Ten Hints for Comparing Health Care Guidelines And Regulations

Australians already realize that Fitness insurance can offer protection for people and families when a medical need arises. Many, however, do not realize the way to discover the pleasant price whilst Comparing health care insurance Guidelines.

Beneath are 10 Suggestions all and sundry need to study before searching for non-public Health coverage.

 health

1. Choose insurance that concentrates for your particular Fitness wishes or ability Fitness wishes.

The primary thing you have to do before Evaluating your Health plan options determines which coverage functions high-quality fit you. A 30-12 months-antique accountant, for instance, goes to want very one-of-a-kind insurance than a 55year-old pro golfer, or a seventy five-yr-antique retired veterinarian. By using understanding the Fitness needs that most customarily correspond to people in your age and interest level institution – your lifestyles level – you could keep cash By using buying simplest the insurance you want and keep away from unnecessary offerings that are not applicable. as an instance, a younger circle of relatives with small children is not going to want coverage for joint replacement or cataract surgical operation. A 60-yr-vintage college instructor is not going to need being pregnant and beginning control-associated services.

 

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Whether or not it is excessive degree complete care you’re after, or the least luxurious choice to exempt you from the medical Levy Surcharge while offering fundamental care insurance, constantly ensure you’re Evaluating medical health insurance Policies with best those services that make an experience for you and your family.

2. Recall options together with Extra or Co-price to reduce your top rate charges.

Whilst you comply with pay for a specified out-of-pocket amount in the event you are hospitalized, you signal an Excess or Co-charge option in order to reduce your medical health insurance top class.

If you Select the Access alternative, you agree to pay a predetermined, precise amount When you visit the medical institution, no matter how long your life lasts. With a Coffee option, you settle for paying an each day some as much as a pre-agreed amount. As an example, if Joanne has an Extra of $250 on her clinical insurance policy and is admitted to the health facility, regardless of how long her life turns out to be, she can pay $250 of the final invoice. If Andrew has signed a $75×4 Coffee along with his company, he can pay $75 per day for just The first The first 4 days of his hospitalization.

For younger individuals who are wholesome and suit and not using a reason to expect to land in clinic anytime soon, either of those options is splendid methods to lessen the month-to-month price of your medical insurance rates.
Understand that extraordinary non-public insurers have their personal rules on the subject of Access and Co-payments, such as how many payments you’ll want to make yearly on both options. It is essential to examine the policy thoroughly and ask questions in advance in an effort to have a clear know-how of what you are paying for, and what you may count on coverage-smart in the occasion that you are hospitalized. Also, make sure you Choose an Access alternative greater than $500 If you’re shopping an man or woman policy, or $1,000 for the circle of relatives insurance, with a purpose to be exempted from the Medicare Levy Surcharge.

three. Pay your health insurance top class earlier before the value will increase.

Every year insurance vendors increase their charges Through about 5 percentage someday around the first of April, a practice accredited By means of the Minister of Health. By instituting these annual increases, your health insurance company retains the ability to satisfy their duties to policyholders despite growing scientific expenses.

Maximum private clinical policy companies allow coverage holders to pay for twelve months’ premium earlier, which locks them into the previous year’s price for an extra one year – an awesome way to keep the cash. so one can take gain of the savings presented, Most insurers require a charge in complete be made in the first region of the 12 months, between January and March.

4. Look into low fee health insurance at an early age.

The Maximum obvious gain any Australian can take with regards to saving money on your coverage charges is to buy in early to the least high-priced charge available. And By means of early, we suggest earlier than age 31. anyone who’s eligible for Medicare will get hold of at the least a 30 percent rebate from the government on the charge of their Fitness care top rate, no matter what age you are. however, Through shopping hospital insurance before the July first following your thirty-first birthday, you could be ensured the lowest premium price to be had.

After age 31, your health insurance price is subjected to a percentage penalty fee increase for each yr after age 30 which you did no longer have medical health insurance. Therefore, If you wait to buy private Health insurance until you are age 35, you may pay 10 percentage greater annually than you’ll have If you had bought it at age 30.

There are exemptions for a few people who were distant places once they grew to become 30, or for brand new immigrants, and positive others beneath special exception repute. but, if you acquire personal coverage after age 30 and are paying an age loading penalty in your Fitness coverage, you will be relieved of the Extra penalty after 10 years of persistent coverage.

The earlier in lifestyles that you lock into a non-public Fitness plan, the more money you may store each right away and over your lifetime.

5. Pick out a Healthcare provider who already works along with your Fitness fund.

Care

decide which sanatorium you decide on if and whilst the need for treatment does arise, and are searching for out the one’s health insurance companies which have an agreement along with your medical institution of preference before you make a decision on your medical health insurance purchase.

it is a good idea to Additionally discover in case your insurer has a listing of “preferred providers,” which would encompass the one’s physicians and practitioners who Also have made preparations with the Health budget concerning their fees for services. Request this information from every issue while Evaluating medical insurance Guidelines. This way you can make certain you may receive the full gamut of blessings to be had at the bottom possible fee. those desired vendors often have “no hole” cowl – special rates that reduce or get rid of out-of-pocket fees to policyholders.

6. Double test your medical insurance coverage earlier than you time table any treatment or processes to ensure you have insurance.

