Health Care Reform: What Do Americans Want? (Or Think They Want?)

On the surface, it seems that American voters have made their will clear.  Poll after poll shows that they are calling for a major overhaul of our health care system.

But when you look closer, their responses bristle with contradictions, contradictions that I think the reform-minded presidential candidates will have to consider when deciding how to approach health care reform. 

In a poll reported in Health Affairs at the end of last year, sixty-nine percent of respondents rated the US system as “fair” or “poor.” Yet in the same survey, when asked about their own experience with receiving medical services or with their own physician, 80 percent who had received care in the last year ranked their care as “excellent” or ”good.”

Other polls reveal the same pattern.

According to a survey released by Greenberg Quinlan Rosner in July, voters express doubts about the quality of the American health care system (with 49 percent dissatisfied), while 74 percent were dissatisfied with the cost.   Yet, “at another, more personal level,” the pollsters note, “a slightly different picture emerges. Fully eight in ten (82 percent) describe themselves as satisfied with the quality of the health care they receive personally. This number jumps to 90 percent among seniors (64 percent very satisfied), but includes impressive majorities of nearly all groups…”

Nevertheless, when the pollsters asked the same group about health care reform, three-quarters called for “major changes” or “completely rebuilding” the system. 

If they are satisfied with the care they are receiving, why would they want radical change? Because they don’t feel secure that they will be able to keep what they have:  “There’s a precariousness to Americans’ contentment with their own health insurance coverage,” the Kaiser Family Foundation reported after looking at a number of polls at the end of last year.  “Among the insured, six in ten are at least somewhat worried about being able to afford the cost of their health insurance over the next few years, and nearly as many (56 percent) said they worry that by losing a job, they or their family might be left without coverage.”

This, then, is why so many Americans want universal health care: it would guarantee that they and their families would always be covered.

Read a little more of the Greenberg Quinlan Rosner report and you find
that the ambivalence deepens. On the one hand, many Americans believe
the system is broken–or at least badly damaged. “There is a deep and
powerful belief that costs are out of control and real ambivalence
about the quality of the system overall,” the pollsters explain. “But
people’s personal experience is better, particularly among the middle
class and affluent, which potentially tempers broad demands for
reform…”

How can so many Americans question the quality of the system as a
whole, but believe that the care they are getting is more than
satisfactory? For the same reason that many American believe that most
politicians are corrupt, but that their own Congressman is honest.
This is the magical thinking that leads the majority of Americans to
distrust most doctors—but to put great faith in their personal
physician.  As I’ve argued on this blog,
we trust our doctors because we must.  Who would go under the knife, or
submit to any painful or invasive procedure if he didn’t trust the
doctor?  For the transaction to go forward, the patient must believe in
his doctor’s competence and his professionalism.

Reform-minded presidential candidates understand that many Americans
like the health care they have—or at least they think they like what
have. (Since most Americans are not seriously ill, they haven’t had a
chance to find out whether what they believe about their coverage and
their doctor is true.)  Nevertheless, what voters believe is most
important.  This is why none of the leading Democratic candidates has
proposed a single-payer system. All three have designed proposals that
let insured Americans keep the private-sector insurance that makes them
feel safe—at least for the moment. (Meanwhile, they are offering a
public sector alternative so that, over time, Americans will have a
chance to see how the public sector insurance stacks up against
for-profit insurance.)

But what many reformers haven’t quite faced up to is this:  Not only do
most Americans want to keep what they have—they believe that, under
reform, what they have should cost them less, even though they also
believe that “the government” should spend  more on health care.

As a study published in the  Winter 2007 issue
of the The American Heart Hospital Journal points out: “When Americans
complain about [the cost of ] health care, it is generally not about
the overall system but rather about personal outlays and the burden
their health care bill places on the family budget. In 2006, 65 percent
of Americans surveyed thought the average citizen spent too much on
health care and that ‘the government’ should spend more.  This is what
it means when Americans consistently list ‘cost’ as the most important
health care problem appropriate for governmental action, but it may be
more accurate to think of it in terms of personal affordability rather
than overall costs, despite the fact that the two are clearly linked.”

