For our October Readers’ Review: a novella that became an instant classic when it was written nearly two centuries ago. It is the ghostly tale of a lanky loner and a headless horseman. Some even call it the first American horror story. Join Diane and her guests for a discussion of “The Legend of Sleepy Hollow” by Washington Irving.
There are signs that health care spending growth has slowed down in the last few years. Diane and her panel of experts look at what higher deductibles, a move away from fee-for-service plans and other changes could mean for future health care costs.
- Karen Davis president,The Commonwealth Fund, former deputy assistant secretary for health policy in the Department of Health and Human Services from 1977–1980
- Annie Lowrey economic policy reporter, the New York Times.
- Peter Orszag vice chairman of global banking at Citigroup Inc.; former director of the Office of Management and Budget in the Obama administration; former director, Congressional Budget Office, and author of "Saving Social Security"
- Joseph Antos Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute, a commissioner of the Maryland Health Services Cost Review Commission and a health adviser to the Congressional Budget Office
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Many experts were startled to hear that health care spending grew at the slowest rate in 50 years. This includes Medicare spending. The reasons behind the flattening are being debated by experts, including those on our panel today. Joining me in the studio: Annie Lowrey of The New York Times, Joseph Antos of the American Enterprise Institute, and Karen Davis of The Commonwealth Fund.
MS. DIANE REHMYou're welcome to join us in the conversation. Call us on 800-433-8850. Send us an email to firstname.lastname@example.org. Join us on Facebook or Twitter. Good morning to all of you.
MS. KAREN DAVISGood morning.
MR. JOSEPH ANTOSGood morning.
MS. ANNIE LOWREYGood morning.
REHMAnnie Lowrey, let me start with you. Give us an idea of just how much health care spending has slowed.
LOWREYWell, it slowed to the slowest pace in the last two years in more than five decades, so it's been less than 4 percent per year growth. So health care spending is still growing, but it's growing very, very slowly. And it's growing somewhat more slowly than health economists would've expected, even counting the fact that so many people lost their jobs, lost their coverage or otherwise were using the health care system less because of the recession.
LOWREYAnd that's what's kind of been surprising for a lot of health experts. They're trying to figure out whether there was something different about this recession that is depressing spending or whether some of the changes to focus on affordable care have depressed spending. There's probably more than one thing going on. And there's considerable interest among academics and hospital administration -- administrators as to what that is.
REHMAnd, Karen Davis, how do you see it?
DAVISWell, undoubtedly, the recession has slowed spending. People have lost their jobs. About 9 million people haven't been able to find health insurance coverage. And we all know that people who are uninsured use services less. But I don't think this is primarily the recession. When we look at the 10-year forecast, we see that health spending in 2020 is projected to be 6 percent lower than we were thinking just two years ago, which is a $1.7 trillion savings in health spending over this decade.
REHMThat's pretty substantial.
DAVISAbsolutely. So there is something fundamental going on now that's not just the recession.
REHMWhat do you see, Joseph Antos?
ANTOSI hope Karen's projections are right. The problem with projections is that they aren't necessarily realized. Ten years from now, we'll see what happens. But I think there are some fundamental changes that have been going on. I agree with Karen. For some time employers, for example, have been changing the shape of their health insurance because the cost has been rising, and they've been trying to keep premiums on.
ANTOSWorkers have not gotten big raises over the past 10 years not because of the recession but largely because their compensation increases have come in the form of higher cost health care.
REHMIn fact, however, haven't premiums actually gone up?
ANTOSYes, premiums. Well, you know, over the last 10 years, as Annie said, the health spending has continued to increase, just at a slower rate. So it's not surprising that premiums are going to continue to go up if this is a constant battle between how much people have to pay out of pocket and how much is covered by the insurance.
REHMWhat does that mean, Annie?
LOWREYWell, there's been the explosion of these high-deductible plans. It's been really, really quick that a lot of people have shifted into them. What a high-deductible plan is, it essentially means that your premiums are lower, but you're going to pay more out of pocket. And this sort of depresses health care spending in two ways. So the first is that upfront, the premiums are lower. The second is that people tend to use the health care system less when they're paying more out of pocket, right?
LOWREYIf you've got to pay a lot of money to go see a specialist, maybe you'll just figure out what to do with your knee yourself. And so the question is, how much this is actually depressing nationwide health spending. It's a $2.6 trillion markets. So there's definitely -- or sorry, a $6 trillion market. So there's definitely more than one thing going on.
