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Tuesday, June 16, 2015

Mystery of Language in Health Care: Prices or Costs?


       Health Care in the United States has a language that is very different from the rest of us. David Goldhill has referred to this as “island speak” in his wonderful book, Catastrophic Care.  Goldhill discusses the use of the word “cost” in place of the word “price” and maintains this choice of language is purposeful: “The distinction isn’t just a linguistic one— with “cost” serving as a polite synonym for “price.” Calling costs “prices” would recognize that they are in fact the industry’s active and calculated responses to incentives created by us.

        So what? Goldhill observes in the same year that gas prices went up 1200 dollars for the average American household, we had a national outcry for action to find out what was wrong. Congress had hearings with the major oil companies summoned before House Committees. Our government wanted answers! However, health care costs increased $1110.00 for the average American household in the same year and there was not a peep of protest; it all seems so inevitable; these “costs.” Prices on the other hand have an evil hand at work. More recently, when oil prices plummeted and gas prices followed, there were no calls to find out what evil was at work behind this scheme. Apparently, the market is only a problem when prices are going up.
 
       The use and misuse of the word costs provides good cover. Many providers and others have no idea of what their costs are in the US health care system. Historically, since the US government took over 40% of the health care system in 1965, this has not been necessary. The large hospital systems have learned to overcharge on their “charge masters,” then the patient surrogates, insurance companies and CMS, tell the providers what they will pay; typically this is a third of the bill being charged. Instead of a market using price to regulate what is produced in terms of health services, we have centralized planners establishing prices. Recently, CMS decided not to reimburse for “readmissions.” A good decision. Now the unintended consequences: the providers, being more of them and certainly more creative than the planners at CMS, have now framed a “readmission” to be an “observation” so they can get paid. CMS is now trying to figure out what to reimburse for an “observation.”
 
       This charade reminds me of the observation from Dr. Thomas Sowell in his book Basic Economics on the role of central planners in the former Soviet Union tasked with setting prices:
 
        “The significance of free market prices in the allocation of resources can be seen more clearly by looking at situations where prices are not allowed to perform this function. During the era of the government-directed economy of the Soviet Union, for example, prices were not set by supply and demand but by central planners who sent resources to their various uses by direct commands, supplemented by prices that the planners raised or lowered as they saw fit. Two Soviet economists, Nikolai Shmelev and Vladimir Popov, described a situation in which their government raised the price it would pay for moleskins, leading hunters to get and sell more of them:
 
       State purchases increased, and now all the distribution centers are filled with these pelts. Industry is unable to use them all, and they often rot in warehouses before they can be processed. The Ministry of Light Industry has already requested Goskomtsen twice to lower purchasing prices, but the “question has not been decided” yet. And this is not surprising. Its members are too busy to decide. They have no time: besides setting prices on these pelts, they have to keep track of another 24 million prices.
 
       However overwhelming it might be for a government agency to try to keep track of 24 million prices, a country with more than a hundred million people can far more easily keep track of those prices individually, because no given individual or enterprise has to keep track of more than the relatively few prices that are relevant to their own decision-making. The over-all coordination of these innumerable isolated decisions takes place through the effect of supply and demand on prices and the effect of prices on the behavior of consumers and producers. Money talks— and people listen. Their reactions are usually faster than central planners could get their reports together.”
 
       A simple solution is to post prices for all providers. Why is this never on the agenda? Singapore spends about 4% of their GDP on health care and is one of the wealthiest countries per capita on the planet. The following link will take you to a price table that is impossible to find in the United States: http://polyclinic.singhealth.com.sg/Pages/FeesAndCharges.aspx
 
       This is just the top level of prices for one provider. The Ministry of Health provides transparency on pricing for all providers and typical operations. Patients are free to choose where they spend their health care dollars. Singapore’s 4% compares to our 16%-18%. Countries in Europe spend on average about 8-9%. Singapore’s market approach, putting the patient in charge, outperforms the socialist countries and certainly our crony capitalist approach in the US.
 
        Just post the prices…please! Put the patients in charge of choosing their health care services.
 
