In-depth Look into Some of The Implications of Health Care Reform

[paul1454]

A lot of us have been voicing our opinions on last night’s passage of the health care bill in the House and I would like to give my opinion on the matter. Ultimately, I can not support the bill passed by the House, not because I do not want to help others, but because I believe there is a better way of doing so that does not create a net loss on society and the economy. Below, I have tried to remain as unbiased as possible, in an attempt to focus on an area that is largely left out of the mainstream media – the economics of the current proposals. I apologize beforehand for not posting it in one of the other threads discussing the matter, but I was afraid this might get lost in the bickering between kicker33 and everyone else. In addition, because this may be long, I may have to break it up into several posts.

These proposals illustrate a tradeoff between equality and efficiency (most good for the most number of people – or utilitarianism). The two primary justifications for health care reform have been the equitable goal of ensuring everyone has access to care and then the economic argument that shifting the burden of uncompensated care to private payers has caused private health insurance to skyrocket. Certainly, reducing the number of those who cannot afford health care is an important policy goal of advanced societies such as the United States. This goal has been the driving factor in the push for the current Senate and House bills. Judged under this framework, it is hard to say the health care bills will not meet their goal. According to a study conducted by the RAND Corporation, the current bills would reduce the number of uninsured by roughly 56%, from nearly 49 million to 23 million by 2019 (http://www.rand.org/pubs/research_briefs/2010/RAND_RB9519.pdf).

Despite this accomplishment, I believe these bills address the country’s problem of health care in the wrong direction by focusing on accessibilitity first and costs second. The significance of health care reform hinges on the number of people cannot afford health care is the costs, which ultimately leads to decreasing accessiblity. Thus, it is the affordability that is the problem. As the President of Anthem Blue Cross and Blue Shield in Wisconsin recently noted, “Insurance is expensive because health care is expensive.” Focusing on reforming health insurance is not going to reduce the costs of health care. In other words, increasing accessibility without focusing on costs is like putting a band-aid on an amputated arm. Unfortunately, rather than seeking to increase access to health care within a framework that better aligns the American health care market so that it can properly control costs, the current proposals seek the opposite.

Before getting into my arguments against the current proposals, I wanted to discuss a general outline of how the bills seek to accomplish their desired objectives (in case you haven’t been keeping up with them). The current proposals accomplish increasing accessibility this by several policies. First, companies offering health insurance coverage will be required to offer insurance to every individual who so desires coverage (guaranteed issue provision). Second, insurance companies will be prohibited from pricing high-risk consumers out of the insurance market by prohibiting increased prices due to factors such as health status, medical condition, claims experience, receipt of health care, medical history, or genetic information. In addition, insurance companies are restricted from adjusting premiums beyond a Congressionally mandated range based on various other factors, such as 1.5 to 1 for tobacco use and 3 to 1 for age. Finally, after ensuring coverage is offered to all Americans, they must be able to afford them. So, prepayable tax credits (you can get them before you file your return) will be given to families with incomes up to 400% of the FPL. In addition, Medicaid will be expanded somewhere between 133% and 200% of the FPL (depending on which bill you are talking about).

Standing alone, the guaranteed issue provisions will help provide access to insurance for high-risk people who have been denied coverage by insurance companies. Similarly, the limits on price adjustments for preexisting conditions will draw more people with high expected medical costs into the market. However, reducing the ability of insureds to adjust prices based on risk ultimately increases premium prices for low risk individuals while simultaneously decreasing costs on very risky. In addition, requiring insurance companies to offer coverage while simultaneously partially eliminating their ability to adjust prices for risk brings about serious adverse selection concerns. In other words, a low risk individual armed with the knowledge that their premiums will not increase as their risk increases could simply stay out of the market by not purchasing insurance until they need care. This is because the law will prevent them from being denied coverage when they later seek to get insurance and even if they wait to get insurance until having preexisting conditino, they will not be charged a rate comenserate with their risk. This is akin to allowing a person to purchase home owners insurance after a fire and requireing the insurance company to cover them.

