American’s health cost problem has no easy fixes

It is clear that healthcare in the US is more costly than in any other place in the world. We spend 18% of the gross domestic product on healthcare and our outcomes are no different than those of other industrialized nations who spend less than half that amount. How did we get here and what are we to do about it?

Recently, an article appeared in the New York Times that explored the increased costs of particular procedures in the US today. In the piece, Elisabeth Rosenthal provides insight into possible reasons for the elevated cost and the ballooning trillion dollar healthcare deficit.

Certainly, insurers, hospital systems, industry and physicians all play a role in the high cost of care in the US. In general, US healthcare systems tend to test more (and the tests are much more expensive here) and provide heroic care in the late stages of life (and this care may not have a real impact on longevity or quality of life). Ms. Rosenthal uses the colon cancer screening procedure known as colonoscopy as an example of a test that has widely variable cost. Depending on where you get your test the price tag can vary by thousands of dollars — but in other countries it can cost as little as a few hundred dollars.

Ms. Rosenthal certainly makes many good points in her article and gives us all pause — industry, hospitals, insurers and physicians all share some responsibility. However, one important group that she does not mention as a contributor to the escalating healthcare costs are the trial lawyers and the American Association for Justice.

First and foremost, I believe the lack of tort reform and the highly litigious environment that has been allowed to thrive in medicine in the US is a major contributor to escalating cost. Physicians must often order more tests than necessary in order to avoid frivolous lawsuits and ultimately find themselves practicing defensive medicine. Unfortunately for US citizens, most politicians are attorneys by profession and they tend to look after their own. There has been little activity on tort reform — the trial lawyers are an incredibly powerful lobby. Medical lawsuits have been allowed to continue unchecked and settlement amounts continue to rise to astronomical levels. Many lawyers have made fortunes by chasing ambulances.

Secondly, as physicians begin to see revenue fall and Medicare/insurance reimbursement are cut, many turn to free standing surgical centers to increase revenue. By owning the facility and treating the patient there instead of the hospital, the physician group is able to recoup a facility fee that is normally collected by the hospital.

In addition, Medicare billing (which often makes no sense whatsoever) will pay higher fees if the procedure is considered outpatient or is performed in an ambulatory surgical center. In addition, academic institutions often are reimbursed at higher rates in order to offset the cost associated with training young doctors. A more standardized approach to determining payments and reimbursements for procedures and tests must be put in place. Medicare and CMS reform is essential to this process.

Currently the application of common sense appears to be quite absent from the government regulation and Medicare payment determinations. The system is full of waste and redundancy. Although an entirely new coding system for Medicare is due to be launched soon, I am certain that this new process will solve none of our current problems.

Our healthcare system is sick. Until Washington stops playing politics and calls all parties to the table for talks of compromise, reform and action, nothing will change. The system cannot be fixed by only dealing with one component. We must strive for tort reform so that physicians can do what is in the best interest of the patient rather than what must be done in case they are sued one day.

Politicians must stand up for the American people and stop being swayed by the trial lawyer lobby. Standardized, equitable and sensible payment systems must be put in place so that the system is not abused by moving procedures from one location to another in order to receive higher payments.

This is a big job. There is no easy fix. But we must commit to finding a solution so that the US can continue to claim to have the best healthcare in the world.

Kevin R. Campbell is a cardiac electrophysiologist who blogs at his self-titled site, Dr. Kevin R. Campbell, MD.

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  • mmer

    //I believe the lack of tort reform and the highly litigious environment that has been allowed to thrive in medicine in the US is a major contributor to escalating cost//

    A couple of counterpoints to tort reform..

    “According to the actuarial consulting firm Towers Perrin, medical malpractice tort costs were $30.4 billion in 2007, the last year for which data are available. We have a more than a $2 trillion health care system. That puts litigation costs and malpractice insurance at 1 to 1.5 percent of total medical costs. That’s a rounding error….A 1996 study in Florida found defensive medicine costs could be as high as 5 to 7 percent. But when the same authors went back a few years later, they found that managed care had brought it down to 2.5 to 3.5 percent of the total.”
    Tom Baker, a professor of law and health sciences at the University of Pennsylvania School of Law and author of “The Medical Malpractice Myth”

    “Eliminating this practice of “defensive medicine” is a primary
    justification for tort reform. On the other hand, however, liability creates incentives for providers to take greater precautions and avoid unnecessary risks. By this logic, reducing liability could increase costly medical errors and encourage providers to recommend profitable but unnecessary and even risky treatments, increasing health care costs and lowering the quality of care..”
    Does Tort Reform Reduce Health Care Costs?, NBER study

    //Medical lawsuits have been allowed to continue unchecked and settlement amounts continue to rise to astronomical levels//

    There are caps in many states providing at least some “check” – for some of these caps, they were set in the 70′s and were not adjusted for inflation, so in today’s dollars they are less than half of what they were set at. Also, only 4-7% of those injured actually bring a case, so it could be worse!

