Sunday, October 19, 2014

Who Shall Benefit from All That Health Care Spending?

All that is and shall be.

Sophocles (495-BC 404 BC) , Antigone

I have a weakness for the word “shall.” To me, “shall” implies command and determination as to what should be, rather than what will be.

“Shall” has moral weight. That may be why I entitled a 1988 book And Who Shall Care for the Sick? The Corporate Transformation of Medicine in Minnesota (Media Medicus).

I was concerned then, as I am now, that physicians were losing control of health care to managed care organizations. My concern now is how much control government should or shall have.

I was concerned too that patients were losing control, a question that Victor R. Fuchs, PhD, a Stanford economist raised in his 1974 classic Who Shall Live? Health Economics and Social Choice (Basic Books). I remember a Harvard Business School professor telling me, “ What a title. I would kill to come up with a title like that.”

Which brings me to the title of today’s blog “Who Shall Benefit from Health Care Spending ?” Perhaps the title should be “Who Should Benefit from Health Care Spending?”

According to the Centers for Medicare and Medicaid Services, the projected spending on health care in 2014 will be $3.06 trillion. The government will spend over $1 trillion of that amount for 50 million Medicare recipients and 110 million Medicaid beneficiaries, or $6250 per person. If you divide $3.06 trillion by 320 million, the U.S. population, that comes to about $9,565.50 per individual. The national debt now runs about $58,000 for every man, woman, and child in the U.S. The fastest growing part of that debt is health care entitlements for Medicare and Medicaid.

Who should benefit from these vast present and future expenditures?

• Should it be government, with the number of people it employs to administer health programs and the political power it conveys upon the governing party? Is government capable of protecting and providing “affordable health care” for all, as implied by the title of the current health law “The Patient Protection and Affordable Care Act?” Evidence to date, nearly five years after ACA enactment, with the law is running roughly 15%-20% over budget, and the Congressional Budget Office giving up estimating what it will cost over the next 10 years, creates doubt about government’s ability to contain costs and benefit those who need care.

• Should it be those agencies and health plans who administer the law? It is estimated that administrative costs eat up one-third of health costs. Chief cost consumers in the administrative realm include government itself and those ubiquitous health plans, including giants UnitedHealth, which has just announced it will invest heavily in health exchanges by introducing two dozen new plans into federal exchange markets, and WellPoint, Inc, which holds monopoly positions in more a dozen major metropolitan markets.

• Should it be participants in “medical-industrial complex” – that vast array of health care product distributors, such as pharmaceutical companies, device manufacturers, big data providers, or companies like General Electric. GE has just announced it earns $3.7 billion producing biologically specific medicines and high-tech diagnostics to screen for disease and health indicators.

• Should it be hospitals and doctors, who together account for about 50% of health spending? There is little doubt that hospitals are benefiting from Medicaid expansion, driving by health exchanges, which now give them predictable sources of revenue. But at the same time more than half of hospitals are being heavily penalized for hospital readmissions and for meeting federal regulations, which make up 25% of their costs. As for doctors, their earnings have been flat for the last 10 years, and they say public and private regulations account for 50% if their overhead.

• Or should it be health care consumers themselves? Nearly 150 million Americans get their health insurance through their employer. But most employers are changing their plans to comply with new expenses from the Affordable Care Act and new demands they cover full-time employees working over 30 hours by shifting costs to workers, cutting benefits, and introducing health savings accounts and new health care arrangements with tax-deductible spending and high deductiables. These plans may be called “consumer-directed”, “account-based plans,” “flexible-health savings accounts ,” or as one cynical observer noted, “ OWAs (Other Weird Arrangements )”. Some employers are even offering employees compensation for not enrolling in their health plans. It’s all a little weird and bewildering.

• This bewilderment has resulted in a growing number of consumers, approaching 5-10%, saying, in essence, “To hell with it, I will take a chance and pay for my health care directly without insurance coverage.” Most workers are studying the options, doing the math, weighing the incentives, and considering other alternatives before considering buying a policy through public exchanges.

To conclude:

It’s all more than a little mind-boggling,

All of this health cost tugging and toggling.

One answer may be universal tax credits,

To minimize those overall health cost debits.

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