Our health reform debates keep overlooking the elephant in the room — the crazy cost of care

Published on
June 8, 2017

The missing ingredient in the food fight over replacing Obamacare is a serious discussion about controlling the cost of medical care. Almost no one is talking openly about that even though in past national debates, the cost of care was often central to the zillions of policy discussions that took place and were reported in the media. During the run-up to Obamacare’s passage, remember all the talk about how the law would bend the cost curve? But in the end, the Affordable Care Act didn’t really offer tough remedies for controlling costs, and as the furor over high premiums suggests, the high price of care is still very much with us.

While talk of cost containment has been less explicit in the present health reform debate, medical costs have been mentioned. Republican Sen. Ron Johnson of Wisconsin, for one, has been pretty open about them. He says allowing people with preexisting conditions to buy insurance is the “biggest reason” premiums have gone up, and he “would rather in this effort focus on how do you constrain the costs of health care” than keep more Americans insured under Medicaid. For South Dakota Republican Sen. John Thune, “In the end, reducing cost is going to be ultimately the way” the bill is judged, Politico reported.

What Johnson and Thune have in mind, though, is not controlling the underlying price of care, but allowing hospitals and doctors to charge whatever they want and forcing the burden of reducing the national health care tab onto patients. They would like to scrap requirements to cover maternity care, prescription drug coverage, and mental health treatment on the belief that not everyone needs those costly services. But if at some point they do jettison some of these “essential health benefits,” patients will be forced to pay for their medicines, prenatal care, or mental health consultations out of pocket, relieving payers, whether the government or commercial carriers, of the responsibility for paying the bills. More important it also means that health care providers can continue to charge whatever they want with no one looking over their shoulder. The cost curve might be bent for insurers or the government, but not for those patients forced to pay through the nose for their care.

A few years ago I asked the CEO of a small regional medical center in Nebraska how many payers his staff had to deal with.  More than 100, he replied. About the same time I posed the same question to the CEO of Ottawa General Hospital in Canada, a considerably larger facility than the one in Nebraska. He said, “One.”

As Theresa Brown, a hospice nurse, wrote in a recent New York Times op-ed, the GOP’s plan to reduce the price of insurance “won’t make much of a dent in the overall price of health care because it doesn’t deal with the fundamental reasons it is so expensive: the profit-driven nature of the system.” She argues that for better and mostly for worse, the American health care industry is a largely for-profit sector, and companies have to charge more to maintain their revenues.

What exactly goes into maintaining those revenues? Unlike previous national discussions of health care, there’s also been little said about why the U.S. spends more than any other country on medical care. Princeton professor Uwe Reinhardt, who has long tackled the subject, revisited the question in an April JAMA Forum commentary, where he noted that 18 cents out of every insurance premium dollar was spent on “operating costs.” What’s included in those costs, which are about twice as high as the overhead costs of insurers in simpler healthcare systems found in other countries? Marketing, determining eligibility, processing claims, controls on care like preauthorizing certain procedures, and negotiating thousands of fees with doctors, hospitals, and other health care providers.

A few years ago I asked the CEO of a small regional medical center in Nebraska how many payers his staff had to deal with.  More than 100, he replied. About the same time I posed the same question to the CEO of Ottawa General Hospital in Canada, a considerably larger facility than the one in Nebraska. He said, “One.” Bills were sent to the government-run Ontario Health Insurance Plan, the hospital got paid, and that was it.

In 2008 as support mounted for health reform under a new administration, Don McCanne, who often contributes to the blog of Physicians for a National Health Program, wrote, “Our fragmented, multi-payer system has resulted in profound administrative waste, adding significantly to our high health care costs.” At the time proposals floating around called for limiting administrative expenses of private insurers to 15 percent of their revenues, which McCann said would have little impact since many were already at that level.

Since then, administrative or overhead costs for other health care sellers have also risen. The Commonwealth Fund found that 25 percent of all hospital spending is related to administrative costs, which includes staff expenses for handling billings and coding. As Elisabeth Rosenthal has pointed out, the use of billing codes has turned into a gold rush, as hospitals have learned to manipulate the codes to boost their bottom lines. This has resulted, she says, in a “battle of coder versus coder” as payers engage in endless negotiations to deny claims or at least pay less than the hospital demands. These fights not only result in outrageous bills, but ones that are undecipherable by patients — the same patients we’re asking to be better consumers of health care. The deck, of course, is stacked against them.

Still, Princeton’s Reinhardt theorizes that in the U.S. individuals and patients are willing to bear the costs imposed by extraordinarily high administrative charges because they want they want choice among health insurers. (As the number of insurers increases, hospitals must in turn devote more resources to administration.) And once patients choose an insurer, they want the choice of multiple products. To get this choice, he argues, people are willing to give up their choice of health care providers.  In reality, all this choice is evaporating and will soon be a relic of the glory days of American health care, if such days ever existed.

Judging from the emails I receive from readers, I would say they are fed up. They don’t want to be pawns in coder battles between hospitals and insurance carriers. They don’t want surprise bills. They don’t want to endlessly fight insurance companies. I have never found anyone who didn’t want good health care along with more simplicity in using and paying for it. The wasteful administrative costs we all pay show we are a long way from such a health care nirvana. The least we can do is to start talking about them.

Veteran health care journalist Trudy Lieberman is contributing editor of the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care blog.

[Image: Kai Stachowiak/PublicDomainPictures]