DAVISI think we have to be clear about the numbers here. We had an explosion of health care cost between 2000 and 2008. After spending 14 percent of the nation's economy on health care during the Clinton years and the Bush years, we went from 14 percent to 18 percent...
DAVIS...and that was an increase from $1.5 trillion spent on health care to $2.4 trillion. So when we tried the market solution in the early 2000, the basic result was an explosion in health care cost. So what we're now seeing is a different phenomenon.
REHMBut what about the insurance rates, have they not gone up?
DAVISAbsolutely. In fact, they went up even faster than health care spending. So they went up 130 percent when family incomes were only going up about 30 percent. So far faster than the economy, far faster than the average working family and even in the most recent numbers where health care spending has slowed down, we're still seeing insurance administrative cost go up over 8 percent a year. So there's still a problem with health insurance premiums.
REHMNow, is the Obama administration trying to direct attention to those -- what one might say are excessive administrative costs?
DAVISAbsolutely. There are two major provisions that are aimed at getting at this problem. The first is that state insurance commissioners and the secretary of Health and Human Services can review premiums, and anything over 10 percent is viewed as unreasonable. And that holds the threat that that insurance company then cannot participate in health insurance exchanges.
DAVISSo that scrutiny is helpful. The second important provision in the Affordable Care Act is that it limited administrative cost in insurance profits to no more than 15 percent of the premium in the case of large employers and 20 percent of the premium in the case of individuals or small employers.
REHMSo you got the Affordable Care Act before the Supreme Court. What happens if the Affordable Care Act in whole or in part goes down? What happens to health care costs, Joseph Antos?
ANTOSYou know, I think the jury is out on that. Remember that the Affordable Health Care Act expands federal subsidies through Medicaid and through the exchanges, so there would be a lot more people with health insurance, subsidized health insurance. And that means they're going to spend more money. I'm not saying that's necessarily a bad thing. But, inevitably, you're going to see more spending. And the savings provisions that are in the Affordable Care Act, first of all, they're mostly Medicare provisions.
ANTOSThey're mostly cuts and provider payments, and we've seen Congress not going -- following through with the provider payment cuts in the case of physicians, for example. So it remains to be seen whether those sorts of things will happen. The other ideas that -- what I think are good ideas to better organize the health care system. Unfortunately, those are still ideas. They're a pretty long way off before we see some real results.
REHMOf course, some of those ideas are already in place, namely maintaining a young person on one's health insurance policy to age 26 and ensuring that no one is excluded from the health care system for pre-existing conditions. Annie Lowrey, how had medical costs themselves gone down? Have they gone down because the cost, the burden has shifted to individual?
LOWREYYes, absolutely. When people are responsible -- when they kind of have to look at the price tag for something, they use the health system less. This is absolutely true. But a lot of health experts think that a lot of the big savings that we're going to get, the big savings over a tenure or a 30-year period involves managing chronic conditions and keeping people out of the hospital. And so there's a lot of provisions within the Affordable Care Act that would help doctors do that.
LOWREYThere's a lot of things to kind of change the incentives to give more care. Right now, though, we still have a predominantly fee-for-service medical system. And so, you know, the incentives are unfortunately aligned for people to spend more money. And so, you know, the hope would be that the ACA would to start to winnow that down, and a lot of states have been very proactive in doing it themselves, as have individual health systems.
REHMAnd, Karen Davis, to what extent has this caused providers to work in more efficient ways and perhaps to help patients learn how to take care of themselves better?
DAVISI think Annie is absolutely right 'cause the real savings come from focusing on the 10 percent that the people who account for two-thirds of all health care spending. Those who are really sick have multiple chronic conditions. And what's happening on the part of doctors in hospitals is that they are getting new incentives to control the diabetes, to control the congestive heart failure.
DAVISObviously, the coverage under the Medicare program of prescription drugs does make it easier for people to have blood pressure medications that control their blood pressure, that control their cholesterol. And, in fact, the Affordable Care Act has eliminated the doughnut hole, is phasing out the doughnut hole in the prescription drug coverage. So it's making certainly prescription drugs more affordable for the elderly, and it's eliminated all cost sharing for preventive services like a colonoscopy or a mammogram both for Medicare beneficiaries and for the working population.
