Our Common Good

Paul Krugman:

There’s a lot we don’t know about what Mitt Romney would do if he won. He refuses to say which tax loopholes he would close to make up for $5 trillion in tax cuts; his economic “plan” is an empty shell.

But one thing is clear: If he wins, Medicaid — which now covers more than 50 million Americans, and which President Obama would expand further as part of his health reform — will face savage cuts. Estimates suggest that a Romney victory would deny health insurance to about 45 million people who would have coverage if he lost, with two-thirds of that difference due to the assault on Medicaid.

So this election is, to an important degree, really about Medicaid. And this, in turn, means that you need to know something more about the program.

For while Medicaid is generally viewed as health care for the nonelderly poor, that’s only part of the story. And focusing solely on who Medicaid covers can obscure an equally important fact: Medicaid has been more successful at controlling costs than any other major part of the nation’s health care system.

So, about coverage: most Medicaid beneficiaries are indeed relatively young (because older people are covered by Medicare) and relatively poor (because eligibility for Medicaid, unlike Medicare, is determined by need). But more than nine million Americans benefit from both Medicare and Medicaid, and elderly or disabled beneficiaries account for the majority of Medicaid’s costs. And contrary to what you may have heard, the great majority of Medicaid beneficiaries are in working families.


So Medicaid does a vast amount of good. But at what cost? There’s a widespread perception, gleefully fed by right-wing politicians and propagandists, that Medicaid has “runaway” costs. But the truth is just the opposite. While costs grew rapidly in 2009-10, as a depressed economy made more Americans eligible for the program, the longer-term reality is that Medicaid is significantly better at controlling costs than the rest of our health care system.

How much better? According to the best available estimates, the average cost of health care for adult Medicaid recipients is about 20 percent less than it would be if they had private insurance. The gap for children is even larger.

And the gap has been widening over time: Medicaid costs have consistently risen a bit less rapidly than Medicare costs, and much less rapidly than premiums on private insurance.

How does Medicaid achieve these lower costs? Partly by having much lower administrative costs than private insurers. It’s always worth remembering that when it comes to health care, it’s the private sector, not government programs, that suffers from stifling, costly bureaucracy.

Also, Medicaid is much more effective at bargaining with the medical-industrial complex.

Kenneth Davis, President and Chief Executive Officer, The Mount Sinai Medical Center:

Turning Medicare into a voucher-based system is not a solution for our seniors or what ails our health care system in this country. With over 100,000 visits to Mount Sinai last year by Medicare beneficiaries, I am acutely aware and concerned about the changes that are being proposed to the Medicare system. The voucher model — which essentially gives seniors a check and sends them off into the private marketplace — is based on the notion that competition, facilitated by a free market, will bring down the cost of health care. Putting private insurers into the ring with traditional Medicare, it is presumed, will change the trajectory of overall health care costs, and solve our cost crisis. Unfortunately, the answer is not so simple.

Another way we overpay for medical care

The number of Northern California hospital stays resulting in charges of $1 million or more rose sevenfold in the past decade, from 430 in 2000 to almost 3,000 during 2010, according to a Bee review of new data from the Office of Statewide Health Planning and Development.

Most of those bills will be lowered significantly – up to 80 percent – following negotiations between hospitals and insurers. Even then, they will usually still cost more than a typical Sacramento home.

Patients generally pay a small portion of million-dollar bills, but even that can leave them penniless. A recent national study in the American Journal of Medicine using 2007 data found that medical bills were a major factor in two-thirds of bankruptcy cases.

Fees not paid by patients are largely borne by society, as insurers and hospitals spread costs across customer pools.

It’s a hefty tab. Cumulatively, charges associated with Northern California million-dollar hospital stays in 2010 came to $5.2 billion. That’s 7 percent of all hospital charges from two-tenths of one percent of all hospital patients.

Northern California hospital officials say they are aware of the fallout caused by massive bills, and try to find solutions for patients to pay them. But they contend they can do little to reverse the trend.

