Healthcare Reform: Treating the Cause, Not Just the Symptoms
By Candidate Dr. Jim Kelly
To Hollis Voters,
Affordability cannot be significantly changed without health-care reform. What specifically have the Democrats proposed to reform health care except new taxes and a nebulous Medicare for all? Why, exactly, do they think MORE government will work when it has failed so dismally in the past? Ask them when you meet them. If you wish to have health-care reform, does it make sense to hire an attorney? Before you can cure a disease, you need to know its cause. Otherwise, you’re just treating a symptom and waiting for more symptoms to present. Here are the causes of some of the costs, and a fix for health care in New Hampshire. This is knowledge which Republicans feel you need to know to make an informed decision in November. It is not political sound bytes. Hollis voters are smarter than that.
We all know that the health-care system in America is broken. It is unsatisfying for providers to manage patients. It is too expensive and it is too convoluted for administrators. For patients it is frustrating, indifferent, and expensive. It seems to work only for CEOs and investors of pharmaceutical companies. I will chronicle how we got here, and provide reasonable solutions which can be attained at the statehouse.
The first intervention of the US government in health care occurred in the 1840s to provide an inducement for Native Americans to relocate on reservations. It is currently called the Indian Health Service (IHS) and it is an abject failure. After 150 years of effort, every outcome metric is worse than in third-world countries. It is government’s example of cradle-to-grave health care. And they are still pretending it works. And they cannot manage it effectively for a segment which comprises fewer than 2% of US population.
The shooting of President Garfield in 1891 (and his subsequent negligent health care for three months at the hands of the 12 best surgeons in America) was the impetus for government standardization of the quality of education at American medical schools. With reform, the number of medical schools at that time dropped from 135 to fewer than 30. This was the first government control of physician supply, but it was not the last. Think about why we import so many of the world’s physicians. When supply goes down, costs go up.
During WWII, the government froze wages. Businesses had to compete for workers and started providing health care as a benefit. This benefit persisted after the war and was institutionalized by the IRS when they ruled that health care was a legitimate business expense and companies can deduct the cost. But the individual workers could not. The government incentivized worker health benefits in lieu of wages.
By 1966, company-sponsored health insurance left millions of retirees without health care at a time in their lives when they needed it the most. Medicare attempted to correct this. Initial costs were estimated to be $138 million. The actual cost in the first year was over $1 billion. In 1967, Medicare projected the cost to be $9 billion by 1990. Instead, it was $110 billion. That is not a rounding error; it is a different economic universe. Medicare institutionalized some things which we still have. The first is a fee-for-service payment model where payments to providers are based upon the services rendered. Sounds legit, right? Yet that system eliminated any incentive for anybody to control costs. And it incentivized doing as much as possible—more office visits, more labs and x-rays. So, in order to control costs, Medicare decided to pay about 30% of the actual physician “customary” charges. Therefore, a physician charge of $10 was being paid about $3. In response, physicians (hospitals, etc.) raised their charges to $30 to receive the original $10. Look at your current “Explanation of Benefits” (EOB) to see where we are today. Those patients without insurance now had to pay $30 for services which previously were $10. The second thing Medicare did was prevent providers from offering reduced fees to the uninsured or poor. End of charitable care, hence Medicaid with similar rules. Fast forward 60 years and you can see where this is going: government control of pricing in health care.
In the 60 years since Medicare began, various rules and regulations with good intent have caused the administrative costs to skyrocket, all without improving patient care. Clinical Laboratory Improvement Amendment (CLIA) added thousands to the cost of using a microscope and doing labs in a private practice. Hence, lab corporations and additional charges. Institution of procedural coding to neutralize geographic payment variance between Beverly Hills and Coos County required hiring new employees to review the medical record to be sure services provided had the right code. Another layer of administrative cost.
In 1983, as Medicare was still hemorrhaging dollars, they realized that fee-for-service was not controlling costs. They instituted diagnostic related groups (DRGs) where a specific diagnosis would result in a specific payment regardless of actual costs. But all hip replacements are not created equal. Some have complications, some have potential risk (people with previous heart attacks, for example). The DRGs with potential complications were paid more. Now, the medical record was not just an instrument to document care—it became a fiscal instrument to glean additional payments for secondary and tertiary diagnoses. Moreover, it incentivized early hospital discharge, without compensation for outpatient or home care. Another layer of administrative cost. Consultants multiplied, infrastructure increased, and it was absorbed into the system.
In 1992, Medicare introduced the Relative Value Unit (RVU) in an effort to equalize price differences for care. All procedural codes (extended office visit, short office visit, surgical time, etc.) received an RVU. The end result was, essentially, the more people a provider saw on any given day, the more the provider was paid. Medicare incentivized the impersonal, assembly-line office visits.
In August 1996, the Health Insurance Portability and Accountability Act (HIPAA) was signed into law. It was projected to cost about $113 million as a one-time cost. Compliance (with IT, attorneys, suppliers, and other administrative costs) now accounts for $8.3 billion annually. A factor off by 500. Not a cent for improved care.
Obamacare, passed in 2010, had a projected cost to initiate their website at $91million. Its actual cost was $2.1 billion. For a website. Do you see a pattern here? The requirement for electronic medical records costs hundreds of thousands of dollars for each provider, not including annual IT support. This was the death knell for independent primary-care medical providers. Another layer of administrative support, without changing medical outcomes.
We now have Accountable Care Organizations (ACOs) tracking population health data to ascertain social determinants of health (race, age, zip code, nutritional status, gender, incarceration, marital status etc.)`to prove that their medical care actually reduces costs. Another administrative layer absorbed into the system.
This is government-controlled health care. And past performance is the best predictor of future performance. Government simply does not belong in this economic sector, despite what the Democrats and Stefany Shaheen say. Those who promote single payer or Medicare for all do not really understand or ignore government incompetence, and the rule of unintended consequences.
A fix: Direct Patient Care (DPCs) clinics are sprouting up. These organizations do not accept insurances (Medicare) and therefore do not have to include Medicare’s administrative costs in their model. They are not fee-for-service so there is no incentive to add on tests or diagnoses. In New Hampshire, there are about 30 DPCs currently active. Current membership fees are about $125/month (annually less than most deductibles). As primary care, they can take care of about 80% of all medical issues. The reduced costs of ancillary services are passed along to the patient. There is no incentive for rapid turnover of patients. Telemedicine is available to reduce travel expenses and time for many chronic medical issues. And most importantly, they put health care back into the competitive marketplace. We have already seen competition reduce the membership fees. The 20% of medical care which is not covered by DPCs will still require catastrophic care insurance. But an 80% solution is still better than what are currently untenable health-care cost increases.
I will be supporting and promoting DPCs in Concord. I intend to hit the ground running and bring my experience to the Health and Human Services committee. With enough DPCs available, there can be a shift so that Medicare dollars follow the individual and not the clinic. Where insurance dollars follow the patient and not the workplace. Patients can then vote for their health-care provider with their wallets.
This is a very condensed presentation of a complex issue. Again, it is not political sound bytes. If you wish more information or would like to contact me directly to discuss some of this, please go to www.commonsensefornh.com
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Respectfully submitted to the voters of Hollis,
Dr. Jim Kelly
Candidate for State Representative
Hillsborough 35
