So Right and So Wrong on Health Care

I cannot remember the last time I read an article here on HuffPo (1/22/14) with so many correct statements of fact leading to so many erroneous conclusions or implications as Ben Veghte's recent piece.

Health economist Veghte offers a graph that is worrisome for all Americans, but immediately relevant for us old folks. He shows that in 1992, healthcare costs consumed 21% of retired Americans' social security checks, and in 2010, that percentage had increased to 37%. So, millions of retired Americans, mostly on fixed incomes, are forced to spend more without getting any value, clearly a inefficient use of dollars.

If you wonder why some in the Golden Years have to choose between prescription drugs and food, that graph gives the answer.

The following are statements taken verbatim from Veghte's article.

"Our Social Security and Medicare systems are indeed "designed to provide seniors and people with disabilities with a measure of economic and health security...which they earned by contributing to Social Security and Medicare throughout their working lives."

The quote above is both accurate and important. It reiterates that Social Security and Medicare, though often called entitlements, they are not entitlements. Generations of Americans paid hundreds of billions of their hard-earned dollars over many decades into these Programs. By contrast, Medicaid is an entitlement: its beneficiaries contribute nothing to the Program.

"If the cost-shifting proposals [to pay for Obamacare] on the agenda now - such as requiring ill seniors to have 'more skin in the game,' a crude term for them bearing a greater share of rising provider costs [italics per this author not by Veghte; explained below] ... - become law, this would cut net Social Security benefits even further."

The above quote is simultaneously so right and so wrong. There is no doubt that the cost-shifting aspects of PPAHCA will hurt seniors even further both by making them pay more while providing less care. What does Congress expect to happen when they cut $716 billion from Medicare reimbursements to providers of services to seniors?

The "so wrong" aspect is the phrase in italics - rising provider costs - particularly the last two words. In common parlance, providers refer to the doctors and nurses who "provide" care. The phrase implies that the costs to We The Patients, i.e., money we have to pay to care providers, that amount is going up. But as you can see, payments to providers are going down, even as our out-of-pocket spending is going up. What is happening?

The answer is this: the increase in our costs - our mandatory spending - is money going not to providers but to bureaucracy. That is called "bureaucratic diversion" in The Cancer In Healthcare. It is a theft that makes Bernie Madoff seem like a piker by comparison.

"Our system of health-care provision is inefficient: we spend twice as much as those of similar countries, with worse public health outcomes."

The U.S. clearly spends more on healthcare than any other nation on earth both in relative terms and in absolute dollars. It is equally true that we do not get anywhere near the best outcomes, whether in infant mortality, post-operative mortality statistics, or nosocomial infections.

The key is the word "inefficient." The U.S. is possibly the most dollar-inefficient nation on earth, at least in healthcare. If you compare the total dollars spent here on the healthcare system - $2.7 trillion in 2012 - to the dollars that actually produce health CARE in any form whatsoever - $1.7 trillion - you see how 40% of our healthcare spending produced no care.

Imagine a company where its bureaucracy took forty percent of revenue off the top, and only after that, the company had to produce its products or provide its services, and pay its workers, and offer dividends to stockholders with only the remaining 60%. That company wouldn't stay in business long.

But the healthcare business can survive because the bureaucracy taking that money is the same bureaucracy that can print money: the federal government.

"...manifold perverse incentives and inefficiencies in our health-care system...perpetuated by an army of provider lobbyists in Washington, DC. "

Again and last, above is a quote that is right on target and yet misses the mark. Healthcare does have manifold perverse incentives, from pay-for-performance (rather than for patient health outcomes) to making money by delaying, denying, or deferring care (insurance companies). Healthcare inefficiencies are legion. Besides the dollar inefficiency shown above, just ask any nurse or doctor how many hours a day they must spend doing work that helps not a single patient.

If, by "provider lobbyists," Veghte means promoters of doctors and nurses, those lobbyists must be the least effective in Washington. Who keeps getting the short end of the stick when the dollars are being handed out? Answer: providers. If, however, he means all the healthcare bureaucracy lobbies, then Veghte is dead on.

Who are the big winners from PPAHCA (Obamacare), i.e., to whom are the 1.3-2.7 trillion dollars going? Answer: actuaries, accountants, billers and coders, compliance officers, insurance sales and management, IRS agents, Information Technologies (our small State Exchange will likely spend over $50 million* just on PPAHCA-mandated IT services), lawyers, oversight reviewers, rule writers, and regulation enforcers. Did I miss any healthcare bureaucrat groups? If so, I apologize.

Who are the big losers in healthcare generally and Obamacare specifically? Answer: We The Patients, with special emphasis on those enrolled in Medicare.

(*) As a pediatric cardiologist, I keep dreaming about how many children with congenital heart disease we could repair if providers had that 50 million dollars to use for patient care!

PS. I have never understood why people living on Social Security are required to sign up for Medicare or lose their Social Security benefits. Can someone justify this to me?

Deane Waldman MD MBA ("Dr. Deane") is a member of the Board of Directors of the New Mexico Health Insurance Exchange; Emeritus Professor of Pediatrics, Pathology, and Decision Science at University of New Mexico; host of the free newsletter, The Hidden Enemy; and author of The Cancer in Healthcare. Opinions expressed here are purely his own and do not necessarily reflect those of the Exchange or the University.