We need a single payment system instead of single payer

One of the great myths of healthcare is that there is an actual “system” in the United States. If such a system exists, I have yet to become familiarized with it. What we have are mountains of paper that slavishly tie the patient, doctor, hospital and insurance carrier alike to a system of coding interpreted by individuals with no sense of what the codes mean or the labor and risk involved in their accomplishment. This inertia is inclusive of purposeless and an infinity of idiotic government regulations that create more dead forest. For the patient, this system is akin to entering The Twilight Zone; actually, it is The Twilight Zone.

As a result, the consumer doesn’t know what they are paying for and the doctor and the hospital spend endless hours trying to explain exactly what was done to an insurance company employee who is not a medical professional. This is akin to the proverbial mouse asking the snake for safe passage across a river.

Administrative costs as a percentage of healthcare expenditure in America comprise anywhere between 18-31 cents out of every healthcare dollar. This figure varies because so many different things can be considered “administrative,” because there are differences in small and large health insurance plans, and because there are differences in excessive spending between private and public sectors. Generally speaking, Medicare/Medicaid administrative costs are between 5-6 cents out of every healthcare dollar percent. According to a CBO report, administrative costs account for approximately 12 cents out of every dollar spent, depending upon the size of the plan.

The McKinsey Global Institute published a study in December 2008 accounting for the costs of U.S. healthcare. They estimated that excessive spending for “health administration and insurance” accounted for as much as 21 percent of excess spending. Translated into current dollars, that’s $525,000,000,000.00. This report suggested that 85 percent of this spending was attached to the “system” described above (that amounts to almost $450 Billion in a $2.5 Trillion spending spree). The remaining 15 percent is attributed to public plans.

Last, consider this well publicized study that included the administrative costs of all parties feeding at the healthcare troth, but not the productive time wasted by patients in receiving care. In 2003, Woolhander and Campbell published a study in The New England Journal of Medicine in which they concluded that when comparing purchasing parity dollars, in 1999 the United States spent $1,059 per capita on administrative costs while the Canadians spent only $307. Imagine the cost today? Imagine the waste that could be reinvested in delivering real healthcare?

So what is the conclusion we can draw from all of this? It is not that we need a single payer. What we need is a single payment system applicable to all that receive healthcare in the United States by whatever means. It means only one system of paperwork and system process, one system reproducible throughout. This true “system” would be online and easily accessible. Furthermore, if we take all these complex codes and bundle them to be inclusive of many things for the more predictable and common surgical and medical procedures and their attendant CPT codes, the estimated savings per year could be substantial. If we can reduce our administrative costs by say, one third, that would translate to $150 Billion in the private sector or a 6 percent savings. If we can cut the administrative costs in half by shamelessly stealing from the Canadians, we would save what amounts to approximately $262 Billion. Soon we will be talking about real dollars.

We don’t need a single payer to control our healthcare freedom; what we really need is a single payment system, a true system, and the freedom to choose our own healthcare.

Mitchell Brooks is an orthopedic surgeon and the host of Health of the Nation on Talk Radio 570 KLIF in Dallas, Texas.  He blogs at Health of the Nation.

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  • Fred Dempster

    Agree – today there are over 7,500 payers and the scrubs, edits, rules, on and on, contribute to well over 20% error rate cited by recent articles. The payers (health plans) are ill prepared and are functionally deficient in performing EDI transactions in a way that would help reduce the issues you cite, and more.  Collectively, they can not even provide up-front eligibility and any decent guess at patient responsibility. Long way to go…

  • http://twitter.com/glevin1 gary levin

    That would invoke anti-trust measures…price fixing?

  • Brian Clay

    Of course, this is the same Medicare that brought us the 1995 and 1997 documentation guidelines that have caused inpatent physician documentation to become prolonged and less relevant to patient care.

    Of course, Medicare can cite lower overhead costs because it outsources its accounts receivable function to the budget of the Internal Revenue Service.

    • Anonymous

      True that! BUT, you assume that Medicare and the Government will determine this schema. They can have theirs; commercial carriers would create their own uniform system. When its costs are shown and publicized to be less that CMS’, then even the bureaucrat types will be forced to adopt a similar system. That said, the latter could possible be a big leap of faith on my part.

      Mitchell Brooks, M.D.
      hotnationtalk.com 

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Does a single payment system implies a single price list?

  • http://wellescent.com/health_forum/topics Wellescent Health

    When you look at the duplicate administrative procedures, centralizing and consolidating administration is a no-brainer. If the health care market were able to consolidate like many other markets, health care business managers would quickly work to eliminate the varied processes involved. Even governments with some of their inefficiencies would work to consolidate. The current situation with so many competing interests and little ability to consolidate is just ripe for streamlining efforts.

