The Reasons for High Healthcare Costs

[excalibur86]

I've received information from a number of different sources as to why US Healthcare costs are so high. I'm wondering what are the main reasons. So far, I've gathered that these are some of the main issues

1) End of life care - a ton of money is spent on the last month of care for elderly people

2) Emergency room vists for the uninsured - rather than seek a doctor early on, because they are uninsured, their medical conditions usually exacerbate until they must be rushed to the ER, which racks up huge costs for the hospitals

3) Doctors overutilizing tests - Now there seem to be two main explanations for this
a) Doctors are practicing defensive medicine and due to fear of being sued, order a number of unecessary tests so they have all their bases covered
b) Doctors want to make more money for themselves, and so they order a bunch of tests which does nothing to improve patient care

I recently read Atul Gawande's article in the New Yorker, the Cost Conundrum. He seems to be espousing explanation 3b, and he performs extensive research and cites many sources and authorities and practice models to show that high healthcare costs are mostly due to the overutilization of tests and procedures for self-interest, at the expense of the patient. Additionally, he shows that the high healthcare costs couldn't be due to other factors (defensive medicine, unhealthy population, etc). He suggests that practice models like the Mayo Clinic, which have the highest standard of care, have the lowest healthcare costs because doctors are salaried (rather than fee-for-service) and practice cooperative medicine.

Now I'm not for reducing doctor's salaries and compensation by any means, because I too hope to be a physician someday. However, from a completely objective standpoint, wouldn't doing precisely this reduce healthcare costs tremendously, if indeed, Gawande is correct that high costs are primarily due to overtesting?

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[Compass]

Skimmed really quick because I'm hungry, but you've hit these on the nail head.

 

[TopSecret]

I've received information from a number of different sources as to why US Healthcare costs are so high. I'm wondering what are the main reasons. So far, I've gathered that these are some of the main issues

1) End of life care - a ton of money is spent on the last month of care for elderly people

2) Emergency room vists for the uninsured - rather than seek a doctor early on, because they are uninsured, their medical conditions usually exacerbate until they must be rushed to the ER, which racks up huge costs for the hospitals

3) Doctors overutilizing tests - Now there seem to be two main explanations for this
a) Doctors are practicing defensive medicine and due to fear of being sued, order a number of unecessary tests so they have all their bases covered
b) Doctors want to make more money for themselves, and so they order a bunch of tests which does nothing to improve patient care

I recently read Atul Gawande's article in the New Yorker, the Cost Conundrum. He seems to be espousing explanation 3b, and he performs extensive research and cites many sources and authorities and practice models to show that high healthcare costs are mostly due to the overutilization of tests and procedures for self-interest, at the expense of the patient. Additionally, he shows that the high healthcare costs couldn't be due to other factors (defensive medicine, unhealthy population, etc). He suggests that practice models like the Mayo Clinic, which have the highest standard of care, have the lowest healthcare costs because doctors are salaried (rather than fee-for-service) and practice cooperative medicine.

Now I'm not for reducing doctor's salaries and compensation by any means, because I too hope to be a physician someday. However, from a completely objective standpoint, wouldn't doing precisely this reduce healthcare costs tremendously, if indeed, Gawande is correct that high costs are primarily due to overtesting?

Doctors generally do not make money from blood tests. Physician self-referrals and kickbacks are also illegal.

Also, at the Mayo Clinic many of their patients have had a ton of tests done before they're seen at Mayo. The Mayo docs review the labs and order just a few specialized ones, keeping the costs down.

 

[MadTown ChzHead]

Great list ... I would add obesity and all the ancillary costs associated with it. It truly is an epidemic that is costing this country in many ways. It needs to be addressed, and soon.

 

[excalibur86]

I guess what I'm trying to get at is, why are so many people up in arms about the CMS proposing to reduce physician reimbursement? I understand that, obviously, this does not bode well for physicians, particularly specialists, but if Gawande is correct, wouldn't this greatly reduce healthcare costs in America? Am I missing something here?