Here, it’s worth pausing to ask: when Americans say that “the
government” should pay more, who exactly do they have in mind?
Presumably most understand that “the government” equals taxpayers, and
so it seems safe to assume that they are saying that other, wealthier
taxpayers should pick up a larger share of the tab.  If you earn
$80,000 a year, you believe that those earning over $100,000 should
show a little more generosity. If you bring home $100,000, on the other
hand…(Does anyone remember Russell B. Long’s definition of tax reform:
“Don’t tax you. Don’t tax me. Tax that fellow behind the tree”?)

Moreover, most Americans do not object to the fact that, as a nation,
we are spending well over $2.2 trillion on care—or that at some point,
if health care inflation continues to outstrip economic growth,
spending on health care will squeeze out outlays for education, the
environment, national security, or anything else that we might want to
do.  Most of those polled see the problem from an individual, rather
than from a collective, perspective.

This, then, is the first problem that an incoming, reform-minded
president will have to face.  While Americans strongly support national
health reform, many believe that “reform” will (or at least should)
automatically cut their own health care bill without crimping the
amount of care that they receive. And while they would like to see
universal coverage, the majority may well resist any tax increases.

In fact, as I have argued elsewhere, there is enough money sloshing
around in our health care system to provide affordable, high quality
care for everyone—but only if we cut back on the waste. This means
eliminating the unnecessary tests, unproven procedures and over-priced
“bleeding edge” drugs and devices that are spurring health care
inflation. In other words, $2.2 trillion is enough to give everyone the
health care they need. But what they “need” may not be what they think
they want.

The polls show that many Americans like what they have; if there is
excess in our system, they embrace it. They find comfort in the idea
that, when they consider their medical options, they have a long list
of choices, including the newest and the most expensive drugs, devices,
tests and procedures.  Most subscribe to the American creed that newer
is almost always better. And, as the latest ABC News/ Kaiser Family
Foundation/ USA Today poll shows, only 30 percent of those surveyed see
unnecessary treatments as a problem in our system, while just 28
percent say that the “increased use of expensive new drugs, treatments
and medical technology” is driving rising costs, “even though,” the
pollsters note, “this is the factor most often named by experts.”

When it comes to public opinion, this is the second major obstacle that
a reform-minded president will encounter.  The average American doesn’t
like to feel that she or her doctor are part of the problem. The polls
show that most of us are far more comfortable assuming that people they
we already dislike—insurers, malpractice attorneys, or drug-makers—are
responsible for excessive costs. We certainly don’t want to entertain
the possibility that many of the treatments our own doctors are
prescribing for us are, in fact, unnecessary, unproven or simply futile.

Of course, up to a point, the polls are correct: profits made by
insurers do add to our health care bill. But if I were elected czarina
tomorrow, waved my wand, and eliminated the entire for-profit insurance
industry, that would cut the nation’s health care bill by just 4.5
percent (That is the share of our health care dollars that goes to
cover insurers’ administrative costs, executive salaries and profits.)
And it would be a one-time savings.

As for drug-makers, the problem is not just the blockbuster pricing needed to sustain double-digit earnings; the truth is that doctors
are prescribing, and patients are demanding, more and more pills. From
1994 to 2005 the number of prescriptions purchased climbed by 71
percent while the U.S. population grew by only about 9 percent. As a
nation, we’re over-medicated.

Over the long run, we can afford high quality, universal coverage—if we
just wring the waste out of the system. But that will take time, more
research into the “comparative effectiveness” of various products and
procedures, and an enormous public relations campaign to convince the
public that “more care is not always better care.”

