9/21/2005

Uwe Reinhardt talks about health care in US

What I Did at Work Yesterday
by OrangeClouds115
Wed Sep 21st, 2005 at 05:28:15 CDT

Today my company held its annual Users Group Meeting. The keynote speaker was Uwe Reinhardt (a past guest on Al Franken's show and Princeton colleague of our beloved Mr Krugman). He spoke about health economics in the U.S... I have rarely been so inspired by a speaker in my life. I am placing as much of the speech as I can recall below the cut...

Would you believe it if I told you that several thousand healthcare professionals from all over the U.S. gave a standing ovation to a liberal proposal to reform American healthcare? The thing is, I identified the talk as liberal because when ideas get politicized, a lot of "common sense" falls on the side of "liberal." But the speaker was a PhD in economics who used research to support the conclusions he spoke about - he was trying to be accurate, not liberal. And the room was full of doctors, nurses, administrators, and IT folks who live in the real world of American healthcare every day and they were listening to the facts they already know well - they weren't thinking about the truth as "liberal" either. If your name is not George Bush, and you are not trying to skew the system to screw the poor, good old fashioned common sense and facts are not inherently political. ..

Uwe's Talk
..The talk had 2 main parts. First he spoke about the breakdown of costs for healthcare in the US and how the US ranks worldwide in terms of healthcare spending. He tied that into the use of IT. He referenced 2 articles ..you can see a blurb for each for free:
- Strategic Action In Health Information Technology: Why The Obvious Has Taken So Long
- Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits, Savings, And Costs

Then he spoke about HSA's (health savings accounts) and framed it in terms of moral values.

Healthcare, Admin Costs, and IT
Start with 2 numbers: We can cover all of our uninsured for $100b annually, and IT can save us $81b annually. The US spends a LOT of money each year on administrative costs for healthcare. These are the costs of creating and approving and signing and archiving HIPAA forms, coding claims, scrubbing claims, submitting claims, reviewing and analyzing denied claims, calling for appointments, calling to confirm appointments, calling to follow up with no-shows, sending letters to dismiss frequent no-show patients, etc etc etc. These costs are not paying for CARE. None of these things makes a sick patient well. None of these things prevent a well patient from getting sick.

I don't have the exact numbers, but Uwe showed graphs basically demonstrating that the US spends more per capita than the rest of the world - but doesn't necessarily get more for it. One graph showed that between the US and Germany, we spent more on admin, but less on care. Just take this away, and trust that the numbers are there: the US spends too darn much on administrative BS for healthcare.

What is IT's role?
IT can help us cope with the administrative complexity of the nightmare we call insurance...

as insurance increases complexity - with IT in the picture - you can either make the IT staff's lives miserable (maintaining things on the back end), the physician's lives miserable (doing the running around on the front end), or the patient's lives miserable (paying for whatever IT and physicians fail to take care of upstream) as everyone jumps through administrative hoops. If this system is going to improve - IT can help but ultimately the administrative garbage coming down from the insurance companies needs to stop breeding. Centralizing the back end setup by creating and using 3rd party sources of content is helpful, but it does increase costs to the organizations paying for the 3rd party data.

Uwe's Talk about HSA's
Then Uwe addressed the idea of the Health Savings account. The idea is this: A normal family has low healthcare costs most years, with a few years where costs spike due to cancer, car accidents, etc. There are 2 types of HSAs:

1. The employer contributes an amount per year, there is a high deductible (with everything above it paid by insurance), and the patient picks up the tab on the rest. In the good years, the money accumulates in the savings account, and in the bad years, the savings account money pays up to the deductible (with the patient hopefully not paying too much), and insurance picks up the tab on everything else.
2. The patient contributes money up to a high deductible and insurance pays the rest.

Here are the issues with this plan:
First of all, it CAN be used to a good purpose. If the employer is putting enough $ in the account and paying the premiums, and the patient is not chronically ill, it can really help the patient out.
But, consider the 80/20 rule: 20% of patients (the chronically ill) use 80% of all healthcare services. These patients would have to pay up to their deductible every single year, which means it would be a huge financial hit for them, even if their employer was contributing. This system would put the worst burden on our sickest patients.
Second, consider a mother of 3 who makes $25k per year at Wal-Mart in Dallas, TX. Wal-Mart doesn't give her healthcare. This was the part of Uwe's talk that made the biggest impression on everyone.
He looked up the plans available to this woman online. There were 2 - one with a ~$120/mo premium and a $10,000 deductible and $5 generic/$10 brand name drug copays, and one with a $160/mo premium and a $5000 deductible.
I unfortunately do not have the numbers in front of me, but he extrapolated out health care costs over the next 10 years using the 2 1/2 % rule (healthcare costs grow at a rate 2 1/2% higher than that of the GDP) and the calculations came out that this woman would have to spend something like 55% of her income on healthcare alone.

He said that the people who contribute the most to our successful society are mothers and high school teachers. The CEO of GE can put a bunch of engineers in a room and kick their butts so they work, but it was their mothers who really got them to that point where they were educated and capable of doing their jobs. He said this woman deserves a medal - or 3, one for each kid.

One more point he made to the audience - basically, if the system screws the patient and the patient doesn't have the cash to cough up, ultimately the costs will all wind up as bad debt for the hospitals. The entire room was filled with representatives of the largest and most prestigious healthcare organizations in the country, and they are familiar with the idea of bad debt. They want to provide care for their patients, and they don't want to create a system in which they get stuck with costs as bad debt. I can't remember more specifically what was said because I work in clinicals and have very little familiarity with billing, but it reminded me of the bankruptcy bill. The credit card companies can write the policies to screw the little guy by not allowing people to declare bankruptcy, but ultimately if the money isn't there, the money isn't there - it will just wind up as bad debt for the credit card companies anyway, meanspirited morally bankrupt bill or no.

He ended on this note: He said he is an economist, and it is not an economists job to tell you how to make moral decisions, but it is his job to point out when a moral dilemma exists. The case above of the woman spending 55% of her income to get healthcare is a moral dilemma.

Daily Kos: What I Did at Work Yesterday

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