 

[Compass]

Re-read the stuff TopSecret highlighted. Only Option A is valid. Option B is rare, but I'm sure MDs refer to their friends back and forth for generic stuff.

 

[wanderer]

All these comparisons to the Mayo Clinic are just lame. Their patient population is not representative of the rest of the country. They can also run their hospital in ways that others can't solely because of their prestige.

 

[LiveUninhibited]

Costs are going up because (in no particular order):

1. Aging population. Japan actually has worse problems with an aging population (or at least a worse problem is emerging with their lower birth rate and higher life expectancy) but their tradition of home care for their elders helps mitigate that. Here, Medicare does not pay for unskilled custodial care, and so does not support 24-hour home care even when it is possible if the families just received more support. Thus more people go into nursing homes than is necessary, or they go earlier than necessary, and it becomes expensive.

2. We have more expensive (often but not always more effective) technology available to us, and it's hard to put a price on how much it's worth to save somebody's life.

3. Lifestyle changes. Americans are more sedentary and eat worse due in part to corn subsidies and how fried food is fast and cheap to make. Though this is also due to how less movement is needed in today's work environment.

4. Lawsuits make doctor's insurance very high. I would suggest both caps and no-fault medical injury arbitration.

5. Lack of preventive and primary care. Primary care docs are underpaid and overworked. About 1/3 of American doctors are PCPs, compared with >50% in most developed nations. Universal health coverage could help too, and that parallels #2 of the OP.

6. Lack of evidence-based medicine.

7. Lack of universal and compatible healthcare informatics, which would help prevent overtreatment (e.g. repeat tests) or undertreat people (they aren't reminded it's time for a screening, e.g.). Would also help us have more epidemiological data to study what works. Thankfully this is gradually being adopted, but not as quickly or smoothly as might be hoped. Studies have been mixed on how great EMR is, but one would expect there to be some problems with getting used to a new system before benefits are seen. It certainly seemed to help the VHA, but was among many other improvements (including strengthening primary care).

8. Private insurance working against the goal of optimizing healthcare as denying patients care (when they have a legal basis to do so) and/or rejecting sick patients who need care (gaming) will save them money.

9. Poor regulation, partly due to the underfunding of the FDA and their lack of scientists with expertise who aren't from the industry they regulate. They have actually charged user fees to pharmaceutical companies to expedite the process, but that makes pharma more of a customer than something they regulate. Even when a treatment exists for the indication of a me-too drug, they are not required to do a head-to-head trial to show improvement over existing rx, only improvement over placebo, which allows Pharma to make money with less innovation.

10. Congress being in bed with medical industry in general, which has an interest in increasing the healthcare sector.

11. Payment systems that encourage doctors to under or overtreat patients. It's not easy to strike a balance though.

Probably more than that.

 

[Rotcodoctor]

1 - There are too few incentives for medical students to become general practitioners/internal medicine - subsidize tuition, more encouraging student loans, etc.
2- Existing GPs can't make any conclusions by themselves and must refer their patients to specialists for fear of medical malpractice

If there exists a shortage already of primary care physicans, how can medicine, as a field, accomodate the supposed 40 million uninsured?
Supply and demand. The rationing of healthcare is unavoidable.

 

[MN premed]

I know a professor who had access to the financial records of a well-known hospital (don't want to say it on here). He showed me it, and every year for the past several years, the patient bills were only about 1/3 paid for by the patients/insurance companies. The rest were marked as "uncollectable" or "charity." He said that the hospitals do this when they know the person will never be able to pay it off (low income, HUGE hospital bill). He said that this is a huge reason why costs are going up so much. It's because the majority of people are not paying for their bills, meaning that the people who DO pay for it, need to pay more and more to make it so the hospital can make any profit at all.

 

[excalibur86]

So I guess what I'm really asking, is Can Costs be Effectively Controlled by Primarily Reducing Physician Salaries?

