Where Does the Money Go?

Where Does the Money Go?

If the cost of health care in the US is so much more expensive than it is in other countries, where does all the money go? It’s tempting to blame the doctors. But they represent only about twenty percent of the expenditures. And it is only recently that it has gotten this high. Hospitals account for about 32 percent of the monies spent, and drugs account for another ten percent. Which leaves nearly a third of the expenditures unaccounted for. These are usually attributed to nursing homes, rehabilitation and home health care services as well as wide spread, expensive testing and procedures.

Did you know that only five percent of the population account for half of all health care expenditures per year? And that approximately half of the population account for less than 3 percent? It has been estimated that people consume 80% of their health care dollars in the last year of their lives. Most industrialized nations have come to that conclusion and limit their health care spending by simply limiting the health care choices for their populations once they achieve a certain age, like retirement age.

Clearly this country has little appetite for limiting access to care simply based on a person’s age. So Congress and the insurance industry have looked to find other, more palatable ways of limiting their financial exposure.

This began in the 1990’s with the advent of HMO’s or health maintenance organizations. Since most of these insurance products targeted a younger age demographic, most of the costs associated with their members’ care were due to high cost testing and physician fees. The insurers began to require prior authorizations for high cost testing, paperwork which, it was hoped, would give medical providers second thoughts before simply ordering these tests in a knee jerk fashion. But interestingly, while this eliminated some testing, the effect was minimal. It turned out that a majority of the testing was appropriate.

So the private insurance companies began to explore another way of limiting their financial exposure: rating or tiering the performances of its health care providers with high cost providers being penalized for their excessive use of resources by requiring patients to pay a higher co-pay to see them. The insurers hoped that doing this would prompt providers to limit their use of expensive providers and resources.

Fearing a backlash however, that patients would become upset that the insurers were forcing providers to limit patient access to certain specialists or to specific testing procedures, they also introduced the concept that providers had to meet certain thresholds for providing quality care as well. And while definitions for quality varied greatly within the system, many employers (purchasers of the insurance) were reassured that quality was important and, when it became apparent that the costs of providing health insurance to their employees could be brought under control by tiering, they began to demand that medical providers be tiered.

This system, the earliest form of value based purchasing, placed physicians delivering high quality care for the cheapest price in tier one. Those who provided high quality care but at a higher price were placed in tier two. And those who provided low quality care at high cost were placed in tier three. The higher the tier, the higher the co-pay for the patient to see that provider.

Intuitively most providers assumed that it was impossible to provide high quality care without it costing more. And, in fact, that was the tier that held the most providers. However, as a former member of tier one, I can say that this was not necessarily true. I spent most of my health care dollar seeing my patients as frequently as they needed to be seen. I did much of their initial assessment, forgoing specialty referrals in all but the most complex cases. And while the cumulative costs of my office visits was likely higher than most of my colleagues, the overall costs to the system were much less. Fewer and shorter hospitalizations were common because I could identify problems before they worsened. I could see them as frequently as necessary after discharge from the hospital allowing for an earlier discharge. And patient satisfaction was much higher because my patients could see me when they felt that they needed to be seen.

However, for many providers, pressed for time, with few appointments available for emergencies, there is the temptation to simply send patients to the emergency room for evaluation of acute problems. And if a medical problem is anything more than a simple diagnosis, the temptation is to send folks to specialists, with their attendant fees and testing. And of course, those specialists, for the most part, are never satisfied with testing that has been done at another institution, insisting that most tests be repeated in their own hospitals and clinics.

Well, if the solution to providing appropriate, less expensive care and leaving patients satisfied with that care simply required taking more time with those patients why have physicians tended, instead, to simply increase the number of patients seen and provide only cursory treatment at that. The answer will be addressed in the next segment.

Is American Healthcare Really the Best?

Is American Healthcare Really the Best?

Have you recently been surprised at how quickly you or a loved one was discharged home from a hospital after an orthopedic procedure? Disappointed by the brevity of an office visit? By your inability to share all your concerns with a doctor during the visit? By your inability to see a doctor in a timely manner? By your inability to see a doctor at all? By the brevity of your rehab stay? By the rising cost of that care?

If you have been, you’re not alone. Welcome to the American Healthcare System, version 2.0, crafted for the twenty-first century. Where costs and cost controls have taken precedence over the quality of care delivered. Your quality of care. What this series of articles is designed to do is to take you behind the scenes, to uncover the inner workings of the health care system, to explain why what you experience is so far removed from the medical care that your parents and grandparents experienced.

But why should you accept what I have to say? Well, perhaps it is because I’ve spent over thirty years providing that care to thousands of adults as their primary care physician. Or maybe it’s because I have served also as an administrator of a hospital sponsored multi specialty group practice. Or because I have been a regional administrator for a large nursing home chain which provides physicians for rehabilitation facilities around the country. Or maybe it’s because I have served on the senior medical advisory boards for three of the top ten medical insurance companies in this country, as judged by the US News and World Reports rankings. Or maybe it’s just because I am one of you: a frustrated, disappointed consumer of health care.

Whatever the reason, I will attempt, in the next several articles, to pull aside the veil and explore the reasons why health care has evolved as it has, and what we have to look forward to. There are many who think that the solution to the current crisis in health care is to transition to a single payer system. That we should simply overhaul the present system and redesign it to better meet our needs. But there are economic forces at work which make this nearly impossible. From the regulation and restrictions of Wall Street and its banking institutions to the current, outmoded models of education in health care training to the current legal tort system, there are several rather insurmountable obstacles.

But to begin to understand the problem, we need first to look at some basic facts. According to a PBS News Hour report from 2016, the average cost of health care per person in the US was over $10,000. The next closest countries spent at least $3000 less per person. But, you say, the American Health Care system is clearly superior to any other system in the world. Well, not so fast. While we may lead the world in health care research and in cancer care, other metrics aren’t nearly as reassuring. Average life expectancy in this country is 78.7 years. Among other industrialized nations, the average is 79.8 years.

But, clearly, isn’t it true that we have more doctors here, that are more available to their patients than the other countries? Not so fast. Actually we have an average of 2.4 doctors per 1000 patients in this country while the average in the 34 industrialized nations surveyed is closer to 3.1 doctors per 1000 patients. What’s more, we have fewer hospitals and hospital beds than other comparable nations as well.

So why is our care so expensive? Are we getting our money’s worth? Because clearly the individualized care that we have come to expect has, as time has gone by, eroded. Oh, that’s not to say that we can’t find a “concierge practice” to provide us with a more customizable experience. A more Marcus Welby MD experience. But it costs much more money. And it doesn’t deliver what you might expect.

So here is the problem. The costs of medical care continue to escalate, while what we get for that money continues to dwindle. And while many of our health care policy wonks wring their hands over this trend, struggling with how to get the costs under control, the patterns continue. And we will, with the following articles, review how those wonks have tried to grab this tiger by the tail, and what it means for your health care experience.

Unlike many, I won’t try to redesign the system. I believe that if we can identify the problems, there are many, much brighter than I, that can look for solutions. But as you go forward, it may be helpful to place your health care experience into perspective, with the benefit of some insider knowledge.