    • newheart807

      Exactly! That is the point. And what would the cost be to the taxpayer in contrast to the savings?

      Mitchell Brooks, M.D.
      hotnationtalk.com

  • http://www.facebook.com/people/Terence-Ivfmd-Lee/1523282856 Terence Ivfmd Lee

    In medicine, just as in other things that we need or want in life, such as food, shelter, leisure, is it better to have a SINGLE ONE-SIZE-FITS-ALL centrally planned system? Or is it better to let people (doctors, patients, hospitals etc) interact to bring out the best solutions (and to eliminate the worst solutions). Remember that in a free market the cream rise to the top and the inefficient are eliminated, thereby leading to constant improvement. The way to halt progress is to put restrictions on the free market, which is precisely what has happened to medicine.

    • Anonymous

      In a truly free market healthcare system, there would be those that would be unable to afford care.  Are you willing to let those people die?  If not, who pays for these people?

      • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

        In an inefficient, wasteful, poorly organized publicly managed health care system, many women are left to have birth outside hospitals. Are you willing to do this to people?

        Britain is already runnning away from its large costs, bureaucratic management, and poor service.

        British Maternity Care – 08/25/09 – Don Surber
        == ==
        Almost 4,000 women gave birth outside maternity wards lacking midwives and hospital beds, instead in places like elevators, toilets, and mobile homes. Maternity units shut their doors to an additional 553 women in labor last year.
        == ==

      • http://www.facebook.com/people/Terence-Ivfmd-Lee/1523282856 Terence Ivfmd Lee

        e_patient. COUNTRY A (free market) has a thriving prosperous economy with the brightest young minds competing to become excellent doctors and to provide the best care. Companies spend time and money developing drugs and treatments that people WANT (and want to pay for). Patients benefit from this prosperity by having more than enough disposable income to pay for the best quality healthcare AND to have more than enough left over to charitably cover the needy. COUNTRY B (central planning) strangles the economy with an onerous tax burden, wastes a chunk of that money on administrative cost, bureaucratic costs, fraud and waste. Doctors are incentivized to game the coding system as a way to better their reimbursement, because making patients happy with quality care will not affect their reimbursement (and may often harm it). Long waiting periods give patients “access” to care on paper, but not in real life.

        In which country, would more people suffer or die? By the way, we don’t live in “A”.

        • Anonymous

          In what country is there no poor?  Do you expect the free market to provide everyone with jobs with high enough wages to have disposable income?  What about those workers at Wal-Mart that make miminum wage?  What if someone can’t afford lifesaving treatment?  Your utopia doesn’t exist.

          In country “A” only a segment of society has the income to afford any meaningful healthcare.  These patients have access on paper but not in real life.

          • http://www.facebook.com/people/Terence-Ivfmd-Lee/1523282856 Terence Ivfmd Lee

            “In what country is there no poor? Do you expect the free market to provide everyone with jobs with high enough wages to have disposable income? What about those workers at Wal-Mart that make miminum wage? What if someone can’t afford lifesaving treatment?”

            I know of no country where there are no poor, including our current welfare state. In a free market, people will tend to gravitate to the job that can best put their talents and skills to the best use and in a free market, people will have a healthier incentive to acquire improved skills that help them move up to be able to do jobs that pay better.

            I’m not sure what your question is about the Wal-Mart workers. What about them?

            If someone can’t afford lifesaving treatment, are they more likely to get better care in a prosperous free-market charitable world or better care in a bankrupt bureaucratic world? If that’s not a fair question, then let me ask you: Are you tickled-pink and ecstatic with the way that poor people live in our current welfare nanny-state NOW?

      • newheart807

        The same people who pay now. The manner in which they pay, however, would need to be altered. There are many ways in which t do this, far beyond the scope of a “comment”. Furthermore, why is it that you, and other people opposed to a free-market solution, must automatically assume that the free-marketer is willing to let people die? That’s quite a leap! That’s like saying that medicine is for free in socialized countries.

        Mitchell Brooks, M.D.
        hotnationtalk.com

  • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

    McKinsey Global Institute – December 2008
    Accounting for the cost of US health care (PDF)
    Dr. Brooks refers to the above report

    Pages 20-21 – Health Administration and Insurance
    === ===
    [1] This category accounts for 7% of overall health care costs and 14% of spending above expected ($91 billion).
    $30 B  Private payer profit and taxes
    $33 B  Private payer selling, general, and administrative
    $28 B  Public administration of Medicare, Medicaid, and other

    [2] Public administration costs in the US average 6% of public health spending, compared to 4% for the average of OECD countries.