If left unfettered, the health insurance reform would ultimately lead to very risky consumers entering the market while less risky consumers sitting out until their risk increased. As Bam’s favorite economist Paul Krugman has pointed out, enacting guaranteed issue provisions and limiting risk-based pricing, with nothing else, would result in a “death spiral” of costs. According to Krugman, the only way to prevent the susceptibility for increased adverse selection is to “keep healthy people in the risk pool, which means requiring that people purchase insurance.” (Op-Ed Columnist - California Death Spiral - NYTimes.com). In fact, this is exactly what Congress and the President have done. They have included mandates in these bills that impose tax penalties for those who do not purchase qualified health insurance coverage by 2014. In the Senate Bill, the individual mandate tax equals the greater of 2% of household income or $750 per year (Sec. 5000A). In the House Bill, the tax amounts to 2.5% of adjusted gross income (Sec. 59B). The individual mandate tax, however, may not completely eliminate the adverse selection problem (i.e., Krugman’s death spiral of costs) because it’s effectiveness depends on the individual’s perceiving the cost of the mandate tax as exceeding the benefits received by simply sitting out of the market until one gets sick.

Even if the individual mandate reduces the adverse selection problem caused by the ban of risk-adjustments in pricing and the requirement of guaranteed issue, it does nothing to alleviate the increase in costs placed on low risk individuals. Eliminating or reducing risk-based price adjustment for risk-factors such as age and health status will significantly increase premiums for younger and healthier people, while reducing premiums for the older and less healthy For example, suppose Insurance Company insures A and B. Insurance companies are in the business of paying out less in benefits than they receive in premiums. A is a young adult with statistically a much lower risk than B, who is elderly. Based on actuarial studies, Insurance Company determines it will need to charge A one hundred dollars per month and B one thousand dollars per month to remain profitable. Thus, it needs to collect $13,200 total per year. Now suppose that Insurance Company is prohibited from adjusting prices beyond a ratio of 3 to 1 based on age. Insurance Company could leave A’s premiums unchanged and cut B’s premiums to 3x A’s, or $300. This, however, would leave Insurance Company with only $4,800 in annual premiums. If it’s actuarial analysis were correct and annual claims equaled $13,200 per year, Insurance Company would lose $8,400. This is not feasible for Insurance Company and this option would soon leave it out of business. Accordingly, rather than reducing B’s premiums to fit A’s, Insurance Company could both decrease B’s premium and increase that of A to a point where it collects $13,200 and also charges B only 3x the premium of A. Under this scenario, A would end up paying $275 per month in premiums and B would pay $825. Thus, B’s premiums have decreased by 17.5% while A’s monthly premium has increased 275%. Ultimately, Insurance Company collects the same amount but A has – in effect – subsidized the risk of B. This is what is poised to happen with the enactment of these mandates, significantly decreasing the costs of unhealthy and high-risk citizens at the expense of those who are healthy and low-risk.

 

[paul1454]

A more significant problem, however, is the effects of these proposals on moral hazard. The problem of moral hazard has been summed up rather well by noting that “the curse of insurance contracts is that their mere existence tends to decrease incentives to reduce risk.”( http://www.econ.yale.edu/seminars/apmicro/am00/chiappori-000427.pdf). To the extent that an insured helps consciously or unconsciously to increase the chance of loss, they are creating a moral hazard. For example, without insurance, a homeowner has an incentive to purchase smoke detectors to warn of fire at an early stage so loss may be avoided. However, having fire insurance may result in the homeowner purchasing too few smoke detectors. This is because the perceived cost of a loss from fire has been decreased by the existence of fire insurance. To the homeowner with insurance, the cost of purchasing smoke detectors may exceed the perceived cost of an insured fire, though they would not exceed the cost of an uninsured fire. Put another way, the homeowner bears the cost of the detector while the insurance company receives much of the benefit. This situation, where a party engages in inappropriate, risky, or immoral behavior because they are not ultimately liable for its conduct is referred to as the problem of “moral hazard.”

A key feature of insurable risks are that the losses are accidental, meaning unintended and unexpected by the insured. Most forms of insurance, such as homeowners and auto insurance, are referred to as casualty insurance. Fire insurance does not cover the arson by the owner, nor does auto insurance include intentional damage by the insured. This is because without these restrictions, an insured would have control over the covered peril and could simply incur losses to collect insurance. Accordingly, insurance companies must prevent such actions or else would be unable to stay in business. Accidental and unintentional coverage does not eliminate the problem of moral hazard, but does limit the problem to the risk of loss. Thus, the problem of moral hazard may increase the risk of loss, but it has no direct bearing on loss or peril since those remain outside of the insured’s control.