Health care costs are projected to reach $20,728 this year for a family of four insured through the most common health plan offered by employers, according to the annual Milliman Medical Index.

The index includes the cost of health insurance and out-of-pocket costs, such as deductibles and co-pays.

This year, employers will pay an average of $12,144 toward the total cost, while employees will pay the remaining $8,584 through their share of the cost of health insurance and out-of-pocket expenses.

"When it comes down to it, that’s a lot of money for the typical family of four," said Scott Weltz, a consulting actuary with the Milwaukee office of Milliman, an actuarial and consulting firm with an office in Milwaukee.

This year’s projected health care cost is up almost 70% from an estimated $12,214 in 2005.


But economists agree that the rise in the cost of providing health benefits has depressed wages over the long term.

The Milliman Medical Index, which does not include the cost of dental care, projects that health care costs will increase 6.9% this year. This is more than triple the current rate of inflation.


Nationally, total health care spending increased 3.9% in 2010 and 4% in 2009, the slowest rate of growth in more than five decades.

Part of the slowdown is attributed to the rise in unemployment and increase in people without health insurance. But an array of other factors also could be at work, from physicians becoming more conscious of costs to high-deductible health plans becoming more common.

Total health care spending is even higher than the figures in the Milliman Medical Index: $8,402 a person in 2010. That amounts to $33,608 for a family of four.

The index also doesn’t include what a typical family pays in state and federal taxes for government health programs such as Medicare and Medicaid. And though the percentage increase projected for this year is the lowest in the past decade, the total dollar increase is the largest: $1,335.

What do hospitals charge to remove an appendix? The startling answer is that it could be the same as the price of a refrigerator - or a house.

It’s a common, straightforward operation, so you might expect charges to be similar no matter where the surgery takes place. Yet a California study found huge disparities in patients’ bills - $1,500 to $180,000, with an average of $33,000.

The researchers and other experts say the results aren’t unique to California and illustrate a broken system.

"There’s no method to the madness," said lead author Dr. Renee Hsia, an emergency room physician and researcher at the University of California, San Francisco. "There’s no system at all to determine what is a rational price for this condition or this procedure."

The disparities are partly explained by differences among patients and where they were treated. For example, some had more costly procedures, including multiple imaging scans, or longer hospital stays. A very small number were treated without surgery, though most had appendectomies. Some were sicker and needed more intensive care.

But the researchers could find no explanation for about one-third of the cost differences.

Other developed countries have more government regulation that prevents these wild disparities. U.S. critics of that kind of system favor more market competition, yet the study illustrates that “the laws of supply and demand simply do not work well in health care,” said Dr. Howard Brody, director of the Institute for the Medical Humanities at the University of Texas Medical Branch in Galveston and a frequent critic of skyrocketing medical costs.

The study was published Monday in the journal Archives of Internal Medicine.


Readers share their experiences about the bewildering fees charged by hospitals. Even medical professionals can be baffled by the way costs are determined.

What if “Obamacare” not only helped save Medicare from fiscal doom, but also quashed the GOP’s longstanding goal of privatizing the program? It’s too early to know what will ultimately happen, but new evidence suggests that nightmare scenario for conservatives is within the realm of possibility.

In a development with potentially profound implications — both for Medicare itself and for the broader ideological fight between the two parties over the role of government — researchers writing in the New England Journal of Medicine believe that the growth in per patient Medicare costs has slowed, contra earlier projections that spending would soar at an unsustainable rate. More importantly, the researchers believe this trend will hold over time, thanks largely to the Affordable Care Act’s sweeping cost-control policies.

It’s not yet clear whether the trend will be permanent — one key reason cost growth has slowed has nothing to do with policy or innovation, but rather that the economy has been depressed for years. But the ACA expanded on provider payment savings policies from the 2000s and adopted a plethora of new measures, some of which are already proving successful at reducing spending. On top of that, U.S. medical cost growth, long having exceeded other areas of the economy, is currently at a five-decade low and more closely in line with GDP.

