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Healthcare remains one of the most controversial, and highly politicized commentaries with a significant up-tick in political debates during recent decades. In standard diatribe, a circular disarray has emerged with the right professing free-market enterprise and the left adhering to socialistic models of universal and single-payer healthcare. While each model has its merits, the majority of Americans do not possess the background knowledge or the history of healthcare to best determine the most beneficial policies. It is almost inconceivable that the vast technological advancements, and the procurement of scientific invention has caused such a dichotomy with this principle evil being “funding,” and fiscal relativism.
While the United States possesses futuristic medicines, it is oft cited as being exponentially more cost-deleterious that our counterparts who have a single-payer practice and universal healthcare. How is this possible? The answer is not as obscure as some would think. It can be summed up in a single word, “regulation.” The unfortunate reality is that healthcare as a fiscal entity has seen significant legislation over the past few decades which has escalated prices above standard inflation rate.
Thomas Jefferson once said, “I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Under the veiled guise of patient protection, legislation has been repeatedly passed that clearly favors corporations and lobbyists but hinders physicians and healthcare workers. Over the past several decades, three major policies were implemented that have brought us to the breaking point with a pending fourth and fifth.
A) HMO Act of 1973
The first legislation passed which directly affected healthcare was the Health Maintenance Organization act of 1973. Conceptually, a false belief exists that issues arose with HMO Act of 1973 that led to insurers seeking for-profit status and resulted in corporate greed. In true partisan form, a meme has begun to circulate that President Nixon signed the act into place specifically to allow Kaiser-Permanente to alter their business model from “non-profit,” to “for-profit.” The reality actually goes back to World War II. As Elizabeth Rosenthal describes in a Stanford article in 2017:
“When the National War Labor Board froze salaries during and after World War II, companies facing severe labor shortages discovered that they could attract workers by offering health insurance instead. To encourage the trend, the federal government ruled that money paid for employees’ health benefits would not be taxed. This strategy was a win-win in the short term, but in the long term has had some very losing implications …
Within a decade, the model spread across the country. Three million people had signed up by 1939 and the concept had been given a name: Blue Cross Plans. The goal was not to make money, but to protect patient savings and keep hospitals — and the charitable religious groups that funded them — afloat. Blue Cross Plans were then not-for-profit.
For-profit insurance companies moved in, unencumbered by the Blues’ charitable mission. They accepted only younger, healthier patients on whom they could make a profit. They charged different rates, depending on factors like age, as they had long done with life insurance. And they produced different types of policies, for different amounts of money, which provided different levels of protection.
Aetna and Cigna were both offering major medical coverage by 1951. With aggressive marketing and closer ties to business than to health care, these for-profit plans slowly gained market share through the 1970s and 1980s. It was difficult for the Blues to compete. From a market perspective, the poor Blues still had to worry about their mission of “providing high-quality, affordable health care for all.”
In 1994, after state directors rebelled, the Blues’ board relented and allowed member plans to become for-profit insurers. Their primary motivation was not to charge patients more, but to gain access to the stock market to raise some quick cash to erase deficits. This was the final nail in the coffin of old-fashioned noble-minded health insurance.”
The reality of the HMO act was that Richard Nixon was actually concerned about the ballooning costs of health care, and it was passed in an effort to quell the rising Medicare and Medicaid costs which went from 4.1% (1961) to 11.3% (1973) of the federal budget. Interestingly, Kaiser-Permanente did not even benefit from the HMO act until 4 years after its implementation. For-profit insurers existed decades before its passage.
The difficulty with for-profit arises in the non-clinical portion of medicine. While physicians and nurses provide the care, the majority of money actually does not go to them. As we will discuss later, the rising tide of healthcare costs are actually a direct result of an increase in administrative personnel. Case in point, in 2017 Excellus of Western NY projected a 100-million-dollar profit. In 2018, it became 150 million. This resulted in an increase in salary for the top-executives in Syracuse, NY to 2.9 million per year (a 23% raise). The top three executives of Excellus in Syracuse alone took home more than 4.5 million in 2019. The rising profit margins to insurance companies never did trickle down to physicians, nurses or hospital systems. While physician compensation from 2004-2013 increased by a paltry 4.1%, standard inflation rates actually increased by 28.1%, implying that physician pay actually went down.
