Caution Needed When “Fixing” Healthcare

This week’s Courier Herald column:

Healthcare has been the dominant political issue for the past five years, with the battlefield and marching orders coming almost exclusively from Washington DC. Democrats managed to use absolute majorities in Congress and the White House to implement the Affordable Care Act, a/k/a “Obamacare”. Republicans managed to use the overreach to take the U.S. House in 2010 and the Senate in 2014. Democrats, however, were successful in re-electing President Obama in 2012.

Thus, in the battle over healthcare we now have the customary DC gridlock. While Republicans may manage to get a bill through Congress to repeal the ACA, it is highly unlikely that the President will repeal his signature legislation during the final two years of his term. The only real hope to break the gridlock is a pending Supreme Court ruling that will decide if citizens that did not set up their own healthcare exchange are eligible for premium subsidies.

This ruling, expected this Summer, will most likely come after Georgia’s General Assembly has gaveled to a close in early April. As such, while many realize much of Georgia’s healthcare delivery system is fundamentally broken, the state has only minor control over what can be accomplished locally. And yet, we have a crisis in rural areas with critical access hospitals.

Four rural hospitals have closed in the last 15 months. 15 hospitals are on the brink, with six considered operating “day to day”. Misty Williams of the Atlanta Journal Constitution recently took an in depth look at the problem, noting that rural hospitals lose money on 80% of the patients they see. They would need to make 300% of costs on their private pay patients just to break even.

Most acknowledge that some of these hospitals have no viable economic model. And yet, Georgia cannot turn our back on the 1.8 million citizens who rely on these hospitals and their physicians. Those who have access to state of the art facilities in metro Atlanta and Georgia’s larger cities should not look at this as just a rural Georgia issue. Rural hospitals are the canary in Georgia’s healthcare mine.

Governor Deal is expected to introduce several pilot programs to determine if other economic models than the traditional critical access hospital can work in some of Georgia’s most rural areas. These are the result of a year long committee of these providers, legislators, and other rural local officials who understand the need.

And yet, there will remain fundamental cost of service problems for all of Georgia’s hospitals, with rural ones showing the most strain. The AJC’s Virginia Anderson recently highlighted an example where Medicaid pays just over $40 for an office visit of “moderate complexity”. Medicare would pay roughly $72, while commercial insurance pays an average of $87. Even here, rural providers are at a distinct disadvantage.

Many of Georgia’s rural healthcare CEO’s spent a day at the capitol a couple of weeks ago. They noted that they do not have the negotiating power with their insurance carriers, as do suburban Atlanta hospitals with a significantly higher base of patients with private insurance. Many noted that they have as many as 2/3 of their insured patients concentrated with just one company. The negotiations are tilted in the insurance company’s favor.

In addition, many report that their insurance companies are rescheduling follow up visits for lab work and MRI’s at private clinics instead of the hospital that initially treated the patients. While a 9-5, Monday through Friday center can offer a lower individual patient cost, hospitals are still required to have these same facilities available every hour of every day. The “lower cost” just means the hospital loses revenue against a fixed overhead. This is not a net savings, but a transfer of potential profit.

We have a system where hospitals operate under a “Certificate of Need” which requires them to provide minimum services. The hospitals are also required to treat many patients regardless of their ability to pay. Given the high amount of regulation passed down from DC and additional rules imposed by the state, it’s hard to find any resemblance of the “free market” in modern health care. As such, those proposing “free market solutions” that involve scrapping CON should be given a healthy degree of skepticism.

There is nothing “free market” about mandating some providers absorb losses while creating carve outs for others to skim profitable patients. There is nothing “free market” about an insurance company with near monopoly market power intercepting one entity’s customers and shifting them to another provider.

Those who wish to legislate the ability to skim paying customers from the existing system without a plan in place to compensate providers at least for their cost of services are playing a game of Jenga with our healthcare network.

It is not the state’s role to create a “free market” for only some. The state’s goal must be equal treatment under the law. That, in a highly regulated industry like healthcare, must be the outcome.

Charlie Harper is the Editor of PeachPundit.com, and is the Executive Director of PolicyBEST, a group which works on policy solutions for Education, Science & Medicine, and Transportation.

