The skyrocketing costs of health care
I was recently asked about why the costs of healthcare are skyrocketing and what consumers, employers and healthcare providers are doing to adapt to the situation.
Here’s a countdown of three big areas of increased cost: (a more detailed discussion of each, which you may wish to use, is provided at the end of this email.)
#3 on my short list, but often first in the news and in the complaints I hear from patients and consumers is the high cost of pharmaceutical medications. The percentage of health care spending devoted to expensive new drugs certainly has risen from about 8% fifteen years ago to about 16% today. HOWEVER, this is actually a huge value because the number and cost of hospital stays, surgeries and doctor visits that result directly from the diseases these new drugs treat has fallen proportionately – and the patients are healthier. Our extraordinary new pharmaceuticals actually represent one of the best values in medical care today. The advancement in technology mirror the pace of computer progress: exponential. So is the cost, not the least of which is caused by increased demands from the FDA to prove safety and efficacy – hundreds of millions of dollars per new drug.
#2 Second is the fact that consumers now demand that all matters of health and wellness be covered by their insurance – everything from cancer treatment (a good place for insurance) to the purchase of Viagra, birth control and even therapeutic massage (more a lifestyle choice in many cases.) This is a financial disaster, because as insurance companies compete to expand the services they cover to meet their customer’s expectations, they must raise rates for everybody. No one had their insurance pay for medication twenty years ago, and mammograms were not covered either. No health plan would have the nerve to deny a mammogrom today! Imagine in the automotive world if you could make your car insurance pay for oil changes, stereo/iPod upgrades or a new paint job for your SUV whenever you felt like it. The skyrocketing cost of car-care benefits force many a motorist to drive uninsured.
#1 Last is the insurance industry itself. All we need to do is step back and take a look at enormity of this profitable bureaucracy. When I started practice twenty years ago there were, on average, 1.8 employees per physician. Now that number is between 4 and 5 and is matched or exceeded by an equal and opposite contingent of paper pusher in the offices of the insurance companies and government health plans like Medicare. I must hire a person to bill their person who sends it back for more information before clearing a bill for payment. The volume of families whose lives are supported health care dollars is simply enormous, and growing every day as new laws such as HIPPA (the federal patient privacy act) spawns whole industries that healthcare providers must pay to make sure they are in compliance with these unforgiving laws. (and we thought OSHA was tough!) We’ve helped buoy up unemployment but have darn near sunk the health industry.
What have doctor and patients and employers done in response to skyrocketing costs? For the most part, employers have been forced to scale back by:
* Denying benefits for part time employees and limiting new hiring to only part time status.
* Removing family members from employee’s existing plans.
* Increasing the portion of the health premium that employees must pay themselves.
* Switching to lower-cost health plans which are more restrictive about who a patient can see or what medications they will pay for.
A promising trend in large companies like Jeld Wend and Les Schwab Tires is to take health care in-house. My experience is a much more efficient and cost effective system, since the for-profit middle man is cut out. We can get things done faster and better.
As a physician, I personally sought to cope by starting Oregon’s first retainer-based medical practice, also called "concierge" or "boutique" practices. They are often misunderstood as being for rich people only, and nothing could be further from the truth; many of my patients, even with low incomes have actually saved money in such a model.
Here’s a countdown of three big areas of increased cost: (a more detailed discussion of each, which you may wish to use, is provided at the end of this email.)
#3 on my short list, but often first in the news and in the complaints I hear from patients and consumers is the high cost of pharmaceutical medications. The percentage of health care spending devoted to expensive new drugs certainly has risen from about 8% fifteen years ago to about 16% today. HOWEVER, this is actually a huge value because the number and cost of hospital stays, surgeries and doctor visits that result directly from the diseases these new drugs treat has fallen proportionately – and the patients are healthier. Our extraordinary new pharmaceuticals actually represent one of the best values in medical care today. The advancement in technology mirror the pace of computer progress: exponential. So is the cost, not the least of which is caused by increased demands from the FDA to prove safety and efficacy – hundreds of millions of dollars per new drug.
#2 Second is the fact that consumers now demand that all matters of health and wellness be covered by their insurance – everything from cancer treatment (a good place for insurance) to the purchase of Viagra, birth control and even therapeutic massage (more a lifestyle choice in many cases.) This is a financial disaster, because as insurance companies compete to expand the services they cover to meet their customer’s expectations, they must raise rates for everybody. No one had their insurance pay for medication twenty years ago, and mammograms were not covered either. No health plan would have the nerve to deny a mammogrom today! Imagine in the automotive world if you could make your car insurance pay for oil changes, stereo/iPod upgrades or a new paint job for your SUV whenever you felt like it. The skyrocketing cost of car-care benefits force many a motorist to drive uninsured.
#1 Last is the insurance industry itself. All we need to do is step back and take a look at enormity of this profitable bureaucracy. When I started practice twenty years ago there were, on average, 1.8 employees per physician. Now that number is between 4 and 5 and is matched or exceeded by an equal and opposite contingent of paper pusher in the offices of the insurance companies and government health plans like Medicare. I must hire a person to bill their person who sends it back for more information before clearing a bill for payment. The volume of families whose lives are supported health care dollars is simply enormous, and growing every day as new laws such as HIPPA (the federal patient privacy act) spawns whole industries that healthcare providers must pay to make sure they are in compliance with these unforgiving laws. (and we thought OSHA was tough!) We’ve helped buoy up unemployment but have darn near sunk the health industry.
What have doctor and patients and employers done in response to skyrocketing costs? For the most part, employers have been forced to scale back by:
* Denying benefits for part time employees and limiting new hiring to only part time status.
* Removing family members from employee’s existing plans.
* Increasing the portion of the health premium that employees must pay themselves.
* Switching to lower-cost health plans which are more restrictive about who a patient can see or what medications they will pay for.
A promising trend in large companies like Jeld Wend and Les Schwab Tires is to take health care in-house. My experience is a much more efficient and cost effective system, since the for-profit middle man is cut out. We can get things done faster and better.
As a physician, I personally sought to cope by starting Oregon’s first retainer-based medical practice, also called "concierge" or "boutique" practices. They are often misunderstood as being for rich people only, and nothing could be further from the truth; many of my patients, even with low incomes have actually saved money in such a model.
posted by John Corso at 10:42 PM
2 Comments:
Bravo Dr. Corso. I appreciate your keen understanding that the benefits pharmaceuticals have provided. However,
1) Drug companies have created many new agents to improve the length and perhaps the quality of life measured on a cost effectiveness basis. However, when you add up the amounts wasted on copy cat drugs, and the amount spent on DTC ads, this must contribute to the ridiculously high costs of pharma agents. Especially in a time when technology, and global sourcing has helped improve the efficiency of drug development and corporate overhead.
2) The biggest disadvantage I see now is the how incentives are no longer aligned in patient care delivery. From insurers whose obligations and decision making are largely determined by shareholders and increasing shareholder value, to physicians who must seek alternatives from direct patient care in order to cover rising costs of practice with declining reimbursements, to patients who think that unlimited "healthcare" is a constitutional right... the entire system is understandably set up to crash under its own weight.
Allign the incentives and we may be able to restore order.
As a new physician who trained in the environment of older physicians complaining about what the current medical practice has evolved into, I too have decided to start my own concierge practice from the ground up. While my practice is not a solution for the healthcare crisis, I can at least provide my patients with the best care that I can provide. Our incentives are now alligned.
~Conciergedoc
Keep up the good work.
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