Millions in U.S. Lost Someone Who Couldn't Afford Treatment

Story Highlights

• 34 million adults know someone who died after not getting treatment
• 58 million adults report inability to pay for needed drugs in past year
• Little progress seen by Trump administration in limiting rising drug costs

WASHINGTON, D.C. -- More than 13% of American adults -- or about 34 million people -- report knowing of at least one friend or family member in the past five years who died after not receiving needed medical treatment because they were unable to pay for it, based on a new study by Gallup and West Health. Nonwhites, those in lower-income households, those younger than 45, and political independents and Democrats are all more likely to know someone who has died under these circumstances.

Knowledge of Deaths in Last Five Years After Inability to Pay for Needed Treatment

"Has there been a time in the last five years when a friend or family member passed away after not receiving treatment for their condition due to their inability to pay for it?"

	Yes
	%
U.S. TOTAL	13.4
Race
White	9.6
Nonwhite	20.3
Annual household income
Under $40,000	18.5
$40,000 to <$100,000	11.1
$100,000+	9.1
Age
18-44	16.9
45-64	12.4
65+	6.6
Party ID
Independent	16.4
Democrat	14.8
Republican	4.9
Gallup-West Health National Healthcare Study, Sept. 16-30, 2019; n=1,099

These data are based on surveys with 1,099 U.S. adults across all 50 states and the District of Columbia, conducted Sept. 16-30, 2019. Respondents were asked, "Has there been a time in the last five years when a friend or family member passed away after not receiving treatment for their condition due to their inability to pay for it?" These results are not meant to quantify the number of people who have died after not being able to pay for medical treatment, including prescription drugs, but rather the number of people who report knowledge of a death under such circumstances. In all, the Centers for Disease Control and Prevention estimate that about 2.8 million persons died in 2017 in the U.S. across all causes.

Dovetailing with these results is a rising percentage of adults who report not having had enough money in the past 12 months to "pay for needed medicine or drugs that a doctor prescribed" to them. This percentage has increased significantly, from 18.9% in January 2019 to 22.9% in September. In all, the 22.9% represents about 58 million adults who experienced "medication insecurity," defined as the inability to pay for prescribed medication at least one time in the past 12 months. The increase reflects a marked rise among women of over five percentage points to 27.5%, widening the gender gap to over nine points when compared with the 18.1% rate for men. And while data among both political independents and Republicans are statistically unchanged since September, medication insecurity among Democrats has risen over six points to 27.7%.

U.S. Medication Insecurity, January and September 2019, by Gender and Party ID

"Has there been a time in the last 12 months when your household has been unable to pay for medicine or drugs that a doctor had prescribed for you because you didn't have enough money to pay for them?" (% Yes)

	January 2019	September 2019	Change
	%	%	pct. pts.
U.S. TOTAL	18.9	22.9	+4.0*
Gender
Male	15.2	18.1	+2.9
Female	22.3	27.5	+5.2*
Party ID
Independent	14.5	17.0	+2.8
Democrat	21.0	27.7	+6.7*
Republican	20.3	23.1	+2.5
* Statistically significant change (p<.05)
Gallup-West Health National Healthcare Study, January 2019 (n=3,537) and September 2019 (n=1,099)

Republicans See Much More Progress Than Others on Drug Costs

Against a backdrop of millions of Americans who know people who have died after not being able to afford needed treatment, and millions more recently experiencing medication insecurity personally, most respondents agree that U.S. consumers are paying too much for prescription drugs. Close to nine in 10 U.S. adults report that the costs of prescription drugs are "usually much higher" (69%) or "tend to be somewhat higher" (20%) than what consumers should be paying for them, compared with only 1% who believe them to be much or somewhat lower. These perceptions are shared by political and demographic subgroups, with only modest differences between groups in the percentage viewing drug prices as too high.

Americans' Assessments of U.S. Prescription Drug Prices, by Party ID

"Based on everything you have read and experienced, please indicate which of the following statements most closely align with your opinion regarding the cost of prescription drugs in the U.S.?"

	U.S. total	Repub.	Ind.	Dem.	Approve of Trump	Disapprove of Trump
	%	%	%	%	%	%
Usually much higher than what consumers should be paying	69	64	66	76	64	74
Tend to be somewhat higher	20	22	21	16	20	19
About right	9	12	10	6	13	6
Tend to be somewhat lower	1	0	1	0	0	0
Usually much lower than what consumers should be paying	1	0	1	1	0	1
Gallup-West Health National Healthcare Study, Sept. 16-30, 2019; n=1,099

While perspectives on the price of medicine relative to what consumers should be spending are largely uniform, perspectives regarding President Donald Trump's success at curtailing rising drug prices are more divided along party lines. When asked, "How much progress has the Trump administration made to limit the rising cost of prescription drugs in the U.S.?" two-thirds of respondents -- split evenly -- report "not very much" progress or "none at all." But only 31% of Republicans express this sentiment, compared with 66% of independents and 96% of Democrats. Nearly nine out of 10 adults who disapprove of the job Trump is doing also report little to no progress.

Evaluation of Trump Administration on Curtailing Rising Costs of Prescription Drugs, by Party ID

"How much progress has the Trump administration made to limit the rising cost of prescription drugs in the U.S. -- a great deal, a fair amount, not very much or none at all?"

	U.S. total	Republican	Independent	Democrat	Approve of Trump	Disapprove of Trump
	%	%	%	%	%	%
A great deal	7	14	6	2	13	3
A fair amount	20	49	16	1	43	5
Not very much	33	25	34	39	29	37
None at all	33	7	32	57	7	51
Not very much/None at all	66	31	66	96	35	88
Gallup-West Health National Healthcare Study, Sept. 16-30 2019; n=1,099

Bottom Line

The substantial number of Americans who know someone who has died after not receiving treatment because of their inability to pay for it, coupled with the rise in the percentage who have not had enough money to pay for their prescriptions, underscores the urgency of the U.S. healthcare cost crisis. These realities starkly highlight the significant practical implications of drug prices on U.S. residents, as well as the effects of healthcare policy action -- or inaction.

