• You mean it’s the prices, stupid?

    So I finally got around to reading Steven Brill’s piece in Time this weekend. Yeah it took me a while, but man – why so long? I have a number of thoughts on  it, although I’ll be very disappointed in you long-time readers if you found much of it surprising.

    First of all, IT’S THE PRICES, STUPID! Is this really news to anyone (each of those words is a different link, BTW)? Seriously? Not to beat a dead horse, but it’s one of the ways Switzerland keeps its costs under more control. As Sarah Kliff points out, other countries do this, too. Have you guys really not read or heard us talk about Maryland? Yes, it’s the prices. They are super, super high in the United States. Everything costs more here. Granted, the sensational nature of the piece carries far more weight, but I’m shocked at how many of my Twitter followers got the vapors after reading it.

    Second, I was terribly disappointed by this:

    Finally, we should embarrass Democrats into stopping their fight against medical-malpractice reform and instead provide safe-harbor defenses for doctors so they don’t have to order a CT scan whenever, as one hospital administrator put it, someone in the emergency room says the word head. Trial lawyers who make their bread and butter from civil suits have been the Democrats’ biggest financial backer for decades. Republicans are right when they argue that tort reform is overdue. Eliminating the rationale or excuse for all the extra doctor exams, lab tests and use of CT scans and MRIs could cut tens of billions of dollars a year while drastically cutting what hospitals and doctors spend on malpractice insurance and pass along to patients.

    I’m all for real malpractice reform. But I cannot believe, after reading a kajillion words in this article on how greed and prices are causing hospitals and doctors to bilk patients, Brill resorted to this canard. Does he really think that the reason things cost so much – AFTER WRITING THIS ARTICLE – is because doctors and hospitals are “afraid of lawsuits”? Or might it be the economic incentives?

    Third, I’m with Matt Yglesias that, after spending a kajillion words talking about how the prices are the problem, I’m surprised Brill couldnt bring himself to mention all-payer rate setting as a possible fix. Austin is right that the politics are messy, but that doesn’t mean Brill shouldn’t state the obvious.

    Finally, for all you consumer directed health plan fans, this is what it looks like when individuals “shop with their own money” for health care. They are left to the whims of chargemasters and ridiculous prices just when they are at their most vulnerable. No one understands the system. No one can make these decisions when they’re scared. Individuals get screwed. It’s not odd that Medicare get the lowest rates – they have a huge market share. Private insurance companies are smaller than Medicare, get worse rates, but still kick individuals’ butts. Individuals get hosed.

    @aaronecarroll

    UPDATE: After I wrote this, I realized I forgot to say that I still found it quite compelling. It was well written, extensively researched, and I think it will likely move a lot of people in a good direction!

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    • Do you actually practice medicine or are you strictly an academic researcher?

      Nobody who actually practices medicine believes that malpractice fears don’t contribute anything to costs.

      I’m with you when you say that economic incentives are probably a bigger driver of costs — but when you say nonsense such as malpractice fears are total non-factor then it is hard to take you seriously.

      And don’t cite me that irrelevant factoid that medical malpractice cases only make 0.0000001% of all healthcare costs. That has NOTHING to do with teh actual decision-driving process that occurs which accounts for a large sum of money in the system (not as much as economic incentives, but real nonetheless)

      • Thanks for the personal insult. I’ll refrain from that.

        I believe physicians fear being sued. I believe they think that the reason they order tests is because they think it will protect them. But (1) it doesn’t, and (2) even when the fears go away they still order the tests.

        Therefore I don’t think malpractice reform will fix health care spending. That’s my point. As I said, I support malpractice reform. I’ve written so here many times. It’s not why we spend so much, nor will it fix this problem.

        • I’m not sure your second point (that once the fear goes away, physicians keep ordering tests) is fair in this context. Using a national survey we found that the presence of caps like the ones you describe in Texas don’t seem to have much of an impact on physicians’ concerns–so it’s not that the fear goes away and physicians keep ordering, but rather that the presence of caps doesn’t seem to take away the fear:

          http://content.healthaffairs.org/content/29/9/1585.abstract

          The answer may be not that tort reform doesn’t work, but rather that there could be approaches other than caps that get more at the heart of defensive medicine.