Conversely, if the auto insurance policy covered non-accidental and intentional acts, the insured would have direct control over the ultimate peril. This exacerbates the problem of moral hazard. By insuring losses within the direct control of the insured, insurance reduces the perceived cost of any given insured good and, thus, more consumers will be willing to purchase that good at the perceived reduced price. For instance, an auto insurance policy that – in addition to accidental coverage – covered acts within the insured’s control, such as repairs and other maintenance would allow the insured to cause a covered loss. Specifically, the policy-holder has direct control over the peril – taking its vehicle to the shop for its sixty-thousand mile service or routine oil changes – that causes the loss – the cost of maintenance. Further, because the perceived costs of the these services have been reduced due to the incurrence of insurance, the consumer will demand more of the covered services and will likely cause the policy holder to obtain oil changes or scheduled maintenance more frequently than it otherwise would in the absence of insurance. In this case, the insured may choose to have its sixty-thousand mile service at the fifty-thousand mark, whereas without insurance the policy holder may have postponed service for an additional fifteen-thousand miles. In this situation, the insured does not simply increase the risk of loss – the risk maintenance will be needed – it directly causes the loss because control of the peril has been placed in the hands of the insured.

In contrast to the typical insurance market, the health insurance does not operate as a typical accidental coverage market and more like the one described directly above. At one time, the United States health care market operated like any other market. Patients demanded high quality services at the lowest price available. At that time, it was the patient who was the consumer as it was common for a patient to pay for doctors, prescriptions, and hospital visits out-of-pocket. The early 1940s, however, laid the foundation that transformed the American health care market from a relatively free and consumer-driven market to a very one where the patients have been ousted from their status as consumers and replaced by third parties such as private insurance companies and governmental entities. Specifically, in an effort to combat wartime price inflation, President Roosevelt enacted wartime price and wage controls within the United States. As with any price and wage control, shortages were destined to result. When wage controls let to shortages of workers, employers sought to entice potential employees in other ways other than wages. As a result, they began offering noncash benefits such as employer provided healthcare insurance. A byproduct of these actions was that as employer provided heatlh insurance was not considered wages, employers sought to pass this on to employees tax free. While the treatment of employer provided health benefits as exempt from gross income was not explicitly recognized under the Internal Revenue Code, subsequent tax court decisions reached that result. While the IRS later overturned the tax court ruling, Congress later solidified the exclusion from federal taxation of employer-provided health care by the enactment of Section 106 of the Internal Revenue Code in 19.

The benefit of this exclusion is significant. By paying for heath care costs through an employer rather than out-of-pocket, an employee can shield a significant amount of income from taxation that otherwise would be subject to taxation at an employee’s marginal rate. Ultimately, this subsidy reduces the overall cost of purchasing health insurance by an amount equal to the taxpayer’s marginal tax rate. According to the Congressional Budged Office, this exclusion has resulted in “a subsidy from the government that reduces the net cost of employment-based health insurance by about 30 percent.” (http://www.cbo.gov/ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf ). In fact, the more health care costs that can be filtered through an employer – or the higher the employee’s marginal tax rate – the larger the benefit to the employee. Thus, employees have an enormous incentive to demand a significant amount of compensation in the form of nontaxable employer-provided health care benefits. Overtime, the tax exclusion for employer-provided health insurance has led employers to demand increasingly inclusive forms of health insurance policies and has significantly decreased the amount of out-of-pocket payments for healthcare services (http://www.cbo.gov/ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf).

Since only 1970, out-of-pocket expenditures have dropped from 40% of all health care spending to around 14% in 2008 (http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf). In fact, a recent survey conducted by the Society for Human Resource Management found that employees value employer-provided health benefits more than compensation (http://www.shrm.org/Research/SurveyFindings/Articles/Documents/09-0282_Job_Satis_SR_Figures.pdf). While the incentive to purchase more and more care through employer-provided heatlh insurance would not be significant if the exclusion was capped, Section 106 provides no maximum amount that can be shielded from income. Similarly, the employer has no incentive to limit the amount of compensation paid in the form of health care as it receives a corresponding deduction for the full cost of purchasing such care. It is not surprising then, that as of 2008, nearly 90% of all privately purchased health insurance was paid for through employers (http://www.census.gov/prod/2009pubs/p60-236.pdf).