With millions of residents knowing someone who has died in the past five years after being unable to pay for needed treatment, the ramifications to public trust in the U.S. healthcare system could be significant. This erosion of trust is likely exacerbated by the estimated 58 million adults who have themselves been unable to afford prescribed drugs at least once in the last 12 months. The level of medication insecurity is high and rising, and is doing so against a backdrop of overwhelming public sentiment regarding the inappropriately high prices of prescription drugs. The rise in reported 12-month medication insecurity among women and Democrats dovetails with rising uninsured rates for related subgroups over the course of 2019, and could be, in part, a reflection of the decreased coverage among these constituencies.

Drug prices directly affect consumers, and with the U.S. one year away from the 2020 election, presidential candidates will increasingly be asked to explain and defend their policy positions regarding rising drug costs. Only 7% of U.S. adults report that the Trump administration has accomplished "a great deal" on the issue, and voters are clearly expecting more from their elected officials than what has been accomplished in the past three years. In Congress, meanwhile, the U.S. House of Representatives is expected to vote soon on House Democrats' plan to curb soaring prescription drug prices by allowing the federal government to negotiate prices of certain drugs, including insulin products and single-source brand-name drugs with no generic competition. The U.S. Senate is considering a separate, bipartisan proposal that would cap seniors' out-of-pocket costs and require drug manufacturers to reimburse Medicare if prices rise more than the inflation rate.

Given these ongoing challenges, West Health and Gallup have committed to measuring public opinion on a wide array of issues relevant to healthcare costs on a recurring basis, providing stakeholders and policymakers with the information they need to gauge whether progress is being made on these most critical issues of our time.
View complete question responses and trends.

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How Non-Profit Hospitals Are Driving Up The Cost Of Health Care

Last year, when New York Governor Andrew Cuomo was battling to win the Democratic primary, his campaign solicited a donation from the Greater New York Hospital Association, according to a recent report from The New York Times. The hospital lobbying group gave over $1 million to the New York State Democratic Party. And not long after, according to the Times, "the state quietly authorized an across-the-board increase in Medicaid reimbursement rates." The increase is expected to cost taxpayers around $140 million a year.

The hospital lobby is a juggernaut in New York, as it is in other states. Over the last year, hospital lobbyists have fought reforms for billing transparency in Ohio, minimum nurse staffing levels in Illinois, and cheaper payment rates in North Carolina. Last month, a leaked email from the Kentucky Hospital Association showed that it was urging members to donate to gubernatorial candidates to "assure access."

In Washington, D.C., the hospital lobby is battling Medicare for All as well as efforts to end surprise billing, which is when Americans go to in-network providers but then — surprise! — end up getting billed for more expensive, out-of-network services. Three-quarters of Americans say they oppose the practice, and leaders from both political parties have been working to end it. Yet, hospital lobbyists are making reform really difficult. Which is weird, because most hospitals are nonprofits.

More Than Just Quid Pro Cuomo?
A recent study by Yale School of Public Health economist Zack Cooper and colleagues takes a look at hospital politics and helps shed light on why American health care is so insanely expensive.

In 2003, President George W. Bush began fighting for a major expansion of the Medicare program. The Bush Administration knew it would be a hard sell, alienating small-government Republicans and putting Democrats in the awkward position of supporting Bush's agenda before an election year.

Cooper says their study was inspired by one of his grad students, who served as a congressional aide when this legislation was being passed. "And the rumor was the U.S. Health Secretary, Tommy Thompson, was on the floor of the House with a notebook, writing down members of Congress who voted for the bill," Cooper says. Thompson allegedly did this to sweeten the deal for lawmakers on the fence, offering to reward supporters by "bumping up payment rates to hospitals in their districts" through a special provision, Section 508.

Cooper and his colleagues have spent years investigating whether this was true, filing Freedom of Information Act requests and crunching data. They've uncovered evidence that suggests it was true. They find that legislators who were on the fence and voted "yea" for the legislation were 700% more likely to see a large bump in Medicare payment rates to hospitals in their district. Between 2005 and 2010, Congress shelled out over $2 billion to 88 hospitals through the horse-trading Section 508 provision. It was a clear win for these hospitals, which spent the money on more equipment, buildings, services, and staff.

Dropping opposition to the Medicare expansion also ended up being a political win for lawmakers on the fence. Not only did the special provision funnel extra federal funds to their districts and create jobs; the lawmakers ended up seeing a 65% increase in contributions from people who worked in their state's health care industry and a 25% increase in overall campaign contributions. "It's suggestive to me that this was in a sense a quid pro quo," Cooper says, adding that their analysis shows how health care spending becomes a "piggy bank" for political influence.

Giving New Meaning To The Term "Nonprofit"
"Hospitals are the largest individual contributor to health care costs in the U.S," Cooper says. Americans spend over a trillion dollars a year at hospitals. That's about a third of national health spending, which now consumes almost 20% of U.S. GDP. Cooper's research shows that, after a long period of consolidation, the cost of hospital services has been exploding. Between 2007 and 2014, hospital prices grew 42 percent.

The irony is most hospitals are "nonprofit," a status that makes them tax exempt. Many (but not all) do enough charity work to justify tax benefits, yet it's clear nonprofit hospitals are very profitable. They funnel much of the profits into cushy salaries, shiny equipment, new buildings, and, of course, lobbying. In 2018, hospitals and nursing homes spent over $100 million on lobbying activities. And they spent about $30 million on campaign contributions. Health industries have also been funneling hefty sums into dark money groups. But their political power isn't just the result of lobbying or electioneering. Hospitals are often the biggest employers in states and cities across America.

Health care reformers direct much of their ire at the nation's health insurance companies. Perhaps they're the easiest targets because they're faceless paper-pushers, located outside their districts or states, who are often the only entity in the system controlling costs. Studies suggest insurance administration and profits do contribute to wasteful health care spending, but they're just one contributor to a bloated system. Hospitals, which often escape criticism, are a significant part of the problem.

