16-07 Segment 2: Fixing the Healthcare Cost Spiral

 

Synopsis: American healthcare is the most expensive in the world. An expert author details some of the causes and possible solutions now being established.

Host: Nancy Benson. Guest: Dr. John Patrick, author, Health Attitude: Unraveling and Solving the Complexities of Healthcare

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What’s Wrong With Health Care

Nancy Benson: Americans are being crushed by medical debt. It’s the number one reason for personal bankruptcy. And surveys show that about 40% of us owe bill collectors for health care. Even insurance won’t necessarily stop it. A new poll by the New York Times and the Kaiser Family Foundation finds that about 20% of people under age 65 who have health insurance are still having trouble paying medical bills. It’s like this nowhere else in the world because American healthcare is so expensive.

Dr. John Patrick: Clearly the biggest problem of all is the cost. We spend almost twice what other countries spend and it’s not because our health care is twice as good.

Benson: That’s Dr. John Patrick, a former board member of the Western Connecticut Health Network and Vice President of Internet Technology at IBM. He’s also author of the book, Health Attitude: Unraveling and solving the complexities of healthcare.

Patrick: Yes unfortunately, this high cost takes a toll on many Americans. People go bankrupt trying to pay their health care bills. Worse yet, some people forego needed treatments because they can’t afford the medications.

Benson: Patrick says there’s a whole raft of reasons why American health care is so expensive—doctors are afraid of being sued, so they order too many tests; information isn’t shared among providers, so the same test may be done again and again; many doctor’s offices are using outmoded technology; and doctors and hospitals are paid through a fee-for-service system which encourages doing more and more.

Patrick: It’s an incentive: the more I do, the more I get paid and that used to be okay back when health care wasn’t that big of a deal but it’s not okay now because it’s really out of control. An example would be a congestive heart failure patient. This is the most common reason that people are admitted to the hospital, CHF: congestive heart failure. So if a patient goes into the hospital with that condition, on average three and a half days later, they’re discharged, the hospital is compensated for the treatment they provided. But then within 30 days, 25% of those people who are discharged are back in the hospital again and so the hospital gets paid again. And if they go back a third time, they get paid a third time. And let’s suppose they go back a fourth time and get an infection while they’re in the hospital, the hospital gets paid to take care of that also.

Benson: What’s more, patients have had little incentive to hold back on their demands for care as long as insurance has been paying for it.

Patrick: We have a high appetite for health care in America. If we have a headache, we want a brain surgeon. And if we have a sore knee, we want an MRI and we want it this afternoon. And because the system has been designed to just pay a fee for everything that gets done, then people don’t mind. They expect it because they’re not really paying for it. Of course we know that one way or another, indirectly they’re paying for it but it’s not out of pocket.

Benson: However, that’s changing as a result of high deductible health insurance policies.

Patrick: It used to be that a very small percentage, 5% or less, of people had a large deductible. Deductibles were small- $500, $1,000. Today, 40% of people have large deductibles and they’re very large. My son, his wife and two kids- they have a health care plan with a deductible of $12,000. And people are attracted or you might say driven to these plans with large deductibles because it’s the only way they can get an affordable premium.

Benson: While high deductibles can be unfortunate for anyone hit with a major illness, Patrick says there’s one good thing about them for the nation as a whole–they’re forcing people to shop for care.

Patrick: An MRI for example can cost $250, it can cost $6,000, so people are beginning to ask, ‘Do I really need that test? Do I really need that medication? And if I become convinced I really need it, then where’s the best place to get it?’” You know a simple example of that is an app on the iPhone, it’s called GoodRX and people use this now to see what’s the cheapest place that I can get a particular medication and you just type in the medication and it will show you a large number actually of places you can get it. And in some cases, using that tool, people find that they can get a drug cheaper by going to Walmart and paying for it than to use their health plan that has a copay bigger than the actual price.

Benson: But what Patrick believes will make the biggest difference in ending the healthcare cost spiral are so-called “accountable care organizations.” Today there are hundreds; before long, Patrick says there will be thousands. They’re paid completely differently than on a fee-for-service model. Instead, they’re paid a flat amount per person by insurers.

Patrick: So for example, a local community, let’s say they have 10,000 Medicare patients and Medicare makes a deal with a hospital where the hospital agrees to take care of the health of those 10,000 people and Medicare agrees to pay them $700 per month. So now, the hospital has a totally different business model than they had before. Before, they get paid for everything they do. Now they get paid per person per month, whether a person is treated or not. So now the hospital has a fixed revenue, a fixed income in other words, and a variable expense. So the first thing that comes to their mind is an attitude change and that attitude change is, ‘Oh, how can we keep people out of the hospital?’

Benson: Twenty-five years ago, insurers developed health maintenance organizations, or HMO’s, with the same idea–paying providers a flat rate per person, no matter how much or how little care they received. But Patrick says accountable care organizations are completely different in execution. HMO’s were criticized for saving money on the backs of patients, by denying care at every turn. That supposedly can’t happen with an ACO.

Patrick: The hospital is evaluated by a set of metrics. Things like, for example, hospital acquired infections or re-admissions. And the consumer gets input on this also, this is unheard of in the past in health care. Consumers actually get a survey if they go to the hospital- every discharged patient gets a survey in the mail where they’re asked, ‘How was the food? Was the room clean? Was it noisy? Did the doctor carefully explain to you what your diagnosis was? Did your nurses explain what medication they’re giving to you and what it’s for?’ It’s a good thing and it’s going to change the focus, or as I call it, attitude of hospitals toward more of a population focus. ‘How healthy is that population we’re responsible for and what clinics could we design that would be helpful to those people to keep them healthier?’ So it really converts, in my opinion, from a system of sick care to a system of wellness in health care.

Benson: So with an ACO, Patrick says it’ll be worth it for hospitals to provide cost-effective care rather than cheaping out completely. In the long run, he says, the concept could save billions of dollars and keep us healthier to boot.

You can find out more about Dr. John Patrick’s book, Health Attitude, through a link on our website, radiohealthjournal.net.

Our production director is Sean Waldron.

I’m Nancy Benson.

 

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