          • And that’s my point, too. I’ve made it in other posts, and this was just a flippant reply to a comment.

            My assertion is that placing a cap on damages does not trickle down into physicians behavior change. See: http://theincidentaleconomist.com/wordpress/meme-busting-tort-reform-cost-control-2/

            • Aaron, wouldn’t the stance that naturally flows from your logic be that we need much more drastic tort reform (e.g., immunity for physicians, a no-fault arbitration council, etc.) than mere caps? After all, that is the approach to medical torts that multiple other countries use with much better results.

              Opposing tort reform as a whole because one thinks one particular method is ineffective seems extremely dubious (not implying that you do but there is definitely evidence that many other experts do)

            • There is a difference between tort reform (damage caps) and malpractice system reform. I support the latter.

            • I’m not sure why some doctors think they should have immunity from lawsuits. If a child wanders into my backyard and falls into my pool and drowns, should I be immune from being sued, or do only doctors get that privilege? When an average person accidentally hits a bicyclist with their car and that person ends up a quadriplegic, they are not immune from being sued and having their life ruined. But doctors seem to think that they should be immune from any liability when it comes to harming a patient, accidental or not.

              My disabled sister was killed by a doctor last year. It took me over 8 months to get a lawyer because of California’s tort reform law, not because my case is without merit, but because of the law. Had I gone 4 more months without getting a lawyer, I never would have been able to hold the doctor accountable for her death. As it is now, the most I can get in total is $250,000 because she was disabled. A “normal” person can get wage damages, loss of consortium, etc. But because she was disabled, the law discriminates against her.

              If that same doctor had run her over in the street in front of the hospital, I could sue him for millions. But because he did it inside the hospital during his work day, I cannot. Where is the sense in that?

              I’m all for bringing down medical costs, doctor’s malpractice insurance costs, etc. But at what cost? Letting people get away with killing, harming and disfiguring patients? Alan Cronin went in for hernia surgery and came out without his arms and legs. His pain and suffering, according to the law, is only worth $250,000 and is meant to last him the rest of his life. Steven Olsen fell when he was a child and because a hospital refused to run a CT scan, he ended up blind, paralyzed and mentally handicapped for life. A jury awarded the family $7 million in non-economic damages, but tort reform knocked it down to $250,000. He’s now an adult and that money is gone, yet he still needs care for the remainder of his life.

              People have state and federal rights to a jury trial and we have the right to have the jury decision stand. It is unconstitutional to take that away from us, just so doctors can be protected from malpractice lawsuits.

              Tort reform never did its job in California and never will. Even the original author of the bill has come out stating that it needs to be changed. Doctors need to stop listening to the insurance and medical lobbies and doing some research of their own. Stand up for your rights to have affordable malpractice insurance rates, but not at the cost of a patient’s rights.

        • As you well know there is very little certainty in medicine and the unexpected can create a disaster that leads to a suit. What do you think the jury thinks when the attorney asks why he didn’t do the MRI. His answer, ‘it wasn’t indicated’ would be considered correct if the jury consisted of trained physicians, but the jury doesn’t and thus might not understand the subtle reasoning. They will, however understand the plaintiff’s attorney when he states ‘but for the fact that this doctor refused to do the MRI this patient would still be alive.’ The lawyer might not win a Nobel Prize for medicine, but he might win the case.

    • THE VIRTUE OF PERSISTENCE IN THE FACE OF INSANITY:

      Dr. Carroll, my hat’s off to you, for your persistence in speaking to this essential topic, which itself is essentially a no-brainer.

      The understanding that healthcare is not a “consumer product,” and that the mechanisms driving the American healthcare industry run counter to our understanding of capitalism and free markets, is crazy-making. How many times can a person repeat the same truths—clear and inarguable and blatantly correct—without turning blue in the face?
      ____________________

      Myself, I keep getting sucked back into the same, ongoing debate here and there, I keep stating and re-stating the same points. But in my case, I don’t do it professionally, as I suppose you do. (In fact, my family’s substantial economic well-being depends on one aspect of excesses of the healthcare industry. Thus, I have a countervailing interest in our horrible system.)
      ____________________

      Nationally, we talk about deficit spending as if it really matter to us, while we defend lifesaving-for-profit as if the future of American capitalism depends on it.

