to afford it, an increase in the number of uninsured, and decreases the pool of people paying for these shifted costs. What follows is a spiral, not unlike what happened in the housing/financial crisis. As cost shifting to those who pay drives the fee schedule up, insurance companies raise their premiums, fewer people can pay, cost shifting increases and the spiral continues.

Laws were then passed which prevented the doctors from altering their fee schedules based on a person’s ability to pay. This government intrusion in the free market resulted in those without insurance being billed this higher rate that was raised because Medicare paid such a ridiculously low price for services to its patient. Countless uninsured patients have been impacted by this stringent government requirement on healthcare providers.

Nearly simultaneously, the insurance companies began to negotiate with the doctors for reduced rates, often basing their negotiated price on what Medicare would pay. Providers and hospitals are promised a “network” of patients for the reduced fees. The insurance companies then contract a new fee schedule for say “125%” or “80%” of Medicare rates. Initially these rates were palatable. However as the “take it or leave it” power of the insurance companies grew, and the rates they paid physicians fell, physicians had to further cost shift to the Cadillac Insurance plans through further higher rates. As the Fee Schedule increased, and with the restraint preventing doctors from discounting their fees to the poor, so did the cost to the uninsured.

In some states, Insurance companies are allowed to manipulate (racketeer) the provider. In order to get access to the “network” of patients, hospitals will contract with insurance companies for preferred rates. Unfortunately, the insurance companies compel the hospital to compel it’s physicians to be “in network” with the insurance company. Meaning, all employed or contracted physicians are required to accept the lowest rates from the insurance companies, frequently less than what the government pays, or lose their jobs. This only precipitates the problems for the uninsured through further cost shifting via increased price to others.

The impact of liability costs can not be disregarded. Here, where physicians alone bear the brunt of numerous frivolous law suits, no government intrusion seems to be allowed. These added costs are passed on to the uninsured, and to the Cadillac insurance plans, ultimately increasing the cost of health insurance. The spiral continues.

The problem with healthcare is the government. More government gets us what Canada and Britain have, socialized medicine. The President of Canada's Medical Association stated in a recent interview, "We all agree that the system is imploding," speaking in regards to Canada's socialized healthcare system, "we all agree that things are more precarious than perhaps Canadians realize."¹ Americans don't want that. But now we are in a situation where the government under bids the price through Medicare and Medicaid, leading to cost shifting driving the cost of care for the uninsured to unreachable levels. The poor are really getting screwed.

Finally, federal mandates require patients be seen in an emergency department. With the numbers of uninsured up and the amounts reimbursed by government plans down, primary care doctors are not adding these patients to their panels. Meaning, they go to the ER, where care is significantly more expensive. They do this because they have no recourse. They have no intension of paying. In my experience at 5 emergency departments, the number of people actually paying their bill was never over 60%. Guess what happens: cost shifting that perpetuates the poor's inability to pay.

But how can we help the people who need assistance in a way that does not disrupt the market dynamics? That is the challenge. Medicare is more difficult to undo and I believe needs serious internal review. Thus a solution for it should be separate from the problems of Medicaid and the uninsured. These can and must be tackled in a way that improves market forces and significantly decreases costs for everyone, essentially reversing the spiral.

The food stamp program, now called the Supplemental Nutrition Assistance Program, or SNAP, is where 31.5 million Americans receive assistance to purchase food. This program is an excellent paradigm for healthcare. People who qualify are given a debit card and allowed to purchase the food they desire. The market price for food remains unchanged for the most part because the consumer is choosing how to allocate the resources he or she has. The consumer recognizes there is a limited amount and thus chooses prudently on how to spend the money. If they foolishly buy filet mignon, they have little to nothing else for the remainder of the month.

Healthcare credits via a debit card would place the decision-making back in the hands of the consumer. The government could issue qualifying personnel a set amount yearly in conjunction with a catastrophic health plan. The individual could chose to save money by waiting to go to a primary care doctor instead of an emergency department and thus have money remaining for preventative care should they desire it. The individual has a choice, the market forces of supply and demand are thus reinstated and assuredly the right price will surface. As more people pay for their care, and make wise choices in regards to their care, cost shifting will stop and, for competition's sake, could even reverse itself.

