There is nothing in this world that is free. Several years ago, I penned Someone has to Pay. I have had significant feedback on that over the years. Some perceive the solution to medical care costs as simple. One famously has explained that it is easy to provide "Medicare for all." This would mean that every American would have access to the treatment and care that the government deems appropriate and necessary. The finances are purportedly as simple, "you just pay for it." There has been some criticism of that statement, some feeling it is an oversimplification.
But, in Someone has to Pay, I suggested that we need to understand that "payment" may mean an actual exchange of money for services. But, "pay" may mean instead a diminution in value on the other side of the equation. If one is injured, some form of insurance may pay for care (health, auto, liability, workers' compensation). Alternatively, if one lacks such coverage, one might pay for such care with cash or credit. But, if none of these are available, then one might instead simply elect to forgo care, and "pay" with diminution of function or pain.
As a country, we long ago decided that the ability to pay will not limit the delivery of care. In 1986, Congress enacted the Emergency Medical Treatment and Labor Act. This is not universal health care. The requirements of the bill apply only to hospitals that accept Medicare patients. Thus, it is voluntary; a hospital may choose to participate in Medicare or not. Furthermore, the care that is mandated is only "stabilizing treatment" for "emergency medical conditions." There are also various state laws that may require more than this in some situations, at some facilities, etc. While the provisions vary, it is fair to say that universal health care does not exist in America today.
However, there is care rendered at some hospitals that is covered by insurance or Medicare. And, those facilities therefore must provide stabilizing treatment to all. Additionally, there is other care not paid for by health insurance. There is care that is billed for, but which may not be paid by the individual, see Bob Wilson's discussion of Explanations of Benefits. There is perhaps even care that is not billed, but merely written off. And, there is undoubtedly care that is simply never sought or delivered as whomever needs it elects not to seek it, or it is not deemed sufficiently emergent to require care. There is a real spectrum for consideration. It is likely that these many variables are part of the reason that discussion of health care and policy is challenging.
This all came to mind in May when The Washington Post published Who's Going to Take Care of These People? The article describes a "15-bed" hospital "fending off closure hour by hour for the past several months." It was in significant debt, and "its outside ownership group entered into bankruptcy." The result of closure of "remote hospitals" is characterized as creating "“health-hazard zones." The article says that there are demographic burdens and changes faced by hospitals, issues with "Medicaid and Medicare reimbursement rates," and challenges with the "percentage of uninsured patients." In short, the economics of their dilemma at this Oklahoma hospital is not balancing.
That article followed only a few days after The New York Times featured differences in charges for hospital systems, described in a recent Rand Corporation study. An Indiana hospital charged "private insurance companies about four times what the federal Medicare program paid for the same care." A cited example in Colorado was even higher. The Times contends that "competition has faltered" in the medical industry. It asserts that "the costs of care are secret," and "hospital systems" have "outsize(d) clout in price negotiations with employers."
Somewhat confusingly, the Times proceeds to then describe rates as "a closely held secret between insurers and hospitals" ("insurers," not "employers," though there is further discussion there of "employers" also). The article describes employers contracting with insurance companies for coverage, and the employer not having access to information about what the insurance company pays for hospital services. There is discussion of care prices affecting premiums, that is the cost to employers. However, it also noted that Michigan is among the states demonstrating private rates closer to Medicare. Despite its lower hospital prices, the "insurance premiums are relatively high."
And, it is notable that the distinctions may not stop there. In 2015, I penned Medical Costs. The figures reported in the article that underlay that post supported that workers' compensation charges in some states were markedly higher than the charges for the same diagnosis if not work related (health insurance or private pay). A sponsor of a Florida workers' compensation bill in 2014 asserted that some surgeries cost double if work related. That post cited an article claiming that "workers compensation claims were reimbursed at 1.5 to 2.5 times more than . . . other commercial health plans."
In the midst of this discussion about costs, there are also discussions of treatment and testing volume. Verywellhealth.com reported in 2018 that
"There are valid reasons for having multiple diagnostic tests, but sometimes doctors order tests that are not truly necessary."
It attributes this to "limited accuracy" of tests, "defensive medicine," and "patient request." That last one is interesting, tests are performed because a patient has somehow concluded it is necessary, and providing it is easier than explaining the "why not" to the patient?" The post suggests that there may be some instances in which "profit" motivates, but suggests this is rare. It notes that:
"Most of the tests your doctor orders for you are done at facilities that are owned and operated by someone besides your doctor"
And, that testing facility might be a hospital. It is entirely possible that the testing has to be at a hospital (when a doctor is making her care decisions in an acute setting while the patient is inpatient, there is little time for sending a blood or urine or tissue to a separate lab for testing). But, it is possible that the testing is performed somewhere as a convenience to a physician, without regard for the cost to the patient (or other payer).