      Few Americans know how bad our healthcare insurance is, until we really need it. (Then, of course, after needing it, we might become “liberals” on the subject. But also by then, we’re bankrupt or dead, or both, and it no longer matters.)
      ___________________

      So, as I say, my hat’s off to you, Dr. Carroll. Please keep it up. As long as you can stand.

      Regards,
      (($: -)}
      Gozo!

    • Aaron,

      I’ll ask you the same question that I asked Matt (though I didn’t get an answer from him). Which of these issues will not be addressed by a rapid shift to outcomes-adjusted global case rates? It’s also a solution that requires no further legislation. ACA has given it sufficient momentum.

      Hospitals, like Sloan-Kettering, that have the data to demonstrate superior outcomes already have the incentive to move in this direction. That, in turn, will create pressure on others.

      • You really think the ACA does that?

        • The ACA is just one catalyst. It is certainly not sufficient on its own but there are independent catalysts as well. The reality is that it is happening. I can’t tell you how soon but, from my vantage point in one hospital, this is where all the momentum is heading.

      • If we use an outcome adjusted global case rate, how large an institution, in terms of number of patients, would we need to fairly attribute better outcomes to better care rather than random variation?

        • George,

          This isn’t an issue that MSK has had to confront but I understand your concern.

          Global case rates would also require case-severity adjustment but could still have an allowance for greater variability in institutions with lower volume.

    • Agreed that the article could have used some major editing to make it a more reasonable length. Regarding Brill’s recommendation on tort reform, I think it demonstrates the need for more research on tort reform and the broader dissemination of that research. Seemingly objective individuals such as Brill are still falling back on it. As researchers, we need to continue looking at the effect of tort reform on the practice of defensive medicine. Yes, I know there’s research out there, particularly on Texas and how that hasn’t reduced costs. But apparently there simply needs to be more, because policy makers/providers/journalists still see it as a significant issue in reducing healthcare costs (costs, which is different than prices).

    • While the biggest problems causing high prices remain, Obamacare will help the issues addressed in the article substantially, though the article doesn’t acknowledge it.

      The prices problem disproportionately affects private insurers. The article is almost entirely about individuals, either uninsured or on unregulated small-purchaser plans, paying chargemaster rates. The ACA will have a large effect on who pays chargemaster rates by decreasing uninsurance. The exchanges and development of ACOs should help create a little market power for small purchasers. Fewer, larger plans through exchanges should help prices for insurers, also.

    • “… after spending a kajillion words talking about how the prices are the problem, I’m surprised Brill couldnt bring himself to mention all-payer rate setting as a possible fix.”

      It sounds like he did, finally

      “by digby

      From the annals of bad punditry, I bring you an excerpt of This Week with George Stephanopoulos:

      BRILL: Well, if you put Medicare in the context of the larger health care system, and this is something that everybody at this table is going to think that I should go to a mental hospital when I get finished saying this, the government and all of us would actually save money if you lowered — I said lowered the age for Medicare. If the Medicare age were 60 instead of 65, the economy and the taxpayers would actually save money. And George, please don’t look at me like that.

      RATTNER: You’re potentially right. And part of the argument — you’re taking people out of the Medicare age to 67 is you’re taking people out of the Medicare system.

      BRILL: Right. And what you would be doing, is you would be putting the most efficient player, which is Medicare — Medicare spends 80 or 90 cents to process a claim and the health insurance companies spend $18 or $20 or $25 to process a claim. Health insurance companies pay two, three, four times what Medicare pays for various services. So if you lowered the age, you would put more people into the bucket of much more efficient health care.

      http://digbysblog.blogspot.com/2013/02/you-cant-take-it-with-you-or-why-dying.html

    • A separate point is that, at least in Sloan-Kettering’s case, Brill did not follow the money very well. The executives that he identifies are being compensated, on the most part, for the returns that they create on investment and philanthropy, not charges. The investment returns and philanthropy, in turn, subsidize care for the vast majority of Sloan-Kettering patients.

