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When will we deal with the cost of health care, really? (Part 2)

When will we deal with the cost of health care, really? (Part 2)

Picture of David Lansky
Photo Credit: Wellness GM via Flickr

In my last blog post, I explained just how out of control our health care spending is and five of the main culprits: prices, utilization, intermediaries, overall administrative costs, and fragmentation and inefficiency in care. 

The other five factors for why the U.S. spends more than anyone else for health care are actually concepts that should push costs down, but don’t.  Here’s why these ideals aren’t working in our uniquely American system.

1.  Competition:  It’s an American ideal that prices go down and quality goes up when we have competition; think smart phones, cars, appliances.  In U.S. health care, this force only applies where the product is a well-standardized commodity and where the patient has flexibility and time and a financial incentive to make a cost-conscious decision.  But for the things that are important and expensive, we don’t have a mechanism that allows consumers or even sophisticated purchasers to compare the expected quality and cost.

2.  Transparency:  If we do want to rely on competition to limit prices and stimulate improved quality, we need a method to evaluate who is doing a good job at managing costs and quality. But we have very limited information on cost and quality in health care. Compare the information you can get about how well your hospital performs cancer surgery or treats heart attacks to what the U.S. Securities and Exchange Commission requires from publicly-traded companies about their financial performance or what the U.S. Department of Transportation requires for car safety.  In England, Sweden and Australia, they mandate reporting of meaningful information about patient outcomes.

3.  Regulation:  Most countries have recognized that health care is too complex and sensitive to be structured as a competitive market and, instead, have decided to regulate what’s offered and what it costs.  Many European countries have set up public commissions to evaluate the effectiveness of new treatments and set prices.  In the absence of such oversight, U.S. providers and suppliers can pretty much charge whatever they want – and they do.

4.  Tough purchasers:  For a market to work, the buyers have to be serious – including being willing and able to “walk away.” You can walk away from your Honda dealer and go over to the Toyota lot — but are you going to walk away from one hospital or surgeon and go negotiate with another?  Is a large company likely to tell its major insurance plan that they’re too expensive and they will switch to another? Unfortunately, U.S. employers and most public agencies do not feel able to drive tough bargains with their suppliers. For many, it’s more important to maintain continuity of providers and plans, to offer “rich benefits” to their workers, and to make sure the highly-regarded hospitals in the community are available than to put significant economic pressure on providers to improve efficiency and quality.

5.  Price sensitivity:  This one may be changing, but for most of the last fifty years, many patients (and employers) didn’t ask or know about the price and certainly didn’t change their health care arrangements because of it. Instead, suppliers and providers offered ever more elaborate marketing pitches to attract us to their products and services, knowing that the costs would be borne by a third party —typically a health plan, government agency, or employer.

When someone wants to blame the pharmaceutical or insurance industries for the high cost of U.S. health care, there’s probably some truth there. But you will also find culprits in every nook and cranny of the U.S. health care system. Our broadly distributed culpability makes it hard to find easy solutions to the cost problem. In the next post, I’ll talk about the fixes that seem to make sense.

[Photo Credit: Wellness GM via Flickr]

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Related Posts

When will we deal with the cost of health care, really? (Part 1)

When will we deal with the cost of health care, really? (Part 3)

Comments

Picture of <span class="username">Guest (not verified)</span>

Please also consider that studies have shown that up to 10% of physicians are practicing impaired, leading to wrong diagnoses, missed diagnoses, and complications. We need national standards of practice by specialty against which physicians are measured. Add to that the fact that no physician can keep all possible symptoms and their relation to diagnoses in her/his head, so we really do need computer assisted diagnoses. So I guess what I am saying is that we need more appropriate medical care!

Picture of <span class="username">Guest (not verified)</span>

Can you cross link to his other posts? Right off top "in my last blog post" ... would love to find it that easily by clicking.
This is a GREAT piece.
lisa

Picture of Ryan White

Good idea, Lisa! The part 1 link is now there, as it should be. Also, you can access David's earlier posts by clicking on his byline, where you'll find "David Lansky's blog" with a fuller list of his posts.
Picture of John Chamberlain

A major factor in the continual increase in the cost of healthcare is the intermediation of government and insurance companies in the process. Disintermediation of the above will result in lower cost, especially in primary care. A relatively simple solution would be to put the control of one's healthcare expenses back into one's own hands would be the following:

1. Use Direct Primary Care (DPC) as a means to provide affordable, timely and convenient access for primary care needs. 80% of medical need can be handled at the primary care level. 75% of those needs can be handled via e-visits, i.e. Texts, Email, Secure video. DPC does not require copays or deductibles. The average cost for a DPC membership is $70/month, $130/month for a family of four.

2. Use a health sharing plan for catastrophic coverage. Under the current ACA regulations, catastrophic insurance policies are generally unavailable, therefore an alternative must be considered. As one example of cost for a health sharing plan, $85/month, $1000 deductible, $125000 cap.

3. Use existing price transparency tools to determine the best price for ancillary services, i.e. labs, imaging and prescription meds. Typically cash pricing is significantly lower than insurance pricing. This could also benefit insured individuals who have a high deductible to satisfy. For instance, if one has a deductible of $5,000 and has historically never reached it, wouldn't it make sense to spend as little as possible?

These solutions will result in a minimum of 20% savings, more timely and appropriate care and ultimately better health, for both the individual and the country.

Of course, these concepts will be met with significant resistance from the entrenched medical/insurance/big pharma/political entities that currently control health care with little regard for the cost to the individual or employer.

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