References:
Goldhill, David (2013-01-08). Catastrophic Care: How American Health Care Killed My Father--and How We Can Fix It (pp. 22-23). Knopf Doubleday Publishing Group. Kindle Edition.
Sowell, Thomas (2010-12-28). Basic Economics: A Common Sense Guide to the Economy, 4th Edition (pp. 17-18). Basic Books. Kindle Edition.
 
 



 

Wednesday, November 26, 2014

Reform Health Care - Let's Truly Get Patient Focused - Time for Action

When the Federal government took over 40% of the healthcare system with Medicare in 1965, the industry has bordered on crony capitalism. Costs have continued to rise. This combined with idea that employers should provide health care insurance had eroded the wealth of the middle class in this last decade; what would have been wage increases have instead gone to pay for enormous increases in health care prices (costs are really not known in health care in the US).  Most of the American public are unaware that they are paying for the entire bill; "The employees ultimately bear the full cost of of the health insurance plan they get form their employer," says Kate Baicker, a Harvard economist who served on President George W. Bush's Council of Economic Advisers from 2005 to 2007. "Even though they're only writing a check for a part of it, they're bearing the full cost."

Here are some immediate fixes:

1. Post prices (not the inflated Charge master) for services to be delivered at hospitals and clinics. Singapore does this on a regular basis. Being patient focused means more than giving a survey at the end of the service. Here is link that shows the prices for SingHealth on regular services: http://polyclinic.singhealth.com.sg/PatientCare/Fees/Pages/Home.aspx


The Ministry of Health also post prices for particular operations and procedures. Much of this can be read in the free Kindle book from Amazon entitled, Affordable Excellence by William A. Haseltine. From the book: “Services at the outpatient clinics had been free-of-charge— modeled after the practice of the British healthcare system. But the government quickly changed that. As Lee Kuan Yew recalled in his memoirs: The ideal of free medical services collided against the reality of human behaviour, certainly in Singapore. My first lesson came from government clinics and hospitals. When doctors prescribed free antibiotics, patients took their tablet or capsules for two days , did not feel better, and threw away the balance. They then consulted private doctors, paid for their antibiotics, completed the course, and recovered. Lee's government imposed a fee of 50 cents for each attendance at the clinics, doubled during public holidays. 11 This bold move reminded Singaporeans that healthcare is not free, and that the nation would not be building a welfare system such as Britain's. People would be expected to a large degree to pay their own way.”

2. Post the quality of the service delivered by institution; if 1 & 2 happen, then the consumer/patient can work the equation: Value = Quality/Price; without this transparency, there is NO MARKET.



3. Change the language; health care loves to throw around the word, "cost," as if this calamity that has absorbed income from the middle class for the last 10 years was foreordained. People who write about health care avoid the word "price" because their costs are not known. If the price of gas goes up, people are ready to riot, while health care "costs: go up, we shrug our shoulders. Nonsense! Let's try a real market!

In my junior high days at South Gate Jr. High, I was fortunate to have a homeroom teacher by the name of Mr. Leeds. Each morning he would greet us with the following statements: Good morning Gentleman (homeroom was all boys in a drafting class)! Remember two lessons:

1.    The government cannot give you anything unless they take it away from you first.

2.    The older you get, the worst you get.

After 3 years, I understood the first lesson. Since I have hit 60 years of age, the second lesson is coming home to roost.

References:

1.    Haseltine, William A. (2013-04-15). Affordable Excellence: The Singapore Health System (Kindle Locations 308-315). Brookings Institution Press with the National University of Singapore Press. Kindle Edition.

2.    You’re spending way more on your health benefits than you think by Sara Kliff (August 30, 2013): http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/30/youre-spending-way-more-on-your-health-benefits-than-you-think/

Monday, November 24, 2014

The Need for Teaching Civics:  Some of our students can Identify Snookie, but they do not know the name of the current Vice President or who won the Civil War…

Richard Dreyfus is under the impression that we need to start teaching civics again. What are the duties and obligations of citizens in understanding their government? Recently, a project was conducted at Texas Tech to see how much history and other facts that college students should know. Here is the clip from NPR at Texas Tech:

It would be convenient to lay off all this ignorance to Tech, unfortunately, there is evidence from all over the country. Here is a sampling.