      Also important to note is that some of those execs, at least those on the investment side, could be making many multiples of their current salaries if they chose to switch to the private sector.

      • I recall him noting a the very tiny degree of philanthropy. I don’t feel like digging through the piece again for it. Maybe another reader can corroborate.

        In any case, can you substantiate your claims? How do you know that the executives are being compensated via investment returns/philanthropy?

        • Austin,

          There is a limit to what I can or should say given that I am not an official MSK spokesperson and my opinions are my own.

          However, the combined investment returns and philanthropy are orders of magnitude greater than the combined salaries of the 14 execs that Brill references. Since their titles include Chief Investment Officer, Chief Development Officer and Chief Financial Officer (I believe that most of the others among the14 are also part of these groups), it is not a stretch to say that they are compensated for those activities.

          The point is, it’s hard to link their salaries to high charges when they generate net revenue for the overall system.

          • Fair enough.

            I also think it is hard to separate investment returns from the hospital’s cash flow. There’s a relationship there.

            • Their actually isn’t. On an annual basis, the operating “profit” is minimal and, many years, negative (Brill’s numbers included philanthropy). The endowment (and it’s subsequent returns as well) is built almost entirely from philanthropy.

            • Austin, In addition to correcting the typo (“Their” should read “There”), I also wanted to acknowledge your intellectual honesty here. It’s a rarity in these discussions. Thank you.

              For what it’s worth, I agree with many of Brill’s overall criticisms of the system and that is why we are pushing hard toward outcome-adjusted global case rates.

    • It’s amazing how much cost the hospitals and surgicenters are able to strip out when the patient is paying cash for cosmetic surgery or LASIK

      Aaron, are you aware of any malpractice cases where a judgment against a physician has resulted in forced sale of assets (home) or liquidation of pension funds? If they exist, they must be vanishingly rare. Yet I know many physicians who are obsessed about the risk of being sued, despite good insurance, even while continuing to drive their cars where the accident rates are relatively high and out of pocket costs non-trivial (ie why no moral hazard with malpractice insurance?)

    • AC was right with his first post: Brill’s article is silly. Ten anecdotes, 100 anecdotes, 1,000 anecdotes, all to prove that health care prices are too high. Who knew? Not even mentioned by Brill but what I find disheartening is that ACA places hospitals at the center and in control of efforts to lower health care costs. Yes, hospitals, the most inefficient of providers. What were they thinking! The combination of consolidation in the industry and integration of physicians’ practices with hospitals will drive prices up, not down.

    • Just had an interesting experience. I have Mcr A, B and Tricare. I was referred to a cardiac hospital for an heart catheter test. Before going I called the Drs Office, the Hospital, Medicare and Tricare trying to find out what my out of pocket costs would be. If they were significant I had the option of going to another hospital in a nearby city/state or going to the VA. No one could really help me with this. All the talk of a patient being more careful with his/her own money will only work if the patient can get a financial estimate before undergoing the procedure. Of course the hospital had me sign a paper saying that I knew I would be liable for any costs not covered by my insurance companies but without some kind of up front estimate this amounts to no more than a consumer scam. I think we need a law here requiring upfront estimates so that a consumer can in fact make good financial choices.

      • “I think we need a law here requiring upfront estimates so that a consumer can in fact make good financial choices.”

        Endorsed!

        • Many times a contract of adhesion is so unconscionable that a court will refuse to enforce it. I don’t know why that doesn’t apply in an emergency medical situation. If a person enters a hospital with a condition that risks life or limb the patient is not in a position to discuss the fee. Thus when presented a bill that is out of line with the median, average, 75%, etc. bill (paid) for the same condition under the same circumstances to that physician or to other physicians then I would think that some type of law could be created to align the fee in some fashion with the community standard.

          I think I should note that from what I have heard most hospitals and physicians will lower the billed amount much closer to the amount they usually receive.