REHMCould that mean, though, that people are not getting the full ecstatic care that they might need simply because of higher deductibles and providers saying, well, maybe you don't need this colonoscopy this year. Maybe you can wait a few years?
DAVISWell, we definitely don't want financial barriers to care for prevention. And that's one of the things that the Affordable Care Act that take all of those services out of the deductible. But we also want people to go to their doctor when they suspect something is wrong, that they have some symptom that they're troubled about. What we need to do is focus on the high-cost patients and help them avoid the amputations, avoid the strokes.
REHMKaren Davis, she was assistant -- former deputy assistant secretary for health policy in the Department of Health and Human Services in the Carter administration.
REHMAnd joining us now by phone is Peter Orszag. He is former director of the Office of Management and Budget during the Obama administration. Good morning to you, sir.
MR. PETER ORSZAGGood morning.
REHMTell me what this information about a slowdown in the growth of health care spending means for the forecast on where it would be by now.
ORSZAGWell, I'd say the deceleration that we've been experiencing is not really embodied yet in the forecast. Forecasters tend to be quite conservative and not really update their long-run projections, certainly not in response to anything that's occurring over a two- or three-year window. But despite that, it's -- it -- the early signs are somewhat encouraging. And if it turns out to be the case that a significant part of the slowing is structural and is continued, it would be a huge accomplishment not only for the federal budget, but also for a worker's take-home pay and for state and local governments also.
REHMSo from where you sit or stand now, you see this slowdown as temporary or a good sign?
ORSZAGWell, I think a lot of it does have to do with the economy, but I don't think -- if I had to bet, I would say that not all of it is due to the economic slowdown. So in other words, part of it is not temporary and will continue. And I say that for a few reasons. The first is that if it were all the economy, you'd really expect the commercial space for current workers to slow down disproportionately because they are the ones who tend to face the most fluctuations from the economy.
ORSZAGAnd yet, instead, what we've seen is that the deceleration, if anything, has been more dramatic in Medicare. And that's, I think, an important piece of evidence that needs to be explained. And the second thing is I spend a lot of time going around to hospital systems and speaking with doctors. There is a significant change that has occurred over the past few years relative to, you know, 10 years ago. And maybe one way of characterizing that is at a speech I gave last week to senior and industry executives.
ORSZAGI asked what share of fee for -- what share of health care payments in 2020 do you believe will not be fee-for-service, and what share of clinical decisions made by doctors in 2020 do you believe will be aided by clinical decision support software? And the vast majority of very knowledgeable health sector executives responded to both questions, suggesting the vast majority of -- in 2020 will be non-fee-for-service and -- with regard to clinical decisions supported by clinical decision support software.
ORSZAGThose are huge changes. And I think we're -- what we've been experiencing over the past few years is the leading edge of where those folks see the health system going.
REHMAnd another decision about which you've written is the recent one by nine physician groups to eliminate 45 unnecessary tests and procedures. To what extent is that going to slow the growth of health care cost?
ORSZAGWell, I think it's not necessarily all that much by itself, but it's a signal or an indicator of this change in perspective. Doctors -- the fact that that announcement was made almost in and of itself highlights a change in perspective.
ORSZAGAnd in addition to that kind of announcement, and perhaps even more importantly, I am seeing in hospital system after hospital system doctors -- not only increasingly on salary, which I think is an important change, but just as importantly or if not more -- being willing to be benchmarked, to be compared to their peers and to be examined as to why, you know, they're ordering two or three times as many tests as their colleagues.
ORSZAGAnd that is a very important change because, once you start to do that, you can examine why the practice variation is occurring and try to narrow it. And there have been -- already been successful cases. The -- one of the most compelling is at Mass General in Boston, where they were experiencing very rapid growth in outpatient imaging, huge variation across doctors in terms of how many images they were ordering.
ORSZAGAnd they put in a computerized order entry system, but, just as importantly, they sat the docs down and said, do you realize that you're ordering a lot more than your colleague on another side of the table?
ORSZAGAnd a lot of them hadn't realized their practices had kind of drifted away from what the norm should be. And the result was very, very successful in terms of slowing the growth and narrowing the variation.
REHMI think -- I am wondering and, I think, perhaps a lot of other people are wondering whether these positive changes that we've seen recently in health care happening outside of Washington may, in fact, be connected in some way to the Affordable Care Act. What are your thoughts?