Finally, the polls show that widespread “distrust of government” could
block change. As the Greenberg pollsters warn, the last seven years
have done little to build public confidence that government is either
competent of honest:

“In our accountability research, we noted that voters are pulled
between a desire for a more activist government than they are getting
and a deep cynicism about whether or not government can function
efficiently and effectively,” the pollsters write. “Not surprisingly
then, voters identify ‘government run programs are wasteful and
inefficient’ as the most pressing concern about health care reform (37
percent). Among independent voters, this concern jumps to 49 percent.”

These are the obstacles that I think presidential candidates should
anticipate. I don’t have the answer as to how a president should handle
these problems. Much will depend on the economic circumstances at that
moment: the temper of the times, the number of seats progressives have
won in Congress, and just how many more employers have stopped offering
health insurance.  But at this point I am convinced that, when it comes
down to it, a large share of the public may be more ambivalent about
reform than it seems.

In the past, I’ve been keen on the idea of “educating” the public.  If
a strong leader explains what’s wrong with health care in America,
patiently and carefully, I have argued, eventually the public will
understand that in our profit-driven system, “over-treatment” can be as
much of a problem as “under-treatment.” After all, Al Gore did
eventually manage to persuade us that global warming is a serious
threat.  Though admittedly, it did take years—and people listened only
after deep dissatisfaction with the Bush administration turned into a
longing for what might have been.

Today, I’m beginning to wonder if we really need a Great Educator: If
reformers try to point to the excesses in our system, will people
listen? Or will they just feel that much more frightened and insecure?
The fact that the three leading Democratic candidates have proposed
such similar plans suggests that if you sit down, read the research,
and study the problem, there is a fair consensus about what needs to be
done. But do most Americans really want to study the problem?

I’m beginning to suspect that “leadership” will be the key to health
care reform—leadership combined with a conviction that inspires trust.

Here, I can’t help but recall what Carl Schneider, a Professor of Law
and of Internal Medicine at the University of Michigan writes near the
end of his exceptional book, “The Practice of Autonomy: Patients,
Doctors and Medical Decisions.”  Schneider is not convinced that
Americans need so many choices. He thinks it may be time to move “away
from [the emphasis on] patient choice and toward changing the medical
system so that it delivers a better product. To put the point
provocatively, it may be time to think about giving patients what we
think they want, but have not been able to secure for themselves. We
might even consider giving patients what we think they would want if
they thought about it.”

17 thoughts on “Health Care Reform: What Do Americans Want? (Or Think They Want?)

  1. Maggie,
    Why do you describe the savings incurred by ridding us of for profit insurance as a one time savings? Are not these expenses incurred on a yearly basis and do not these highly paid CEOs get their big payouts on a yearly basis? It seems there are incredible savings to be wrung out of this complicated and overly administrated system that we currently have. Having a more simplified (dare we say single payer) system of helth care delivery would go a long way toward providing the resources we need to cover all the uninsured and probably have some left over!

  2. Keith–
    Welcome–and thanks for your response.
    These are one-time savings in the sense that once we cut them out of the health care pie other costs would rise to fill the empty space.
    For example, if we shifted to a single–payer government-run system, we would have to pay the government to admnister health care. The government’s adminisgtrative costs are less than half of what it costs for-profit insurers to deliver care, but that still means that the savings to less than 3 percent.
    And, if the government had a monopoly, there is a danger that it would become sloppy, and its administrative costs would being to creep up . . . .
    More importantly, private insurers’ adminstrative costs are not growing at the rate that paymnents for cutting edge medical techologies, some specialists, and many hospitals are spiralling.
    That’s the real problem–the sectors where costs are rising twice as fast as GDP or earjmgs. Cut out for-profit insures, and you stil will see that our nation’s health care bill was climbing far faster than GDP.
    Finally, administrative costs are much higher in the U.S. than in other countires, not simply becaue we have multple payers, but because we have so many providers–solo practioners, small hospitals, etc.
    The fragmentation of our system greatly adds to the paperwork.