Likely, the overall price of health care is contributed to by product costs as well. Fiercehelthcare.com reported recently that "more than 500 drugs saw price hikes at the beginning of 2019." That site asserts that "prescription drug pricing is one of the biggest health care issues in politics." Benefitspro.com also contends that "overuse of services and care are identified as being the top two factors driving medical costs per person." It also identifies the cost of "new medical technologies" as a contributing factor (a doctor once told me a particular test he ordered in a case was "because they got a new ______ machine at the hospital and I am expected to order its use at least twice a month").
There are examples of medical care prices being disparate. There is also evidence of medical prices continuing to increase. In 2018, I penned The Conundrum of Medical Inflation. That noted that the costs of medical care have increased more rapidly that the costs of other things Americans consume. The medical consumer price index has exceeded, not quite double, the consumer price index for many decades. As a result, medical care has grown in its consumption of the American family budget. The same is true for America overall. According to www.thebalance.com, in 1960 health care accounted for 5% of gross domestic product. In 2017, that had grown to 17.9%. Medical care is consuming our resources.
That impact may be felt through the payment of medical bills by those who are not insured. However, it may also be felt through the increase in health insurance premiums, which some contend have been increasing steadily, see the 2018 report of the Henry J. Kaiser Family Foundation (Section 1, "Cost of Health Insurance," figure 1.10). That report also discusses the changes in American's deductibles and other "cost sharing." (Section 7, Employee Cost Sharing). There is significant evidence that medical care cost is increasingly affecting people.
The Balance (www.thebalance.com) contends that "government policy and lifestyle changes" have fueled this expansion. It says that "government programs like Medicare" expanded the population of health care consumers (demand) and thus led to increased prices by those who supply health care. In the category of "lifestyle," it suggests that there have been increases in "chronic illnesses," which it asserts affect "almost half of all Americans." This analysis also makes various assertions regarding the volume of care that is rendered in the final months of life.
So, what is the crisis in America? Is it that medical care costs too much due to outside forces (products, liability, etc.)? Or, is it that demand has simply driven prices? With some hospitals already in financial straights, and at least implying that Medicare rates must be supplemented by group health and private payers, would a transition to a single-payer("Medicare for all") process further strain such facilities? The implication is that today, those who private-pay or who have health insurance are subsidizing those on Medicare some, and those stabilized at no cost even more.
And, the impact on workers' compensation might be more pronounced. If the claims regarding the cost of workers' compensation medical care are accurate, that a comp surgery is double the group-health surgery, then reducing those group-health payments to Medicare rates through "single payer" might further stress the economic posture of some hospitals.
Of course, it is possible that such economic stress could be avoided. The math would suggest that if everyone were paying Medicare rates, and that those rates are insufficient even in the current diverse market of payers, that in a market predominantly or exclusively Medicare, those rates would have to increase markedly for hospitals to remain in business. Thus, a Medicare for all, or other single-payer transition might be more expensive in the long run than one would anticipate by merely examining what is spent by Medicare on a per-person basis in the current market with its private payer subsidies.
In today's market, if the New York Times and Washington Post are accurate, group health is paying a great deal more for services than Medicare and hospitals are nonetheless financially failing. If all charges were reduced to Medicare rates, that would seemingly exacerbate the problem. Thus, perhaps what "you just pay for" Medicare taxes would necessarily increase if it were the only significant payer left in the system? However, might such a decision save employers a significant amount on workers' compensation?
The point, is that the questions of medical care are complex. The costs have risen, and debate seems mired generally in a focus of how that can be financed. There seems little if any interest in discussing why the products and services are this costly or why the inflation rate is so robust. In short, there is some suggestion that in this discussion there is perhaps room for conversation about more than just who should pay and how. Perhaps there is room to discuss why the prices are where they are, how they got there, and what might be done to bring the medical CPI in line with the market generally? Maybe there is some level of cost that might be better controlled?
Or, left unaddressed, perhaps the share of domestic product described by www.thebalance.com will continue to expand. In 2064, at the rate of increase comparing 1960 to 2017, medical care could be consuming 64% of our domestic product. And, in the meanwhile, the only medical care debate or discussion may have been focused exclusively on how society can shoulder those payments? Maybe there is room for more robust analysis than "you just pay for it?" It is interesting indeed.
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Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.