We reached out to the Greater New York Hospital Association to get a response to criticism of the appearance of a quid pro quo between them and the Governor of New York. They stressed that state hospitals "hadn't received a Medicaid rate increase in 10 years" and that while they "aggressively lobbied" to change this, they deny the interpretation that suggests their large donations were motivated by increasing Medicaid rates. They say, instead, the donations were aimed at defending the Affordable Care Act from "relentless attacks" from lawmakers in the nation's capital.

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Waste accounts for one-quarter of healthcare spending

A new study found waste accounts for roughly one-quarter of all U.S. healthcare spending, an estimate that's in the same ballpark as its predecessors. 

The cost of waste in the U.S. healthcare system ranges from $760 billion to $935 billion annually, according to a JAMA review of 54 peer-reviewed studies, government reports and other information, released Monday. The study found one-quarter of that could be cut using interventions found to reduce waste.

Two previous studies on the subject from 2012 estimated waste at roughly 30% and 34% of total healthcare spending.

"There have been a lot of changes in the healthcare system in the last seven years," said Dr. William Shrank, an author of the study and chief medical and corporate affairs officer for health insurer Humana. "We thought it was an appropriate time to update that study." 

Shrank undertook the research with a Humana colleague and a third researcher from the University of Pittsburgh School of Medicine.

One reason the new study's estimate is lower than previous ones is because it took the conservative approach of not extrapolating Medicare-only data to the broader population, whereas previous studies did. Shrank said Medicare-only research represented the minority of contributing studies.

The current study divided waste into six previously identified categories. Administrative complexity accounted for the most waste, at $265.6 billion annually. Below that was waste due to pricing failure, which costs $230.7 billion to $240.5 billion annually. Failure of care delivery accounts for $102.4 billion to $165.7 billion annually. Overtreatment or low-value care results in $75.7 billion to $101.2 billion in waste annually. Waste related to fraud and abuse costs between $58.5 billion and $83.9 billion annually. Finally, failure of care coordination generates $27.2 billion to $78.2 billion in waste annually. 

The study also estimated potential annual savings from measures shown to cut waste. In aggregate, those interventions could save $191 billion to $282 billion annually, or about 25% of the total cost of waste. 

"There's always going to be some waste," Shrank said. "I don't think we'd ever expect to see zero waste." 

But there were no interventions in the scientific literature to chip away at the biggest culprit: administrative waste. Shrank said that's because those efforts tend to happen within businesses and aren't widely disseminated. He hopes this study encourages more shared learning across the healthcare industry. 

The key takeaway theme of the study, in Shrank's mind, is that aligning payers and providers through value-based care initiatives can go a long way toward cutting waste. He said sources of administrative complexity like prior authorization, utilization management or other billing issues are simply methods payers use to reduce waste. 

"In an environment where payers are pre-paying physicians or sharing risk with physicians for the management of populations, much of these sources of administrative complexity can be reduced or eliminated or streamlined," he said. 

Other experts drew far different conclusions. 

Former CMS Administrator Dr. Don Berwick, the Institute for Healthcare Improvement senior fellow who wrote a 2012 JAMA study on healthcare waste, said value-based payment arrangements like bundled payments and accountable care organizations have been shown to generate 1% to 3% in cost savings—a "big gap" from the waste estimates researchers have published. 

"I tend to be an optimist and I'm grateful for the progress, but I suspect we're going to need bolder approaches to changing the financing of healthcare than we have accepted so far," he said. 

Similarly, Dr. Ashish Jha, professor of health policy in the Harvard T.H. Chan School of Public Health, said research has shown almost no value-based care programs have yielded improvement. Even the most effective form of value-based care, physician-led ACOs, have produced savings up to roughly 3%. 

"I've got literally dozens of studies I can point to that show it's having little to no impact," he said. "This is not one where people just get to have differing opinions. You've got to bring some evidence to bear for why it's going to be useful, because all the data so far show things heading in one direction." 

Berwick said he thinks the solution to healthcare waste will need to be a political one. People must mobilize to say, " 'It's enough. We're not going to put up with this kind of administrative waste,' " he said. " 'We're not going to put up with this obscene pricing. It's time to stop.' I don't know without that kind of political force, how these circumstances can be changed." 

Jha thinks part of the solution will be to address healthcare's irrational pricing. One potential tool is price transparency improvement that will help people shop around for the lowest-cost care, although there's not much evidence that such efforts are helpful in lowering prices. 

Enhanced regulation of healthcare monopolies could also help, Jha said. In recent years, he said federal agencies haven't adequately pushed back against mergers and acquisitions, but that's partly because they're underfunded. Another difficult but potentially helpful task would be to either break up large health systems or enable new providers to enter markets, he said. Jha said the federal government could lower drug prices by importing generic drugs from other countries and potentially negotiating drug prices directly. 

Shrank believes stronger payer and provider relationships will help chip away at waste by allowing for more value-based partnerships. Those bonds must be built on trust and transparency, he said.

"In the absence of trust, that relationship is much more limited and our ability to take better care of people and reduce waste similarly will be far more limited," Shrank said. 

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Why Is U.S. Health Care So Expensive? Some of the Reasons You’ve Heard Turn Out to Be Myths

""There were two areas where the United States really was quite different: We pay substantially higher prices for medical services, including hospitalization, doctors’ visits and prescription drugs. And our complex payment system causes us to spend far more on administrative costs. The United States also has a higher rate of poverty and more obesity than any of the other countries, possible contributors to lower life expectancy that may not be explained by differences in health care delivery systems."

In a new, detailed international comparison, the United States looks a lot more like its peers than researchers expected.

Maybe the United States health care system isn’t that bizarre after all.

Compared with peer nations, the United States sends people to the hospital less often, it has a smaller share of specialist physicians, and it gives people about the same number of hospitalizations and doctors’ visits, according to a new study. The quality of health care looks pretty good, it finds, while its spending on social services outside of health care, like housing and education, looked fairly typical. 

If you’ve been listening to many of the common narratives that seek to explain the high costs of America’s health system and the nation’s relatively low life expectancy, those results might surprise you. Analysts are fond of describing the system as wasteful, with too many patients getting too many services, driven by too many specialist doctors and too few social supports.