ORSZAGWell, I think there's no doubt, again, coming back to this change in orientation, more towards value, more towards hospitals and doctors realizing that they're going to be bearing more risks, that is certainly very much at the heart and center of the Affordable Care Act. And so even though many of the provisions actually hasn't taken hold yet, they -- you can see where the system is going, and folks are, I think, starting to respond to that ahead of time.
ORSZAGThe second thing that's happening, which was not technically part of the Affordable Care Act, it was actually part of the stimulus, were the set of subsidies for health information technology systems. And, you know, the example I just gave about outpatient imaging, you can't do that if you don't have a good health IT system in place that then has to be used. So we're seeing two things.
ORSZAGOne is hospitals and doctors looking forward, seeing the way that the system is evolving towards bundled payment and towards affordable care organizations and towards pay for performance and realizing that the fee-for-service model is not going to be the dominant model in the future and trying to respond to that now.
ORSZAGAnd the second thing is a significant uptick in the installment and use of health IT systems, especially when linked to clinical decision support software, which can be part of -- it's not sufficient by itself, but it is often necessary to get towards a higher value health care out -- set of outcomes.
REHMJoseph Antos might want to ask a question.
ANTOSWell, Peter, good to hear from you. I agree that -- I think the underlying theme of your conversation is that if you don't get the payments right, if you don't align financial incentives, the system isn't going to work. And the reason why doctors are increasingly being willing to, in essence, be examined by their peers is, bluntly, it's a matter of money.
ANTOSI guess the question is, is there anything that you see that's really going to move us away from fee-for-service aside from the -- these accountable care organizations? I mean, do you see greater movement? I personally believe that the movement is really on the private side, not on the government side. I'd like your reaction to that.
ORSZAGSure. Well, I actually -- I think a particularly important development will be increased use of bundling. I was struck -- for example, earlier this year, the Congressional Budget Office came out with an analysis of the various demo projects that have been done as part of Medicare to try to change payments there. The -- and the media coverage was nothing works. What the report actually showed was one thing did work, and that was bundling payments for CABG, for coronary artery bypass grafts in the 1990s, reduced costs by 10 percent, no adverse consequences for quality.
ORSZAGAnd the thing that's striking is that nothing happened. It was like a tree falling in the woods, and, you know, the world went on as if we didn't have evidence that that worked. I agree with you. What's interesting is private insurance companies now are increasingly moving towards a bundled payment approach.
REHMPeter, explain what that bundled payment means.
ORSZAGWhat does that mean? What that means is if you have a patient who needs a bypass graft -- that's an example -- you're not going to pay for each individual thing that the hospital or doctor does. So if you order a test or this or that, you're not going to pay for each individual thing. Instead, there's going to be a fixed payment that you get for taking care of that patient with that kind of condition.
ORSZAGAnd typically or ideally, you link it to some measure of quality so that you don't have an incentive to skimp on what you do. But instead of getting paid piecemeal for every little thing you do, you're getting fixed payment for taking care of that patient, basically.
ORSZAGAnd the use of that is now expanding. And I would say it's expanding a little bit within Medicare, but it's expanding much more aggressively, Joe, to your point, among a variety of private insurance firms. And one of the interesting developments that I think is going to persist, regardless of what happens in the Supreme Court, regardless of what happens in the presidential election is hospitals and doctors are bearing more risk.
ORSZAGSo, for example, when you do a bundled payment, they are -- they face the risk that the patient is going to need a lot more care, and they're going to have to provide that even though they're only getting a fixed payment for providing the care. As that is occurring, the dividing line between the providers -- that is, the hospital -- and insurance companies is eroding. It's getting a little fuzzy.
ORSZAGAnd so you're seeing hospitals trying to acquire many of the tools that insurance companies had previously used in order to manage that kind of risk, insurance companies sometimes moving into the direct provision of care, that dividing line erasing.
ORSZAGAnd I actually think that's a very positive development because when you have that dividing line and the hospital system was -- or the doctor was getting paid for each thing it did, that's at the heart of many of the problems where -- we have where we drive up quantity without improving quality.