Any time you’re headed to a personal medical institution for remedy, first check to see if the hospital and your medical insurance issuer have an agreement to be virtually positive you have got good enough coverage. On the same time, test along with your coverage company, the medical doctor and the clinic to peer if there may be a gap between their costs and the government’s Medicare blessings. This is extraordinarily critical due to the fact if your doctor costs greater than Medicare covers and also you do no longer have a “no gap” plan set up, you may locate yourself answerable for a substantial invoice. Simply contact your medical doctor and your insurance employer to double test on those gadgets, and keep away from being saddled with an out-of-pocket rate your weren’t watching for.

7. Record your price claims right away.

If you have a medical health insurance club card, you can Document a claim towards your benefits At the time of treatment and not use an extra paperwork or file to fear about, at the least in Maximum instances. On occasion, you could nonetheless want to Document a claim along with your insurance company. when that takes place, make certain to File you are declare directly. The typical cut-off for insurers to pay Fitness care claims is two years. you could Record your health insurance claim immediately along with your provider or at your region Medicare workplace, which has a reciprocal agreement in the vicinity with Most coverage providers.

8. Every time you travel overseas, drop your Fitness coverage.

Every time you journey remote places for various weeks, however, less than 24 months, sure health insurance companies permit policyholders to drop their memberships for the time they are out of the country, liberating the policyholders from paying premiums at some stage in that term. at the same time as your insurance policy is suspended, your Lifetime Fitness cowl reputation stays intact, so that you do not have to fear about age loading delivered When you go back home. touch your health insurance provider to make sure in their coverage and rules regarding ready intervals and re-activation.

Don’t forget too that Australia has reciprocal preparations in positive countries, which include New Zealand, Finland, Ireland, Italy, Malta, the Netherlands, Sweden and the U.K. For more records, visit

9. Evaluation your coverage benefits annually.

Life trade, people get married, have kids, age – youngsters grow up and circulate out on their personal, couples separate. Lots can occur within the span of 365 days, which is why the private medical health insurance Ombudsman recommends that everyone Evaluation their policy blessings as soon as each year to make sure your insurance nevertheless suits your needs.

no matter your existence changes, your Lifetime Fitness cowl popularity remains protected, and waiting periods for advantages that identical your modern-day insurance is waived in compliance with the non-public health insurance Act of 2007. This indicates you’ll be capable of Record claims associated with features you had earlier than you made any changes without interruption in benefits.

10. Evaluate Guidelines to get the exceptional charge and the insurance you need.

Guidelines

To make certain that you are getting the fine feasible charge to your medical insurance top class, you ought to Examine Guidelines from special insurers, ensure you are Comparing Guidelines that replicate the treatment plan and insurance you want, without filler offerings that you won’t want. The greater you realize about private Fitness coverage and authorities backed Medicare, the more likely you will discover the first-rate value to your money when it comes time to purchasing or renewing your Fitness insurance.

Health Care Reform

Why are Americans so worked up about health care reform? Statements such as “don’t touch my Medicare” or “everyone should have access to state of the art health care irrespective of cost” are in my opinion uninformed and visceral responses that indicate a poor understanding of our health care system’s history, it is current and future resources and the funding challenges that America faces going forward. While we all wonder how the health care system has reached what some refer to as a crisis stage. Let’s try to take some of the emotion out of the debate by briefly examining how health care in this country emerged and how that has formed our thinking and culture about health care. With that as a foundation let’s look at the pros and cons of the Obama administration health care reform proposals and let’s look at the concepts put forth by the Republicans?health

Access to state of the art health care services is something we can all agree would be a good thing for this country. Experiencing a serious illness is one of the life’s major challenges and to face it without the means to pay for it is positively frightening. But as we shall see, once we know the facts, we will find that achieving this goal will not be easy without our individual contribution.

 

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These are the themes I will touch on to try to make some sense out of what is happening to American health care and the steps we can personally take to make things better.

A recent history of American health care – what has driven the costs so high?

Key elements of the Obama health care plan

The Republican view of health care – free market competition

Universal access to state of the art health care – a worthy goal but not easy to achieve

what can we do?

First, let’s get a little historical perspective on American healthcare. This is not intended to be an exhausted look into that history but it will give us an appreciation of how the health care system and our expectations for it developed. What drove costs higher and higher?

To begin, let’s turn to the American civil war. In that war, dated tactics and the carnage inflicted by modern weapons of the era combined to cause ghastly results. Not generally known is that most of the deaths on both sides of that war were not the result of actual combat but to what happened after a battlefield wound was inflicted. To begin with, evacuation of the wounded moved at a snail’s pace and this caused severe delays in treating the wounded. Secondly, many wounds were subjected to wound care, related surgeries and/or amputations of the affected limbs and this often resulted in the onset of massive infection. So you might survive a battle wound only to die at the hands of medical care providers who although well-intentioned, their interventions were often quite lethal. High death tolls can also be ascribed to everyday sicknesses and diseases in a time when no antibiotics existed. In total something like 600,000 deaths occurred from all causes, over 2% of the U.S. population at the time!

Let’s skip to the first half of the 20th century for some additional perspective and to bring us up to more modern times. After the civil war, there were steady improvements in American medicine in both the understanding and treatment of certain diseases, new surgical techniques and in physician education and training. But for the most part, the best that doctors could offer their patients was a “wait and see” approach. Medicine could handle bone fractures and increasingly attempt risky surgeries (now largely performed in sterile surgical environments) but medicines were not yet available to handle serious illnesses. The majority of deaths remained the result of untreatable conditions such as tuberculosis, pneumonia, scarlet fever and measles and/or related complications. Doctors were increasingly aware of heart and vascular conditions, and cancer but they had almost nothing with which to treat these conditions.