 

[TopSecret]

So I guess what I'm really asking, is Can Costs be Effectively Controlled by Primarily Reducing Physician Salaries?

No.

Physicians will see more patients in less time to keep up with overhead.

Less time means checking off more boxes, signing more lab slips, and referring the patients out to other doctors because they themselves do not have time to see patients anymore. All they have time to do is write orders, prescriptions, and referrals. Forget about inquiring into symptoms or even examining patients. If the time crunch is really bad, they won't even bother reviewing charts from outside for lab results four to six months old. They will simply order them again.

 

[guestdoc]

Costs are going up because (in no particular order):

1. Aging population. Japan actually has worse problems with an aging population (or at least a worse problem is emerging with their lower birth rate and higher life expectancy) but their tradition of home care for their elders helps mitigate that. Here, Medicare does not pay for unskilled custodial care, and so does not support 24-hour home care even when it is possible if the families just received more support. Thus more people go into nursing homes than is necessary, or they go earlier than necessary, and it becomes expensive.

2. We have more expensive (often but not always more effective) technology available to us, and it's hard to put a price on how much it's worth to save somebody's life.

3. Lifestyle changes. Americans are more sedentary and eat worse due in part to corn subsidies and how fried food is fast and cheap to make. Though this is also due to how less movement is needed in today's work environment.

4. Lawsuits make doctor's insurance very high. I would suggest both caps and no-fault medical injury arbitration.

5. Lack of preventive and primary care. Primary care docs are underpaid and overworked. About 1/3 of American doctors are PCPs, compared with >50% in most developed nations. Universal health coverage could help too, and that parallels #2 of the OP.

6. Lack of evidence-based medicine.

7. Lack of universal and compatible healthcare informatics, which would help prevent overtreatment (e.g. repeat tests) or undertreat people (they aren't reminded it's time for a screening, e.g.). Would also help us have more epidemiological data to study what works. Thankfully this is gradually being adopted, but not as quickly or smoothly as might be hoped. Studies have been mixed on how great EMR is, but one would expect there to be some problems with getting used to a new system before benefits are seen. It certainly seemed to help the VHA, but was among many other improvements (including strengthening primary care).

8. Private insurance working against the goal of optimizing healthcare as denying patients care (when they have a legal basis to do so) and/or rejecting sick patients who need care (gaming) will save them money.

9. Poor regulation, partly due to the underfunding of the FDA and their lack of scientists with expertise who aren't from the industry they regulate. They have actually charged user fees to pharmaceutical companies to expedite the process, but that makes pharma more of a customer than something they regulate. Even when a treatment exists for the indication of a me-too drug, they are not required to do a head-to-head trial to show improvement over existing rx, only improvement over placebo, which allows Pharma to make money with less innovation.

10. Congress being in bed with medical industry in general, which has an interest in increasing the healthcare sector.

11. Payment systems that encourage doctors to under or overtreat patients. It's not easy to strike a balance though.

Probably more than that.

Good list.

I'm concerned that doctors' salaries have become the new scapegoat for all of the wasted money in healthcare. Insurance companies, anyone? The increased percentage of healthcare dollars going to "administrative" duties? Cut out the insane profits of insurance companies--those who don't go through up to a decade or more of post-graduate training and, on top of that, don't even provide the care? Where's the love for the front lines? Doctors, PAs, RNs and all the support staff do the actual work.

 

[excalibur86]

Physicians will see more patients in less time to keep up with overhead.

I see where you're coming from. So then why do many physicians themselves, like Atul Gawande, and Arnold Relman, former EIC of the NEJM, advocate either eliminating the fee for service model, or making physicians salaried employees to reduce the inclination to overtest, and hence healthcare costs? Obviously there's got to be some merit to what they're saying.