But a large and comprehensive review in The Journal of the American Medical Association punctures a lot of those pat explanations. The paper, conducted by a research team led by Ashish Jha, compiled detailed data from the health care systems of the United States and 10 other rich developed nations, and tried to test those hypotheses. The group included nations with single-payer health care systems, like Britain and Canada, and countries with competitive private insurance markets, like Switzerland and the Netherlands. 

Dr. Jha, the director of the Harvard Global Health Institute, said he came to the project with a sense of the conventional wisdom about how the United States differed from its peers. But, after assembling the data from the countries’ health ministries, he changed his mind about a number of key assumptions. 

“We know we spend a lot more than everyone else, and we have looked for easy explanations — things like greed in the system, fee-for-service medicine, overutilization,” he said. But the research, he said, didn’t match his expectations. “I’ve been looking at other countries and seeing there’s a lot of fee-for-service in other countries, and other countries are struggling with overutilization.”

When it came to many of the measures of health system function, the United States was in the middle of the pack, not an outlier, as Dr. Jha had expected. Many analysts have called for the country to shift its physician training away from specialty care and toward more primary care medicine, for example. But the study found that 43 percent of U.S. doctors practice primary care medicine, about typical for the group. 

It’s often argued that patients in the United States use too much medical care. But the country was below average on measures of how often patients went to the doctor or hospital. The nation did rank near the top in its use of certain medical services, including expensive imaging tests and specific surgical procedures, like knee replacements and C-sections.

The data are consistent with other evidence that health care systems are beginning to converge, as information and technologies spread around the world among doctors and administrators.

Bruce Landon, a professor of policy and medicine at Harvard Medical School, said that the complaints about rising health care costs are a worldwide issue. Even though other countries spend less than the United States, few believe they have found a way to tame spending forever. 

“I don’t think there’s any of these countries where if you went and talked to them individually, they wouldn’t say they’re having a health care cost crisis,” he said. “They’re all struggling with paying for new technology and the cost of the system.”

The data did not suggest that any country had a plug-and-play policy template for devising a lower-cost, high-performing system. The systems tended to perform better than the United States on some measures and worse on others, with lots of idiosyncrasies.

Some experts who reviewed the results wondered about the accuracy of all the paper’s data points, which were numerous and drawn from an array of international sources. Dr. Jha acknowledged that the numbers may not be perfect but described the effort as careful and more comprehensive than previous comparisons.

There were two areas where the United States really was quite different: We pay substantially higher prices for medical services, including hospitalization, doctors’ visits and prescription drugs. And our complex payment system causes us to spend far more on administrative costs. The United States also has a higher rate of poverty and more obesity than any of the other countries, possible contributors to lower life expectancy that may not be explained by differences in health care delivery systems.

Just because other countries use the hospital more doesn’t mean that every hospitalization in the United States is appropriate. Jonathan Skinner, a professor at Dartmouth, who has studied patterns in health care use in the United States, noted that there probably is money to be saved by eliminating some of the extra scans and operations that are much more common in the United States than elsewhere. 

“It’s not that we’re buying more pizzas, we’re just paying more for each pie,” Dr. Jha said. “But that doesn’t mean that you can’t still buy fewer pizzas.”

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Unnecessary Medical Care: More Common Than You Might Imagine

Marshall Allen

From

It's one of the intractable financial boondoggles of the U.S. health care system: Lots and lots of patients get lots and lots of tests and procedures that they don't need.

Women still get annual cervical cancer testing even when it's recommended every three to five years for most women. Healthy patients are subjected to slates of unnecessary lab work before elective procedures. Doctors routinely order annual electrocardiograms and other heart tests for people who don't need them.

That all adds up to substantial expense that helps drive up the cost of care for all of us. Just how much, though, is seldom tallied. So, the Washington Health Alliance, a nonprofit dedicated to making care safer and more affordable, decided to find out.

The group scoured the insurance claims from 1.3 million patients in Washington state who received one of 47 tests or services that medical experts have flagged as overused or unnecessary.

What the group found should cause both doctors, and their patients, to rethink that next referral. In a single year:

• More than 600,000 patients underwent a treatment they didn't need, treatments that collectively cost an estimated $282 million.
• More than a third of the money spent on the 47 tests or services went to unnecessary care.
• 3 in 4 annual cervical cancer screenings were performed on women who had adequate prior screenings – at a cost of $19 million.
• About 85 percent of the lab tests to prep healthy patients for low-risk surgery were unnecessary – squandering about $86 million.
• Needless annual heart tests on low-risk patients consumed $40 million.

Susie Dade, deputy director of the alliance and primary author of the report released Thursday, said almost half the care examined was wasteful. Much of it comprised the sort of low-cost, ubiquitous tests and treatments that don't garner a second look. But "little things add up," she said. "It's easy for a single doctor and patient to say, 'Why not do this test? What difference does it make?' "

ProPublica has spent the past year examining how the American health care system squanders money—often in ways that are overlooked by providers and patients alike. The waste is widespread – estimated at $765 billion a year by the National Academy of Medicine, about a fourth of all the money spent each year on healthcare.

The waste contributes to health care costs that have outpaced inflation for decades, making patients and employers desperate for relief. This week Amazon, Berkshire Hathaway and JPMorgan rattled the industry by pledging to create their own venture to lower their health care costs.

Wasted spending isn't hard to find once researchers—and reporters— look for it. An analysis in Virginia identified $586 million in wasted spending in a single year. Minnesota looked at fewer treatments and found about $55 million in unnecessary spending.

Dr. H. Gilbert Welch, a professor at The Dartmouth Institute who writes books about overuse, said the findings come back to "Economics 101." The medical system is still dominated by a payment system that pays providers for doing tests and procedures. "Incentives matter," Welch said. "As long as people are paid more to do more they will tend to do too much."

Dade said the medical community's pledge to "do no harm" should also cover saddling patients with medical bills they can't pay. "Doing things that are unnecessary and then sending patients big bills is financial harm," she said.

