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.