18 comments

  1. blakeage80 says:

    I wonder at this point, if Georgia really has the flexibility to ‘fix’ healthcare that doesn’t require total state control and 75% of it’s annual budget.

    • John Konop says:

      The “fixing” of healthcare is fairly basic….as I posted many times…..The politics is another story…..When you add on both sides promising alternatives that do not math out….it makes the issue worse…like any resource we can only afford so much….nobody wants to hear the truth….

      • blakeage80 says:

        But Georgia is working within a framework of Federal laws and money that make it very difficult to fix. The basic facts are that there are a bunch of people who can’t pay and healthcare, for reasons mostly beyond Georgia’s control, is getting more expensive. The solution to fixing healthcare will not start and end within a state.

        • John Konop says:

          This is a very easy list that could be implemented right here in Georgia:

          1) Force anyone in a government healthcare program subsidized by the state of Georgia to fill out a living will. 60% of healthcare spent in last 6 months of a persons life, and most do not even want the care.

          2) Create a dial doc healthcare system in emergency rooms for under insured, non insured and government workers for non emergency care. Way cheaper than treating people in emergency rooms.

          3) Negotiate a VA type pricing deal on medication for government workers, peach care……about 60% less expensive

          4) Create and easy access coordinated services for government workers, peach care…. for preventive medicine with private companies like Walmart, Walgreens, Rite Aide, Kroger….a lower cost solution with better service.

          I could go on and on…..just the above would bend the cost curve materially…..Both sides would rather use it as a political weapon, than fix it. As I said not rocket science….

          • blakeage80 says:

            1) If the experiment on drug testing welfare recipients has taught us anything, it’s that it is very difficult for the government to single out people on government programs for special treatment. If implemented, you’re right, it would save money, but I don’t think that idea is going anywhere.

            2) Again, not a bad idea as a cost saving measure in general, but you are proposing more doctors at a time when there is already a shortage. Also, what did government employees do to deserve being relegated to the same system as under/non-insured folks, which is almost guaranteed, as a government run healthcare entity, to be inferior to other forms of care?

            3)If government employees are paying the healthcare system less, how does that solve healthcare’s financial problems?

            4)OK. That sounds like it is worth a try.

            • John Konop says:

              ……. government to single out people on government programs for special treatment….

              1) Not really they have insurance cards……

              ……. proposing more doctors at a time when there is already a shortage…….

              2) Proposing less doctor time….ie phone can be done by NP….also that is what they use at Walmart, Walgreens…..

              ……If government employees are paying the healthcare system less, how does that solve healthcare’s financial problems?…..

              3) Bending cost curve…you understand?

              • blakeage80 says:

                1) They have insurance cards like everyone else that has insurance. The courts told government they can’t single out welfare recipients as a group, for drug testing, how would that be different from forcing them to have a living will? If government could do it, why couldn’t other insurance companies? I believe this would be struck down in much the same manner as the Florida drug testing law.

                2) Sidenote: I always chuckled when Neal Boortz mentioned people riding ambulances into the city for shopping trips. Anyway, If a person has a chance to see a doctor of even a nurse in person or call a dial a doc service and sit on hold (which they will) and they aren’t paying for either, which do you think they are going to do? I would hardly trust someone to tell me what’s wrong over the phone. What if the lumpy feeling in my throat isn’t just drainage, but a growth? I can’t depress my own tongue and look in the mirror to tell.

                3) I fail to see how one small group of people, state employees, paying less than everyone else bends anything except my wallet wider open when hospitals charge more for their services in order to make up the slimmer margins they make on government employees while still losing money on Medicare/caid patients.

                  • blakeage80 says:

                    OK. That would be a fine service to offer. I think you could probably work a deal with a software vendor like NOLO or Legal Zoom or something and just have a specialist fill out the form for them.

                    The skeptical part of me says that conversation will go this way:
                    Gov’t Worker: “Hey, we have this great new service to help you create a living will.”
                    Medicaid/care Recipient: “What’s that?”
                    Gov’t Worker: “(it really doesn’t matter how this answer is worded)”
                    Medicaid/care Recipient: “So, you want me to say it’s OK to pull the plug even though there is a chance to come back out of my vegetable state? What’s good is that?”
                    Gov’t Worker: “Well, end of life care is often very expensive and taxing on the family.”
                    Medicaid/care Recipient: “Oh, well, I don’t think I’ll do that.” (all the while thinking, “If I’m not paying for it, what do I care.”)