In this way, the wage controls enacted during the 1940s led to a tax policy that promotes the positive goal of encouraging health care in the form of health insurance for its citizens. By promoting citizens to purchase health insurance on their own, the tax code reduces public health care expenditures, promotes greater efficiency and equity in the health care system, and even furthers social justice. Unfortunately, incentivizing health insurance at the expense of health care has resulted in significant consequences for the health care market.

As employees have responded to tax incentives by attempting to funnel more and more health care costs through health insurance, insurance companies have responded to this demand by moving away from accidental and unintentional coverage where benefits are outside the control of the insured, to coverage where the insured has direct impact on the receipt of the insured good. For that reason, today’s health insurance policies cover a wide array of non-accidental and intentional heath expenses such as purchase of contraceptives, hair restoration, fertilization treatments, mammograms, maternity expenses, port wine stain elimination, stop-smoking treatments, child care, acupuncture, athletic trainers, midwives, massage therapy, and professional counseling just to name a few (http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2009.pdf). In fact, as of 2008 private and public forms of health insurance paid roughly 86% of all health care costs, up from 59% in 1970 (http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf). Because of the rise of both promoting insurance and also promoting more inclusive insurance, the problems associated with moral hazard are a particularly serious in the market for health care insurance.

By having significant control over many of the insured goods in health insurance, those being health care expenses, patients who are insured have an incentive to over-consume the covered health benefits. In a normal functioning market, the consumer would resist overconsumption because the marginal cost of the additional care would exceed the consumer’s benefit. Because health insurance significantly reduces the consumer’s perceived cost of overtreatment, the consumer is unlikely to object to unwanted treatment. Thus, combined with the fear of malpractice liability, doctors may have a temptation to over-treat and over-prescribe medicines for their patients because they know the patient is unlikely to both object or inquire into the costs of the procedure. In fact, because health insurance has caused consumers to become such passive observers in the costs of their care, the doctor is unlikely to even seek approval from the patient before ordering unnecessary treatments.

In addition, the patient’s lackadaisical attitude caused by moral hazard potentially permits hospitals to set prices above marginal costs or be productively inefficient, given that the consumer lacks the incentive to reduce costs due to the decreased perceived cost of health care (accord http://www.whitehouse.gov/assets/documents/CEA_Health_Care_Report.pdf). Since 1996, the average hospital markup has risen from 85% above cost to about 185% above cost in 2007 (http://www.medpac.gov/documents/Jun09DataBookEntireReport.pdf, p. 90.). According to the Medicare Payment Advisory Commisssion, because “few patients pay full charges, rapid charge growth may have little impact on hospital financial performance” as patients have little incentive to demand reduced costs when their perceived payment is relatively low. As a result, the market may overproduce goods that—if given perfect information—buyers would not purchase. Consequently, by removing incentives of patients to question prices, or treatments, the current health care market creates a noncompetitive market where sellers need not act as “price takers” and can instead act as “price makers.”

 

[paul1454]

In the only long-term experimental study of its kind, the RAND Health Insurance Experiment studied nearly 8,000 individuals over an eleven-year period to determine the effects of cost-sharing on utilization and health (http://www.rand.org/pubs/research_briefs/2006/RAND_RB9174.pdf). The individuals were assigned one of five health insurance plans ranging from zero-deductible plans to high deductible plans. The experiment made several key findings. According to the survey, “participants who paid for a share of their health care used fewer health services” than those who paid zero out-of-pocket expenses. What was most surprising about these findings was that the cost-sharing “had no adverse effects on participant’s health.” This finding has lent support to many economists’ assertions that the incentives resulting from an increasingly inclusive health insurance market leads to overuse of health care in which the patient receives relatively little health benefits. In other words, the more health care is paid through health insurance, the more the consumer uses services that do not positively contribute to the patient’s overall health. A congressional staff report released in 1989 suggested that as of 20 years ago, roughly 20% of medical services may be unnessesary. While other estimates differ, recent studies suggest that “the overall spread of health insurance between 1950 and 1990 may be able to explain half . . . [of the increase in spending] over this time period” (http://www.cbo.gov/ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf).

