Tuesday, February 26, 2013

Crisis of greed, health care style

The government, the financial industry, and the medical industry have long ago realized that where the real money is - the middle classes.  Steven Brill's exhaustive 26,000 word article in Time Magazine looks at why health care costs too much.  This is a longer than normal post.

His first point is that the political fight over the passage of Obamacare was mostly over who would pay the bills.  But, the more important question may well be - why are the bills so high?  Hint - hospitals, medical device makers, and big pharma are at the heart of it according to Brill.  

I didn't realize that hospitals have a sliding scale for billing: the less money and power someone has the more they are charged.  Really.  It's amazing.  

Hospitals give patients itemized bills.  These are deliberately indecipherable with codes and acronyms.  They are deliberately confusing. They are intimidating. Individuals without insurance are expected to pay them, period.  These, of course, are the poorest amongst us.  Every hospital has charity outreach for the poor, but it is offered to a tiny fraction of patients and reduces the hospitals' bottom line by only tiny fractions.  The hospitals get their highest profit margins from their poorest patients, or patients who thought they had good insurance only to find out that it wasn't enough and they were on their own.  60% of bankruptcies are from medical bills. Those who didn't start out poor become poor.  Kind of disgusting, really.

The itemized bills are the product of each hospital's Chargemaster.  Each hospital has its own Chargemaster, which has thousands of codes for everything that they think they can get away with charging for.  No two hospitals have the same Chargemaster.  No one inside the hospital can explain how the charges on the Chargemaster is calculated.  Chargemaster charges are historically established and are probably bumped up across the board yearly to account for whatever increase in overall billing the hospital deems necessary or possible. Chargemasters are kind of like the list prices for services.  The hospitals actually see them as a beginning negotiating position to collecting money (except to those too ignorant and powerless to negotiate).  Of course, the general public doesn't understand that when they receive a hospital bill that it is only the first step in a long, painful, rigged negotiation designed to make patients give up and give in and pay as much as the hospitals can squeeze out of them. 

So, if you have no insurance, or if you have reduced insurance, or if your insurance has an upper limit that the charges vastly exceed, you are on your own and charged the full list prices.  Brill suggests that if you are in this position, you are best served by employing professional negotiators, medical-billing advocates, to do battle with the hospital for you.  Because you don't have a clue how to go about it on your own. 

If you have a good insurance, your insurance company does the negotiating.  They are large, they are professionals, they understand the codes, and they have leverage that individuals don't.  They get the bills negotiated to substantially lower payments.  Good for them and good for you.

If you have Medicare, Medicare does the negotiating, and Medicare is huge, has a lot of leverage, is staffed by government employees and independent private contractors, and they get bills negotiated to even lower payments than private insurers can.  Good for them, and good for you, and good for the taxpayers for keeping Medicare costs low.  A side note: the size and efficiency of Medicare is such that the cost of processing claims is less than half of even the major insurance companies.  Hard for conservatives to believe, but in this case the government seems to be much more efficient and effective than private companies - because of its size, leverage, and professionalism.

Some examples about how those on their own pay vs how much Medicare pays:
  • RESP SVCS (supplying oxygen during hospital stay and testing breathing) $94,799 total ($134 per charge) vs $17.94 per charge
  • Tropinin 1 (blood test to detect heart attack residue) - $199.50 vs $13.94
  • CBC (complete blood count) - $157.61 vs $11.02
  • NM MYO REST/SEPC EJCT MOT MUL (stress test using radioactive dye) $7.997.54 vs $554.
  • Diabetes test strips - $18 vs $0.55
  • Acetaminophen tablet - $1.50 vs $0.015
  • Niacin pill - $24 vs $0.05
  • Basic instruments like bandages, IV tubing, blanket warmers, marking pens - something vs $0.00
  • Drawing blood during hospital stay - $15,000 vs a few hundred dollars
  • 88 year old man with massive heart attack (survived) - $268,227 vs $43,320
  • 90 year old woman who broke her wrist - $121,414 vs $16,949
  • 91 year old man getting tests and being sedated before dying in hospital - $51,445 vs $19,242
We can see that Medicare negotiates dramatic reductions from the Chargemaster charges.  Insurance companies don't do nearly as well, and medical-billing advocates do even less well, I am sure. 

Although the medical industry claims that they can't make money on Medicare patients, they very actively seek them in places with high Medicare eligible patients, like Florida. So, the claims don't really hold up.