Dr. Walter Williams has observed that many people are graduating with fraudulent degrees. From the clips above, this might be the case. If you are not aware of Richard Dreyfus’s efforts to get the teaching of civics back into school, you may want to visit his web site. This is a noble effort; Dreyfus Initiative.

Dreyfus does an excellent job of explaining the need for civics relative to thought and the role of the citizen in this short video clip.  

For our students and others to know who Snookie is but cannot name the first President or the current Vice President, we may be in trouble. Dreyfus observed: “To teach our kids how to run our country, before they are called upon to run our country…if we don't, someone else will run our country.”

Friday, October 3, 2014

Some Guidelines for Voting in the Mid Terms; What candidates need to do to get my vote!


The Republican, Democrat or Independent Candidate needs to do the following to capture my vote in November:

1. Declare a flat tax; eliminate all the subtractions including the mortgage exemption. K street exists primarily to get tax breaks for their constituents. Kill the source.
2. Tell us the 10 programs that will cut or eliminated; prefer the latter.
3. Come out for declaring Jerusalem an International City; both Israel and the Palestinians can make it their capitol, cutting the embassy expense in half for all nations who otherwise would have to have two embassies.   
4. Move the United Nations out of New York to the new International City in Jerusalem. This way all the diplomats will be on the "factory floor" for most of their work. Most of us have to live close to our work.
5. Develop a strategy that allows us to stop tampering with the world. For example, the problems we have in the Middle East can be traced back to the attempts of the British and French to create spheres of influence in the Middle East after defeating the Ottoman Empire in 1916. The so-called Sykes–Picot Agreement ignored the promises made to the Arabs through Colonel T. E. Lawrence (Lawrence of Arabia); a national Arab homeland was promised in the area of Greater Syria, in exchange for their alliance with the British against the Ottoman Empire.
The illusion of creating nation-states where tribal communities dominate has been a continuing problem since 1916. Political leaders and others in the West have a bad habit of projecting on to tribal people their own values; for example, an interest in democracy. Dr. Michael Maccoby has developed a diagram that shows the continuum of the development of social character for a society. From Figure 1, you can see that as tribalism dominates it can slide toward human pathology, especially when driven by a 13th Century ideology and the fact that the tribes have been lied to for a century.
Figure 1: Social Character Continuum
 
6. Once we have a strategy for minding our own business and fixing our own problems, question why we need 900 military bases around the world in this day and age of jet travel. A few strategic bases yes; We no longer need to occupy Germany but we do need to fix Detroit and a few other bankrupt cities in the US. Moving the troops from Europe to our border would be good for security and the local economy; troops buying breakfast burritos in El Paso as opposed to apple strudel in Germany.
This would be a good start...
 
 
 

 
 

 

 

Tuesday, April 29, 2014

Learning from Washington's Farewell Address

Today David Brooks has a column in the NY Times that discussed American involvement in foreign affairs around the world. How did we get this far into entanglements with the politics of other nations. George Washington would have been appalled. But Washington never met Hitler, Stalin or Mao. It might be time to rethink our need to be involved in every country's internal affairs. So I pulled up the Address on Google. I found the original version here:

http://avalon.law.yale.edu/18th_century/washing.asp

Lovely writing. I then found this Cliff Notes version on Wikipedia:

http://en.wikipedia.org/wiki/George_Washington's_Farewell_Address#Foreign_relations_and_free_trade

Below are some summarized ideas relative to the establishment of political parties and advice on foreign relations from Wikipedia:


1.     Political Parties

Washington argues that “political parties must be restrained in a popularly elected government because of their tendency to distract the government from their duties, create unfounded jealousies among groups and regions, raise false alarms amongst the people, promote riots and insurrection, and provide foreign nations and interests access to the government where they can impose their will upon the country.”