Officials from Washington's hospital and medical associations didn't quibble with the alliance's findings, calling them an important step in reducing the money wasted by the medical system. But they said patients bear some responsibility for wasteful treatment. Patients often insist that a medical provider "do something," like write a prescription or perform a test. That mindset has contributed to problems like the overuse of antibiotics – one of the items examined in the study.

And, the report may help change assumptions made by providers and patients that lead to unnecessary care, said Jennifer Graves, vice president for patient safety at the Washington State Hospital Association. Often a prescription or technology isn't going to provide a simple cure, Graves said. "Watching and waiting" might be a better approach, she said.

To identify waste, the alliance study ran commercial insurance claims through a software tool called the Milliman MedInsight Health Waste Calculator. The services were provided during a one-year period starting in mid-2015. The claims were for tests and treatments identified as frequently overused by the U.S. Preventive Services Task Force and the American Board of Internal Medicine Foundation's Choosing Wisely campaign. The tool categorized the services one of three ways: necessary, likely wasteful or wasteful.

The report's "call to action" said overuse must become a focus of "honest discussions" about the value of health care. It also said the system needs to transition from paying for the volume of services to paying for the value of what's provided.

ProPublica is a nonprofit newsroom based in New York. You can follow Marshall Allen on Twitter:@marshall_allen. 

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Healthcare's Tipping Point -- Amazon, Berkshire Hathaway, And JP Morgan Chase Take On Care And Cost

Last week, Intermountain Healthcare announced an initiative to establish a not-for-profit generic drug company aimed at ending shortages and reducing prices.  It was a bold move and reported here.  But this morning, bold move to brazen as three corporate giants announced another initiative that pushes the healthcare debate in a new and unexpected direction.

Amazon, Berkshire Hathaway and JPMorgan Chase & Co. announced today that they are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.  The first choice in their disruption tool kit will be technology that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.

The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.  Warren Buffett, Berkshire Hathaway Chairman and CEO

Looking back at old fixes doesn't seem to be the strategy. As Jeff Bezos implies, it appears that it's time to look forward with new thinking for a complex problem.

The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”  Jeff Bezos, Amazon founder and CEO.

The initial focus of the new company will be on technology solutions—at least according to the press release.  The technology comment is tucked into the first paragraph but it also tempered by caveat of  'reasonable' cost. And while technology is mentioned once, cost is directly mentioned 5 times.  There's no doubt that economics is driving today's healthcare debate and the actions by these three companies.  But as technology is held up as a key solution, you must wonder what pressures will be placed upon innovation when examined under the magnifying glass of cost and value?  Today 'experiments' at Intermountain, Amazon, Berkshire Hathaway, and JPMorgan Chase are interesting steps to tame a beast of healthcare. But the similarly bold and important innovations in health tech carry a cost too. This price may, in the final analysis, offer a great value than spreadsheet shifts and line item cuts.

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How U.S. Health Care Became Big Business

Health care is a trillion-dollar industry in America, but are we getting what we pay for? Dr. Elisabeth Rosenthal, a medical journalist who formerly worked as a medical doctor, warns that the existing system too often focuses on financial incentives over health or science.

"We've trusted a lot of our health care to for-profit businesses and it's their job, frankly, to make profit," Rosenthal says. "You can't expect them to act like Mother Teresas."

Rosenthal's new book, An American Sickness, examines the deeply rooted problems of the existing health-care system and also offers suggestions for a way forward. She notes that under the current system, it's far more lucrative to provide a lifetime of treatments than a cure.

"One expert in the book joked to me ... that if we relied on the current medical market to deal with polio, we would never have a polio vaccine," Rosenthal says. "Instead we would have iron lungs in seven colors with iPhone apps."

On what consolidation of hospitals is doing to the price of care
In the beginning, this was a good idea: Hospitals came together to share efficiencies. You didn't need every hospital ordering bed sheets. You didn't need every hospital doing every procedure. You could share records of patients so the patient could go to the medical center that was most appropriate.

Now that consolidation trend has kind of snowballed and skyrocketed to a point ... that in many parts of the country, major cities only have one, maybe two, hospital systems. And what you see with that  level of consolidation is it's kind of a mini-monopoly.

What happens, of course, when you have a mini-monopoly is you have an enormous sway over price. And so, what we see in research over and over again is that the cities that have the most hospital consolidation tend to have the highest prices for health care without any benefit for patient results. So consolidation, which started as a good idea in many places, has evolved to a point where it's not benefiting patients anymore, it is benefiting profits.

On the ways the health-care industry stands to profit more from lifetime treatment than it does from curing disease
If you're a pharmaceutical manufacturer and you have a problem like diabetes, for example, if I invented a pill tomorrow that would cure diabetes — that would kill a multi-billion dollar business market. It's far better to have treatments, sometimes really great treatments ... [that] go on for life. That's much better than something that will make the disease go away overnight.

On how prices will rise to whatever the market will bear
Another concept that I think is unique to medicine is what economists call "sticky pricing," which is a wonderful term. It basically means ... once one drugmaker, one hospital, one doctor says "Hey we could charge $10,000 for that procedure or that medicine." Maybe it was $5,000 two months ago, but once everyone sees that someone's getting away with charging $10,000, the prices all go up to that sticky ceiling.

What you see often now is when generic drugs come out ... the price doesn't go down to 20 percent of the branded price, it maybe goes down to 90 percent of the branded price. So we're not getting what we should get from a really competitive market where we, the consumers, are making those choices.

On initiating conversations early on with doctors about fees and medical bills
You should start every conversation with a doctor's office by asking "Is there a concierge fee? Are they affiliated with a hospital? Which hospital are they affiliated with? Is the office considered part of a hospital?" In which case you're going to be facing hospital fees in addition to your doctor's office fees. You ask your doctor always ... "If I need a lab test, if I need an X-ray, will you send me to an in-network provider so I don't get hit by out-of-network fees?" ...

Often that will be a little hard for your doctor, because they may have to fill out a different requisition, but it's worth asking. And any doctor who won't help you in that way, I think, isn't attuned to the financial cost that we're bearing today.

