Apologies everyone for another spammy email. This is a followup to a previous email, "Work conservation is the solution to the global recession".
Random song..! You may have seen it before.
http://www.youtube.com/watch?v=Vo0Cazxj_yc
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Most people would agree that receiving more health care will increase the amount of time you live, while receiving less care will decrease your lifespan. Cases where this is not true include when the medical procedures performed carry some amount of risk such as radiation exposure or the possibility of complications, when the cost of a procedure leads to inefficient allocation of limited financial resources, or when the expectation of medical treatment causes acceptance of risks such as smoking or drinking similar to how antilock braking systems can lead to riskier driving.
What is missing from the national conversation on health care is the idea that people might be willing to accept a slightly lower quality of health care in exchange for a significant reduction in cost. Anecdotal evidence suggests that this is due to a fear of death, or the empathetic perception of that fear in other people as a consequence of reduced health care[1]. If we accept the idea of different qualities of medical treatment, society's structure must give people the option of choosing higher qualities instead of being forced to accept less expensive health care.
This means reducing unemployment, which can be accomplished by adopting the idea of work conservation[2]. Affordable health care is less likely to happen with current levels of unemployment because the inefficiency that results in high health care costs also provides people with jobs. Although the medical profession has always been well-represented in the upper class of the United States, the increase in health care costs has not significantly changed the proportion of doctors in the top 1% of income while the representation of the financial sector has nearly doubled[3].
The cost of health insurance from the perspective of an insurance company's perspective is the result of health consumers feeling that they must get enough value from their insurance policy while disregarding costs. According to physicians, unneeded care occurs because standard procedures require it (to the financial benefit of the institutions they work for), because patients request it, or to guard against litigation through the use of defensive medicine[4~9].
However, the amount of care delivered is completely separate from the prices charged for that care. People generally trust doctors[10][11], but both doctors and patients are frequently ignorant of the cost of treatment options[12][13]. Since most people think it's important for their health care plan to cover any needed treatment and to be able to choose any doctor or hospital they like [10], insurance companies have limited ability to influence the prices facilities charge. This is much of why prices for medical services in the United States are so much higher than other countries and can vary widely even within the US[14][15], although price caps for medical services or government reimbursement are common in other countries. An MRI costs around $160 in Japan[16] and $281 in France, but costs $1,080 on average in the United States, varying from a low of $503 at the 25th percentile to a high of $2,758 at the 95th percentile.
Other sources also show wide variations in prices within the United States. One study that looked at 19,368 cases of routine appendicitis found that hospital bills ranged from $1,529 to $183,000 with a median of $33,611[17]. In another case, a hospital was charging $517 for a chest x-ray or $310 for those who know to ask for a discount, compared to $73 at a nearby private radiology office for the same quality[18]. A third example is a comparison of the costs of a CT scan for an uninsured patient at several facilities, ranging from $5459 before any discounts to $1616 after discounts[19].
Consumer-driven health care, where patients pay more of the costs of routine treatment and health insurance is only for exceptional medical problems, is thought to be a way to increase price competitiveness and has had some success[6]. However, families tend to cut back on both 'frivolous' care and 'useful' care when it's entirely up to patients to make decisions on specialized medical topics[20].
The solution is to give a 'cost rating' to medical providers based on their past record of treating patients with a particular diagnosis compared to the national average, and allow people to purchase a level of insurance coverage based on the cost rating of facilities in their local area. Unlike bundled payment, medical facilities would only be paid for care actually provided based on a certain diagnosis-related group or category of preventive care, and similar to indemnity insurance the patient would need to pay for costs that exceeded the level of coverage for the particular diagnosis.
Patients would still need to trust doctors to recommend the best treatment, but would have a distinct advantage in that they would have previously made a decision before any medical problem even appeared as to what quality of treatment they are able to afford. Physicians could feel ethically and professionally justified in suggesting a less expensive course of treatment and would not be accused of 'trying to save insurance companies money' when discouraging expensive tests for a patient whose level of insurance coverage was lower than the prices typically charged at that medical facility. While less health care can increase the risk of undetected medical problems, it would save the patient from additional costs and lower the cost rating of the medical facility, attracting future patients who are sensitive to the cost of their health care or insurance.
Not all families in the United States feel a financial burden from the cost of health insurance so physicians could still make decisions that would increase the cost of treatment. In this sense it might not decrease prices for hospitals used by the rich, but even for someone for whom an expensive hospital is the only option, they could still purchase a low level of coverage and use it to bring up the topic of costs with a physician without seeming insulting or feeling 'poor' because they would come prepared with knowledge of the hospital's high costs compared to the national average.