B) Education Reform
The second major legislation that affected healthcare was passed around the mid-late 1980’s as education reform. At the time the government believed two-fold, that an education was something every American was entitled to and that if students borrowed money from the federal government, it should be readily available, and it should be paid back. While initially college was reserved for the wealthy, many students in middle- and lower-class brackets could not afford higher level education, and so were referred to trade schools.
Gradually, the federal government asked the banks to open up their reserve allowing unprotected loans for students across all socio-economic divides. While noble in intent, the net result was actually several fold. First, students saw an opportunity to go to school to obtain higher education, but also bypassing trade positions. This ultimately led to a slow decline in trade enrollment which has threatens to cause a crisis in skilled laborers 30 years later. Additionally, more student enrollment also necessitated more staff and infrastructure. This was not just professors but ancillary staff. The perfunctory rising cost of education was only then matched by the skyrocketing tuition costs. In fact, the average amount of tuition increased over 260% in 30 years.
Medical school took these numbers and stratified them exponentially. In 1980, the average debt of a medical student was $22,000. Today, the average debt far exceeds $200k. Once again, inflation alone cannot account for this number. If taken into consideration, $22K adjusted to inflation would be equal to $69k today. This implies a 3-4 fold increase in tuition costs and debts for those entering the medical career. As medical school costs increased, physicians began asking for more money in order to be able to pay off those debts, however, as you will recall physician reimbursement itself has not mirrored standard inflation rates. As a result, on a per capita basis doctors are actually making less relative to debt to income ratios now than they did in the 1980s. The average physician also completes training in their early 30’s, which causes a net lag in fiscal propriety by an average of 5-10 years
In response to the increased reimbursement requests, insurance companies increased their premiums, putting the sole onus on the patients (aka the consumers). Despite the increased premiums, the money never actually went to physicians. If taken as above, the price of healthcare has also not merely tripled since 1980 to account for physicians. In fact, the cost of insurance has gone up 740% since 1984 (Consumer Expenditure Survey conducted by Clever). This number may be an underestimate as it does not take into consideration people whose employers cover the full cost of healthcare. This is reflective of an opportunity which arose for non-clinically based businesspersons to increase their costs and tag them to physician payments.
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C) Hitech and HiPAA Act of 2009 and the Affordable Care Act
As part of the generalized attempt to improve healthcare, access to medical records, and maintain privacy, the government passed the Hitech Act of 2009. Part of this mandated implementation of electronic medical records (EMR’s). Access to an EMR was meant to calibrate a patient’s care by maintaining consistent knowledge across specialties. For example, if a patient went to see a cardiologist, they would have access to the internists note, and vice versa. Additionally, privacy would be maintained through adaptive technological advancements, for better security.
A streamlined electronic health system was meant to improve clinical outcomes, adherence to medications, compliance, and overall access. As always, the tenet was noteworthy, however the execution entirely lacking. While it has facilitated access to medical history and medication usage, the cost has escalated into the billions, and patient encounters are now even more limited temporally by computer time. 30 years ago, the average doctor spent the majority of a patient interview looking at and diagnosing the patient. Today, 90% of their time is spent looking at a screen.
To curb costs to healthcare systems, the government began a grant system to offset the high associated costs. With an average cost of 15,000- 70,000 per provider, often hospitals pay in the vicinity of millions for complete staff coverage. In lieu of this CMS has seen a large increase in costs since implementation of an EMR, with approximately $50 billion paid out in incentives to date.
Perhaps the more disturbing trend however, was watching companies vie for a piece of the electronic pie and push their software through. An article published in Healthcare IT News showed the average cost that each EMR company spent on lobbying to achieve this goal. They are noted below. Invariably, these additional costs were also offset to the consumer via higher taxes.