DAVISI think Peter is exactly right that the direction Medicare is moving in under the Affordable Care Act to pay one global fee for a surgical procedure is exactly the right thing to do. So you don't get separate bills for the surgeon, the anesthesiologist, the radiologist, the pathologist. But beyond that, it's like surgery with a warranty. The hospital and doctors don't get paid again if you have to go back and have a complication and redo the surgery.
DAVISSo that's a big incentive to improve quality.
LOWREYYeah. And I think that there's cases in which private companies are actually pulling the government along. So if you look in Massachusetts, the biggest private insurer has moved towards -- away from fee-for-service and towards being -- rewarding providers for quality of care rather than quantity. And what's happened is that the state is actually moving to make sure that its Medicare and Medicaid programs are doing the same thing.
LOWREYAnd what's going on in Massachusetts, I think, is kind of fascinating because it's one of the states that's furthest along in -- you know, they were kind of first in taking care of the coverage problem, and they might be first in taking care of the payment reform problem, although there's many complications and it's a complicated thing to do.
REHMAnd, Peter Orszag, how do you see patient behavior changing?
ORSZAGWell, one of the other big things that has been going on and I think will continue is employers are basically moving in the direction of a defined contribution model for health care, just like they did for pensions, for retirement income over the past two to three decades. So consumers are bearing more cost, and they're -- and that is having some effect and maybe one of the explanations for why we've actually seen some slower growth throughout the past decade.
ORSZAGBut, again, I come back to the point that the recent deceleration has been disproportionate in Medicare. So you can't really explain that based on the expanded use of cost-sharing within employer plans. And the second thing I'd say is I've always been of the belief that more consumer cost-sharing can help, and there's a wide variety of evidence suggesting that it does, but that we shouldn't stake all of our hopes on that.
ORSZAGAnd the reason is that under almost any consumer -- any approach in which you're trying to increase cost-sharing, you're still going to provide very deep insurance against very high cost, which is the whole point of insurance, after all. And the difficulty in health care is that's basically where all the money is. It's stunning. But if you look at Medicare beneficiaries and rank them by their cost, the top 25 percent of beneficiaries ranked by cost account for 85 percent of the total Medicare cost.
ORSZAGSo you're having your -- by introducing more cost-sharing, at least in the Medicare space as an example, you'd have your biggest effect on over 75 percent of beneficiaries, but they're only 15 percent of the total. So it can help, but I worry about putting it in pole position and just sort of the lead of trying to move towards a higher value health care system. I think, instead, what we really need to be getting at directly is the financial incentives and the information flows to providers because I think that's what really determines what happens in those high-cost cases.
REHMPeter Orszag. He's former director of the Office of Management and Budget during the Obama administration. He's currently a vice chair at Citigroup. And you're listening to "The Diane Rehm Show." Peter, here is an email from John, who says, "Does anyone remember how health care cost dropped during the '90s when the Clinton administration was close to a health care deal? Is it possible the health care industry backs off their cost increases to make the Obama Affordable Care Act seem less necessary?"
ORSZAGWell, look, there's a lot of -- there are a lot of questions about -- this really comes back to whether this slowdown is temporary or not and analogies to what happened during the early to mid-1990s. My own view is that this is much different because you are getting more directly at the delivery system itself. When you have physician groups coming out and saying, here are 45 unnecessary tests and procedures, that's a much different thing than managed care companies saying, here are 45 unnecessary tests and procedures.
ORSZAGAnd I think a lot of the structural change that -- changes that have -- we are seeing directly involving hospitals and doctors, rather than just kind of pushing from the insurance side, will be more sustainable than what happened in the 1990s.
DAVISI agree with Peter that the main way we're going to get progress and move toward a high-performance health system is by changing the incentives that face doctors and hospitals. But I also think the increase in public information on quality and cost is very beneficial. So, for over a decade, we've been reporting rates for managed care plans on how well they do at diabetes control or asthma control.
DAVISAnd with the Affordable Care Act, there's simply going to be more information out there on the quality of different hospitals. Already, we have information on complication rates, surgical infections. And it's not so much that patients choose, but hospitals want to be the best. And this is a spur to improvement.
REHMPeter, in 20 seconds or less, what happens if the Affordable Care Act goes down?
ORSZAGTwenty-second answer is it depends on what it means by going down and whether the whole thing is struck down or just the mandate. But the good news is, again, regardless of what happens in the Supreme Court, here are three things that I think are going to be.
