Blog | Monday, February 27, 2017

Health insurance as a contributor to high medical costs


After writing about the coming demise of the Affordable Care Act, I began to think, again, about why it costs so much to deliver health care in this country. If it was cheaper, legislation to make health care a right, rather than the randomly distributed privilege it is now, would be so much easier.

Medical costs doubled every decade from 1960 through 2000. This happened in tandem with the rise of comprehensive health insurance. Today the vast majority of health care is paid for by some sort of health insurance. Hospitals and physicians spend a huge amount of time generating information to convince insurance companies to pay us. Patients aren't usually aware that more than half of the time doctors or nurses spend at work is used to document what we do. These days it is primarily on a computer. The documentation can be helpful to communicate our thoughts and plans to colleagues or keep a record of what happened so we can create a history that caregivers can read at some future time, but the majority of it is to prove to insurance companies that we worked hard and we did what we were supposed to do. There are also many employees of a hospital or a clinic who are employed primarily to communicate with insurance companies so we can be paid. I've heard it estimated that 50% of human hours in a hospital is devoted to billing. This rings about true, though I think that if we were to examine all of the adjustments we have made over the years that are due to our payment system, we would find the percentage to be higher.

In an attempt to make us do our jobs better, we are monitored for the quality of our care as measured by adherence to certain guidelines for serious diseases in the hospital. It is cumbersome to develop the tools we need to report on, for instance, how we treat sepsis (overwhelming infection.) The data regarding how to do this best is still actively evolving and new recommendations seem to show up in the good journals a few times a year. By the time we have our tools developed, the newest recommendations have changed and insurance companies are still judging us based on outdated guidelines.

The amount of administrative complexity associated with insurance billing is huge and requires the insurance companies to employ large numbers of people. Each of these people's salaries and the new large buildings they sit in are part of medical costs as well and are reflected in insurance premiums and become part of the cost of delivering health care.

Insurance includes not only private health insurance companies such as Blue Cross and Humana, but also federal and state administered insurance, Medicare and Medicaid. Public and private payers have very similar inefficiencies built into their systems. Public insurance providers, at least in theory, have another level of inefficiency built in since they not only are large bureaucracies using complex schemes for paying for services delivered to people who are far removed, but they also require expensive legal processes to be funded.

There are other parts of the equation that add up to high medical costs, and some of them have their very own devoted blog posts. A third party payment system, such as we have, along with fee for service payment for medical care are a recipe for rising costs.

It would be jolly to dismantle such an inefficient system, except that it would also be economically horrific on a national and possibly global scale. Nine percent of Americans are directly employed in the health care industry. This doesn't include all of the people employed because we have a large and growing health care industry. It doesn't include the postal worker who delivers health related junk mail, the construction workers who build the new health insurance building, the people who polish the Mercedes Benz of the CEO's of hospitals, the devoted teachers who educate health care workers or the many other people who thrive or survive because the health care industry is booming. Reducing costs by making a major cut in the way we do business, such as getting rid of private insurance companies, would have far reaching consequences on employment and the economy.

This is one of the reasons that changing the way we do health care is so tricky. Perhaps we want to continue to spend lots of money on health care because it is a quirky thing we Americans like to do. Even so, it seems like it should be possible to have better outcomes for all of the money we spend. We ought to be able to winnow out the parts of the system that don't add value. In order to make such changes, we should go slow, creating alternatives that prove their value and edge out present less functional systems.

Creating a national health care system, a single payer, seems almost attractive enough to make what would be a huge and potentially catastrophic change. Canada and France, both of whom have systems that provide health care for every citizen at a cost that is lower than that in the US, use single payers. In Canada, with which I am more familiar, this makes billing incredibly simple and actually possible for a doctor to do him or herself quickly and without help. Patients do not pay for anything except for most drugs, dental care and some other necessities that are specifically excluded from coverage. Instead they pay a hefty but income adjusted tax to pay for the entire system, called Medicare. There are some private health insurance companies that people sometimes use to pay for those things that are not included in Medicare coverage, but this is a small fraction of the health care industry.

It could be argued that we have tried very hard to make a health care system work with a hodge podge of public and private funding and that it clearly hasn't worked, with rising prices and far from universal coverage, even with changes wrought by Affordable Care Act. A single payer system is the cure for our ills. A single payer could negotiate with providers of health care services, setting prices and examining new technology based on its costs and benefits. There are problems, both practical and theoretical, with this answer. As far as the theoretical issues, it is usually better to allow private businesses to create solutions to needs such as health care since they can be more innovative and more flexible than large governmental agencies. If the federal government designs a health care system there will be a tendency to create “one size fits all” solutions, which don't lend themselves to the truth that every person is different and has somewhat different health care needs. Practical aspects include the fact that we presently have a federal government which is far too influenced by powerful lobbies and thus probably can't actually negotiate better prices. Other creative solutions to improve quality with innovative ideas require the ability of lawmakers to work together, listen to each other and develop compromises, which they appear unable to do. There is also a pervasive distrust in the federal government that means that the majority of constituents would likely not trust them to manage health care. It would, in fact, be a huge change in how things are done and the road would be very bumpy.

It is very difficult to think our way to a perfect and universal health care system. It will require small and sometimes courageous steps in the right direction based on a shared concept of what we want as both providers of health care and consumers. It will require leaders who thrive on working together to find new solutions. It may involve private insurers as well as public and it may even transition to a true single payer. In the end it will need to be a flexible and high quality way to provide good health to everyone at a price that we can afford without pinching the rest of the economy.

Janice Boughton, MD, ACP Member, practiced in the Seattle area for four years and in rural Idaho for 17 years before deciding to take a few years off to see more places, learn more about medicine and increase her knowledge base and perspective by practicing hospital and primary care medicine as a locum tenens physician. She lives in Idaho when not traveling. Disturbed by various aspects of the practice of medicine that make no sense and concerned about the cost of providing health care to every American, she blogs at Why is American Health Care So Expensive?, where this post originally appeared.