This very basic review of American medical history helps us to understand that until quite recently (around the 1950’s) we had virtually no technologies with which to treat serious or even minor ailments. Here is a critical point we need to understand; “nothing to treat you with means that visits the doctor if at all were relegated to emergencies so in such a scenario costs are curtailed. The simple fact is that there was little for doctors to offer and therefore virtually nothing to drive health care spending. A second factor holding down costs was that medical treatments that were provided were paid for out-of-pocket, meaning by way of an individual’s personal resources. There was no such thing as health insurance and certainly not health insurance paid by an employer. Except for the very destitute who were lucky to find their way into a charity hospital, health care costs were the responsibility of the individual.care

What does health care insurance have to do with health care costs? Its impact on health care costs has been, and remains to this day, absolutely enormous. When health insurance for individuals and families emerged as a means for corporations to escape wage freezes and to attract and retain employees after World War II, almost overnight a great pool of money became available to pay for health care. Money, as a result of the availability of billions of dollars from health insurance pools, encouraged an innovative America to increase medical research efforts. More Americans became insured not only through private, employer-sponsored health insurance but through increased government funding that created Medicare and Medicaid (1965). In addition, funding became available for expanded veterans health care benefits. Finding a cure for almost anything has consequently become very lucrative. This is also the primary reason for the vast array of treatments we have available today.

I do not wish to convey that medical innovations are a bad thing. Think of the tens of millions of lives that have been saved, extended, enhanced and made more productive as a result. But with a funding source grown to its current magnitude (hundreds of billions of dollars annually) upward pressure on health care costs are inevitable. Doctor’s offer and most of us demand and get access to the latest available health care technology in the form of pharmaceuticals, medical devices, diagnostic tools and surgical procedures. So the result is that there is more health care to spend our money on and until very recently most of us were insured and the costs were largely covered by a third-party (government, employers). Add an insatiable and unrealistic public demand for access and treatment and we have the “perfect storm” for higher and higher health care costs. And by and large, the storm is only intensifying.

At this point, let’s turn to the key questions that will lead us into a review and hopefully a better understanding of the health care reform proposals in the news today. Is the current trajectory of U.S. health care spending sustainable? Can America maintain its world competitiveness when 16%, heading for 20% of our gross national product is being spent on health care? What are the other industrialized countries spending on health care and is it even close to these numbers? When we add politics and an election year to the debate, information to help us answer these questions become critical. We need to spend some effort in understanding health care and sorting out how we think about it. Properly armed we can more intelligently determine whether certain health care proposals might solve or worsen some of these problems. What can be done about the challenges? How can we as individuals contribute to the solutions?

The Obama health care plan is complex for sure – I have never seen a healthcare plan that isn’t. But through a variety of programs his plan attempts to deal with a) increasing the number of American that are covered by adequate insurance (almost 50 million are not), and b) managing costs in such a manner that quality and our access to health care is not adversely affected. Republicans seek to achieve these same basic and broad goals, but their approach is proposed as being more market driven than government driven. Let’s look at what the Obama plan does to accomplish the two objectives above. Remember, by the way, that his plan was passed by Congress, and begins to seriously kick in starting in 2014. So this is the direction we are currently taking as we attempt to reform health care.

To cover the cost of this expansion the plan requires everyone to have health insurance with a penalty to be paid if we don’t comply. It will purportedly send money to the states to cover those individuals added to state-based Medicaid programs.

To cover the added costs there were a number of new taxes introduced, one being a 2.5% tax on new medical technologies and another increases taxes on interest and dividend income for wealthier Americans.

The Obama plan also uses concepts such as evidence-based medicine, accountable care organizations, comparative effectiveness research and reduced reimbursement to health care providers (doctors and hospitals) to control costs.

The insurance mandate covered by points 1 and 2 above is a worthy goal and most industrialized countries outside of the U.S. provide “free” (paid for by an individual and corporate taxes) health care to most if not all of their citizens. It is important to note, however, that there are a number of restrictions for which many Americans would be culturally unprepared. Here is the primary controversial aspect of the Obama plan, the insurance mandate. The U.S. Supreme Court recently decided to hear arguments as to the constitutionality of the health insurance mandate as a result of a petition by 26 states attorney’s general that Congress exceeded its authority under the commerce clause of the U.S. Constitution by passing this element of the plan. The problem is that if the Supreme Court should rule against the mandate, it is generally believed that the Obama plan as we know it is doomed. This is because its major goal of providing health insurance to all would be severely limited if not terminated altogether by such a decision.

As you would guess, the taxes covered by point 3 above are rather unpopular with those entities and individuals that have to pay them. Medical device companies, pharmaceutical companies, hospitals, doctors and insurance companies all had to “give up” something that would either create new revenue or would reduce costs within their spheres of control. As an example, Stryker Corporation, a large medical device company, recently announced at least a 1,000 employee reduction in part to cover these new fees. This is being experienced by other medical device companies and pharmaceutical companies as well. The reduction in good paying jobs in these sectors and in the hospital sector may rise as former cost structures will have to be dealt with in order to accommodate the reduced rate of reimbursement to hospitals. Over the next ten years, some estimates put the cost reductions to hospitals and physicians at half a trillion dollars and this will flow directly to and affect the companies that supply hospitals and doctors with the latest medical technologies. None of this is to say that efficiencies will not be realized by these changes or that other jobs will, in turn, be created but this will represent a painful change for a while. It helps us to understand that health care reform does have an effect both positive and negative.