    • doc99

      Thank you for bringing the basket full of old chestnuts to the table. Though most med mal suits result in a defendant’s (doctor’s) verdict, the victory is truly pyrrhic, resulting in damage to the doctor’s sense of competence and self-worth with collateral damage to family, friends, colleagues, and ultimately patients.

      Moreover, the adversarial system works against the healthcare ethos where team effort should be the guiding principle. The tort system is extremely wasteful, time consuming and destructive.

      These costs are far more difficult to measure but need to be addressed rather than dismissed out of hand. Moving forward to restore balance to the system should be the rule, not the exception. I’ve no doubt that refinements could be made which insure fair, just and timely compensation to those injured while restoring/retaining the trust of medical professionals in working toward the goal of patient safety. This would also help motivate physicians to begin to reverse years of defensive behavior not easily nor quickly unlearned.

      OK, I’m done now.

  • civisisus

    There may be a case for more attention to tort reform, but unfortunately Dr Campbell’s meandering screed does not adequately advance it.

    Bring facts, Dr Campbell. Bring details. Show how in places where reforms (and “reforms”) have been implemented, they have either improved patient care & safety or curbed soaring costs -all the better if they’ve done both, of course.

  • buzzkillerjsmith

    The malpractice thesis is rubbish. ignore it.

    Cost depends on volume of care and cost per unit volume.

    1. Volume of care. This has increased due to increased population, aging of the population, societal factors. and technological change. Tech change refers to the fact that we do a lot of things now that we did not use to do. MRIs and new anticoagulants are two examples. Societal factors include such things as induced demand for care (advertising) and the general idea that we should get what we want when we want it. This is in the air and will not change soon.

    Note that in medicine, unlike in, say, manufacturing, tech advance often does not lead to decreased prices because it increases the need for labor instead of replacing labor. New surgical techniques still require surgeons. Curious how many persons trained in industrial techniques either do not understand this or refuse to understand it.

    2. Cost per unit of care. Here is where the US is an outlier among advanced countries. Things that we do simply cost a heck of a lot more than the same things costs in Canada or the UK or Germany. The New York Times is doing a series of articles on this.

    Doctors, nurses and other HC providers generally get paid more here. Some doctors gouge. Hospital pricing is opaque which creates huge opportunities to gouge. These opportunities are often taken.

    CorpMed is interested in maximizing profits. The idea that we as a society are entrusting our medical system to CorpMed would be hilarious were it not so vicious. If you don’t know what I mean yet, you will.

    Insurance companies cost billions and provide no useful societal function. Drug companies gouge.

    We’ve got some work to do on factor 2.

    • charles smith

      Exactly

  • DavidBehar

    It sure does have a simple solution. Get rid of the vile lawyer internal traitor. I can cut cost in half, provide top of the line insurance to the uninsured, and improve outcomes by that simple measure.

    A direct action movement is needed to take the fight to the lawyer hierarchy that runs the three branches of government. At some point, there will be a decision to arrest these 15,000 traitors, give them an hour’s fair trial, then execute them all on the spot, by shooting them in the head in the basement of the court.

  • Anthony D

    That’s way ObamaCare will fail as it will cause us more in the long run and drive up the cost of doing business especially for the small companies. It will be a drain as now those who work will be paying the premiums for those who choose not to work and much like social security will become a bottomless pit that they have gutted to fund other pet projects. Our government has never been efficient at oversight of any thing that they have created. Waist, fraud and abuse is rampant in every program they have attempted.

  • Marc

    Bull pucky! We have had tort reform of the sorts proposed by conservatives, and Republicans, since 1975 in California, and it hasn’t resulted in any reduction in health care costs.

    Doctors and hospitals over test and over treat because they get paid to do so. And so long as the government and health insurers continue to reduce reimbursement rates, the trend will continue, and likely get worse.

    Blaming our tort system is disingenuous at best.

    The real truth is for-profit, fee-for-service medicine doesn’t work, and unless we come to that realization soon, our entire health care system is doomed.

    • SBornfeld

      I assume you’re referring to MICRA

      http://en.wikipedia.org/wiki/Medical_Injury_Compensation_Reform_Act

      Of course, we’re doomed anyway. But as long as we’re rearranging the deck chairs on the Titanic, perhaps you can point to something that might work here, and whatever position/perspective/bias you may be coming with.

  • SBornfeld

    Do you really want agriculture to be the model followed in medicine?
    If we are to eliminate FFS (and, I presume, put physicians on a salary), what are you prepared to do to see that doctors are well-prepared to practice without graduating with a few hundred grand in debt at age 30?
    I suspect that many who advocate elimination of FFS expect that many medical services will be performed by so-called “mid-level providers”.
    I’d love to see how those “quality metrics” work out. From where I sit, keeping capitated managed care honest is a grand idea, but it’s got to get there first. And all the Dr. Berwicks in the world aren’t going to get to 3 or 300 aims if we start from the position that only physicians have motivations, perverse or otherwise.