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Trends, Costs in Healthcare

Excerpts from: "Empowering Patients and Improving Public Health"

NCPA article by Devon M. Herrick, Ph.D., Mar 2009

Chronic Diseases

Treatment of chronic diseases is one of the factors driving up health care costs and a major focus of public health programs. Nearly half (45 percent) of all Americans have a chronic condition, and half of those (60 million) have multiple chronic conditions.  A Yale University study found that one-quarter of Americans have one or more of five chronic conditions: mood disorders, diabetes, heart disease, high blood pressure and asthma.

Moreover, patients with these conditions account for almost half of all health care spending.  The estimated cost of chronic diseases in the United States, including treatment and lost productivity, is $1.3 trillion per year.  Unless this trend is reversed, by 2023 the cost will swell to $4.2 trillion.

Of the 125 million or so Americans have chronic medical conditions, most are not receiving appropriate care from their physicians. For instance, less than one-quarter of patients with high blood pressure control it adequately. Twenty percent of Type-1 diabetic patients do not see a doctor annually. Twice that number do not test their blood sugar level regularly, and 40 percent do not receive recommended yearly retinal examinations.

One reason for this poor compliance with recommended care is that physicians often lack an integrated system to monitor their patients‘ chronic conditions.  They also often lack an incentive. Helping patients properly manage a chronic condition — especially diabetes, which often results in complications such as heart disease — is often complex and time-consuming.  When multiple physicians are treating a patient for multiple conditions, a case manager must ensure that they are coordinating their efforts.  However, such close monitoring and interaction is labor-intensive and costly.

Insurers rarely reimburse these management tasks, or reimburse them at rates lower than the cost of providing the services. It should be easy for doctors to get paid a different way by Medicaid if they propose to repackage and reprice their services in ways that raise quality and lower taxpayer costs. Take diabetes, for example. Care tends to be delivered in discrete bundles, each with its own price. No one provider is responsible for the end result (fewer ER visits, lower blood sugar level, etc). This is because no one has bundled ―diabetic care‖ as such — taking responsibility for final outcomes over a period of time — in return for a fee.

To appreciate how different diabetes care could be, imagine a conversation in which a doctor says to a diabetic patient: ― You do not need to come to my office as often as you do.  Most of our communication can be by telephone or e-mail.  For these consultations you will pay less.  I need to put your records on a computer so that I can take advantage of safety protocols and order your prescriptions electronically. For these quality improvements, you will pay a bit more.

I‘m also going to teach you how to manage your own care and I‘m going charge for the instruction. But you‘ll get your money back through fewer consultations. Also, I‘m going to show you how to cut your drug costs by shopping in a national online marketplace and I‘m going to charge you for that advice as well. But you‘ll get that money back too through lower drug prices.

This conversation cannot take place in the current system.

Why? Because each of the bundles of care mentioned above are services Blue Cross does not pay for (no e-mail, no telephone, no electronic records).  Medicare doesn‘t pay for these bundles either.  Nor do most employer plans. But this conversation, and thousands of others just like it, would take place if doctors were free to repackage and rebundle their services and get paid.

So how do we get from here to there?

A reasonable reform might work like this:  A state Medicaid office announces that it welcomes offers from doctors, hospitals and other providers to repackage and reprice their services. The parameters are: (1) the repriced, repackaged services must not increase total spending by the state, (2) the quality of care received by patients must not decline and (3) the provider/entrepreneur must propose a way to measure cost and quality to make sure that requirements (1) and (2) are satisfied.

For the reform to be workable, the transactions must be easy to negotiate and consummate. Paperwork and time delays are the enemy of entrepreneurship. However, given a willing state administrator, the process of reform should not take long. There are already low-cost, high quality pockets of excellence just waiting to be replicated.

A similar arrangements could work in Medicare.

From Kaiser on Chronic:

About 45% of Americans suffer from one or more chronic illnesses, which account for 70% of deaths and about 75% of all health care spending.