  3. This is all interesting. Yet time and again, when people say they want things, their supports wanes when you tell them of some of the sacrifices *they* may have to make:
    * They may pay higher taxes or more insurance premiums out of pocket;
    * They may be hit with an “individual mandate” to purchase a health insurance policy;
    * They may be directly penalized financially for suboptimal “lifestyle decisions”;
    * They may have to carry around insurance cards that some privacy advocates would call a “national ID card”;
    There are other things as well. I don’t think this should dissuade positive progress, but widespread support for a nebulous concept like “universal health coverage” almost always erodes sharply when specific costs and sacrifices are mentioned. That’s why polls saying what people want are, IMO, of limited use, because for many of the people being surveyed, the assumption seems to be that everyone else will have to make the personal and financial sacrifices.

  4. Maggie,
    I would like to offer a few comments on this.
    First, while I certainly agree that there is plenty of waste in the system in the form of unnecessary and/or inappropriate care, I think it will probably take quite some time to implement the tools (like comparative effectiveness analysis and interoperable electronic medical records) that could start to drive some of that waste out of the system. In the meantime, it will likely require about $100-$150 billion per year of additional spending to provide health insurance to the currently uninsured. If the population at large really thinks that there is a small group of wealthy taxpayers who can be soaked to cover this cost, they are likely to be very disappointed. Ways and Means Committee Chairman, Charles Rangel, is already looking at significantly higher income taxes on people who make more than $200K or so in order to pay for eliminating the Alternative Minimum Tax.
    Since I am probably more knowledgeable than much of the population about financial issues and I have lots of experience as a patient (including a half dozen surgeries and hospitalizations over the last 13 years), I’ll offer my perspective on the quality of the healthcare system. The bottom line is that the medical care was very good, but the billing related part of the system is exasperating. Hospitals are especially bad. Their chargemaster (list price) rates are often five to six times what they routinely accept as full payment from insurers but expect the uninsured to pay full list or close to it, at least if they have resources. In 2000, I had a surgical procedure done on at outpatient basis at my local community hospital. The bill (at list price) for the hospital, the surgeon and the anesthesiologist came to approximately $14,000 ($8,800 for the hospital alone). Insurance paid 18% of the hospital charge and 31% of the doctor’s fees with both accepted as full payment. Recently, my colleague had a similar procedure at another NJ community hospital. The combined bill: a bit over $20,000. The actual insurance payment is much closer to what the services are worth, in my opinion.
    While hospitals account for about 31% of total healthcare spending according to the California Healthcare Foundation, they account for fully 44% of the healthcare costs that we normally associate with health insurance coverage – hospital charges, doctor and clinician fees, and prescription drugs. These three categories account for 71% of healthcare costs according to the CHF with the rest attributable to dental and other professional fees (10%) nursing home and home healthcare (10%), public health initiatives (3%) and investment including hospital construction (6%).
    It is interesting to note that dental charges are not rising nearly as fast as doctor and hospital costs. Neither are nursing home or home healthcare costs. I think there are several reasons for this. First, my understanding is that only 40% of the population has dental insurance (I don’t have it), and many of those who do have it still are subject to significant copays and/or deductibles while overall costs are not very large for the vast majority of people. Nursing home and home healthcare services are, to a significant degree, also paid out of pocket except for Medicaid which pays for the poor on a means tested basis. Long Term Care insurance also pays for some costs for people who purchased a policy, and Medicare pays on a very limited basis for those discharged from a hospital straight to a skilled nursing facility. Even then, it only pays for the first 20 days and 80% of the next 80 days. The number of people in nursing homes is not growing as fast as the elderly population, and the cost structure of these facilities is driven mainly by labor costs for comparatively low paid people. The other key aspect of both dental services and nursing home and home healthcare costs is that utilization is driven mainly by consumers and not by doctors. Social workers may help in finding or selecting a nursing home and doctors may offer recommendations as to which facilities are better than others, but the doctors don’t drive utilization. By contrast, virtually all hospital, doctor, lab, imaging and prescription drug utilization is driven by doctors.
    This doctor driven utilization phenomenon is why I have high hopes for the newly emerging doctor ranking systems that the insurers are developing and recently reached implementation agreements with NY State Attorney General, Andrew Cuomo. Assuming the metrics are fully transparent and are eventually based on national standards (as opposed to local or regional standards), it will be interesting to see how the doctors who are identified as high utilizers react. Assuming insurers offer insureds lower copays to use doctors who earn the premium designation, the high utilizers should have an incentive to change their practice patterns in a way that will earn them a spot on the preferred list. The two main reasons why a doctor would be a high utilizer, I think, are defensive medicine (in comparison to peers) and being more aggressive than peers at driving revenue, especially if he or she has a financial interest in a lab, imaging center or has a lot of expensive equipment in the office that makes it easier to run expensive, non-invasive tests.
    Finally, as for prescription drugs, this is starting to fade as a cost problem. An increasing percentage of prescriptions are generic drugs which are actually somewhat cheaper in the U.S. than overseas. Ultra expensive biologics for cancer and other diseases are priced about the same throughout the developed world. While brand name traditional drugs are more expensive here, the overall category of prescription drugs is increasing at a slower percentage rate than either hospital charges or doctors’ fees.