Rather than combat these problems these proposals simply compound the problem. Clearly, requiring all consumers to enter the risk pool encourages insurance coverage. More importantly, the current proposals also have the effect of increasing the inclusiveness of health insurance by limiting the amount of out-of-pocket payments that can be charged to the consumer and mandating minimum levels of coverage for insurance plans offered through health insurance exchanges. According to the Office of the Actuary at the Centers for Medicare and Medicaid Services, the increased demand for medical services may lead to price increases, cost shifting, and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage. It is no surprise that nearly every study of the current health care plans has found that, while tax subsidies may result in lower out of pocket costs to the consumer, the true cost of health care will increase.

According to the RAND Corporation cost estimates, the current proposals will accelerate rising health care costs (http://www.rand.org/pubs/research_briefs/2010/RAND_RB9519.pdf). Even the Chief of the CBO says the cost “curve is being raised.”( Budget Analyst Assails Cost of Congress's Health-Care Proposals - washingtonpost.com). In fact, a recent CBO Report indicates that current proposals could result in an increase in of 10 to 13% above the status quo (http://cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf). Moreover, a study conducted by consulting firm Oliver Wyman suggests that “Premiums for individuals and families purchasing coverage on their own will go up 54%. Premiums for small businesses will go up 20%. Both numbers are over 5 years and both numbers exclude the impact of medical inflation.” (http://www.bcbs.com/issues/uninsure...otection-and-Affordable-Care-Act-on-Costs.pdf). Massachusetts has enacted similar legislation. The result has been an explosion of premiums (http://www.john-goodman-blog.com/the-costly-insurance-exchange/). Thus, it appears that current proposals have sacrificed the goal of slowing the cost of health care in favor of ensuring full health insurance coverage, stability, and security for all.

Considering that the problems of rising health care costs are the true reason for the current lack of care, a bill that merely covers a portion of the cost while accelerating future increases is hard to justify. But, that is exactly what this bill does. While I am not so concerned that the reduced reimbursement rates of Medicare and Medicaid will eventually lead to decreased care, I am concerned that the rising costs will eventually end up more than even the government can cover.

Instead, I would have suggested an alternative approach. To me, the first step in properly addressing the nation’s health care crisis requires the realization that the main problem of the American health care system is that the explosion of health care costs is the main barrier to accessibility, is what is creating the strain on federal budgets, and has resulted in decreased competitiveness for American businesses. When looking at the explosion of costs, it is important then to realize that health insurance is, economically speaking, susceptible to inefficiency that has been accelerated by current tax policies. Health care reform based on the goal of full insurance, in its current form, will never be efficient. However, removing incentives for health insurance from the current market lead to fears of decreasing accessibility. Fortunately, “health insurance” is not the same as “health care” and the former is not necessary for the latter. By first addressing rising costs and then, within that framework, addressing health care accessibility, policy makers can both address improving coverage for citizens while also removing the distorted incentives that have resulting dramatically rising health care costs – a result that is impossible when the problem is approached from the other direction. For those concerned about equity, subsidies can be put in place (or current entitlements can be expanded) to ensure care to those in need during the transition.

Because some economists consider the problems causes by the exclusion for employer-provided health insurance from taxation the main driver of these costs, Congress must first remove these perverse incentives that have wreaked so much havoc on the U.S. health care market. By reducing this exclusion, the choice between paying for health insurance and simply paying for health care will be equalized. Over time, this should reduce the demand for insurance – currently 90% of which is paid for by employers – and return the cost-conscious consumer to the health care market. By placing the role of the cost-conscious consumer back in the hands of the patient rather than with a third party, current cost increases are expected to level or decrease over time. Ultimately, increasing affordability leads to a de facto increase in access to care.

The premise of this idea has been supported by the Center for Economic Advisors, who suggest that one of the main objectives to improving both quality and cost of the American health care market is to “[g]ive[] patients a greater role.” According to the CEA, realigning incentives inherent in other goods and services market from a third-party structure to a more consumer-driven role can “lead both to better alignment of treatment strategies with patient preferences and to lower costs.” (http://www.whitehouse.gov/assets/documents/CEA_Health_Care_Report.pdf p.24). According to the President’s Counsel of Economic Advisors, a shift in higher deductible, less inclusive, coverage would increase wages because it “would reduce the growth rate of employer-sponsored health insurance premiums.” (p.9). The success of reducing these incentives in favor a more consumer driven has been well documented. (see e.g., http://newsroom.cigna.com/images/56/1209_CIGNA ChoiceFund_Study.pdf).