- Allscripts: $140,400, the same as 2016
- Athenahealth: $550,000, down from $600,000 in 2016
- Cerner: $290,000, up from $200,000 in 2016
- Epic Systems: $108,000, down from $144,000 in 2016
- McKesson: $1,012,000, down from 1,235,000 in 2016
The cost trend:
Recent studies have shown that healthcare accounts for approximately 3.6 trillion dollars yearly (2018). For perspective, healthcare accounts for 18% of the US GDP (2018) compared to 12% in Canada. In 1980, healthcare accounted for 9.4% of the GDP, with an estimated 42.2% from public funds. At that time, the total bill was in the vicinity of $240 billion dollars with 18.9% of the costs going to physicians.
In 2017, physicians accounted for 15.6% of spending (taken from AMA based on CMS data). As a consumer, I have seen our insurance premiums increase by 10-15% yearly which has been coupled with high deductibles and copays, placing an exorbitant encumbrance on the consumer, effectively making adequate healthcare untenable. In today’s market of high deductible insurances, it is not uncommon to see a consumer pay in excess of 25,000 dollars yearly between premiums and out of pocket expenses.
Over the course of 30 years, this amounts to roughly 750,000 dollars spent on premiums and potential out of pocket bills. When taking into consideration income taxes paid towards Medicare and Medicaid, the cost rises even more. Despite and in lieu of these trends, the federal government placed a individual mandate on the consumer in 2010 to obtain insurance under the Affordable Care Act (ACA). While the fundamental tenet of universal coverage is noble, the implementation process resulted in escalating costs for all consumers, higher premiums, lower quality healthcare (by the addition of untrained personnel to curb costs), and a failing infrastructure.
Over time a new entity emerged in the form of physician employed corporations (eg. Mednax). These corporations bought out physician practices for large sums of money with guarantees of several years of work and began to develop corporate models of physician staffing. They developed strict marketing patterns and elimination of private practice competition at an attempt at monopolization of healthcare with lower reimbursements to physicians and huge margins of profits to the owners. In lieu of this, many physicians have decided to pursue self-employment but are struggling to fight the ever-present tsunami of employment over ownership. Interestingly, the Affordable Care Act of 2010, section 6001 was passed limiting a physician’s ability to own a healthcare system or hospital. Notably, it is also illegal for physicians to unionize, being cited as a violation of the Hippocratic oath.
Despite this, the government continues to ignore legislation that is equally important to curb healthcare costs. Of all countries, the US sits atop the pedestal for malpractice. For reference, the average physician paid 4k dollars towards malpractice premiums in 1983. Today, surgeons may pay upwards of $30-50k yearly. As Americans age and become sicker, litigation has seen a sharp rise with no mention of tort reform. Principally, this is because those who have legislated policies into being, have more interest in maintaining their ability to litigate (lawyers backing lawyers), then actually worrying about the patients.
This has been hidden under the guise of “holding physicians accountable for their mistakes to protect the patients.” An article published in JAMA in 2017 clearly demonstrated a decrease in the number of claims brought against physicians, but a substantial increase in the amount of money payments (JAMA Intern Med 2017 May, Rates and Characteristics of Paid Malpractice Claims Among US Physicians by Speciality, 1992-2014; Schaffer, et al.).
A large part of this may be attributable to “defensive medicine.” Defensive medicine is the practice of extensive testing to avoid potentially missing a diagnosis that could result in untoward outcomes. Often times, the breadth of testing is so wide that it lacks pertinence to the actual disease process. In some rare instances, it actually leads to over-diagnosing. The major culprit is no longer physicians, however. Despite fear of litigation physicians have maintained a semblance of structure, but “advanced practice providers,” (APP) have taken it even a step further. Studies have recently demonstrated that APP’s are actually costing the system even more than they potentially save by ordering infinite diagnostics for simple diseases.
D) Independent Practice for non-Physicians
Advanced practice providers include Nurse Practitioners, Physicians Assistants and Certified Registered Nurse Anesthetists (CRNA’s). APP’s were originally devised to facilitate healthcare in rural areas that lacked adequate physician coverage. Over time, and with an increasing need, their numbers have seen a significant influx. In the interim, physician numbers remain relatively stable.