  5. Keith,
    They are one-time savings because once eliminated, you’ve done nothing to curb the underlying causes of health care cost inflation. If insurance costs were gaining share as a percent of total health care costs, this would not be true. But they aren’t.
    To put in numeric terms: If the total health care tab is $2 trillion and growing at 6 percent a year, and 15 percent goes to administrative waste due to the insurance industry, that’s $300 billion in one-time savings if eliminated. But if health care costs are still rising at 6 percent per year, the next year (after elimianting the waste), the base would be $1.7 trillion with a 6 percent inflation rate or $1.8 trillion. And we’d be right back where we started — but presumably, with only a single payer who would be in a much stronger position to deal with rising costs vis-a-vis the providers.
    The true value of single-payer is its ability to use monopsony buying power to counter the monopolistic-like pricing power of providers.

  6. One element missing from the discusssion of administrative costs is the extent to which these costs reduce health care expenditures. Obviously they do. In both good ways (identifying unnecessary care, policing fraud, negotiating discounts, identifying high-quality/ high efficiency providers) and bad ways (denying necessary care, cost-shifting). An insurance plan that has low administrative costs as a percentage of premiums may simply be doing a poor job of cost containment.

  7. Marc–
    It think you are right- low administrative costs can mean that a payer isn’t enough spending enough money to catch fraud.
    I suspect that Medicare and Medicaid –as well as private insurers–need to spend more investigating fraud. And a good fraud investigation unit would, I think, pay for itself, partially by serving as a deterrent.
    Private insurers have less of an incentive to do this as long as they can just pass along the cost of fraud in the form of higher premiums. (In my book, I write about some insurers being quite cavalier about this.)
    Medicare, on the other hand can’t pass along the cost unless it raises co-pays, premiums and Medicare taxes–something that Congress really does not want to do.
    But Congress should increase the amount of money that it gives Medicare and Medicaid to do spot-checks and investigate fraud.
    And Congress should pass laws with mandatory jail sentences for health care providers (be they CEOs of hospitals or doctors) who knowingly overcharge payers.