    • The PPACA provides for caps on out-of-pocket expenses for in network expenses, but not for out-of-network expenses.
      It seems to me the cost of setting up and maintaining a netework is significant.
      How much could be saved on premiums if people simply used the provider of their choice, and used some type of servivces which would negotiate for the patient at the time the expenses actually occurs.
      I understand these organizations exist, and they could do a great job with a fee for service pay structure.
      Don Levit

      • Why the hell should anyone have to negotiate the price of a service?

        It’s crazy. Providers should be required to publish price lists and charge everyone the same thing. And yes, that means Medicare, Medicaid and the rare pigeon everyone thinks can be fleeced – the rich foreigner.

        Gouging anyone without a good negotiator should be illegal.

        • It depends upon who sets the prices. A provider likely has a price list that is set high for many reasons (in part caused by the payers). Medicare, Medicaid, network insurance all pay a fixed amount.

          In the past a lot of physicians used to adjust their prices based upon the ability to pay (price discrimination). A lot of economists don’t like that, but it is a private decision. Why should a private business be forced to charge everyone the same thing? That is a question that needs an answer. Do you believe in the market place?

          Think of the following: Tuesdays seniors get 10% off. AAA members get a 10% discount. Women admitted to the nightclub free. Groupon provides a lower price to those that use their services.

          • There’s a fundamental difference between on Tuesdays, Seniors get 10% off and if you don’t have insurance, you pay 1,000% more. I’d be surprised to learn many people support gouging, particularly when it’s someone in an ER possibly having a heart attack.

            Even if you have something simple and not life threatening, like a broken leg, how many people are going to ignore the pain and crawl over to the phone and start comparing prices? And if they do, they’ll certainly never be told whether or not the hospital of their choice is going to suggest an unnecessary and expensive CAT scan or other procedure that will add to their bill.

            • You must spend most of your life concentrating on only the bad things of life because my view is that most people get excellent care and are not ripped off. For most medical expenses there is time to investigate both the providers and the prices.

    • Is it really the prices? Prices certainly count, but so do a lot of other things. Healthcare is expensive even if the system is efficient and not abused.

      We are all for real malpractice reform, but I note how you emphasize greed among physicians while perhaps deemphasizing malpractice concerns. The extra marginal care provided that I believe you are referring to lies smack in the middle of these two problems and can overlap. (I won’t deal with hospitals as I believe physicians and hospitals function very differently and should not be linked together.)

      Many assume the cost of malpractice is in the premiums and the suits, but I think that assumption is a big mistake. I think a bigger problem is that protection breeds a type of community standard that physicians look towards thus ratcheting up the marginal care provided. Physicians are not just concerned with suits where they might lose, but they are concerned with suits that might even get thrown out of court and thus do everything they can to prevent even those nuisance suits.

      That means a lot of MRI’s, CT scans consultations and the like. Many times a primary care provider might refer to a consultant when it wasn’t necessary just to avoid hearing in court ‘you are not a cardiologist are you?’ ‘had a cardiologist been consulted the patient might be alive today’ even though the care was correct and the physician wins the case. The cardiologist does the same and covers all the basics and a work up begins that may have been marginal.

    • “Finally, for all you consumer directed health plan fans, this is what it looks like when individuals “shop with their own money” for health care. They are left to the whims of chargemasters and ridiculous prices just when they are at their most vulnerable.”

      I think that’s what got people excited about the article.
      Yes, many of us already understand this. But we saw in this article, a compellingly written detailed description of what happens, that was quite frankly, yes, emotionally charged. And passed it on, on say Twitter or whatever, in hopes that someone who is completely out of touch might bother to read it & gain some insight.

    • “Is it really the prices? Prices certainly count, but so do a lot of other things. Healthcare is expensive even if the system is efficient and not abused.”

      Yes, it’s the prices.

      Health care is cheap if you do it the way the Japanese do it. (I was using the wrong term, it seems: it’s not single-payer, it’s more like all-payer.) Whatever, prices for services are low low low. By law. Dental’s covered, too. And, of course, no one’s uninsured and the premiums (for the corner of it I use) are progressively indexed to salary. Five days in the hospital (fixing a detached retina) set me back around US$2500 (that’s 30% of the charge, insurance picks up 70%), but they refunded half of that a couple of months later, since the customer’s monthly charges have a maximum s/he has to pay.