Finally, the Obama plan seeks to change the way medical decisions are made. While clinical and basic research underpins almost everything done in medicine today, doctors are creatures of habit like the rest of us and their training and day-to-day experiences dictate to a great extent how they go about diagnosing and treating our conditions. Enter the concept of evidence-based medicine and comparative effectiveness research. Both of these seek to develop and utilize databases from electronic health records and other sources to give better and more timely information and feedback to physicians as to the outcomes and costs of the treatments they are providing. There is great waste in health care today, estimated at perhaps a third of an over 2 trillion dollar health care spending annually. Imagine the savings that are possible from a reduction in unnecessary test and procedures that do not compare favorably with health care interventions that are better documented as effective. Now the Republicans and others don’t generally like these ideas as they tend to characterize them as “big government control” of your and my health care. But to be fair, regardless of their political persuasions, most people who understand health care at all, know that better data for the purposes described above will be crucial to getting health care efficiencies, patient safety and costs headed in the right direction.

A brief review of how Republicans and more conservative individuals think about health care reform. I believe they would agree that costs must come under control and that more, not fewer Americans should have access to healthcare regardless of their ability to pay. But the main difference is that these folks see market forces and competition as the way to creating the cost reductions and efficiencies we need. There are a number of ideas with regard to driving more competition among health insurance companies and health care providers (doctors and hospitals) so that the consumer would begin to drive cost down by the choices we make. This works in many sectors of our economy but this formula has shown that improvements are elusive when applied to health care. Primarily the problem is that health care choices are difficult even for those who understand it and are connected. The general population, however, is not so informed and besides we have all been brought up to “go to the doctor” when we feel it is necessary and we also have a cultural heritage that has engendered within most of us the feeling that health care is something that is just there and there really isn’t any reason not to access it for whatever the reason and worse we all feel that there is nothing we can do to affect its costs to ensure its availability to those with serious problems.

OK, this article was not intended to be an exhaustive study as I needed to keep it short in an attempt to hold my audience’s attention and to leave some room for discussing what we can do contribute mightily to solving some of the problems. First, we must understand that the dollars available for health care are not limitless. Any changes that are put in place to provide better insurance coverage and access to care will cost more. And somehow we have to find the revenues to pay for these changes. At the same time, we have to pay less for medical treatments and procedures and do something to restrict the availability of unproven or poorly documented treatments as we are the highest cost health care system in the world and don’t necessarily have the best results in terms of longevity or avoiding chronic diseases much earlier than necessary.

I believe that we need a revolutionary change in the way we think about health care, its availability, its costs and who pays for it. And if you think I am about to say we should arbitrarily and drastically reduce spending on health care you would be wrong. Here it is fellow citizens – health care spending needs to be preserved and protected for those who need it. And to free up these dollars those of us who don’t need it or can delay it or avoid it need to act. First, we need to convince our politicians that this country needs to be sustained public education with regard to the value of preventive health strategies. This should be a top priority and it has worked to reduce the number of U.S. smokers for example. If prevention were to take hold, it is reasonable to assume that those needing health care for the myriad of lifestyle engendered chronic diseases would decrease dramatically. Millions of Americans are experiencing these diseases far earlier than in decades past and much of this is due to poor lifestyle choices. This change alone would free up plenty of money to handle the health care costs of those in dire need of treatment, whether due to an acute emergency or chronic condition.reform

Let’s go deeper on the first issue. Most of us refuse to do something about implementing basic wellness strategies into our daily lives. We don’t exercise but we offer a lot of excuses. We don’t eat right but we offer a lot of excuses. We smoke and/or we drink alcohol to excess and we offer a lot of excuses as to why we can’t do anything about managing these known to be destructive personal health habits. We don’t take advantage of preventive health check-ups that look at blood pressure, cholesterol readings and body weight but we offer a lot of excuses. In short, we neglect these things and the result is that we succumb much earlier than necessary to chronic diseases like heart problems, diabetes, and high blood pressure. We wind up accessing doctors for these and more routine matters because “health care is there” and somehow we think we have no responsibility for reducing our demand for it.

It is difficult for us to listen to these truths but easy to blame the sick. Maybe they should take better care of themselves! Well, that might be true or maybe they have a genetic condition and they have become among the unfortunate through absolutely no fault of their own. But the point is that you and I can implement personalized preventive disease measures as a way of dramatically improving health care access for others while reducing its costs. It is far better to be productive by doing something we can control then shifting the blame.

There are a huge number of free websites available that can steer us to a more healthful lifestyle. A soon as you can, “Google” “preventive health care strategies”, look up your local hospital’s website and you will find more than enough help to get you started. Finally, there is a lot to think about here and I have tried to outline the challenges but also the very powerful effect we could have on preserving the best of America’s health care system now and into the future. I am anxious to hear from you and until then – take charge and increase your chances for good health while making sure that health care is there when we need it.