  8. Barry and Tim–
    Thank you for your comments.
    Tim– I’m afraid you are right. Most people would like the safety net, but don’t want to pay for it.
    Barry– You are right that it will take a long time to eliminate much of the waste in the system–but some of it could be eliminated very soon, if we have the political will to do it. See my newest post on the NYT editorial.
    IF both the American Cancer Society and the National Cancer Institute no longer recommend PSA testing and treatment of early-stage prostate cancer, saying that “there is no evidence that early detection and treatment affects the course of the disease” why are we still paying for it?
    Of course anyone who wants a PSA test and radiation has a right to pay for it out of pocket, by why are Medicare and private insuers paying for it?
    The spine surgeons have come out with guidelines saying that MRI’s are not appropriate for “non-specific back pain” (see latest issue of JAMA) so why are we paying for it?
    Why are we paying for artifical knees that are supposedly designed specifically for women and cost twice as much as other knees? (See my post on this blog on “bespoke knees”)
    There is also a lot of waste in the area of drugs. (Again, see my most recent post on the NYT editorial. When you add in the cost of drugs administered in hopsitals, doctor’s offices and nursing homes, drugs account for far more than 10% of our health care bill–closer to 13% or 14%–and growing fast.
    That’s the important point–the growth. As noted in my post on the NYT editorial,the price of cancer drugs alone is growing exponentially and becoming a major component of our drug bill. Yet that cost is hidden in hospital bills and doctor’s bills because people don’t buy cancer drugs retail at their pharmacies.
    The device industry is also growing by leaps and bounds. Devices like stents are now being made by pharmaceutical companies because they are more profitable than drugs. Every year more and more new devices come to market (coated stents, knee implants for women, souped-up defribillators) and FDA regulation is very lax.
    Again, the cost of devices is hidden in hospital and doctors bills and isn’t broken out, so most people don’t realize how quickly those costs are growing.
    As for hospital bills, you are right, there is often very little relationship between the bill and the cost of providing the service– and different hospitals will charge different amounts for the same service.
    Moreover if the payer has no leverage to negotiate a discount (i.e. is an uninsured individual) he will be charged the highest “rack rate.”
    This is not so much because hospitals are gouging their customers as that they are cost-shifting. Every time they accept a payment from Medicaid that pays half or one-third of what it actually cost the hospital to provide that service, it must make up the cost elsewhere–by charging someone else more.
    Every time a hospital cares for a homeless person who has no way to pay his or her bill, the hospital must make up that cost by charging someone else more.
    In addition,different hospitals pay different prices for exactly the same devices and equipment–depending on how much clout they do or don’t have when negotiating with the manufacturer and depending on whether doctors at that hospital have the political clout to tell the hospital–“either buy the equipment and devices I want or I’ll take my patients elsewhere.” Usually the doctors who say that are taking “consulting fees” from certain manufacturers in return for making sure that their hospital uses that manufacturers equipment.
    Finally, how much different hospital pay GE for an MRI unit or Johnson & Johnson for devices is a secret. The companies claim that this is “proprietary information” so no one knows how much hospital A or hospital B is paying, making it very difficult for hospitals to negotiate for the best price. . .
    Finally, keep in mind that half of the hospitals in this country are operating in the red –they have no choice but to cost-shift. (The hopsitals operating in the red are often teaching hospitals that provide a lot of charity care and also take responsiblity for providing the unprofitable burn centers and trauma centers that communities need while suburban hospitals concentrate on the amenities.)
    If we want hospital prices to be transparent we would have to
    –be willing to pay the taxes needed to fund Medicaid so that it could pay what it cost the hospital to provide the service (see Niko’s recent post on Medicaid reimbursements)
    –pay the taxes necessary to insure the uninsured or subsidize hospitals that provide charity care for the uninsured and underinsured while also mandating that everyone must buy insurance even if young and healthy
    –insist that manufacturers disclose the prices they charge hospitals; force manufacturers to submit open bids to hospitals for all equipment and devices; make it illegal for doctors to take fees from manufactuers while recommending that manufacturer’s goods . . .
    On why dental costs don’t rise as quickly as medical costs. Many people just put off having needed dental care. I have done this at various points in my life, going four or five years without seeing a dentist (for example when I was in grad school) because I didn’t have the money.
    Dental insurance is not very good–it usually pays only a small percentage of the cost.
    Because most people don’t have dental insurance, and because many will just delay needed dental care, dentists aren’t in a position to raise their prices the way oncologists do.
    Nursing home prices don’t spiral because so much of their business comes from Medicaid. Also, most nursing homes in this country are places that you would not wish on your worst enemy. Unless you are very wealtlhy–and can afford a top-tier nursing home–many Americans will do everything in their power to avoid going into (or putting a relative in) a nursing home. This less than enthusiastic demand puts a brake on prices.