      • David, if you are in love with Japan go there. Maybe you won’t like it as much as you think. The per capita income is about 1/3 less than ours. Maybe part of their income gets channeled to provide social services including health care.

        Check out one segment of Japanese health care at http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2628506/

        It sort of shocked me as regulation of physicians and hospitals is not what I would have expected in Japan. You can see for yourself, but it shows up in the premiums paid for malpractice insurance. About 10 years ago in south east Florida malpractice for an Internist with what formerly was usual coverage was $78,000 (varying slightly from insurer to insurer). In Japan it was $500.

        I’ll quote a bit about the doctor patient relationship which fortunately is improving from what we see written below, but my understanding from other sources Japan has a long way to go.

        “Traditionally, with respect to physician-patient relationships, a paternalistic paradigm prevailed in Japan. The creed of medieval Japan’s feudal lords in ruling their subjects—“Keep them ignorant and dependent”—was often ironically applied to doctors’ methods of managing patients [31]. Customary practice hid cancer diagnoses from patients, withheld information about prescription drugs, refused access to their medical records, and sometimes conditioned provision of medical treatment on waiver of the right to sue or complain [19].

    • Only chiming in here to give Aaron props for the “catch the vapors” reference. Bravo.

    • The correction your post needs is not solved by your addendum. What it requires is rather the frank recognition that a front cover story in Time is a much bigger megaphone than your blog. That is, unless you think that trumpeting a message you got to first is less important than getting credit for it.

    • I still don’t quite understand though why many providers don’t accept Medicaid. Is it because Medicaid does not enjoy the large bargaining power of Medicare?

      • Along with being difficult to deal with Medicaid frequently doesn’t pay enough to cover the overhead.

        • Right, but given that Medicaid is cheaper given health risk and has lower admin costs how is that possible? I basically still don’t understand how private insurers can be less efficient but pay providers better. I am an economist and trying to learn more about health so it’s just puzzling to me!

          • Philip, it all comes out in the premium or PMPM equivalent cost of coverage. Higher admin cost plus higher medical cost equals higher total cost per covered life. Private insurance costs more than Medicaid for the same person (risk profile).

          • ” has lower admin costs”

            I don’t know that private insurers are less efficient. I do believe that Medicare has a lot more fraud than private insurers have so I would suspect Medicaid to be similar. If you are under the impression that Medicare has very low administrative costs and therefore assume the same for Medicaid then I would refer you to Mark Litow, Merrill Mathews and Benjamin Zycher.

            In reality Medicare’s real administrative costs are hidden and there is great difficulty in comparing the administrative costs between Medicare and private insurers. For example there are differences between the amounts of money per claim paid out with Medicare paying out on average much higher amounts which changes the cost factor when making these calculations. Let me put it to you this way. If company M had administrative costs of $10 on a bill of $1,000 that would be a 1% cost. If company P had an administrative cost of $5 on a $100 that would be a 5% cost which is actually a lot lower per claim. Most I believe recognize that administrative costs are relatively similar whether dealing with $100 or $1,000. As the claim goes up the administrative cost doesn’t go up that much if at all. If one uses an adjustment to correct for this problem Medicare’s administrative costs drastically rise.

            There are many more factors that go into calculate administrative costs and these factors similarly raise Medicare’s administrative costs (potentially the same with Medicaid). We have to remember that Medicare subs out their administration of claims processing to private insurers and that cost is the only cost used in the commonly promoted administrative cost which I believe is an errant number if they are comparing those costs to private insurer costs.

            All economists are not alike. I have listened to a lot of economists that are not ‘health care’ economists who seem confused over a lot of things health care economists say and do.

            • “Mark Litow, Merrill Mathews and Benjamin Zycher” — would love a link to something specific on admin costs.