For this to work, several things have to happen at the national level. Using existing codes for classifying medical conditions, the appropriate federal agency must determine the statistical distribution of costs for treatment under the 'episode-based payment' model based on diagnosis by a physician. Since costs rise significantly for older patients[21], age would be included in the analysis. This would be used to determine a profile with which to measure the costs of treatment at a medical facility and also to determine the coverage limits at a certain level of insurance for someone of a specific age, for each diagnosis or type of preventive care. A lower level of coverage would not decrease all limits equally in proportion, but would be based on the national distribution of costs for that payment category.
Any insurance policy which used cost rating would then be based on partial community rating and guaranteed issue, and would offer the same coverage limits as any other insurance policy of the same cost rating. Consumer decisions would be based primarily off the desired coverage limit judging from the cost ratings of nearby medical providers, with insurance companies distinguishing themselves through 'extras' like case management and low administrative costs. Unlike standard health plans, even catastrophic medical conditions would have a coverage limit based on the typical cost of such events. While there would not be much a patient could do to control costs in a catastrophic situation, the prices charged by a medical facility would be directly reflected in its cost rating which would give an incentive to provide needed care at a low cost.
Coverage limits for 'episode-based payment' might conflict with PPACA's ban on annual coverage caps and this would have to be changed. For preventive care, an annual limit might work better than a per-visit coverage limit which would just encourage multiple visits. For preventive care which normally needs to be done every, say, five years someone might be able to get coverage for every year but coinsurance would discourage this. Elective treatment without recommendation from a physician for a specific diagnosis would not be covered, as with normal health plans that sometimes require pre-authorization for a procedure. However, those costs would still be included in a facility's cost rating, by influencing the computed costs of diagnosis-related groups that use that specific treatment or as a separate, elective component to cost rating that would decrease its utility as a way to judge what level of insurance coverage to purchase.
Other changes to the health care system would involve all insurance plans, not just ones that use cost rating. It has been widely argued that the individual mandate to purchase insurance or be fined is necessary to prevent adverse selection due to guaranteed issue[22], but there is another way to encourage people to purchase health insurance even when healthy. When someone purchases insurance or switches providers, the new insurance provider is immediately responsible only for medical conditions which the policy holder had no way of knowing about or anticipating at the time they purchased insurance. Pre-existing medical problems or previously anticipated costs, including preventive treatment, must be partially funded by the previous insurance provider or by the individual during a one-year transition period, during which the responsibility of the new insurance provider gradually increases to 100%. Modifying the level of coverage would have the same effect.
The second way of encouraging purchase of health insurance is subsidies through tax deductions. This would involve altering the qualified medical deduction for US income taxes so that health insurance premiums are applied last and always fully deducted from income. Employer-sponsored insurance would still have the advantage of avoiding payroll and other taxes, while other tax-advantaged options like health savings accounts can be used for a wider variety of expenses and invested so would continue to have a place.
Employer-sponsored health insurance can also be treated conceptually more like a portion of wages when affordable health care is available outside of employment for those with pre-existing conditions. Employees would have the option of diverting pre-tax contributions from an employer toward a third-party insurance provider or even cashing out on benefits by choosing to have no health insurance, with the employer-side costs such as payroll and unemployment taxes being deducted from the premium amount so that the employer has no additional costs from giving workers this option.
This is especially important for the issue of providing health insurance to part-time workers, especially if the work conservation option of working less at a higher wage rate becomes popular. Having a flexible, pre-tax contribution to health care costs for employees without the restrictions (such as giving equal benefits to all employees) of existing tax-advantaged plans would make it much easier to think of health insurance costs as just a flat addition to hourly wage rates or salary, with the employee having the choice of how much of compensation should go to tax-advantaged payment of insurance premiums and how much should go to a paycheck or another destination such as a health savings account.
This might mean that older workers would have to divert more of their income to health insurance premiums for employer-sponsored insurance or another insurance provider, but the cost of covering older workers might be why they currently make up most of the long-term unemployed during the current recession so this would just make it easier for older workers to find work and pay for health premiums for their family with pre-tax earnings.
Mini-argument: people are afraid of death because they feel there is something important they haven't been able to do, or because they're uncertain they made the right choices in life with regard to adapting to the perceived conflict between society and the concept of love[23], specifically whether better outcomes can be achieved by encouraging people through example to accept or reject the necessity for conflict on important issues or at a personal level. People often realize the need for "a broad awareness of the varying reliability of primary signals" due to the wasted effort that results when the instantaneous or temporal accuracy of a standard of achievement is not what was expected, but lack confirmation of the reason for the problem or how to fix it[24]. When the strategy of acceptance of conflict is adopted with no regard for one's life, it often results in actions designed to cause people to question their assumptions. This might be the reason Anders Behring Breivik made an anti-Muslim video but engaged in actions commonly associated with those of the Muslim faith. Contrast 'Death to America' day in Iran[25], a nation from the same part of the political spectrum as the Republican party of the United States. Compare propaganda disseminated by the resistance groups of Iraq[26], which came from a culture with progressive political tendencies somewhat similar to the Democratic party of the US.