 

[TopSecret]

I see where you're coming from. So then why do many physicians themselves, like Atul Gawande, and Arnold Relman, former EIC of the NEJM, advocate either eliminating the fee for service model, or making physicians salaried employees to reduce the inclination to overtest, and hence healthcare costs? Obviously there's got to be some merit to what they're saying.

The inclination to overtest comes from the fear of losing your medical license and being sued out of your home.

If you had a 1 in 1000 chance of failing to diagnose a disease by not ordering a $1000 test, what would you do? Would you take that risk?

If you get sued for $1 million because of the failure to diagnose because you wanted to save $1000 for each of the 1000 patients that you see, you just made a bad economic decision and a terrible patient management decision.

Why?

If you had ordered 1000 of the $1000 test, $1 million would have been spent and the correct diagnosis would've been made for the patient. On the other hand, because of your decision to save $1 million, the patient does poorly, and you get sued, lose your license and end up losing $1 million.

Why not spend the $1 million for the 1000 patients and save yourself all the trouble?

 

[excalibur86]

True, but in Texas for example, they've capped malpractice damages to $250,000, and yet health costs are still extraordinarily high in cities like McAllen.

 

[TopSecret]

True, but in Texas for example, they've capped malpractice damages to $250,000, and yet health costs are still extraordinarily high in cities like McAllen.

Incorrect. Non-economic damages (pain and suffering) are capped at $250,000. Malpractice awards factor in things like lost wages, medical expenses dealing with complications, etc. You could still end up paying millions.

I know a resident who was sued for $19 million because the resident botched the care of a big-time executive (a lot of lost income totaling millions).

 

[TopSecret]

This is a case of an intern being sued for millions. I think she's practicing in Idaho now probably because no other state would give her a license.

http://www.wisconsinmedicalsociety.org/office_of_general_counsel/case_summaries/hegarty

http://www.consumeraffairs.com/news04/medmal_hegarty.html

 

[TopSecret]

This is an oldie but a goody on frivolous lawsuits.

http://articles.latimes.com/1986-03-30/news/mn-1672_1

 

[BlueAether]

Unhealthy Americans are a big issue. That and all violent crime.

 

[shiftingmirage]

Though I don't have a citation, I heard that administrative costs have also gone up. And that each insurance company hads their own papers to file a claim, and want it done a certain way, and it takes more man hours than if there was a universal form that goes to every insurance company.

Also, there is little preventive care. It's a lot cheaper for a person with diabetes to be treated with insulin, diet, weight loss, than not controlling blood glucose, and there fore, bp, and killing one's kidneys, needing dialysis, transplant. Preventative care is less expensive.
Lots of people, including myself, simply do not go to a physician unless there is a problem. With 'silent killers' by the time one thinks they have a problem, it may be too late.

 

[Parts Unknown]

I've received information from a number of different sources as to why US Healthcare costs are so high.

Dr. Thomas Bodenheimer wrote an excellent four part series on the drivers of health care costs. The are published in the Annals of Internal Medicine, but the text is now available for free.

Part 1: Seeking an explanation
Part 2: Technologic innovation (select the PDF file from the menu on the right)
Part 3: The role of health care providers
Part 4: Can costs be controlled while preserving quality?

Bodenheimer also wrote one of the more popular textbooks explaining fundamental health policy.

 

[Hernandez]

6. Lack of evidence-based medicine.

Evidence based medicine isn't evidence based.

 

[Poliscidoc]

The people that go to the ER for every little thing. Now if you have insurance you don't get the bill, but the insurance company has to pay it. There in business to make money so if there cost goes up so does everybodys.

I mean it's crazy the people that come to the ER for a splinter, upset stomach, or a common cold.

The bill for a regular visit to a primary care doctor I am guessing is probably 1/3 that of a ER visit.

 

[BlueElmo]

I found a good list and explanations here.

http://money.cnn.com/2009/08/10/news/economy/healthcare_money_wasters/index.htm

 

[NightSwim]

I really like a lot of idea people have pointed out so far! This is a list of the issues I think are most important.