A Prescription For the Health Care Crisis

With all the shouting going on about America’s health care crisis, many are probably finding it difficult to concentrate, much less understand the cause of the problems confronting us. I find myself dismayed at the tone of the discussion (though I understand it—people are scared) as well as bemused that anyone would presume themselves sufficiently qualified to know how to best improve our health care system simply because they’ve encountered it, when people who’ve spent entire careers studying it (and I don’t mean politicians) aren’t sure what to do themselves.health

Albert Einstein is reputed to have said that if he had an hour to save the world he’d spend 55 minutes defining the problem and only 5 minutes solving it. Our health care system is far more complex than most who are offering solutions admit or recognize, and unless we focus most of our efforts on defining its problems and thoroughly understanding their causes, any changes we make are just likely to make them worse as they are better.

 

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Though I’ve worked in the American health care system as a physician since 1992 and have seven year’s worth of experience as an administrative director of primary care, I don’t consider myself qualified to thoroughly evaluate the viability of most of the suggestions I’ve heard for improving our health care system. I do think, however, I can at least contribute to the discussion by describing some of its troubles, taking reasonable guesses at their causes, and outlining some general principles that should be applied in attempting to solve them.

THE PROBLEM OF COST

No one disputes that health care spending in the U.S. has been rising dramatically. According to the Centers for Medicare and Medicaid Services (CMS), health care spending is projected to reach $8,160 per person per year by the end of 2009 compared to the $356 per person per year it was in 1970. This increase occurred roughly 2.4% faster than the increase in GDP over the same period. Though GDP varies from year-to-year and is, therefore, an imperfect way to assess a rise in health care costs in comparison to other expenditures from one year to the next, we can still conclude from this data that over the last 40 years the percentage of our national income (personal, business, and governmental) we’ve spent on health care has been rising.

Despite what most assume, this may or may not be bad. It all depends on two things: the reasons why spending on health care has been increasing relative to our GDP and how much value we’ve been getting for each dollar we spend.

WHY HAS HEALTH CARE BECOME SO COSTLY?

This is a harder question to answer than many would believe. The rise in the cost of health care (on average 8.1% per year from 1970 to 2009, calculated from the data above) has exceeded the rise in inflation (4.4% on average over that same period), so we can’t attribute the increased cost to inflation alone. Health care expenditures are known to be closely associated with a country’s GDP (the wealthier the nation, the more it spends on health care), yet even in this the United States remains an outlier (Figure 3).

Is it because of spending on health care for people over the age of 75 (five times what we spend on people between the ages of 25 and 34)? In a word, no. Studies show this demographic trend explains only a small percentage of health expenditure growth.care

Is it because of monstrous profits the health insurance companies are raking in? Probably not. It’s admittedly difficult to know for certain as not all insurance companies are publicly traded and therefore have balance sheets available for public review. But Aetna, one of the largest publicly traded health insurance companies in North America, reported a 2009 second quarter profit of $346.7 million, which, if projected out, predicts a yearly profit of around $1.3 billion from the approximately 19 million people they insure. If we assume their profit margin is average for their industry (even if untrue, it’s unlikely to be orders of magnitude different from the average), the total profit for all private health insurance companies in America, which insured 202 million people (2nd bullet point) in 2007, would come to approximately $13 billion per year. Total health care expenditures in 2007 were $2.2 trillion (see Table 1, page 3), which yields a private health care industry profit approximately 0.6% of total health care costs (though this analysis mixes data from different years, it can perhaps be permitted as the numbers aren’t likely different by any order of magnitude).

Is it because of health care fraud? Estimates of losses due to fraud range as high as 10% of all health care expenditures, but it’s hard to find hard data to back this up. Though some percentage of fraud almost certainly goes undetected, perhaps the best way to estimate how much money is lost due to fraud is by looking at how much the government actually recovers. In 2006, this was $2.2 billion, only 0.1% of $2.1 trillion (see Table 1, page 3) in total health care expenditures for that year.

Is it due to pharmaceutical costs? In 2006, total expenditures on prescription drugs were approximate $216 billion (see Table 2, page 4). Though this amounted to 10% of the $2.1 trillion (see Table 1, page 3) in total health care expenditures for that year and must, therefore, be considered significant, it still remains only a small percentage of total health care costs.

Is it from administrative costs? In 1999, total administrative costs were estimated to be $294 billion, a full 25% of the $1.2 trillion (Table 1) in total health care expenditures that year. This was a significant percentage in 1999 and it’s hard to imagine it’s shrunk to any significant degree since then.

In the end, though, what probably has contributed the greatest amount to the increase in health care spending in the U.S. are two things:

1. Technological innovation.

2. Overutilization of health care resources by both patients and health care providers themselves.

Technological innovation. Data that proves increasing health care costs are due mostly to technological innovation is surprisingly difficult to obtain, but estimates of the contribution to the rise in health care costs due to technological innovation range anywhere from 40% to 65% (Table 2, page 8). Though we mostly only have empirical data for this, several examples illustrate the principle. Heart attacks used to be treated with aspirin and prayer. Now they’re treated with drugs to control shock, pulmonary edema, and arrhythmias as well as thrombolytic therapy, cardiac catheterization with angioplasty or stenting, and coronary artery bypass grafting. You don’t have to be an economist to figure out which scenario ends up being more expensive. We may learn to perform these same procedures more cheaply over time (the same way we’ve figured out how to make computers cheaper) but as the cost per procedure decreases, the total amount spent on each procedure goes up because the number of procedures performed goes up. Laparoscopic cholecystectomy is 25% less than the price of an open cholecystectomy, but the rates of both have increased by 60%. As technological advances become more widely available they become more widely used, and one thing we’re great at doing in the United States is making technology available.