    [3] [edited] US administative costs are somewhat lower ($19 billion) than expected for a system that is largely privately administered with multiple payers.
    === ===

    [1] Dr. Brooks writes “McKinsey estimated that excessive spending for “health administration and insurance” accounted for as much as 21% of excess spending. Translated into current dollars, that’s $525,000,000,000 [$525 billion]”

    I don’t know how Dr. Brooks calculated, and I am not impressed by his writing out all of the zeroes. McKinsey says total “above expected or excess” US healthcare costs were $650 billion (page 13), of which “excess” health administration and insurance costs were $91 billion (page 20), of which $63 billion was attributed to private insurers.

    [2] So, the US government spends 50% more as a percentage of its healthcare expenses than does the OCD. Taken at face falue, then why will transfering all healthcare to public administration save money?

    Actually, that percentage means nothing without knowing further details. We could ask what is the mechanism by which the OECD does it? Is this supposed to be the (magic) efficiency of governments versus private markets? If so, this would be the first time that government is more efficient in providing a service than private enterprise.

    [3] Then Kinsey reports that US administrative costs are somewhat lower than “expected”, given that healthcare is not adminstered by a single, uniform, efficient government agency.

    What is an “excess” health care cost above the “expected” amount? On page 13 McKinsey shows a graph of health care spending vs GDP per capita for the US and OECD countries. The US falls above the avrraged line. OK, but what stretch of logic says that it is the bureaucratic control of health care which accounts for that supposed inefficiency? Also, why should we think that this ratio is the proper measure, given the great differences in culture and administration among the countries? Statistics sometimes raise an eybrow, but do not offer answers.

    The arguments offered against the quality of US health care are based on flawed infant mortality and life expectancy comparisons.

    Just two points, with more at the link:
    (1) The US follows the WHO definitions exactly for reporting a live birth, “even one breath”. Many countries do not count premature births or babies with severe birth defects. The increased deaths of these children raises US numbers for infant mortality and decreases average US life expenctancy accordingly.

    Also, the US is much more agressive in attempting to save babies at early stages of development, say when the mother has medical emergencies. This increases the number of frail newborns and the infant death rate.

    (2) The US has far more death from auto accidents and violent crime, but higher survival for cancer and other chronic diseases. Overall mortality is not a good statistic for comparing health care effectiveness or population health.

    USA Healthcare is First – Infant Mortality is Low

  • Anonymous

    “Statistics sometimes raise an eybrow, but do not offer answers….but higher survival for cancer”

    So where are the statistics that the US overdiagnoses cancer and then applauds survival rates?

  • newheart807

    Mr. Garland:

    While I appreciate your confusion over my “accounting”, I am sure you read the commentary above the portion referencing The McKinsey Global Report; that is, that the Administrative Costs are dependent upon what is included, who you ask and how they are calculated. Given your taxonomy 1 approach, as well as your use of “statistics” I understand your confusion. The point however, kind sir, is that we, as practicing physicians, are overwhelmed with myriad paperwork, most of which has nothing to do with that which is necessary to care for our patients. This says nothing about the confusion our patients have with the same issue at their end of the continuum. By centralizing the “system” as one system in lieu of one payer, a substantial amount of money, time and productivity can be recovered and utilized to a better purpose.Data is more easily retrievable and can be applied to continuously improve the methodology of care and thereby eliminate wasteful practices. 

    These are the advantages of the single system and the point I was attempting to make. Perhaps it was lost is the trees of the particular forest you were investigating?

    Mitchell Brooks, M.D., F.A.A.O.S. 
    hotnationtalk.com

  • Anonymous

    So you would “socialize” healthcare for the poor-just like food and housing?

    • Anonymous

      You can surely do better that a flippant reply.

       I have no doubt that if you put your mind to it, you can come up with innovative ways to deliver healthcare to those that cannot afford it. Furthermore, you throw the term “socialize” around. What exactly do you mean by that? The goal is to deliver care to everyone in an efficient manner. How this is done is the rub. At what cost is the rub. Who does it is the rub.

      Think about this. CVS and Walgreens are positioning themselves to set up neighborhood clinics in their existing structures. How would you build upon this fact to achieve the access of care to the poor? What pay scheme would you use?

      Mitchell Brooks, M.D.
      hotnationtalk.com

      • Anonymous

        “How would you build upon this fact to achieve the access of care to the poor?”

        Open heart surgery as a blue light special…

        Clearly, taking primary care and giving to the nurse practitioners is a free market solution.  Technicians could also do limited procedures and surgery.  A knee replacement could be done by a technician who only does this type of surgery without the background most doctors have.  Care by doctors can be reserved for the wealthy.

        Those that live along the Mexican border can go get cheaper healthcare in Mexico.  The cost of a knee replacement in Mexico is one quarter of the cost than in the US.