  9. Maggie:
    You’re correct that, if the average administrative cost of private insurers is 15 percent, cutting it out would save only about 5 percent of overall costs. But you don’t mention that providers also have big administrative costs in dealing with myriad insurance companies. Under a single payer system, where the government was spending, say, 5 percent on administration, the insurer and provider savings would be about 15-17 percent of private insurance costs. That adds up to more than $100 billion a year, which would be enough to reach universal (but not comprehensive) coverage. Those savings would be annual, not one-time, but you’re correct that they’d soon be swallowed up by continuing cost increases.
    You and I agree that much of the problem lies in the exorbitant amounts paid to hospitals, doctors, and drug and device companies (for more details, see my book Rx For Health Care Reform). Yet the answer isn’t to have consumers diagnose themselves and decide what treatments they need–they do need to depend on their doctors. But to ensure that physicians provide just enough care–not much and not too little–their incentives need to be changed. As Paul Ginsburg has pointed out, fee for service provides the wrong incentives. Yet we can’t go back to the capitation schemes of managed care companies in the ’90s, either, because that motivated some doctors to skimp on care. We need a new model in which care is managed by doctors and patients, not insurers.
    You say that consumers want everything under the sun, and I’d agree–up to a point. Most people would prefer not to go to the doctor or be hospitalized, and I don’t think anybody enjoys taking medications every day. Much of our over-medication and over-use of specialists has been prompted by the medical profession, as well as by an uncritical media that laps up the hyped results of the latest medical studies as if they were the word of God. Again, it all goes back to the patient-doctor relationship. If physicians showed themselves to be worthy of trust, and if they shared decisions with patients, the “rationing” that so many fear would not come to pass. For proof of that, one need look no further than the primary-care driven systems of Western European countries, which get results as good or better than ours at much lower cost.
    You’re also right in saying that there’s plenty of money in our system already to provide good care to everyone. But the next President–or his or her successor–will need the courage to stand up to all the special interests that profit from the status quo.

  10. Ken–
    I agree, it’s the fragmetation of the total system, and not just the number of insurers that makes total administrative costs so high.
    Single Payer would greatly reduce those administrative costs, but politically it’s probably not possible to persuade the public that everyone should go into a public sector health care plan. There’s just too much distrust of government.
    If, however, a public sector plan competes with regulated private sector plans on a level playing field, then over time, more and more people might well enroll in the public sector plan, and the savings in terms of administrative costs would be huge.
    We could also save a large amount of money if more doctors became part of large medical organizations like Kaiser, the Mayo Clinic or the Cleveland Clinic where they work primarily on salary and an enormous “back office” takes care of billing, malpratice insurance, health care IT–enjoying the economies of scale that a large back office brings.
    Instead we have turned healthcare into a cottage industry (especially in the East) where solo practitioners and small group practices have an enormous overhead.
    Finally, I agree that patients are not in a position to know what they need (though they should ask why? when someone orders an MRI). But physicians must lead the way in cutting the waste.
    Again this is more likely to happy in large multi-specialty practices like the Mayo Clinic rather than at hositals where hundreds of solo practitioners in private practice have privileges.
    Dartmouth’s research shows that if Medicare patient is treated at the Mayo Clinic it costs Medicare half as much as it would if a very similar patient were treated at UCLA hospital.
    At the Mayo Clinic, care is better co-ordinated, the patient will see fewer specialists, doctors are looking over each others’ shoulders (all looking at the same chart) there will be fewer errors, and both outcomes and patient and doctor satisfaction are better. (See http://www.dartmouthatlas.org)