Those who view the government’s role as ‘equitable,’ may find the elimintation of this exclusion troubling at first. However, you should note that the benefit of a tax exclusion/deduction hinges on (1) your marginal rate; and (2) the amount of the deduction. Thus, a person who pays tax at a 0% marginal rate (i.e., the poor and much of the lower-middle class) receive no benefit from the exclusion because they wouldn’t be paying tax anyway. It is the wealthy individual with a high-dollar plan that benefits the most.

In addition, I would merge Medicare and Medicaid, putting income limitations on Medicare recipients. There is no reason for a retiree with $2 million in assets to receive Medicare benefits.

 

[MG1968]

did you just write all that yourself, or did you just copy and paste someone else' article without any kind of attribution?

 

[paul1454]

Had most of it prepared beforehand, but it is my work. Its for a publication I've been working on as of late.

PS. Some of the facts were from books so I couldn't paste a link and didn't want to clutter it up with cites.

 

[volinbham]

Excellent work Paul

 

[OrangeEmpire]

Paul, I have a chubby!

 

[T-TownVol]

Good read......wait....I thought that there were NO other ideas on how to fix healthcare.....the Dems are the only ones that know what is best for all of us

 

[Oldvol75]

You had me at I don't like the healthcare bill.....

 

[paul1454]

^^^ Haha.

I was really hoping to get some debate going from the other side with this write-up, but it looks like I may have been a bit too long-winded to hold their interests to the end. Oh well. :boredom:

 

[volinbham]

^^^ Haha.

I was really hoping to get some debate going from the other side with this write-up, but it looks like I may have been a bit too long-winded to hold their interests to the end. Oh well. :boredom:

The other side prefers to believe that you want people to die.

 

[BigPapaVol]

The other side prefers to believe that you want people to die.

And that it's purely about opposing Obama's agenda. No chance that the agenda is incredibly objectionable.
Posted via VolNation Mobile

 

[tri_vol]

I had this exact debate with a couple of people in a sports bar tonight. Their arguement was it is the socially right thing to provide insurance to everyone. For some reason they couldn't see that giving insurance to everyone is not the solution.

What really left me confused is when I raised the question of should smokers, alcoholics or people who choose an unhealthy lifestyle be given free health insurance? Their answer was yes because those people were a product of their enviroment. I feel everyone can make their own choice. If you consistently make negative lifestyle choices, why should it be up to society or government to bail you out? The attitude of some individuals is amazing.

 

[kiddiedoc]

You see very well versed on the details of the plan. A huge concern of many doctors (many of us who are NOT members of the AMA due to political discrepancies) is the lack of any real attention to tort reform. What is your take?

 

[paul1454]

I definitely think tort reform is something that needs to be addressed in any overhaul. I am not a big fan, as of yet, on the idea of putting limits on damages because I look at that as akin to a government imposed wage control. Nevertheless, I must say I have not thought too deeply on what I would consider the ideal structure of tort reform. That being said, I do think that the impact on health care costs of malpractice liability is not just a testament to problems for doctors. It signifies a glaring whole in our entire judicial system. It is far too easy to sue someone today and, in most cases, the plaintiff has nothing to lose other than a filing fee if they lose. Because of this, I think if Congress were to do anything, they should impose federal rules that require the non-prevailing party to I definitely think tort reform is something that needs to be addressed in any overhaul. At the outset, I must point out that I am not a big fan, as of yet, on the idea of putting limits on damages. I look at such caps as akin to a government imposed wage control. That being said, I believe the problems of medical malpractice liability can be lessened without placing caps on damages. First, I think that the impact on health care costs of malpractice liability is not just a testament to problems for doctors. It signifies a glaring whole in our entire judicial system. It is far too easy to sue someone today and, in most cases, the plaintiff has nothing to lose other than a filing fee if they lose. Because of this, I think if Congress were to do anything, they should impose federal rules that require the non-prevailing party to pay the prevailing party’s costs and fees. This will at least cut down on frivolous claims. Second, I think shifting to a more consumer driven system will cut down on at least some of the remaining medical malpractice problems. This is because, once consumers are reconnected with the costs of care, they will begin refusing treatments to which they perceive the costs exceeding benefits. At least in these cases, to the extent that treatment was not provided in accordance with the local standard of care, the patient’s contributory negligence of refusing such treatment will prevent recovery – assuming the doctor properly informed the patient. Finally, if these two systems proved inadequate, I think enacting non-economic damage caps may be a feasible solution.