Americans pay over $8000 per person per year for health care, which is double what they pay in Japan, Spain, U.K.  Here are some interesting cost comparisons for health procedures:
  • CT scan (head) - U.S. $510, Germany $272, France $141
  • Appendectomy - U.S. $13,003, Germany $3,093, France $3,164
  • Coronary bypass - U.S. $67,583, Germany $16,578, France $16,140
CTs and MRIs tests are extraordinarily expensive and produce huge profits to hospitals and labs.  But they are used to excess, mostly because they are needed to protect doctors and hospitals from malpractice lawsuits.  Malpractice reform, long touted by conservatives, would do a lot to lower the cost of healthcare in America.  Unfortunately, liberals are in the grip of trial lawyers, and efforts to institute "safe harbor laws" (legally sanctioning care given within the bounds of what peers establish as reasonable under the circumstances) are always killed by liberals in Congress.

Conservatives fare no better when it comes to blocking meaningful cost savings reforms.  Liberals have been pushing the comparative-effectiveness movement, which allows Medicare or insurance companies to choose the less expensive drugs or treatment.  Obamacare tried to implement a Patient-Centered Outcomes Research Institute to expand comparative-effectiveness of drugs and procedures.  Conservatives restricted it. For example, it would have allowed doctors to be paid to counsel end of life patients, excluding euthanasia, but Sarah Palin and conservatives stopped that obvious and compassionate service by labeling it "death panels." 

A bigger criticism of conservatives is for blocking Medicare from being able to negotiate the prices of drugs and durable medical equipment.  Keep those profits exorbitant, and keep those campaign contributions coming.

Obamacare mandates that after 2013 there be no cap on payments for patients, and nobody can be refused insurance if they have pre-existing conditions.  As long as the country has decided that people's health coverage will be paid by private insurance, the premiums for that insurance must go up in order to accommodate those two new laws. Insurance companies must increase the prices of their policies because their costs must go up to pay more to conform to the new law.  If they don't, they go out of business.  A lot has been written about the greed of health insurance, and much of it is probably true, but it seems to me that skyrocketing premiums are a pretty simple fact dictated by arithmetic of increased costs for private insurance.

How big is the medical industry?  A shocking fact, to me, is that of New York's 18 largest private employers, only four are banks, the rest are hospitals.  That is the size of these financial institutions - the hospitals I mean.

Another interesting fact demonstrating the size of this industry: ambulance revenues were over $12 billion last year, which is about 10% higher than Hollywood's box office take!

Another way of understanding the financial size and clout of the health care mega-industry is how much they spend on lobbying.  The health care industry, from doctors and hospitals, to pharmaceutical and health care product industries, nursing homes, health services and HMOs have spent $5.38 billion in lobbying since 1998 in Washington.  This is much more than either the entire defense and aerospace industry ($1.53 billion) and the oil and gas industry ($1.3 billion).  If you think Congress is in the pocket of the defense industry or the oil and gas industry, it must something of a shock to find out that the health care industry makes them look like small players in Washington.

The drug industry was looked at as well. We pay about 55% more for our drugs than in other developed countries.  The drug industry justifies their high prices as needed to cover their R&D costs, and I always thought that argument was a good one.  However, Brill points out that looking at securities filings of major drug companies show their R&D expenses to be 15 - 20% of their gross revenue.  This is substantially below the extra 55% they are charging us for their drugs.

When it comes to health care, there is no free market.  The argument against single payer or government provided health care is the free market is more efficient and provides better quality.  But, none of us is capable of shopping for hospitals, or drugs, or even doctors.  It is like going to the archives and deciding which Sanskrit tablet offers the most effective prayers.  Only the highly trained have any chance of making intelligent discernments.  This is a nearly perfect sellers' market selling to powerless buyers in a totally opaque system.  Keep the buyers ignorant and without the ability to make informed choices, and you end up with multimillionaire non-medical executives running these opaque, exploitative, and heartless profit machines.  

In many ways, it seems to me, the health care industry is a utility, i.e. it provides necessary-for-survival services without any real competition.  Utilities are regulated to keep them from exploiting their monopoly powers, but the health care industry's prices are unregulated and they do indeed exploit their monopoly powers.  

Since Congress has proven itself to be unable to do much to reign in the greed which is ruining our health care system, perhaps the only recourse is to embarrass the greedy with articles like Brill's in this week's Time Magazine.  Or maybe to embarrass Congress into meaningful reform.   

Because we like our doctors, we think of the health care industry as caring.  And I know that many doctors and nurses, and many others giving care are compassionate healers.  

But those running these business also care a lot - for wealth, theirs.  And they get it from the people who have it - the middle classes in America.

Wednesday, February 20, 2013

Time for RINOs to stand up

Kathleen Parker, center-right editorialist for the Washington Post, hopes that RINOs will take back the Republican Party.  So do I.

RINOs (Republicans In Name Only) are the definition of center-right politicians.  I believe they are the natural complement to Obama, who I consider to be center-left.  RINOs have long been attacked by the fervid on the far-right as being unworthy to be called Republicans.  But, I believe that it is the extremists on the right who are killing the Republican Party, and hurting the country in the bargain.  