        For me, health care would be cheaper if I could prescribe myself my own medications.  A truly free market healthcare system would not regulate prescription drugs.

        Of course, a free market system would mean repealing EMTALA.  I guess that hospitals would engage in patient dumping more than they do now.

        • Anonymous

          I thought you would have something sensible to say and to offer the reader serving as an intellectually honest foundation to some of your points. Sadly, this does not appear to be the case so that any further exchange is pointless and fruitless. I am sorry you are so angry.

          • Anonymous

            I am serious.

            EMTALA inhibits hospital from setting market prices.  The fact I can get medical care without paying a market price makes any system with EMTALA not a true market based system.

            Training people to do specific tasks, which has worked in other sectors, should work in medicine.  To think that medicine will continue to promote a classical education for something a techician can do means you want innovation as long as doctors have the market share.  It’s already happening.  Specialized nurses and medical technicians already do thing physicians used to do.

            I have a friend who is not insured and she goes to Mexico for some medical and dental care.  Isn’t that feel market…getting the best price?

            I want the freedom to get my medicaiton in the free market.  Anything less is not truly a free market.

  • Anonymous

    Mr. Garland:While I appreciate your confusion over my “accounting”, I am sure you read the commentary above the portion referencing The McKinsey Global Report; that is, that the Administrative Costs are dependent upon what is included, who you ask and how they are calculated. Given your taxonomy 1 approach, as well as your use of “statistics” I understand your confusion. The point however, kind sir, is that we, as practicing physicians, are overwhelmed with myriad paperwork, most of which has nothing to do with that which is necessary to care for our patients. This says nothing about the confusion our patients have with the same issue at their end of the continuum. By centralizing the “system” as one system in lieu of one payer, a substantial amount of money, time and productivity can be recovered and utilized to a better purpose.Data is more easily retrievable and can be applied to continuously improve the methodology of care and thereby eliminate wasteful practices. These are the advantages of the single system and the point I was attempting to make. Perhaps it was lost is the trees of the particular forest you were investigating?Mitchell Brooks, M.D., F.A.A.O.S. hotnationtalk.com

  • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

    To newheart807,

    I can’t know if you are Mitchell Brooks, M.D., F.A.A.O.S., and I hope that you are not. Your condescending tone, snide remarks, and archaic politeness (“kind sir”) should be beneath Mitchell Brooks’ position and intelligence.

    The primary complaint of Mitchell Brooks’ post is indeed that “practicing physicians are overwhelmed with myriad paperwork, most of which has nothing to do with that which is necessary to care for our patients.” I support lowering that paperwork.

    Brooks then makes the point that “there are differences in excessive spending between private and public sectors.” The implication is that private insurers are wasteful, imposing much greater costs and paperwork than public insurers (Medicare/Medicaid I assume).

    I pointed out that his use of statistics from the Kinsey report are not consistent with that report, to my understanding. Newheart807 has not explained how those figures were derived.

    Brooks concludes that we need a “single payment system” as somehow different than a “single payer system”. But, his suggestion is to copy the Canadians, who have a single payer system. What are we supposed to copy?

    It seems to me that we already have a government mandated, single payment system. Wikipedia reports the provisions of the Health Insurance Portability and Accountability Act (HIPPA) of 1996.

    One intent of HIPPA was to specify in great detail how doctors, hospitals, insurers, and everyone else would communicate about health care information and billing. Here is one part [edited].
    === ===
    Title II: Preventing Health Care Fraud and Abuse; Administrative Simplification; Medical Liability Reform
    Transactions and Code Sets Rule

    EDI Health Care Claim Transaction set (837) is used to submit health care claim billing information, encounter information, or both, except for retail pharmacy claims (see EDI Retail Pharmacy Claim Transaction). It can be sent from providers of health care services to payers, either directly or via intermediary billers and claims clearinghouses. It can also be used to transmit health care claims and billing payment information between payers with different payment responsibilities where coordination of benefits is required or between payers and regulatory agencies to monitor the rendering, billing, and/or payment of health care services within a specific health care/insurance industry segment.

    For example, a state mental health agency may mandate all healthcare claims, Providers and health plans who trade professional (medical) health care claims electronically must use the 837 Health Care Claim: Professional standard to send in claims. As there are many different business applications for the Health Care claim, there can be slight derivations to cover off claims involving unique claims such as for Institutions, Professionals, Chiropractors, and Dentists etc.
    === ===

    This is one small part of what are probably endless rules designed to fit all doctor-insurer communication into one set of computer protocols.

    Almost certainly, its effect has been to constrain development of convenient communication. Market forces and practical reality have been superceded by government rules. I would expect the burden of paperwork to become much less upon relaxation of those rules.

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