2.     Foreign Relations

Washington advocates a policy of good faith and justice towards all nations, and urges the American people to avoid long-term friendly relations or rivalries with any nation. He argues these attachments and animosity toward nations will only cloud the government's judgment in its foreign policy. Washington argues that longstanding poor relations will only lead to unnecessary wars due to a tendency to blow minor offenses out of proportion when committed by nations viewed as enemies of the United States. He continues this argument by claiming that alliances are likely to draw the United States into wars which have no justification and no benefit to the country beyond simply defending the favored nation. Washington continues his warning on alliances by claiming that they often lead to poor relations with nations who feel that they are not being treated as well as America's allies, and threaten to influence the American government into making decisions based upon the will of their allies instead of the will of the American people.
It may be time for us as Americans to reevaluate our need to be a busy body with the rest of the world. To start minding our own business, we may have to examine what the political parties are stirring up.

 

Friday, February 14, 2014

Inequality – The Income Gap and Spending on Health Care


This morning a friend of mine who owns a small company with 124 employees was told his health care costs are going up 30%. In the past few weeks a lot of attention has been paid to the idea that the "rich are getting richer and the poor are getting poorer." People are rightfully concerned about the "inequality gap" that is growing in America. It appears that the spending on health care and this gap are very much related. David Goldhill in his very informative book, Catastrophic Care discusses this connection:

"In the decade before the recession— 1998 to 2008— the American economy grew by 25 percent and corporate profits grew by 54 percent. Yet average wages grew by only 13 percent. Cast your mind back to those good old pre-recession days. Liberals and conservatives argued furiously as to why the American worker seemed to be doing so poorly. Was it because of tax cuts, declining unionization, deregulation, or globalization? But while the data are difficult to measure precisely, President Obama’s Council of Economic Advisors suggested an alternative leading cause: the explosion of employer health insurance costs. In its 2009 “Economic Case for Health Reform,” the CEA includes a chart which it says shows that the bulk of growth in compensation costs in the decade 1996– 2006 went to employer health premiums; in other words, spending on health insurance crowded out growth in wages. The CEA projected that more than 100 percent of the growth in future compensation could go to higher premiums. In other words, wages could actually decline over time to compensate for higher employer health costs."

David introduces us to one of his employees, Becky. He then goes on to break down her salary and benefits:
"Let’s say Becky’s work would be worth around $ 40,000 a year to us; if we can hire her for $ 40,000 or less, we’ll do it. What does hiring her cost? For simplicity, forget about all other benefits and costs for a moment and just focus on health care. Paying our share of Becky’s health insurance premiums will cost us about $ 5,000 a year. So the maximum salary our company will pay Becky is actually $ 35,000— the $ 40,000 her job is worth to us minus the $ 5,000 cost to us of her premiums. The more health insurance costs us, the less our company can afford to pay out to Becky or to any employee as salary or wages. Of course, all Becky knows is that her salary is $ 35,000."
David then goes on to analyze how much Becky will contribute to health care throughout her lifetime:
"Let’s assume that health care costs grow at only 2 percent a year— half of Becky’s income growth. This hasn’t been true for forty-five years, but we can always hope. Given all those factors, how much do you think Becky will contribute into the health care system for herself and her dependents over her lifetime? I’ll give you a hint: Becky will earn $ 3.85 million over her career.
The answer is $ 1.9 million!  Now also remember that $ 1.9 million was based on an assumption that health costs were somehow tamed below Becky’s income growth. In recent years , per capita health costs have actually increased 2 to 3 percent faster than income. If health costs grow merely equal to Becky’s income, Becky is looking at an additional $ 1.3 million in expenses over her lifetime— almost $ 3.2 million in total. In that scenario, Becky will contribute one out of every two cents she earns to our health care system."
 Back to my friend. At the beginning of the year, he was talking about raises for the people who work at his plant. With this 30% hit on insurance, that pool of money just dried up. So if you are wondering why we have an income gap and you are not getting a raise, I would recommend a discussion with the folks who are paying for health care on your behalf. The rich will have no problem in absorbing these costs. However, for the rest of us, we will all suffer a loss of income to pay for more health care, which is really sick care, but that is another topic.
 