For background, in 2010, the total number of NPs was 56,000 and PA’s 30,000. In 2019 the number of NP’s swelled to over 270,000 and PA’s number 118,800 in 2018. Typical education pathways begin with nursing, or straight from high school, meaning little to no healthcare background. Obtaining an advanced practice degree has become one of the most streamlined methods to obtain a health degree with online classes actually becoming a preferred method for NP’s. Unfortunately, this has led to a lack of satisfactory clinical time. This is in contrast to the hundreds and thousands of hours spent in medical school to become a physician.
Allied and systemic organization for APP’s have recently advocated for independent practice, and for advanced providers to be removed from the coordination and supervision of physicians despite their lack of training and knowledge (especially in regard to the fundamentals of pathophysiology). Their institutions refer dogmatically to the tenet of “under served areas,” ignoring the fact that the majority actually practice in large cities, institutions and universities.
An article published by CMS attempted to push the agenda further by decrying the cost value, citing cost savings. The article itself was flawed and contained antiquated information. Worse still, it looked at outcomes of APP’s that were actually being supervised at the time under the direct care of physicians. Imagine saying that a para-legal knew law just as well as a lawyer? Or that an airline hostess was just as capable of flying a plane as a pilot? Take it a step further and publish a paper wherein the hostess was being supervised and landed without a problem because the pilot was there. The conclusion that “hostesses are just as safe as pilots,” is nonsensical.
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Worse still, most studies are conducted on young healthy patients. With an aging population, co-morbidities are on the rise and the validity of any claims diminishes gratuitously. To add to the confusion of healthcare “providers,” it is also now possible to obtain an online “Doctorate of Nurse Practice,” (DNP), which allows advanced providers to refer to themselves as “doctor”. The American Association of Nurse Anesthetists (AANA) have also taken it upon themselves to determine that the phrase “Anesthesiologist,” does not only pertain to physicians, as “ologist,” implies an expertise in a specific science. They believe that the physician expertise, garnered and branded through years of research, study, clinical time, training, and sleepless nights is matched by their own. Caveat emptor to all patients.
E) The Surprise Bill Act of 2019
Enter the surprise bill act. In December of 2019, the government began the process of introducing a new policy to ensure that patients are not “surprised by bills from out of network doctors.” The premise of this bill that patients should not seek medical care, and subsequently be presented with a large bill that their insurance did not cover because the physician did not accept that particular insurance. Unfortunately, it is fundamentally flawed and favors the insurer more than the patient or physician.
The reality has always been that patients seen by out of network physicians have the option to forward their bills to their insurer, who then would typically pay the bill much the same as if they were in network. If the insurer refused, an arbitration process could take place between the practice and the payer. For background, the only method of contract negotiation between physicians and insurers in the past was via a method referred to as “non-participation.” Insurers are mandated to keep a certain number of local physicians within network. To appeal to their constituents, they will do whatever is in their power to hold on to those physicians, going so far as to offer hospitals kickbacks in the form of “bonuses,” to keep a certain number of contracted physicians within network.
Since physicians are not allowed to unionize, unlike standard business relations the only opportunity to help cover costs and payback debt was re-negotiation with third party payers. The surprise bill act eliminates the only negotiating tactic with insurers that keeps their greed in check. The act obligates physicians to accept any dollar sign the insurer says, including a lower than community standard. The reality of the surprise bill act is the lack of protection for patients and guarantee of financial sovereignty for insurers. This will translate to lower payments to doctors, higher bonuses and salaries for insurance company C’ levels and will further threaten to limit access to good healthcare by lowering the number of physicians over the next several years. To be frank, why go to medical school and accrue insurmountable debt, only to receive minimal reimbursement?