Overutilization of health care resources by both patients and health care providers themselves. We can easily define overutilization as the unnecessary consumption of health care resources. What’s not so easy is recognizing it. Every year from October through February the majority of patients who come into the Urgent Care Clinic at my hospital are, in my view, doing so unnecessarily. What are they coming in for? Colds. I can offer support, reassurance that nothing is seriously wrong, and advice about over-the-counter remedies—but none of these things will make them better faster (though I often am able to reduce their level of concern). Further, patients have a hard time believing the key to arriving at a correct diagnosis lies in history gathering and careful physical examination rather than technologically-based testing (not that the latter isn’t important—just less so than most patients believe). Just how much patient-driven overutilization costs the health care system is hard to pin down as we have mostly only anecdotal evidence as above.

Further, doctors often disagree among themselves about what constitutes unnecessary health care consumption. In his excellent article, “The Cost Conundrum,” Atul Gawande argues that regional variation in overutilization of health care resources by doctors best accounts for the regional variation in Medicare spending per person. He goes on to argue that if doctors could be motivated to rein in their overutilization in high-cost areas of the country, it would save Medicare enough money to keep it solvent for 50 years.

A reasonable approach. To get that to happen, however, we need to understand why doctors are overutilizing health care resources in the first place:

1. Judgment varies in cases where the medical literature is vague or unhelpful. When faced with diagnostic dilemmas or diseases for which standard treatments haven’t been established, a variation in practice invariably occurs. If a primary care doctor suspects her patient has an ulcer, does she treat herself empirically or refer to a gastroenterologist for an endoscopy? If certain “red flag” symptoms are present, most doctors would prefer. If not, some would and some wouldn’t depend on their training and the intangible exercise of judgment.

2. Inexperience or poor judgment. More experienced physicians tend to rely on histories and physicals more than less experienced physicians and consequently order fewer and less expensive tests. Studies suggest primary care physicians spend less money on tests and procedures than their subspecialty colleagues but obtain similarly and sometimes even better outcomes.

3. Fear of being sued. This is especially common in Emergency Room settings but extends to almost every area of medicine.

4. Patients tend to demand more testing rather than less. As noted above. And physicians often have difficulty refusing patient requests for many reasons (eg, wanting to please them, fear of missing a diagnosis and being sued, etc).

5. In many settings, overutilization makes doctors more money. There exists no reliable incentive for doctors to limit their spending unless their pay is capitated or they’re receiving a straight salary.

Gawande’s article implies there exists some level of utilization of health care resources that’s optimal: use too little and you get mistakes and missed diagnoses; use too much and excess money gets spent without improving outcomes, paradoxically sometimes resulting in outcomes that are actually worse (likely as a result of complications from all the extra testing and treatments).

How then can we get doctors to employ uniformly good judgment to order the right number of tests and treatments for each patient—the “sweet spot”—in order to yield the best outcomes with the lowest risk of complications? Not easily. There is, fortunately, or unfortunately, an art to good health care resource utilization. Some doctors are more gifted at it than others. Some are more diligent about keeping current. Some care more about their patients. An explosion of studies of medical tests and treatments has occurred in the last several decades to help guide doctors in choosing the most effective, safest, and even cheapest ways to practice medicine, but the diffusion of this evidence-based medicine is a tricky business. Just because beta blockers, for example, have been shown to improve survival after heart attacks don’t mean every physician knows it or provides them. Data clearly show many don’t. How information spreads from the medical literature into medical practice is a subject worthy of an entire post unto itself. Getting it to happen uniformly has proven extremely difficult.

In summary, then, most of the increase in spending on health care seems to have come from technological innovation coupled with its overuse by doctors working in systems that motivate them to practice more medicine rather than better medicine, as well as patients who demand the former thinking it yields the latter.

But even if we could snap our fingers and magically eliminate all overutilization today, health care in the U.S. would still remain among the most expensive in the world, requiring us to ask next—crisis

WHAT VALUE ARE WE GETTING FOR THE DOLLARS WE SPEND?

According to an article in the New England Journal of Medicine titled The Burden of Health Care Costs for Working Families—Implications for Reform, growth in health care spending “can be defined as affordable as long as the rising percentage of income devoted to health care does not reduce standards of living. When absolute increases in income cannot keep up with absolute increases in health care spending, health care growth can be paid for only by sacrificing consumption of goods and services not related to health care.” When would this ever be an acceptable state of affairs? Only when the incremental cost of health care buys equal or greater incremental value. If, for example, you were told that in the near future you’d be spending 60% of your income on health care but that as a result, you’d enjoy, say, a 30% chance of living to the age of 250, perhaps you’d judge that 60% a small price to pay.

This, it seems to me, is what the debate on health care spending really needs to be about. Certainly, we should work on ways to eliminate overutilization. But the real question isn’t what absolute amount of money is too much to spend on health care. The real question is what are we getting for the money we spend and is it worth what we have to give up?