REHMDon't have time, Peter. Thank you so much for joining us. I want to hear about those things another time.
REHMAnd we'll open the phones now, first, to Dr. Everett Murphy in Kansas City, Mo. Good morning, sir. You're on the air.
DR. EVERETT MURPHYGood morning. Diane?
REHMYes, go right ahead, sir.
MURPHYWell, looking at it from a perspective as a practicing physician, what -- I've seen the change. At least a major change is through the use of palliative care. What we're doing for those very complex patients is identifying the goals. It's from a patient's perspective. We as -- we can offer them a lot, but if we really don't know what they really want when they know that their life maybe come to the end in months or years, then we may be offering things that really don't help them.
REHMAnd, you know, we devoted an entire hour last week or the week before to palliative care because I do believe it is an important thing for individuals, both doctors and patients, to be considering. Karen Davis.
DAVISYes. I think it's very exciting, this whole move toward patient-centered care. And it could mean, in the case of end of life care, really talking with patients and their families about what they want.
DAVISBut, more broadly, we're seeing it throughout the health system, in primary care practices where they're being redesigned to be available to patients 24/7 without going to an emergency room, to help patients navigate the health care system when they have a complex condition that have information systems so they don't have to repeat their records over and over and really work with them to control their chronic condition. So it's a whole new approach to care.
REHMAll right. Thanks for calling. And to Grand Rapids, Mich., good morning, Sheila.
SHEILAGood morning, Diane. I'm so pleased. I'll be very brief because I want other callers to have a chance. I just want you to know I admire you and all the areas you go into and your balanced panels.
SHEILAMy -- two things that I'm dealing with that match so much what your panel is discussing is I have a doctor, who will remain nameless, and she is very mad at me. And she calls me stubborn because she orders every test you can imagine, and I tell her I can't afford it. And my last lab test was $490, and my insurance paid $91 of it. And you have to keep in mind, my husband worked for a large corporation for 30 years and retired, but no insurance. We're personally responsible.
SHEILAWe pay $22,000 a year, and it is the best that we can find. I'm a diabetic, and he has a heart condition. And she calls me stubborn, and she says, I know you're going to put me on Angie's List. And I'm not, but I might. And the second issue is my insurance, which will remain nameless, has me order my insulin through a mail-order pharmacy. Three times, in the last year-and-a-half, they have -- the delivery has left it out in the freezing cold. The pharmacist -- I've called and told her that -- says, you cannot use it. You have to send it, and we'll resend it.
SHEILAAnd they will not let me use a local pharmacy. And so that cost, in the year-and-a-half, at least $1,500. And who's paying for that? And it's just so very frustrating. And I've spent hours and hours writing them letters and calling them and trying to communicate, and so I'm just at a dead end.
REHMI'm glad you called this morning. Annie Lowrey, I bet, in doing your own reporting, you talk to a lot of people like Sheila.
LOWREYYeah. And I think that what Sheila's story shows is that there's been this cultural shift, that people are refusing care. They're being much more cost conscious. And so it's happening at all of these different levels. You have patients who are saying, look, you know, maybe I'm going to use palliative care, or maybe I don't want all of these tests. You have doctors who are thinking a lot more about whether the care they're giving is the best quality for cost.
LOWREYAnd then you have, obviously, large provider groups and insurers, as well as the government, that are moving in this direction. So even if all of the incentives haven't been aligned yet and people are still, you know, primarily in this pay-for-service system, it seems that that cultural shift is important even if it's a little bit hard to tease out how that's affecting cost at the national level.
ANTOSYeah, I think one of the -- unfortunately, one of the things we didn't hear from Sheila is the only question that she should have asked, which is not -- I'm not going to do it 'cause it's too expensive, but rather, what if we do this test? How will that influence the treatment? How will that improve my care?
REHMAll right. Sheila is still on the phone. Did you ask that question?
SHEILAI did. And I said, is this absolutely necessary? And some of them are routine lab tests that I've had yearly for my diabetes. And she's ordering some that says, are you still a diabetic? Well, I know that's not necessary 'cause I've been a diabetic for 35 years.
DAVISI think this illustrates the problem with the private health insurance industry that really brought on the Affordable Care Act. It's very hard for older people to get coverage out of reasonable premiums, sometimes any coverage at all. The Affordable Care Act will cover everybody at the same premium, whether they have a heart condition like Sheila's husband or have diabetes. It's outrageous to pay $22,000 a year.