Reference: Goldhill, David (2013-01-08). Catastrophic Care: How American Health Care Killed My Father--and How We Can Fix It (pp. 54-61). Knopf Doubleday Publishing Group. Kindle Edition.

Friday, September 27, 2013

Democracy Is Not Enough



By Michael Maccoby

          As we debate the military takeover of the democratically elected Egyptian government, we should seriously consider the consequences of promoting budding democratic movements. Our well-meaning efforts are based on a profound confusion about our own history and the role of democracy. When did democracy become the end rather than a means toward creating a government that would protect individual liberty? The term democracy does not appear in the Declaration of Independence or in the US Constitution. The purpose of the Constitution, stated in the preamble, was “to form a more perfect union, establish justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.” The special importance of liberty was emphasized by the first ten amendments to the Constitution. Abraham Lincoln affirmed the principle of liberty in his debates with Stephen A. Douglas and the Civil War against the claims of Southerners that they had a democratic right to choose slavery and succession.
          Democracy is an essential means to safeguard liberty. It provides the means for the people to elect their representatives and also dispose of them. But as James Madison warned in Federalist 10, democracy can threaten liberty. He writes that factions will form with conflicting ideologies and agendas, and if a majority party is not controlled, it may oppress minorities. This is what happened in Gaza and Egypt. To avoid this result, Madison proposed and the framers of the Constitution agreed that this government should be a republic, not a democracy, with checks on democracy.
          The American republic is structured to further the purposes of the Constitution by establishing a balance of authority between executive, legislative, and judicial structures. The president and members of Congress are elected democratically, although it took many years to enfranchise all adult Americans. The Supreme Court, appointed by the president and confirmed by a majority of Senators, cannot be voted out of office unless they are proved to have made an egregious offense. Although their decisions are by majority, they are the least democratic of the federal decision making groups because they can’t be voted out of office by the people.
          We seem to forget that this country is a republic formed to further specific purposes when we promote democracy for other countries without clarifying that it is a means, not an end. We fail to warn others that without checks and balances and protections for justice and liberty, democracy can produce autocratic dictators, as it has done time and again from Hitler to Hamas.
          The idea of democracy as the end rather than a means was promoted by Woodrow Wilson in his address to Congress, April 12, 1917. He asked for a declaration of war against Germany, stating that “the world must be made safe for democracy”. The context was his belief that the autocratic and unelected Kaiser Wilhelm II was responsible for the war and attacks on US ships. He believed that “free and self-governed people” would maintain peaceful relations. Even if this is so, democracy by itself including elections does not guarantee a free people. That also requires protective laws, controls of authority, and an uncorrupted system that administers justice.
          Why then do public officials and editorial writers advocate democracy as a goal rather than a means for developing a more just society? Is it because Libertarians wave the banner of liberty against an interpretation of the general welfare supporting government attempts to build a more equal society? Is it because the gun lobbyists have hijacked the concept of liberty? Or is it because unlike the founders of this country who were independent farmers, craftsmen and professionals, who had suffered under the yoke of Britain, most Americans now work for organizations and have already accepted limitations of their independence? Liberty has lost some of its original meaning for many Americans.
          Even with our Constitution, liberty is sometimes constrained and threatened by decisions to favor national defense, the administration of justice, or the general welfare. And recently, extremes of NSA spying on citizens and threats to freedom of the press seem to awaken fears of losing our liberty. However, when the purpose set forth in the preamble of the Constitution conflict, our democratic processes should facilitate debate within the republican framework.
          So before we cheer democratic elections in other countries, let’s caution others that democracy is not enough and use our influence to help them frame constitutions that protect liberty and further the common good before they hold national elections, just as we did in 1789.
Michael Maccoby’s most recent book is Transforming Health Care Leadership, A Systems Guide to Improve Patient Care, Decrease Costs, and Improve Population Health with Clifford L. Norman, C. Jane Norman, and Richard Margolies.