[1] End-Of-Life Savings: The ‘Fool’s Gold’ Of Reform? July 28th, 2010.
http://web.archive.org/web/20110305024748/http://healthaffairs.org/blog/2010/07/28/end-of-life-savings-the-fools-gold-of-reform/
[2] http://jobcreationplan.blogspot.com/
[3] Who are the 1% and What Do They Do for a Living? Oct 14, 2011.
http://www.nextnewdeal.net/rortybomb/who-are-1-and-what-do-they-do-living
[4] Study Finds Many Primary Care Physicians Think They Provide Too Much Care. 10/27/2011.
http://www.aafp.org/online/en/home/publications/news/news-now/practice-professional-issues/20111027toomuchcare.html
[5] Many Physicians Feel They’re Delivering Too Much Care. September 26, 2011.
http://blogs.wsj.com/health/2011/09/26/many-physicians-feel-theyre-delivering-too-much-care/
[6] Consumer Directed Health Care. December 2006.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=985572
[7] Defensive medicine worsens patient care and raises costs. May 2010.
http://www.kevinmd.com/blog/2010/05/defensive-medicine-worsens-patient-care-raises-costs.html
[8] Unnecessary testing needs more than tort reform to cure. July 2010.
http://www.kevinmd.com/blog/2010/07/unnecessary-testing-tort-reform-cure.html
[9] Why doctors can’t screen patients for every disease. May 2011.
http://www.kevinmd.com/blog/2011/05/doctors-screen-patients-disease.html
[10] Majority in U.S. Favors Healthcare Reform This Year. July 14, 2009.
http://www.gallup.com/poll/121664/Majority-Favors-Healthcare-Reform-This-Year.aspx
[11] On Healthcare, Americans Trust Physicians Over Politicians. June 17, 2009.
http://www.gallup.com/poll/120890/Healthcare-Americans-Trust-Physicians-Politicians.aspx
[12] Ordering tests may take food out of the mouths of our patients. April 2011.
http://www.kevinmd.com/blog/2011/04/ordering-tests-food-mouths-patients.html
[13] Finding out the cost of lab tests is a real challenge for patients. February 2011.
http://www.kevinmd.com/blog/2011/02/finding-cost-lab-tests-real-challenge-patients.html
[14] Why an MRI costs $1,080 in America and $280 in France. 03/03/2012.
http://www.washingtonpost.com/blogs/ezra-klein/post/why-an-mri-costs-1080-in-america-and-280-in-france/2011/08/25/gIQAVHztoR_blog.html
[15] 2011 Comparative Price Report - Medical and Hospital Fees by Country.
http://www.ifhp.com/documents/2011iFHPPriceReportGraphs_version3.pdf
[16] In Japan, MRIs Cost Less. November 18, 2009.
http://www.npr.org/templates/story/story.php?storyId=120545569
[17] Study Shows Shocking Disparities in Hospital Bills for Appendicitis Treatment #costsofcare.
http://mydoctorsf.com/study-shows-shocking-disparities-in-hospital-bills-for-appendicitis-treatment-costsofcare.html#more-432
[18] The case of the $517 chest x-ray. May 1, 2012.
http://costsofcare.blogspot.com/2012/05/case-of-517-chest-x-ray.html
[19] Savvy patient finds hidden discounts just by asking. April 22, 2012.
http://costsofcare.blogspot.com/2012/04/savvy-patient-finds-hidden-discounts.html
[20] The Moral Hazard Myth. August 29, 2005.
http://www.gladwell.com/2005/2005_08_29_a_hazard.html
[21] Forecasting the Cost of U.S. Healthcare. September 3, 2009.
http://www.american.com/archive/2009/september/forecasting-the-cost-of-u-s-healthcare
[22] Americans Prefer Having Cake, Eating It. March 27, 2012.
http://prospect.org/article/americans-prefer-having-cake-eating-it
[23] http://jobcreationplan.blogspot.com/2012/04/story-of-love-good-and-evil.html
[24] http://en.wikipedia.org/wiki/Lust,_Caution
[25] Iranians delight in 'Death to America' day. Nov 4, 2007.
http://www.youtube.com/watch?v=WRjG36WGvWM
[26] Iraqi Insurgent Media: The War of Images and Ideas. June 2007.
http://realaudio.rferl.org/online/OLPDFfiles/insurgent.pdf
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