REHMTotally. Sheila, I'm...
DAVISAnd this would set limits on how much people have to pay and also get at this excessive price charging that's going on that she referred to in terms of the lab test.
ANTOSAnd one of the problems, though, is that who knows whether $22,000 is actually excessive in terms of the average annual cost of health care for somebody. I know that the average federal employee, for example, the total cost, not out of pocket, not the premium the employee pays, but the total cost for a family policy for the average federal employee is somewhere around 18 to $20,000. That reflects the cost of the system. And so, if the system cost...
REHMBut that's different from...
ANTOSNo, no. But if ...
REHM...the costs out of her pocket.
ANTOSRight. But the other...
ANTOSBut the other part of this is getting the cost of the system down.
ANTOSAnd so if we do provide subsidies to people, as we're headed toward, that doesn't lower the cost. That just shifts it around to people.
LOWREYAnd I think that this gets to a really fascinating point, which is that one big difference in the U.S. system than other systems that get sort of similar outcomes is that we just pay a lot more for things. And there isn't always a good reason for it. And there's a number of provisions within the Affordable Care Act that would also work on that. You know, if you are paying $700 for something here and you pay $200 for it somewhere in Germany, you know, why that's different is -- big reason.
REHMAnd here's an email from Dan in Tulsa: "Will this information influence the Supreme Court's pending decision on the Affordable Care Act, or should it?" Karen.
DAVISWell, I'm not the expert on the Supreme Court. But, certainly, I think we need the Affordable Care Act. We simply can't have people who are out of the health insurance system because they're excluded for pre-existing conditions, who are paying premiums that are outrageous percents of their income. So I think it would be devastating and a major step backwards if the Supreme Court were to strike down the provisions of improving health insurance coverage and setting rules on the terms on which insurance coverage is (word?).
ANTOSWell, let's keep in mind that the Supreme Court is not supposed to decide whether something is necessary or not. It's a constitutional issue, and it's, of course, hard to know where they're going to come out. But something I think Peter would have said had he had time, which is that a lot of changes have been set into motion, some by the Affordable Care Act, some by just reality setting in on the health industry. And those things are going to continue. That's a positive sign, I think.
REHMAll right. To Palm Beach, Fla. Good morning, Dr. Seth.
DR. SETH LEVYYes. Good morning. This is Seth Levy from the Mobile Doctor Services. We're a group of physicians that do nothing but house calls. Most of what we've done has already been proven. The American Academy of Home Care Physicians, in their pilot study in Washington, D.C., showed a 65 percent reduction in ER visits, (word?) in Arizona by 27 percent. We're now part of the Affordable Care Act under the CCTP program, care coordination transition.
DR. SETH LEVYIt's a $500 million grant that basically has coaches go into the hospital upon discharge, goes home with the patient and simply calls the doctor to set up the appointment. Eighty-six percent of the reason why people are readmitted into the hospital within 30 days or less is a combination of medication problems and not getting the follow-up visit from the physicians. So by sending my physicians out to their home and seeing how they actually live, we're able to significantly cut down on that hospital readmission.
DR. SETH LEVYAnd remember, next year, if a person is readmitted to a hospital in 30 days or less, not only does that hospital not get paid, they will also get a 2 percent fine. So, for example, Jackson Memorial Hospital, which is a very large hospital in South Florida, will be fined and will come out to about $9 million. So there are programs that are in process right now, like my company, Mobile Doctor Services, that is able to reduce these hospital readmissions and keeping people out of hospitals and nursing homes.
REHMAnd congratulations to you. Annie Lowrey, do you know about these programs?
LOWREYNot this program specifically, but I do know that preventing readmissions or taking patients from a hospital and giving them care in an outpatient setting, this is a huge way to tackle the cost problem. And I think that, you know, something that Karen was speaking about earlier, publicizing rates of readmission and basically ensuring the doctors are competing with one another to ensure the quality of care, as well as sort of changing the way that they're paid, is going to have huge effects on making sure that people aren't in the hospital.
LOWREYObviously, you look 10, 15 years ago and even still today, hospitals will get paid to readmit somebody in a lot of cases. They'll end up making more money. It's, you know, kind of one the crazy things about the way that we pay for medicine in this country.