Additionally, other incentives could include, all unused healthcare credits at year end could roll over into an IRA, or other vehicles which further incentivize the individual to not abuse healthcare, specifically the emergency department for routine care. With the financial incentive to decrease the cost of a person's healthcare, some people would decrease their risk as well, eating better and perhaps ending a nicotine habit. Why not, if they don't get sick, they get the financial reward.

As a busy businessman and physician I do not have the time to dig through the details and price this out for the US. My hope is that someone will take this idea and run with it. I honestly believe, SNAP could serve as a model for redoing Medicare and help more of the uninsured find care. If you can punch holes in it, let me know. I look forward to the dialogue.

Mark

¹http://www.google.com/hostednews/canadianpress/article/ALeqM5jbjzPEY0Y3bvRD335rGu_Z3KXoQw

Second Order Effect - Basic Economics

I'm hopeful a politician will read this. You see, politicians never seem to understand the second order effects of economic decisions. For example, if you raise taxes in a given city, you get increased revenue to build parks. The first order effects of the increased taxes are good. But in the end, industry moves away because the cost of doing business there is bad, people lose their jobs decreasing the tax base and lowering tax receipts. The park cannot be maintained, and who cares anyway because all the taxpayers left. Second order effects in economic decisions can often be tragic and do more harm than good.

Let's take the Clunkers Program, or as I like to call it, the "let's take tax payer's money without their permission and give it to complete strangers so they can buy a new car and maybe salvage the government buy out of the auto industry program." Here the government had tons of cars purchased with taxpayer money to help people get a new car, hopefully more fuel efficient, and safe for the environment.

First let's look at the environment piece. As I mentioned in a blog below, and as was recently pointed out in an article on CBS, efficient cars lead people to drive more miles and thus DO NOT decrease carbon impact on the planet.¹ Ok, enough said.

Now, does it really help people in need? The answer is a big NO! You see, the program does not allow the clunkers to be resold once bought. Meaning, the second order effect is a significant decrease in the number of cheap cars out there for the very poor. As supply for these low cost used cars drops drastically, the guy who needs a $1,500 car to get to work and home, can't because there are relatively none left on the road. And, because the supply is down, the price of the ones still out there will go up. Basic economics. Bottom line, the very poor won't be able to find a car in the very low, less than $4,500 dollar range. They will pay the price of this ridiculous scheme.

And what about the folks who do go out and buy a new car? $4,500 is a nice incentive, just look at the rate at which the program emptied its coffers requiring a rapid infusion of cash. Most new cars will still come with a payment, decreasing the cash available in the monthly budget of consumers. That payment will mean they can buy less other stuff. Meaning, the economy will now suffer in all other areas a decreased amount of cash available every month for years to come. Other business will now suffer more, because the government chose to favor the auto industry in its economic stimulus practices. Oh, but that's right, the government is now in the auto industry!

Have you seen the parts stores popping up almost everywhere? It seems like there is a new auto parts store opening monthly in my town. Oh well, I guess they didn't predict that the government would buy up all the old cars needing replacement parts. Sucks to be in the parts industry now. According to Financial Times, there is an 8 percent decrease in the sale of parts. Just another second order effect. Someone is going to lose their job.²

Second order effects of the clunkers for cash program will do more harm than good. We need a new clunkers program. What would really be great is if we could trade in a few politicians for some tax relief. Now there is a program I could get behind.

Mark

¹http://www.cbsnews.com/blogs/2009/08/05/business/econwatch/entry5217824.shtml

²http://www.ft.com/cms/s/0/940088ae-8830-11de-82e4-00144feabdc0.html

A Brilliant American

This is from an article in the St. Petersburg, FL Times Newspaper on Sunday.

The Business Section asked readers for ideas on "How Would You Fix the Economy?"

Dear Mr. President:

Please find below my suggestion for fixing America 's economy.
Instead of giving billions of dollars to companies that will squander the money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 40 million people over 50 in the work force.
Pay them $1 million apiece severance for early retirement with the following stipulations:

1) They MUST retire. Forty million job openings -
Unemployment fixed.

2) They MUST buy a new American CAR. Forty million cars ordered-
Auto Industry fixed.

3) They MUST either buy a house or pay off their mortgage-
Housing Crisis fixed.