              “We have to remember that Medicare subs out their administration of claims processing to private insurers and that cost is the only cost used in the commonly promoted administrative cost which I believe is an errant number if they are comparing those costs to private insurer costs.” — totally wrong. See http://theincidentaleconomist.com/wordpress/chart-of-the-day-medicares-administrative-costs-explained/

            • Your source is dealing most specifically with claims administration and that is done by a private insurer, but that does not equate to total administrative costs or their percentage.

              The comparison in administrative costs is an apples to orange one. It doesn’t deal with the many problems mentioned by Litow in his paper which should be read and probably posted on this list nor did it deal with the papers of Merrill Mathews or Benjamin Zycher.

              It also doesn’t even mention the difference in the amount of the claims which greatly alters administrative costs which is the one example I presented. There are other examples, but that one should be dealt with first and wasn’t in your reference which also didn’t include many other cost factors mentioned by Litow and the others.

              If one wanted a true discussion on the subject they wouldn’t be criticizing a journalist, Ezra Klein, rather they would go directly to the source that has the numbers and the experience in dealing with these types of problems. That is never done to my knowledge. I don’t think it can be done.

              I suggest that anyone truly interested in discovering the truth in administrative costs start with Mark Litow. Then one will see how difficult and foolish the comparisons are between Medicare and private administrative cost comparisons.

              Mark Litow was a principal and consulting actuary for Milliman. That provides him with credibility with regard to numbers of this nature. He has an excellent reputation in this field.

            • Al (March 3rd, 2013 at 00:01) writes, “I do believe that Medicare has a lot more fraud than private insurers have so I would suspect Medicaid to be similar.”
              ____________________

              Does this belief have any basis in fact?

              If so, it will enlighten one to learn the facts.
              ____________________

              It often seems that many of us confuse the absence of government crimes committed as evidence that the government coverup must just exceptional.*

              Where there’s no “smoke” of corruption, there must be a damn fine ventilation system to hide the “fire.”

              Regards,
              (($; -)}
              Gozo!
              __________
              *How these two assertions—government ineptitude at acting versus government expertise at covering up—can be reconciled is one great mystery of American politics.

            • @ Gozo Rabat: “Does this belief have any basis in fact?”

              Yes.

              A place to start would be the 60 minutes segment on Medicare fraud in South Florida. Then go to the government websites. Interesting though not on point to the question at hand, at least in the past Medicare used to list the fraud on a government website. When I looked years ago physicians practicing medicine (not selling things like DME etc.) committed very little proven fraud. Be careful, however, if you are trying to figure out total costs to the system. Marginally beneficial care is not fraud.

              The Mark Litow paper on this issue might have included fraud as a cost in his discussion. I think he did, but I can’t promise as I read the piece a long time ago and sometimes one cannot remember the exact citation. A lot of the administrative costs of private companies is spent to prevent fraud.

              “It often seems that many of us confuse the absence of government crimes committed as evidence that the government coverup must just exceptional.*”

              Check out Senator George LeMieux comments on this issue (both the problem and the cure). Then you won’t have to spend so much time worrying over an accepted issue that has been widely discussed for a considerable length of time.

    • Dr. Carroll,

      Thank you for the work you are doing to inform us. We need an anti-greed pill to diminish the selfishness that is rampant. How many executives would voluntarily take it, though?

    • I’ve been making the same responses for years in response to people on the right who think that medical malpractice is the main cost driver, and on the left, who think it’s insurance company profits and inefficiency. The latter is a much bigger component of our health care dollars, at 15% – 20% of private plan costs, but that just means that if you completely eliminated insurance company revenue captures, we get back to the health care cost levels we had 3 years ago.

      It’s good to see hospitals called out for gouging uninsured middle class patients, excessive exec compensation, etc., but Brill goes too far in making them the big villains in his article. Cost-shifting and uncompensated care are real issues and for most hospitals, consume the vast majority of the excess revenue generated from over-charging. Otoh, he has swallowed the physician community’s perspective hook line and sinker. Not only does he pick up their tort-reform crusade, the only time he mentions physician compensation is to say that it’s not enough.