  11. Ken–
    I agree, it’s the fragmetation of the total system, and not just the number of insurers that makes total administrative costs so high.
    Single Payer would greatly reduce those administrative costs, but politically it’s probably not possible to persuade the public that everyone should go into a public sector health care plan. There’s just too much distrust of government.
    If, however, a public sector plan competes with regulated private sector plans on a level playing field, then over time, more and more people might well enroll in the public sector plan, and the savings in terms of administrative costs would be huge.
    We could also save a large amount of money if more doctors became part of large medical organizations like Kaiser, the Mayo Clinic or the Cleveland Clinic where they work primarily on salary and an enormous “back office” takes care of billing, malpratice insurance, health care IT–enjoying the economies of scale that a large back office brings.
    Instead we have turned healthcare into a cottage industry (especially in the East) where solo practitioners and small group practices have an enormous overhead.
    Finally, I agree that patients are not in a position to know what they need (though they should ask why? when someone orders an MRI). But physicians must lead the way in cutting the waste.
    Again this is more likely to happy in large multi-specialty practices like the Mayo Clinic rather than at hositals where hundreds of solo practitioners in private practice have privileges.
    Dartmouth’s research shows that if Medicare patient is treated at the Mayo Clinic it costs Medicare half as much as it would if a very similar patient were treated at UCLA hospital.
    At the Mayo Clinic, care is better co-ordinated, the patient will see fewer specialists, doctors are looking over each others’ shoulders (all looking at the same chart) there will be fewer errors, and both outcomes and patient and doctor satisfaction are better. (See http://www.dartmouthatlas.org)

  12. Low administration costs could also mean skimping on maintenance and cleanliness, but also monitoring for fraud. Frankly, I’d like to see a strengthening of whistleblower laws and a requirement that administrations (hospital, clinic and nursing homes) provide education to employees to let them know what fraud is, not to participate in it, and if they see it to report it first to administration and if it doesn’t cease (or they experience retaliation) to report it to authorities, upon which they will receive a percentage of any fine for cases proven. If the employees are knowledgeable and looking out for fraudulent activity, there will be damned few cases where nursing homes put patients in front of a TV and bill Medicare for a “therapy session.”
    I think most of the waste is from the insurance bureaucracy. PNHP and others have this pegged at 31% (I’d guess 11% for excessive hospital and clinic billing clerks and 20% for the insurers). I know of few industries that can keep admin costs to 4.5% when you consider sales commissions, gatekeeping costs, actuarial, CEO and executive salaries and bonuses, and shareholder profits.
    But then you must look at other internal wastes, which Dartmouth pegs at 33% (http://tinyurl.com/2y363m). The McKinsey report shows that physicians that have ownership in the lab equipment (MRIs, CT scanners, Stress and echocardiograph testing, etc.) are up to eight times more likely to order tests than are physicians without such conflicts. Hospitals can now also employ their own physicians and give them incentives for ordering tests and even admitting patients. All, while at the same time overbuilding beds (that they must fill) and upgrading technology in two years rather than five. And no, this is not going to all be offset by price competition (http://tinyurl.com/ynkkr6).

  13. Let’s also not forget about the high lobbying costs and campaign contributions that are added to the account called “administrative costs” and passed on to the patient.

  14. We can mess around with the trees with all this detail regarding surveys and the like. In essence we like our health care system, if we are covered by insurance, because someone else is paying. That is the promise of universal health and why it is appealing. See http://www.healthcaresoundoff.com and read Other People’s Money. It is the cominant psychology in the market. It needs to change and then physicians will change with it. They are both adaptable and resourceful and will be able to respond favorably. Also see The Healthcare Access Card on http://www.healthcaresoundoff.com as a potential solution to some of our problems.

  15. Why do you describe the savings incurred by ridding us of for profit insurance as a one time savings? Are not these expenses incurred on a yearly basis and do not these highly paid CEOs get their big payouts on a yearly basis? It seems there are incredible savings to be wrung out of this complicated and overly administrated system that we currently have. Having a more simplified (dare we say single payer) system of helth care delivery would go a long way toward providing the resources we need to cover all the uninsured and probably have some left over!