“On the whole, we do not believe that the recent slowdown in Medicare spending growth is a fluke,” wrote the researchers Chapin White and Paul Ginsburg. Thanks to the cost-control reforms over the last decade, they added, “the CBO projects that over the next decade Medicare spending per enrollee will grow substantially more slowly than the overall economy.” They argued that the ACA in particular lays the framework for longer term cost-control by transitioning the provider reimbursement system from paying for quantity to paying for quality, something even Republicans quietly believe is a good idea.

If the cost-growth slowdown continues into the foreseeable future, it could have dramatic implications on the future of health care policy.

During the first six months of 2011, 1 in 3 people lived in a family that had trouble paying its medical bills within the previous year; was currently paying a medical bill over time; or currently had a medical bill the family was unable to pay at all. That’s according to a survey of more than 50,000 people by the National Center for Health Statistics, part of the Centers for Disease Control and Prevention.

Earlier studies had shown that 1 in 5 Americans had trouble paying his medical bills. But this study is larger and asked questions — such as whether people are paying medical bills over time — that researchers have not asked previously.

The news was not pretty.

The concept of support for universal health care is taboo among Republicans who scrutinize the Affordable Care Act — dubbing it the “Job-Killing Health Care Law Act” — and call for its repeal. But a new UC Irvine study challenges the GOP argument that the health care law is too costly, with data illustrating that health care costs on the whole fall when poorer, uninsured patients are provided with insurance.

"In a case study involving low-income people enrolled in a community-based health insurance program, we found that use of primary care increased but use of emergency services fell, and — over time — total health care costs declined," David Neumark, a co-author of the study, said in a release accompanying the findings.

The study — which focused on uninsured people in Richmond, Virginia who fell 200 percent below the poverty line — found that over three years, health care costs fell by almost 50 percent per participant, from $8,899 in the first year to $4,569 in the third after they received insurance. Participants who enrolled in health coverage made fewer trips to the emergency room, which are notorious for running up patient bills. Instead, insured participants went for more primary care visits.

Food for thought…

The U.S. healthcare system is more effective at delivering high costs than quality care, according to a new study that found first-rate treatment for cancer but insufficient primary care for other ailments.

The study, released on Wednesday by the 34-nation Organization for Economic Cooperation and Development, or OECD, said Americans pay more than $7,900 per person for healthcare each year — far more than any other OECD country — but still die earlier than their peers in the industrialized world.

The cost of healthcare in the United States is 62 percent higher than that in Switzerland, which has a similar per capita income and also relies substantially on private health insurance.

Meanwhile, Americans receive comparatively little actual care, despite sky-high prices driven by expensive tests and procedures. They also spend more tax money on healthcare than most other countries, the study showed.

An “underdeveloped” U.S. primary care system is plagued by shortages of family doctors and high rates of avoidable hospital admissions for people with asthma, lung disease, diabetes, hypertension and other common illnesses.

The study from the University of Toronto and New York’s Cornell University says U.S. doctors pay an average of nearly $83,000 each for administrative costs associated with insurance documents. In Canada, for doctors based in Ontario that cost is significantly less at just over $22,200.

In addition, nurses, medical assistants and other hospital staff dedicate nearly 21 hours per week to filing insurance papers and other duties required to push insurance claims through. For the same duties in Ontario, just 2.5 hours are spent each week.

The findings of the study, published in the August edition of the journal Health Affairs, show that the “single payer” health-insurance system in Canada is largely responsible for the difference between countries.


The study, which surveyed physicians on how much time was spent by themselves and other staff on filing insurance documents, said that if U.S. doctors were able to reel in the administrative costs to a level on par with those polled in Ontario, it would result in an annual savings of more than $27 billion for the American health-care system.

Morra said the high financial and time costs can often deter U.S. doctors from working in some medical environments. He noted, however, that the current political climate in the U.S. will likely not allow for a significant overhaul to allow for a streamlining of paperwork to allow doctors more time doing what they do best.