    • IN DEFENSE OF NATIONAL MILITARY & HEALTHCARE:

      Responding to a post by Al on February 25th, 2013 at 17:03:
      http://theincidentaleconomist.com/wordpress/you-mean-its-the-prices-stupid/#comment-38478:

      Thank you for your thoughtful response. If asked, I could not reciprocate the courtesy, other than to refer you to Dr. Carroll’s extensive, fact-based knowledge of our healthcare system.
      ____________________

      Al writes, “Check out Senator George LeMieux comments on this issue….Then you won’t have to spend so much time worrying over an accepted issue that has been widely discussed for a considerable length of time.”

      I must dispute the implied assertion that Medicare fraud versus private-insurer fraud is “an accepted issue…widely discussed for a considerable length of time.” This discussion, here on this site, continues the broader topic of the healthcare debate.

      Clearly, we harbor different views. Fortunately for those on one side, preponderance of evidence (much of which would be inadmissible in courtroom settings) is not the determinant. The Affordable Care Act has been made law, and is moving through implementation. It will be amended and (one hopes) improved over time.
      ____________________

      Also, thank you for your expressed concern over my time and worry. Here’s wishing that neither of our families ever find themselves compelled to place our lives and fortunes and fiscal honor in the hands of the American system of healthcare and healthcare insurance.

      Like military defense, healthcare is one of the few things that, in the hour of need, one cannot borrow from one’s neighbor.

      Regards,
      (($; -)}
      Gozo!

    • There are so many things wrong with this discussion and the article I don’t even know where to start.

      Many in this country seem to think we can actually get care at an insurance company. This is nuts.

      I have worked in a very large healthcare insurance company and nobody ever had any care provided there.

      I have worked at hospitals and many of the smaller ones are going out of business (pick your reason but not enough income and increasing costs of dealing with insurance companies for reimbursements would be mine, not malpractice)

      I have worked at a medical device manufacturer and the smaller of these companies are going out of business for the same reason – reducing revenue and increasing costs of dealing with insurance companies (if they do that).

      The statement of rising costs makes me laugh. The only part of this industry that I have worked that is making tons of money are the insurance companies and the are the only ones that don’t actually provide health CARE. I am sure there are hospital “systems” that make money. There are tricks to making money as a provider even when insurance companies don’t pay what they promise or change the rules after the fact. For example, larger hospitals can fight this and live through the appeal process (often months or even years) where smaller hospitals cannot. I am also positive that there are manufactures of healthcare products that make money too. I bet they sell to providers and are not billing insurance companies. I say this because if they do, they would have to be huge providers as well or the insurance companies can ignore them and keep cutting what the pay or delay what they pay to the point of driving the out of business.

      Clinics or smaller doctor practices are in very deep trouble because of the increasing costs of doing business, delays in getting paid if they get paid at all and increasing government regulation too, making it a BUSINESS that makes less and less sense for anyone to be in even when you really do want to help people.

      What is really crazy is that I work for a company today that knows it would be cheaper for us to give our products and services away to Medicare patients for free then have deal with submitting for reimbursement but we are not legally allowed to do that because it would be considered a kick back. How is that for costs are increasing and Medicare is the best of the bunch!!!

      So, maybe we should just remove insurance from the discussion and have a real business dialog about healthcare. If you want to talk insurance let’s discuss that industry. But PLEASE STOP COMBINING THEM AS THEY ARE VERY DIFFERENT INDUSTRIES!!!!!!

      Thanks for reading…..

      • L, respectfully you have very confused ideas about where the money is being made in health care. On average, health insurers have a profit margin almost identical to those of hospitals, about 3-5%. I include both for-profits and non-profits here (non-profits have positive net incomes as well).

        Yes, smaller hospitals often struggle. So do smaller insurers. So do smaller device makers. Basically, if you don’t have the economies of scale from large size, and you don’t have market power that comes with a high market share, you have to fight that much harder to survive no matter what part of the industry you represent.

        No one on this blog is confused about whether insurers provide care. (As a rule, they don’t, but there are important exceptions, and those exceptions are growing as the trend seems to be back towards the classic HMO model of joining care delivery with insurance.) So, have that argument on yahoo discussion boards, or your local newspaper comment section, not here.