- Drugs. I think the issue of drug costs is HUGE. One of the Bodenheimer Annals articles focuses on this issue of rising costs associated with technological innovation. As a patient, I easily spend >$20,000 a year, with most of that going towards the medication I get. Obviously, I'm very conflicted over the issue of pharmaceutical companies making so much money. I wouldn't be healthy if it wasn't for their innovation, and there is no question that I'm willing to pay literally anything to keep getting life-saving drugs. However...there's got to be a way to keep drug costs down, rather than exponentially rising as they seem to have been. I don't know the answer though .

- Incentives to provide quality care. I think the issue of fee-for-service is another GIANT one. If we can shift the incentive of hospitals to providing quality care over quantity, that could be a difference maker. Fixing this will be very tricky, but vital IMO.

- Insurance companies. Nothing new here. We know insurance companies want to make money, and more of it every year. Their designed to screw over sick people, it's sad. I'm hoping this is the first issue the government addresses with whatever health care reform they are able to pass.

- Obesity. I agree, this is another biggie. Obesity drags along with it so many other comorbidities. Prevention is key in this situation. We all need more exercise and less junk food! I think grass roots organizations will be fundamental to this fight, and hopefully research comes through with some brilliant ideas. Diet pills will surely not be the way out.

- Collaboration between doctors. A smaller issue for sure. If hospitals could share information more easily (e.g. on EMR networks), there would be fewer new tests/procedures performed when a patient changes location. Right?

- The uninsured. Last, but certainly not least important. I think it's going to be very hard to cover everyone if we are not able to make major changes to curb the rising costs of health care first.

I know these are all general ideas, but at least more people are having this discussion. I'm excited.

 

[ToBeAnMD]

Evidence based medicine isn't evidence based.

What would you all define as "evidence based" medicine? To me that sounds like treatment based on symptoms and test results, right?

 

[NightSwim]

What would you all define as "evidence based" medicine? To me that sounds like treatment based on symptoms and test results, right?

Not exactly. Evidence-based medicine means assessing the risks and benefits of treatments based on scientific evidence. If clinicians do this, the treatments are more likely to work, and thus patients will generally cost the system less. Don't forget about the research part, it's essential to this concept.

 

[TopSecret]

Not exactly. Evidence-based medicine means assessing the risks and benefits of treatments based on scientific evidence. If clinicians do this, the treatments are more likely to work, and thus patients will generally cost the system less. Don't forget about the research part, it's essential to this concept.

It basically means using the results of clinical trials rather than conjectures to guide patient management.

However, a lot of clinical trials are funded by pharmaceutical companies and they usually do not publish results that hurt the bottom line ($$$).

So a lot of evidence that docs use in their practice results in $$$ for pharmaceutical companies. Government-sponsored research, on the other hand, tends to result in lower costs.

Google "publication bias."

 

[kiks]

the health insurance industry is not non-profit.

Costs are going up because (in no particular order):

1. Aging population. Japan actually has worse problems with an aging population (or at least a worse problem is emerging with their lower birth rate and higher life expectancy) but their tradition of home care for their elders helps mitigate that. Here, Medicare does not pay for unskilled custodial care, and so does not support 24-hour home care even when it is possible if the families just received more support. Thus more people go into nursing homes than is necessary, or they go earlier than necessary, and it becomes expensive.

2. We have more expensive (often but not always more effective) technology available to us, and it's hard to put a price on how much it's worth to save somebody's life.

3. Lifestyle changes. Americans are more sedentary and eat worse due in part to corn subsidies and how fried food is fast and cheap to make. Though this is also due to how less movement is needed in today's work environment.

4. Lawsuits make doctor's insurance very high. I would suggest both caps and no-fault medical injury arbitration.

5. Lack of preventive and primary care. Primary care docs are underpaid and overworked. About 1/3 of American doctors are PCPs, compared with >50% in most developed nations. Universal health coverage could help too, and that parallels #2 of the OP.