The passionate and inflexible evangelicals, second amendment absolutists, libertarians, and social issue conservatives are all very sincere, rigidly committed to their own versions of idealism, and see compromise and deal making as signs of weakness and a failing of moral character.  They are fanatics. And fanatics cannot govern through the actions of politics, they are only temperamentally capable of ruling by decree. 

Indeed, I believe it is the far-right who are actually Republicans in name only.  Republican politicians, by definition it seems to me, are politicians.  And politicians, it seems to me, are by definition those who are dedicated to governing via the political process.  And the political process, it seems to me, is by definition the process of give and take, compromise, deal making, getting most of what you want in the context of negotiating with others who want different things.  

The far-right don’t seem to have any give on abortion, taxes, religious issues, military spending, unfettered free markets, etc. etc.  They seem to see politics itself as immoral.  I think if they are not marginalized by the mainstream Republicans, RINOs, the center-right Republicans, the Republican Party is in danger of becoming obsolete, and going the way of the Whigs.

Interestingly, enough, as I understand it, the Whigs had split into two factions prior to the Civil War: the Conscience Whigs (anti-slavery) and the Cotton Whigs (pro-South).  They eventually disappeared as the Conscience Whigs became part of the newly formed Republican Party, which was anti-slavery (some hard core abolitionists, and mostly Free-Soil members opposed to the expansion of slavery as the U.S. expanded into the west).  So, the Republican Party absorbed the northern anti-slavery Whigs, and the Democratic Party absorbed the southern pro-slavery Whigs.

If today’s Republican Party disintegrates, it is hard to see how a strong party can emerge.  I would seem that it would break up into Libertarian, Evangelical, and Moderates – none of which would have enough members to be a viable alternative to the Democratic Party.  So, perhaps the party’s only future lies in the RINOs taking over the party and having the Libertarians and evangelicals become less influential voices on the margins, but stay within the party trying to influence policy by – politics, persuasion, compromise, deal making.  

What I don’t want to happen is for the Democratic Party to become the only viable political party in the country, because, regardless of any party’s principles it will become corrupt and blind if it becomes a monopoly.

So, go RINOs go.

Tuesday, February 5, 2013

Time to lower the boom on Wall Street?

Is the Obama administration finally getting ready to lower the boom on Wall Street?  Perhaps.

I have been upset that Obama let the management of the monster financial firms off the hook after the meltdown of 2008.  He had a chance right after the collapse and government bailout of these firms, while Wall Street was weakened, to depose the management as a condition of their rescue, prosecute unethical behavior, and break them up so that they were no longer too-big-to-fail.  But he didn't, and I was disappointed in him and his administration.

But, Matthew Iglesias makes the suggestion that the newly appointed head of the Security and Exchange Commission (SEC), Mary Jo White, is a pretty tough cookie and was a former prosecutor in Manhattan.  In fairness, she was also a defense attorney, so we can't really predict her predilections, but there is reason for optimism for those of us who think Wall Street still needs to have their immense powers trimmed.  It could be that the SEC is finally going to go after some real prosecutions on Wall Street.

Also, we just received the news that the government is suing Standard and Poors rating agency for their allegedly criminal negligence in giving high evaluations and ratings to the toxic investments that were at the heart of the financial collapse in 2008.  Bravo, I say.

So, these two facts may be showing us that Obama might finally be getting tough with the financial industry.  I think there may be a couple of reasons for this.

First, Obama very clearly chose to rescue Wall Street and the financial system when he first came into office four years ago.  I agree that saving the system was necessary to preventing nation wide and world wide financial collapse and economic catastrophe, and therefore was the number one priority.  I believe that he decided that rescuing Wall Street was more important than prosecuting criminal activity, and more important than breaking up the banks.

Second, four years have passed and America's financial system has weathered the terrible storms that it created out of their recklessness and greed.  And Obama may be concluding that civil, and even criminal, prosecutions of these behemoths will no longer destabilize the financial industry or the economy.  Wall Street may well be stable enough to be able to withstand the next steps needed bring balance and soundness to the country's financial system.

So, civil and criminal prosecutions of the giants of Wall Street would likely be a positive step making our system healthier and less risky (by quashing the hyper-aggressive risk taking culture that apparently still runs these too-big-to-fail institutions), rather than threatening instability and collapse.

In addition to prosecutions, Obama could finally break up the too-big-to-fail, too-big-to-regulate, too-big-to-prosecute, too-big-to-manage dinosaurs.

This could finally be the death blow to the persistent Wall Street culture of high stakes risk taking that threatens us all with financial disaster.

Maybe Obama has been waiting for the financial industry to regain its footing enough to move to the next stage in reforming the financial system - prosecution and breaking up of the giant banks.