                    • John Konop says:

                      Studies have already been done….must people would not take the extra care in many situations….loved ones feel very guilty to make the call…without knowing wishes….

                    • John Konop says:

                      This is from 2009……that number was just cancer….which is way higher via inflation….

                      ……According to a recent study by the Dana-Farber Cancer Institute, America could reduce medical costs by $75 million a year if more cancer patients discussed living wills with their families or medical professionals before it became too late. Assuming these figures hold true for other groups of Americans, the potential national savings could be far greater.

                      Nathan Kottkamp, a healthcare attorney and founder of the initiative, boasts about the success of this year’s initiative that took place on April 16. According to new numbers, at least 3,755 people completed advance directive documents while the campaign exposed potentially millions of Americans to the organization’s message.

                      “[Living wills] save Americans money because we are more efficient,” Kottkamp emphasized. “This is not saving money because we are pulling the plug.” Furthermore, Kottkamp insists that reducing uncertainty in the medical process can “save tons of money by not involving lawyers.”

                      One recent study by the Pew Research Center shows that only 29 percent of Americans have living wills while 71 percent have thought about their end-of-life treatment preferences…………….

                      http://abcnews.go.com/Health/HealthCare/story?id=7817908&page=1

                    • blakeage80 says:

                      Again, the living will thing is a good idea, but I think it is just one little dutch boy with his finger in the dam.

                • John Konop says:

                  …..They have insurance cards like everyone else that has insurance. The courts told government they can’t single out welfare recipients as a group, for drug testing, how would that be different from forcing them to have a living will? ….

                  1) You could force everyone to fill it out….on your tax statement…..save a ton of money…it is still your healthcare choice….but your loved ones know what you want….

                  …….make up the slimmer margins they make on government employees while still losing money on Medicare/caid patients….

                  2) Much of that business is being moved to drug stores and or by phone….which does make for a lower cost and profitable model…

                  • blakeage80 says:

                    Alright, so we’ve whittled it down to two things on your list. While they could be some relief to the system, it will still take a fundamental change to save our healthcare system, long term. It probably involves less government involvement and a shift to insurance being only for big ticket items instead of every prescription filled and doctor visited being covered.

                    • John Konop says:

                      Huh 2 things….first the suggestions I posted are major cost savings…second I have even more, as we as other people….like in business it is never one silver bullet….put head in sand, and make it political bs….instead of holding officeholders accountable seems to be your solution.

  2. saltycracker says:

    If we believe equal or moral treatment involves some level of healthcare, a safety net, to citizens it involves public regulation but not necessarily public ownership. To make any financial sense there has to be maximization of those with skin in the game, mandated insurance and to operate efficiently that should suggest to the GOP, privatization and a very competitive market within the boundaries of strict regulation (not crony restriction) on the delivery.

    Government ownership of health services in our society is a road to bankruptcy.

  3. Roughtly $29 (or 1/3) of the average $87 that commercial insurance pays for in the example procedure is actually paid for by the federal government via the tax subsidy that most (but not all) commercial/employer provided insurance benefits from.

    Minus subsidy, commercial insurance is often paying less than what Medicare pays, though a little more than Medicaid.

    Medicaid certainly has its issues and it is true that in communities where a larger than normal percent of the population is Medicaid eligible the math may not work out. But communities that have large portions of people who can’t afford healthcare almost exclusively have an uncompetitive and extremely expensive commercial insurance marketplace because it is left to the only people who do pay to make up for those that don’t. Again, if it is provided through work, taxpayers are picking up 1/3 of the cost of that exorbitantly expensive insurance tab.

    There’s a reason that every large hospital chain in America, and increasingly many Republican governors support Medicaid expansion. It may not be the best long term solution, but it will temporarily end the death spiral that many communities face. At that point, please feel free to debate about whether a voucher system or some other way of providing care to the indigent/poor is the best solution, but it is insane not to take the only option that’s on the table, especially since it costs Georgia’s state taxpayers nothing.

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