People alarmed by the notion that as health care costs increase policymakers may decide to ration health care don’t realize that we’re already rationing at least some of it. It just doesn’t appear as if we are because we’re rationing it on a first-come-first-serve basis—leaving it at least partially up to chance rather than to policy, which we’re uncomfortable defining and enforcing. Thus we don’t realize the reason our 90-year-old father in Illinois can’t have the liver he needs is that a 14-year-old girl in Alaska got in line first (or maybe our father was in line first and gets it while the 14-year-old girl doesn’t). Given that most of us remain uncomfortable with the notion of rationing health care based on criteria like age or utility to society, as technological innovation continues to drive up health care spending, we very well may at some point have to make critical judgments about which medical innovations are worth our entire society sacrificing access to other goods and services (unless we’re so foolish as to repeat the critical mistake of believing we can keep borrowing money forever without ever having to pay it back).

So what value are we getting? It varies. The risk of dying from a heart attack has declined by 66% since 1950 as a result of technological innovation. Because cardiovascular disease ranks as the number one cause of death in the U.S. this would seem to rank high on the scale of value as it benefits a huge proportion of the population in an important way. As a result of advances in pharmacology, we can now treat depression, anxiety, and even psychosis far better than anyone could have imagined even as recently as the mid-1980’s (when Prozac was first released). Clearly, then, some increases in health care costs have yielded enormous value we wouldn’t want to give up.

But how do we decide whether we’re getting good value from new innovations? Scientific studies must prove the innovation (whether a new test or treatment) actually provides clinically significant benefit (Aricept is a good example of a drug that works but doesn’t provide great clinical benefit—demented patients score higher on tests of cognitive ability while on it but probably aren’t significantly more functional or significantly better able to remember their children compared to when they’re not). But comparative effectiveness studies are extremely costly, take a long time to complete, and can never be perfectly applied to every individual patient, all of which means some health care provider always has to apply good medical judgment to every patient problem.

Who’s best positioned to judge the value to society of the benefit of an innovation—that is, to decide if an innovation’s benefit justifies its cost? I would argue the group that ultimately pays for it: the American public. How the public’s views could be reconciled and then effectively communicated to policy makers efficiently enough to affect actual policy, however, lies far beyond the scope of this post (and perhaps anyone’s imagination).

THE PROBLEM OF ACCESS

A significant proportion of the population is uninsured or underinsured, limiting or eliminating their access to health care. As a result, this group finds the path of least (and cheapest) resistance—emergency rooms—which has significantly impaired the ability of our nation’s ER physicians to actually render timely emergency care. In addition, surveys suggest a looming primary care physician shortage relative to the demand for their services. In my view, this imbalance between supply and demand explains most of the poor customer service patients face in our system every day: long wait times for doctors’ appointments, long wait times in doctors’ offices once their appointment day arrives, then short times spent with doctors inside exam rooms, followed by difficulty reaching their doctors in between office visits, and finally delays in getting test results. This imbalance would likely only partially be alleviated by less health care overutilization by patients.

GUIDELINES FOR SOLUTIONS

As Freakonomics authors Steven Levitt and Stephen Dubner state, “If morality represents how people would like the world to work, then economics represents how it actually does work.” Capitalism is based on the principle of enlightened self-interest, a system that creates incentives to yield behavior that benefits both suppliers and consumers and thus society as a whole. But when incentives get out of whack, people begin to behave in ways that continue to benefit them often at the expense of others or even at their own expense down the road. Whatever changes we make to our health care system (and there’s always more than one way to skin a cat), we must be sure to align incentives so that the behavior that results in each part of the system contributes to its sustainability rather than its ruin.

Here then is a summary of what I consider the best recommendations I’ve come across to address the problems I’ve outlined above:

1. Change the way insurance companies think about doing business. Insurance companies have the same goal as all other businesses: maximize profits. And if a health insurance company is publicly traded and in your 401k portfolio, you want them to maximize profits, too. Unfortunately, the best way for them to do this is to deny their services to the very customers who pay for them. It’s harder for them to spread risk (the function of any insurance company) relative to say, a car insurance company, because far more people make health insurance claims than car insurance claims. It would seem, therefore, from a consumer perspective, the private health insurance model is fundamentally flawed. We need to create a disincentive for health insurance companies to deny claims (or, conversely, an extra incentive for them to pay them). Allowing and encouraging across-state insurance competition would at least partially engage free market forces to drive down insurance premiums as well as open up new markets to local insurance companies, benefiting both insurance consumers and providers. With their customers now armed with the all-important power to go elsewhere, health insurance companies might come to view the quality with which they actually provide service to their customers (ie, the paying out of claims) as a way to retain and grow their business. For this to work, monopolies or near-monopolies must be disbanded or at the very least discouraged. Even if it does work, however, government will probably still have to tighten regulation of the health insurance industry to ensure some of the heinous abuses that are going on now stop (for example, insurance companies shouldn’t be allowed to stratify consumers into sub-groups based on age and increase premiums based on an older group’s higher average risk of illness because healthy older consumers then end up being penalized for their age rather than their behaviors). Karl Denninger suggests some intriguing ideas in a post on his blog about requiring insurance companies to offer identical rates to businesses and individuals as well as creating a mandatory “open enrollment” period in which participants could only opt in or out of a plan on a yearly basis. This would prevent individuals from only buying insurance when they got sick, eliminating the adverse selection problem that’s driven insurance companies to deny payment for pre-existing conditions. I would add that, however reimbursement rates to health care providers are determined in the future (again, an entire post unto itself), all health insurance plans, whether private or public, must reimburse health care providers by an equal percentage to eliminate the existence of “good” and “bad” insurance that’s currently responsible for motivating hospitals and doctors to limit or even deny service to the poor and which may be responsible for the same thing occurring to the elderly in the future (Medicare reimburses only slightly better than Medicaid). Finally, regarding the idea of a “public option” insurance plan open to all, I worry that if it’s significantly cheaper than private options while providing near-equal benefits the entire country will rush to it en masse, driving private insurance companies out of business and forcing us all to subsidize one another’s health care with higher taxes and fewer choices; yet at the same time if the cost to the consumer of a “public option” remains comparable to private options, the very people it’s meant to help won’t be able to afford it.