I must say I have not thought too deeply on what I would consider the ideal structure of tort reform. In fact, if you have suggestions, I would love to hear them. It is an area that I admittedly haven’t examined in-depth and am always looking to learn.

 

[volinbham]

You see very well versed on the details of the plan. A huge concern of many doctors (many of us who are NOT members of the AMA due to political discrepancies) is the lack of any real attention to tort reform. What is your take?

How much defensive medicine do you think is being practiced?

 

[paul1454]

How much defensive medicine do you think is being practiced?

In addition, of that amount, how much do you think is facilitated by the fact that the patient has little to no concern over the costs of his or her care? In other words, if the patient had to pay for these additional treatments that are purely defensive, what percentage of patients do you think would refuse them if they were paying for their treatment out of pocket?

 

[volinbham]

In addition, of that amount, how much do you think is facilitated by the fact that the patient has little to no concern over the costs of his or her care? In other words, if the patient had to pay for these additional treatments that are purely defensive, what percentage of patients do you think would refuse them if they were paying for their treatment out of pocket?

I know LG hates personal anecdotes but:

I have a friend who provides HI for his employees but personally decided to not use the group plan and go with an HSA.

As a result, he discusses options with his doc based on out of pocket costs and effectiveness likelihood of alternative courses of care.

Sounds like an informed way to do things no?

 

[VolsNSkinsFan]

Hey Old People, dont forget to bring your reading glasses to Dinner because now every menu in American is going to have to have the Calorie count on it

The Associated Press: Health law will make calorie counts hard to ignore

 

[paul1454]

I know LG hates personal anecdotes but:

I have a friend who provides HI for his employees but personally decided to not use the group plan and go with an HSA.

As a result, he discusses options with his doc based on out of pocket costs and effectiveness likelihood of alternative courses of care.

Sounds like an informed way to do things no?

Can't say that I'm surprised. That's exactly what the RAND corporation found in their experiment and what CIGNA recently found in a similar experiment on HSAs. It is strange that the problem of third-party payments has alluded so much of the public.

 

[kiddiedoc]

How much defensive medicine do you think is being practiced?

While it would be difficult to enumerate: an immense amount, especially in emergency care. It is shocking to see how often my kids with cold symptoms get a bevy of tests, x-rays, and bloodwork for things that I can see in my office and diagnose with a reasonable office visit fee. Minor head injuries often get CT scans, headaches get MRIs, and a multitude of adult "issues" get scoped, scanned, and (gasp) operated on in fear of missing something.

On the topic of tort reform: non-economic damages MUST be capped, as these cases often amount to illogical and emotionally-driven settlements or rulings that put enormous strain on insurance premiums. It would also be very helpful to place stipulations on the payment of the costs of what amounts to be trivial lawsuits (i.e. the plaintiff should be held responsible for court costs).

 

[kiddiedoc]

In addition, of that amount, how much do you think is facilitated by the fact that the patient has little to no concern over the costs of his or her care? In other words, if the patient had to pay for these additional treatments that are purely defensive, what percentage of patients do you think would refuse them if they were paying for their treatment out of pocket?

That's hard to determine, but I can tell you that I often allow my patients to help decide the course of treatment based on cost, and they often choose the less-expensive route in non-emergent cases.

Example: antibiotic A is a good choice, and may cost $10. However, if there is a resistant bacteria, and symptoms don't improve, we may have to use something more broad spectrum and expensive, in which case I have them call back in a couple of days. Or: if an injury does not respond to conservative care and rest, then we consider an MRI or additional X-rays.

A little education and some TLC goes a long way. . . .two aspects of care that may become more difficult as the burdens of overpopulation and decreasing reimbursement increase under the new plan.