On getting charged for "drive-by doctors" brought in by the hospital or primary doctor
You do have to say "Who are you? Who called you?" and "Am I going to be billed for this?" And it's tragic that in recovery people have to think in this kind of keep-on-your-guard, somewhat adversarial way, but I think if we don't push back against the system in the way it bills, we're complicit in allowing it to continue.

On how to decipher coded medical bills
Don't be alarmed by the "prompt payment discount." Go back to the hospital and say, "I want a fully itemized bill. I want to know what I'm paying for." Some of it will be in codes, some of it will be in medical abbreviations. I've discovered you can Google those codes and find out what you're being charged for, often, and most importantly, you might find you're being charged for stuff that obviously you know you didn't have.

Elizabeth Rosenthal is editor-in-chief of Kaiser Health News, an editorially independent news program of the Henry J. Kaiser Family Foundation and a partner of NPR's. Neither KFF nor KHN is affiliated with Kaiser Permanente. Radio producer Sam Briger and web producers Bridget Bentz and Molly Seavy-Nesper contributed to this story.

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Health care costs need serious debate

Bozeman state Rep. Tom Woods is proposing to put the rates hospitals charge under the control of the Public Service Commission. It would set all hospital rates at what Medicare pays for those services. And everyone – the insured, the uninsured, Medicaid and Medicare patients – would be charged the same, not the inexplicable hodgepodge of pricing we have today.

Under Woods’ legislation, if a hospital wants to charge anything over the Medicare rate, it would have to make a case before the PSC, which could grant or deny the rate increase.

The measure will likely meet a tsunami of resistance from the hospitals and those who insist health care rates be set by a free market. And it may ultimately be defeated by that resistance. But at the least the bill should start a badly needed conversation about soaring health care costs.

Free marketeers have long insisted consumers have a choice when it comes to health care. That may be true when you want to get a bunion removed or have Lasik eye surgery. You can call around and get the best price.

But if you are unfortunate enough to break your leg at the ski hill, are you going to shop around for the cheapest doctor? No, you take the quickest route to the hospital emergency room and hope for the best. Even if you were stoic enough to do some calling around, no one would – or even could – tell you what it’s going to cost to fix that leg without seeing it. But you better believe it’s going to cost you aplenty.

Woods’ bill is not without precedent. One state, Maryland, has regulated hospital rates for almost 40 years, and that state has the lowest hospital rates in the nation along with the second lowest health insurance costs.

Perhaps Woods’ proposed legislation won’t provide the solution to control health care costs here in Montana. It’s an idea, however, certainly worthy of debate.

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The truth about why the U.S. can’t control healthcare costs

Editor’s Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Ryan Gamlin, a former health care management consultant and current medical student at the University of Cincinnati. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.

A graphic making the rounds on social media has people talking—plots health spending per capita against the average life expectancy for two dozen countries. The chart has renewed the important conversation around why the United States’ experience is such an outlier, spending more than any other country by a wide margin, effectively proving the adage that “more is not better.”

Blog: Doctors are being held back from intellectual creativity

 We spend more on healthcare only to generate outcomes far poorer than any comparable country.

The question of why the U.S. generates so little value for its healthcare dollar is a persistent source of study and debate. While dramatic changes are underway in how care is financed and delivered, two major structural impediments to moving the U.S. “closer to the curve” are rarely discussed.

The Inverted Pyramid

The U.S. spent less than $300 per person on public health in 2014 (the most recent year for which data is available) – this compared to $9,523 in per-capita total healthcare spending. While this figure is not comprehensive (it does not include things such as corporate wellness programs), the best estimate is that only 3% of all healthcare spending goes towards promoting health, response to health emergencies, and the prevention of illness and injury.

A rational system of health promotion would invest in wellness, rather than reveling in its ability to cure disease, yet under traditional fee-for-service compensation models, prevention has been a business model without profit, and the fractured and often fractious landscape of federal, state, and local public health spending has often left public health agencies without adequate resources and direction to achieve their mission.

Blog: Better quality will equal better pay for physicians

The bulk of public health expenditures have been shifted to the state level, creating an inefficient patchwork quilt of programs and initiatives. Funding for public health has been feast or famine, leaving delivering agencies and organizations unable to plan for or execute long-term projects. Much as the tragic I-35 bridge collapse in Minneapolis brought the issue of infrastructure under-investment to the public’s attention, Congressional inaction on salient threats to public well-being such as the Zika virus have left Americans in undue danger.

Dependency on the Healthcare Jobs Machine

Growth in the healthcare sector has been a bright spot in the preceding dismal economic decade. The sector has been a consistent source of jobs growth , but there is reason to believe that economic gains created by healthcare spending are not analogous to growth driven by other sectors of the economy.

When healthcare jobs do not increase productivity, the increased real price of healthcare is transmitted, via increased costs of production, to nearly all goods and services throughout the broader economy – a vast “ripple effect” not seen with inefficiency in other jobs sectors.

Unwinding this system quickly would be catastrophic. The U.S. has made a Faustian bargain: a healthcare system that generates fantastic profits for shareholders and delivers well-paying jobs, while straining governments at every level and households across the nation.

Blog: Top 3 warnings to medical providers from the fall of retail

While excessive profits are often cited as the cause of runaway spending, it is more important to examine the rampant excesses – the accumulated inefficiencies, myriad costs, large and small – of the system. Healthcare transactions in the U.S. are defined by a complex and unenviable process, during which information and money are transferred between a number of entities, accruing cost and complexity at each step. Each step is marked by administrative duplication.

In the health insurance market, for example, a number of companies offer a similar set of services (charitably, these would include handling claims, answering customer inquiries, and negotiating discounts with facilities and health care providers), yet each organization generates a unique set of transactional and profit totaling in the tens of billions of dollars. With a simplified payment system, insurance – and insurers – would be less complex. Less complex organizations may be run more efficiently, and with a lower managerial burden.

Inefficiency also manifests itself on the provider side. From 1990 to 2012 healthcare jobs grew by 75% -- far faster than patient volumes. Worse, the growth of healthcare administrators far outpaces the rise of the healthcare labor force as a whole; more than 60% of all physician jobs are now purely administrative.