United HealthCare in New Jersey took it a step further. United is one of the newest insurance companies to practice “vertical consolidation.” In an effort to “curb costs,” but secretly and dramatically increase profits, insurers themselves are removing physicians from their network (except for Medicare subsidized components) and telling their customers to use, “in-network physicians.” These physicians have a separate contract with the insurers and allow the insurer to shift patients to their sister companies.
In the game of chess, a player anticipates movement in an attempt to counter to their advantage. Using this as a metaphor, imagine that the payers are dropping physicians out of their network and forcing their clients to go to their subsidiaries. Effectively, this drives their cost down, but more importantly their reimbursement. This resets the parity level of reimbursement to a much lower rate. In today’s market, physicians can still use the arbitration process to ensure adequate compensation. Once the surprise bill act passes, however, the new baseline is set so low that payments become untenable. And yet, the payers go unchecked.
The Doctor is not in house, but the CEO will see you now….
The culmination of all the legislation that have been passed, and those pending is a monetary sustenance not provided to physicians or nurses who actually care for the patients.
To be clear, our story unfolds as follows… Physicians gave up. As the government became more intrusive on healthcare increasing regulations, bypassing consumer relations and forcing agendas based on PAC’s and lobbyists, physicians looked for a way out of administrative work. Their primary focus has always been on the patient, not the nuances of ensuring appropriate paperwork. While the number of administrators has increased, greed has pushed them to dip into the funds. What normally would have gone towards physician reimbursement is now being spent on regulatory bodies.
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Take the joint commission for example. In preparation for a visit, a hospital may spend in excess of 30-50K dollars. These are preparatory only. Once they arrive, the joint commissions sole objective seems to find minuscule errors and threaten citations. While, technically, they are entirely unable to cite a hospital, they can remove their accreditation. Once that happens, the government refuses to reimburse CMS costs. These preparatory steps have therefore become mandatory to ensure government-based Medicaid and Medicare payments. This is the same system that is being advocated for complete control.
A recent study conducted by Harvard Business Review has demonstrated an increase in healthcare workforce by 75% since 1990. 95% of the new hires were not physicians. In fact, it appears that there are now 10 administrators per 1 doctor. The net result has been a dramatic increase in cost to offset administrative work, with frequent CEO’s, CMO’s et al making in the several million per year. These funds come directly from the work provided by physicians and nurses. Rest assured that the non-clinical component of medicine accounts for a large part of the fiscal component of health care (estimated at 73% in 2018). This extends to not only hospitals, but administrators of health insurance and pharmaceutical companies as well.
In order to offset their large bonuses, companies raise costs. These costs get translated to the consumer. A recent example was the escalation in epi-pen and insulin costs. Actual revenues are a matter of public interest and can be found online and in tax returns for the “not for profit,” facilities.
The terrible tragedy of 2020 continues with the Covid pandemic. The latest casualty to the virus is also physician reimbursement. Once more, almost as if tempting the herculean efforts of yore, insurers have begun a process to cut back on payments for doctors’ work. The greatest casualty will not be the disease itself, but the prolonged effects on a healthcare system stricken with the cancer of greed.
Fundamentally, the truth is that America and Americans are being had. We are all paying exorbitant amounts to salaries for non-clinical politicians and businessmen. We have been successfully duped and dysregulated to the point that we feel that giving the government complete control is our only option.
Simply put, Medicare-For-All is not the answer. Removal of red-tape is the only logical outcome to save our dying field. Physicians need to take hold of it again. We are so fond of decrying Canada’s model as being superior, yet many Canadians seek healthcare here because of the delays in their own country. The one major benefit in Canada is the lack of red-tape. Removal of administrators and massive corporate payouts can not only curb costs, but restore a truth in order.
Why do we give control and power to people with no background and no experience in the field? The same applies more fervently to the government. Of all the politicians, how many physicians are present to help make decisions about healthcare? The insanity of the situation is complete. We keep attempting to same thing expecting different results. Healthcare can only be reformed by folks who have spent time in the field, who know the nuances, and who can regulate appropriately and definitively to ensure the profiteering diminishes and the patients (aka consumers to non-clinicians) do not suffer.
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