REHMAnd here's another email from Constance, who says, "The purpose of health insurance is to make profits for the insurance company, not to provide medical benefits for the people who pay the premiums. Risk managers know that insurance companies often refuse to pay benefits they owe simply because they know few people have the time, energy and expertise to fight for their rights. Stockholder profits and CEO salaries are a higher priority than human life or health." Joe Antos.
ANTOSThat's a very cynical view. The fact is that the United States...
REHMTell me this. Have insurance companies continued to make huge profits?
ANTOSI couldn't tell you. I don't know whether they're...
ANTOSI don't know what you mean by huge profits. But I do know that insurance companies, including the Medicare program, which is operated through insurance companies, have -- has rules about what they'll cover and what they won't cover. And they're complicated rules because they also depend on the condition of the patient. It's not just a blanket rule that some people seem to believe. It's a very complicated business.
ANTOSAnd the fact is that Medicare, as an insurance company, is like all insurance companies trying to impose some discipline on a health system that is largely undisciplined and largely because of Medicare fee-for-service.
REHMJoseph Antos of the American Enterprise Institute and you're listening to "The Diane Rehm Show." I want to go back to that question about profits. Karen Davis, what can you tell us?
DAVISWell, I think we do need rules, but we need rules not by the insurance company about what they'll pay for or not pay for. We need rules that protect the consumers' interest. And, again, that's part of the Affordable Care Act. It limits profits by setting a limit on the proportion of the premium that can go for administrative cost and profit, but it also has protections for patients. It has to cover essential benefits. It can't have high cost sharing.
DAVISIt must at least pay a certain proportion of an individual's -- average individual's health care expenses. It must cover everybody on the same terms regardless of health condition. So it's correcting some of these practices that unfettered in the insurance industry. The way you make money in the insurance industry right now is you cover healthy people. Because health spending is so skewed as we've talked about, so few people are capped for so many bills, you can make a lot of money by avoiding people who are sick. And that's what's got to be changed.
REHMAll right. And to Sugar Land, Texas. Good morning, Fremal. (sp?)
FREMALHi. Good morning, Diane. I have three points. One is that I think government involvement leads to higher health care cost, and I'm going to give an example. In last 10 years, LASIK eye surgery is the only surgery I know the prices have gone down because people or the patients have to pay out of pocket. Number two, we have to understand that with Affordable Health Care Act or Obamacare, there are going to be 30 more million people in Medicaid, which is essentially a taxpayer-paid program.
FREMALSo about 50 percent of United States' population pays taxes. They're going to -- their back is going to be broken by this. Number three, we have to understand -- I did my medical education in India. And they have a completely different system. There is a government system where poor and people who are in need can go free services, but at the same time, there is a free market for doctors. You can see a doctor for $5. You can see a doctor for $500. Or if the doctor thinks you are poor, he may not charge, but they don't have any malpractice.
REHMAll right. Sir, thanks for calling. I want to correct one thing you said. I think the phrase Obamacare is used politically. It is actually the Affordable Care Act. Do you want to comment, Karen?
DAVISI think that, in fact, what the Affordable Care Act is is a mixed public-private approach. It does use public funds to cover low-income people who can't afford to pay their own premiums, their own bills. So about 16 million people would come on to Medicaid, and others with incomes up to $50-, $80,000 would also get some help on a sliding scale with their premiums. But it preserves private practice. It preserves private insurance. So it does embody many of these principles of having those who need help with their assistance.
DAVISBut the point I would make and disagree a bit with the caller is that this is paid for under the Affordable Care Act. It does find the money without raising taxes to cover the uninsured. In fact, the Congressional Budget Office estimates that over the next 10 years, the Affordable Care Act, in fact, will reduce the deficit by $210 billion.
LOWREYYeah. And building on Karen's point, one thing that I think is important is that when we talk about bending the cost curve, when we talk about health care cost, we're talking about private cost and public cost. And, you know, there is sometimes some co-shifting between, you know, making the public system pay for people or whatever else it is. But it's really that universal cost that you want to bend down, and these rules are really, you know, moving towards that hopefully.
REHMAnnie Lowrey, she is economic policy reporter for The New York Times. Karen Davis, president of The Commonwealth Fund, Joseph Antos of the American Enterprise Institute, I want to thank you all so much. Thanks for listening, all. I'm Diane Rehm.
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