What Lies Ahead

Physicians, for their part, have begun to push back against administrative waste and excess, moving in large numbers to service delivery models like Direct Primary Care – saving themselves and patients the time, frustration, and costs associated with third party payment.

Blog: Physicians abused, ignored and silenced no more

New reimbursement structures, like shared savings and ACOs, will draw provider and payer incentives closer to one another – and it is within these highly aligned arrangements that the efforts of physician stewardship organizations, such as Costs of Care and Choosing Wisely. will likely be most effective.

But with 53% of physician reimbursement tied to fee-for-service, the majority of dollars saved through these efforts are still subject to recapture by insurers, administrators, or other entities, rather than making their way back to patients in the form of lower out-of-pocket costs.

As Holman W. Jenkins pointed out in a recent, devastating, satire of the Mylan Pharmaceuticals Epi-Pen scandal, many of the incentives in the current healthcare system are aligned only with growing the total scale of healthcare expenditures, not shrinking them.

Until we create a system that rewards investment in wellness and healthcare dollars not spent, there is reason to fear that the negative effects of healthcare excesses will continue to be borne by households, businesses, and governments.

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Healthcare And The Budget Deal: Three Steps Forward, One Step Back

Yesterday, the White House and Congressional leaders announced a last-minute budget agreement that avoids a so-called government shut-down for now. The deal has four health-related items, and is expected to reduce net federal health spending by about $4.5 billion over five years, and $15.5 billion over ten years. Overall, it is not a bad deal with respect to health care. However, some of its budget savings are fragile and it largely avoids reforms that will actually reduce the growth of health spending.

The highest profile item is rolling back Medicare Part B premiums, which were due to jump by about half next year for almost one third of Medicare beneficiaries. This year, the standard Part B monthly premium is $104.90. Without the budget agreement, the premium for about 30 percent of beneficiaries would have jumped up to $159.30. Although this prospect understandably discomforted politicians who have falsely promised that Medicare costs are under control, the premium hike was a consequence of a provision that protects taxpayers.

 

WASHINGTON, DC – JULY 29: (L-R) Former congressman John Dingell, Rep. Joseph Crowley (D-NY), Rep. Debbie Dingell (D-MI), Rep. Doris Matsui (D-CA), Rep. Jan Schakowsky(D-IL), Rep. Lucille Roybal-Allard (D-CA), Rep. Paul D. Tonko (D-NY) and other lawmakers celebrate the 50th anniversary of Medicare and Medicaid with a special cake on Capitol Hill on July 29, 2015 in Washington, DC. During the event they promised they would fight any proposed cuts to the important program for senior citizens. (Photo by Astrid Riecken/Getty Images)

Medicare has a so-called “hold harmless” provision that protects most seniors from Medicare premium hikes higher than the cost-of-living adjustment (COLA) in their Social Security income for the forthcoming year. There is unlikely to be a COLA in 2016, so most Medicare beneficiaries cannot have their premiums increased at all. However, Medicare Part B costs have increased such that the appropriate premium in 2016 should be $120. On the other hand, Medicare Part B is financed one quarter by premiums and three quarters by federal taxpayers. Holding premiums at $104.90 cannot simply impose a higher share of costs on taxpayers. So, the shortfall has to be made up by 30 percent of Medicare beneficiaries who have incomes above a certain cut off.

The premium hike to $159.30 is politically intolerable. The pressure to roll it back without paying for it at all (like Congress did with the so-called Medicare “doc fix” last April) must have been immense. Congress and the President should be congratulated for agreeing to pay for a reduction in the premium to $120 next year (and, perhaps, 2017) by adding $3 to monthly premiums in future years. The “fix” is approximately budget neutral over 10 years.

However, this assumes 2016 (and, perhaps 2017) will be idiosyncratic, and future Social Security COLA increases will prevent a repeat. That depends on general price inflation increasing from zero, which largely depends on the Fed, not health policy. If COLA remains at zero for a few years, we could see this premium adjustment recur again and again – just another case of Congress kicking the can down the road.

A more promising, permanent reform is the repeal of a part of Obamacare that automatically enrolls workers in their employers’ health plans, unless they chose to opt out. This reform will increase federal revenues by about $8 billion, because workers who do not chose employer-based coverage will have higher taxable incomes. More importantly, it challenges the prejudice that Americans should be forced to take employer-based benefits, instead of making their own health choices. Real reform of this problem would give Americans who buy individual health insurance the same tax preference as those who receive it as an employer-based benefit.

A very important reform invisible to most Americans will be how Medicare pays certain hospital-owned outpatient facilities. Many services cost significantly less when provided in an outpatient setting than in a hospital. However, hospitals which own outpatient facilities are expert at claiming higher hospital-based charges for services delivered in off-campus outpatient settings. Closing this loophole for new facilities will save $9.3 billion over ten years. Far more could be done to adopt more generally “site neutral” payments. President Obama has proposed reforms that would save $29.5 billion over ten years, and we should hope that this will be just the first of many bipartisan successes in reducing unnecessarily expensive hospital charges.

The item that will likely have significant unintended negative consequences is the arbitrary rule that manufacturers of generic drugs must pay rebates to Medicaid if their prices increase greater than the rate of inflation. This is estimated to save a very small amount of $1 billion over ten years. However, inflation these days is zero. Price increases of generic drugs are caused by a number of challenges, such as slow regulatory approvals and problems in the supply chain of chemical ingredients. Simply imposing price controls without addressing the real issues will lead to more shortages, not savings.
Overall, the health care piece of the budget deal should be characterized as a moderate success.

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Wendell Potter: Let’s stop buying party line from insurers, drug companies

Americans spend more per capita on health care than people anywhere else in the world, yet outcomes in every other developed country are better on almost every measure, from infant mortality to life expectancy.

A big reason for that is our collective gullibility. We continue to believe what many politicians tell us, despite evidence to the contrary: that we have the best health care system in the world.

Similarly, we continue to be persuaded by insurance companies that they’re essential to the system and better than any government program could possibly be at controlling health care costs.