6. Lack of evidence-based medicine.

7. Lack of universal and compatible healthcare informatics, which would help prevent overtreatment (e.g. repeat tests) or undertreat people (they aren't reminded it's time for a screening, e.g.). Would also help us have more epidemiological data to study what works. Thankfully this is gradually being adopted, but not as quickly or smoothly as might be hoped. Studies have been mixed on how great EMR is, but one would expect there to be some problems with getting used to a new system before benefits are seen. It certainly seemed to help the VHA, but was among many other improvements (including strengthening primary care).

8. Private insurance working against the goal of optimizing healthcare as denying patients care (when they have a legal basis to do so) and/or rejecting sick patients who need care (gaming) will save them money.

9. Poor regulation, partly due to the underfunding of the FDA and their lack of scientists with expertise who aren't from the industry they regulate. They have actually charged user fees to pharmaceutical companies to expedite the process, but that makes pharma more of a customer than something they regulate. Even when a treatment exists for the indication of a me-too drug, they are not required to do a head-to-head trial to show improvement over existing rx, only improvement over placebo, which allows Pharma to make money with less innovation.

10. Congress being in bed with medical industry in general, which has an interest in increasing the healthcare sector.

11. Payment systems that encourage doctors to under or overtreat patients. It's not easy to strike a balance though.

Probably more than that.

also, tort reform seems like an ideal solution for (frivolous) malpractice lawsuits (#4). but imo, i do not think it will be widely supported. patients usually don't have the financial abilities to pay hourly for attorneys and so attorneys work on contingency, enabling patients to pursue justice. caps on settlements/judgements limit the cut the attorney can make. so patients and attorneys alike would no longer be able to win big against the bad, rich doctor. if attorneys resort to billing hours, then patients with legitimate lawsuits may no longer have the means to get justice.

 

[kevltp05]

Bill McGuire, CEO of United Healthcare, ended up receiving around $1 billion after he left the company, and he only received that much after people made to big of a fuss over him originally receiving $1.6 billion.

 

[Hernandez]

What would you all define as "evidence based" medicine? To me that sounds like treatment based on symptoms and test results, right?

The 1A 1b, 2C, guidelines is what that is mostly geared towards that they try and call EBM, Martin Tobin had a good point-counterpoint discussion in Chest last year in March I think that kinda discussed the good/bad & ugly about current EBM as it stands.

If clinicians do this, the treatments are more likely to work, and thus patients will generally cost the system less.

m'ok, sure, whatever. [/canadian]

 

[LiveUninhibited]

also, tort reform seems like an ideal solution for (frivolous) malpractice lawsuits (#4). but imo, i do not think it will be widely supported. patients usually don't have the financial abilities to pay hourly for attorneys and so attorneys work on contingency, enabling patients to pursue justice. caps on settlements/judgements limit the cut the attorney can make. so patients and attorneys alike would no longer be able to win big against the bad, rich doctor. if attorneys resort to billing hours, then patients with legitimate lawsuits may no longer have the means to get justice.

There is a built-in bias against poor patients with either contingency or billing hours. As noted above, there was a resident sued for $19 million. When the person with a bad medical outcome makes more money, the lawyer stands to gain more with a larger contingency fee, which is based upon a percentage of the settlement, which includes lost wages. The advantage of contingency for the client is that they assume little risk and lose much less if they lose the case. But the fact remains that lawyers want clients who they can use to reap larger contingency fees, and somebody making minimum wage will net them much less than others.

Only about 2% of cases of actual negligence receive compensation, and 40% of malpractice cases don't even involve medical injury (Understanding Health Policy: A Clinical Approach, 5th edition by Dr. Bodenheimer and Dr. Grumbach). The patient only knows he did not have a favorable medical outcome. Lawyers, judges, and juries know very little about appropriate medical practice. It just stands to reason that the courtroom is not the ideal place to decide whether a doctor did something wrong, or even if a medical injury occurred.