2. Motivate the population to engage in healthier lifestyles that have been proven to prevent disease. Prevention of disease probably saves money, though some have argued that living longer increases the likelihood of developing diseases that wouldn’t have otherwise occurred, leading to the overall consumption of more health care dollars (though even if that’s true, those extra years of life would be judged by most valuable enough to justify the extra cost. After all, the whole purpose of health care is to improve the quality and quantity of life, not save society money. Let’s not put the cart before the horse). However, the idea of preventing a potentially bad outcome sometime in the future is only weakly motivating psychologically, explaining why so many people have so much trouble getting themselves to exercise, eat right, lose weight, stop smoking, etc. The idea of financially rewarding desirable behavior and/or financially punishing undesirable behavior is highly controversial. Though I worry this kind of strategy risks the enacting of policies that may impinge on basic freedoms if taken too far, I’m not against thinking creatively about how we could leverage stronger motivational forces to help people achieve health goals they themselves want to achieve. After all, most obese people want to lose weight. Most smokers want to quit. They might be more successful if they could find more powerful motivation.

3. Decrease overutilization of health care resources by doctors. I’m in agreement with Gawande that finding ways to get doctors to stop overutilizing health care resources is a worthy goal that will significantly rein in costs, that it will require a willingness to experiment, and that it will take time. Further, I agree that focusing only on who pays for our health care (whether the public or private sectors) will fail to address the issue adequately. But how exactly can we motivate doctors, whose pens are responsible for most of the money spent on health care in this country, to focus on what’s truly best for their patients? The idea that external bodies—whether insurance companies or government panels—could be used to set standards of care doctors must follow in order to control costs strikes me as ludicrous. Such bodies have neither the training nor overriding concern for patients’ welfare to be trusted to make those judgments. Why else do we have doctors if not to employ their expertise to apply nuanced approaches to complex situations? As long as they work in a system free of incentives that compete with their duty to their patients, they remain in the best position to make decisions about what tests and treatments are worth a given patient’s consideration, as long as they’re careful to avoid overconfident paternalism (refusing to obtain a head CT for a headache might be overconfidently paternalistic; refusing to offer chemotherapy for a cold isn’t). So perhaps we should eliminate any financial incentive doctors have to care about anything but their patients’ welfare, meaning doctors’ salaries should be disconnected from the number of surgeries they perform and the number of tests they order, and should instead be set by market forces. This model already exists in academic health care centers and hasn’t seemed to promote shoddy care when doctors feel they’re being paid fairly. Doctors need to earn a good living to compensate for the years of training and massive amounts of debt they amass, but no financial incentive for practicing more medicine should be allowed to attach itself to that good living.

4. Decrease overutilization of health care resources by patients. This, it seems to me, requires at least three interventions:

* Making available the right resources for the right problems (so that patients aren’t going to the ER for colds, for example, but rather to their primary care physicians). This would require hitting the “sweet spot” with respect to the number of primary care physicians, best at front-line gatekeeping, not of health care spending as in the old HMO model, but of triage and treatment. It would also require a recalculating of reimbursement levels for primary care services relative to specialty services to encourage more medical students to go into primary care (the reverse of the alarming trend we’ve been seeing for the last decade).

* A massive effort to increase the health literacy of the general public to improve its ability to triage its own complaints (so patients don’t actually go anywhere for colds or demand MRIs of their backs when their trusted physicians tells them it’s just a strain). This might be best accomplished through a series of educational programs (though given that no one in the private sector has an incentive to fund such programs, it might actually be one of the few things the government should—we’d just need to study and compare different educational programs and methods to see which, if any, reduce unnecessary patient utilization without worsening outcomes and result in more health care savings than they cost).

* Redesigning insurance plans to make patients in some way more financially liable for their health care choices. We can’t have people going bankrupt due to illness, nor do we want people to underutilize health care resources (avoiding the ER when they have chest pain, for example), but neither can we continue to support a system in which patients are actually motivated to over utilize resources, as the current “prepay for everything” model does.

CONCLUSION

Given the enormous complexity of the health care system, no single post could possibly address every problem that needs to be fixed. Significant issues not raised in this article include the challenges associated with rising drug costs, direct-to-consumer marketing of drugs, end-of-life care, skyrocketing malpractice insurance costs, the lack of cost transparency that enables hospitals to paradoxically charge the uninsured more than the insured for the same care, extending health care insurance coverage to those who still don’t have it, improving administrative efficiency to reduce costs, the implementation of electronic medical records to reduce medical error, the financial burden of businesses being required to provide their employees with health insurance, and tort reform. All are profoundly interdependent, standing together like the proverbial house of cards. To attend to any one is to affect them all, which is why rushing through health care reform without careful contemplation risks unintended and potentially devastating consequences. Change does need to come, but if we don’t allow ourselves time to think through the problems clearly and cleverly and to implement solutions in a measured fashion, we risk bringing down that house of cards rather than cementing it.