And we are still buying the pharmaceutical industry’s argument that if Americans don’t keep paying more for prescriptions than anyone else on the planet, drug companies—which have gargantuan profit margins­­—won’t be able to keep developing the drugs we need.

To understand how foolish we are, let’s consider the war of words that recently erupted between health insurers and drug companies.First, though, let’s take a look at a new study that compares how much Americans pay for prescription medication compared to what folks in a few other industrialized countries pay.
The study, released last week by the Kaiser Permanente Institute for Health Policy, showed that pharmaceutical spending in the U.S. per capita had reached $1,010 in 2012. The next highest spender was Germany at $668 per capita. Australia came in at $558.

Am I the only one who finds it more than a little upsetting that the Germans spend 66 percent of what we spend for drugs and the Aussies spend just 55 percent?

As the Kaiser researchers point out, those countries’ citizens get a much better deal on their meds because their federal governments have policies in place to regulate drug prices. And those nations are not alone. Every other country in the developed world has instituted some kind of price control mechanism. Except, of course, the United States.

Kaiser’s numbers are consistent with those from a 2013 analysis by the 34-member Organization for Economic Cooperation and Development (OECD), which showed that Americans spend 40 percent more on drugs than the next highest spender, Canada.

As PBS pointed out last year in a report on drug prices around the world, government agencies in other countries set limits on how much they (and their citizens) will pay drug makers for their various products.

“By contrast,” as PBS further pointed out, “in the U.S., insurers typically accept the price set by the makers for each drug, especially when there is no competition in a therapeutic area, and then cover the cost with high copayments.” (Emphasis mine.)

PBS nailed it. American insurance companies are essentially powerless when it comes to negotiating prices with Big Pharma, just as they are becoming increasingly powerless in controlling the cost of hospital care and physician services. The way insurers continue to make money is not by doing a good job for their customers but by constantly shifting more of the cost of care to those customers.

If we were paying close enough attention to what insurers were saying during the health care reform debate, we would have realized that they are, for all practical purposes, impotent when it comes to holding down costs. All we had to do was read between the lines.

One of the insurers’ consistent talking points was that instead of putting them in the crosshairs, policymakers should instead focus on “the real drivers of health care costs.” Those “real drivers,” according to insurance company executives, are the companies and people who actually provide most of the care we need: hospitals, doctors and pharmaceutical companies.

The industry’s impotence was on display yet again last year when the drugmaker Gilead slapped a $1,000 per-pill price tag on its new hepatitis C medicine.

“Is this ‘whatever you can get away with’ pricing here?” America’s Health Insurance Plans’ then-CEO, Karen Ignagni, asked during a health care conference.

The answer: yes. Drug companies can get away with it because private insurance companies can’t stop them. And, with the exception of the Veteran’s Administration and Medicaid programs, neither can the U.S. government. In fact, the pharmaceutical industry was able to persuade lawmakers to make it illegal for the government to negotiate with drug companies when they enacted the Medicare drug benefit in 2003.

It’s telling that, in response to Ignagni’s rhetorical question, a pharmaceutical industry spokesman said, almost mockingly, that insurers should do more to control health care costs.

As for Big Pharma’s claim that Americans must pay more to keep their R&D departments humming, which we seem to have bought hook, line and sinker, the Kaiser researchers, like many others before them, suggested we’re being duped.

“There is evidence that companies overestimate the amount they actually spend,” they wrote, citing a 2011 analysis that found the median R&D costs for producing a new drug was $43 million, which is just 5 percent of the $802 million figure the industry routinely cites.

Maybe the question we should be asking is, how much longer can we afford to be so gullible?

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Obamacare Has Reversed A Negative Trend. Researchers Call It ‘Remarkable.’

For the first time in a decade, the number of people struggling to pay their medical bills has started to decline, according to a new survey released on Thursday by the Commonwealth Fund. The researchers attributed the historic drop to the number of people gaining insurance under the health care reform law.

Between 2012 and 2014 — as Obamacare’s main coverage expansion took effect — the Commonwealth researchers found that the number of people who had issues paying for health treatment dropped from 41 percent to 35 percent. Over the same time period, the people who skipped out on health services because they couldn’t afford them declined from 43 percent to 36 percent:

CREDIT: Commonwealth Fund

CREDIT: Commonwealth Fund

In a press release, the researchers described the declines as “remarkable.” This marks the first time since 2005, when Commonwealth started surveying people on these questions, that the number of Americans struggling to afford medical care hasn’t increased.

“Health insurance really provides people with a financial means to get care,” Sara Collins, a vice president at the Commonwealth Fund and one of the people who worked on the study, told the New York Times. “We don’t know yet that the law is improving people’s health, but this is a first indication that people are affording care that they weren’t able to get in the past.”

Commonwealth’s findings, which also documented a drop in the number of Americans going without insurance, track closely with other surveys that have reported declines in the uninsured rate under Obamacare. The number of Americans without health care was reduced by about 25 percent last year, which means that between eight million and eleven million people have gained coverage.

The high cost of health care remains an issue for millions of Americans; according to Commonwealth, there are still about 66 million adults who reported skipping out on care last year because they couldn’t afford it. And previous studies from the organization have documented a trend in employers pushing more health costs onto their workers, leaving some Americans struggling to pay their deductibles and co-pays. Medical debt is one of the leading causes of bankruptcy in the United States.

Still, the new report provides significant evidence that the Affordable Care Act is taking steps to tackle the problem. As the New York Times reports, “financial distress was a clear target of the health law,” and Commonwealth’s data suggests that Obamacare is moving toward this goal.

That progress could be undermined, however, depending on the outcome of a pending Supreme Court case against Obamacare. King v. Burwell seeks to prevent the government from providing tax credits in the 37 states with federally-run marketplaces, essentially cutting off millions of people from affordable coverage under the health law. Previous analyses have calculated that, if federally-run marketplaces were no longer permitted to extend tax credits, the cost of insurance in those states would increase by an average of 76 percent. In some states, monthly premiums could jump by nearly $400.

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