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Where Is The Money In Healthcare?


In healthcare, as in other areas of life, we tend to lose the forest for the tree in front of our noses. Such is the case when considering the stubbornly high cost of healthcare in the US.

In healthcare, as in other areas of life, we tend to lose the forest for the tree in front of our noses. Yet, it is the state of the forest overall that is the major influence on the tree in front of us. In 2012, Ezekiel Emanuel, MD, PhD (the alleged smarter brother of Rahm Emanuel, former chief of staff to President Obama and now mayor of Chicago) wrote an op-ed piece for JAMA that is worth reconsidering in light of our tendency to wander off point.

Docs prefer cost control proposals that do not involve changing their own role or practices—just like patients who are all for change in their unhealthy habits but resist the actual changing.

So: “Show me the money,” as was famously stated in the movie Jerry McGuire. Is the high cost of healthcare from malpractice suits, insurance costs, and liability avoidance (docs’ favorite whipping boy)? The Congressional Budget Office says we might save 0.5% through common-sense reforms, about $12 billion per year. Worth doing? Of course, but a relative drop in the bucket.

Is the Bad Boy in our financial mess from insurance company profits? The combined profits of the five biggest insurers, again in 2010, totaled about $12 billion, the very same 0.5% of the total. Should we review and reform this bloated industry? You bet, but still a tiny fraction of the Problem.

How about drug costs? Big Pharma has been in the news lately with $100,000 courses of treatment, even as they bemoan the high cost of developing and marketing new drugs. But their industry sector profit, even after these large costs are amortized, is more than the bloated financial sector.

Drug expenditures are about 10% of our national healthcare bill, in spite of 75% of spending being for generics. We can certainly improve our processes and eliminate Republican opposition to a Medicare lowest bid procurement system etc. But savings, according to the best estimates, would still be in that pesky 0.5% range. It’s billions, and we should do it, but that alone won’t keep our nation from medical cost ruin.

So what about the much publicized “Million Dollar Babies,” Emanuel asks? His analysis of 20 million insurance claims only found 255 such unfortunate situations in one year. Once again, 0.5% of total costs. Worth improving? You bet, but not the Key to the Kingdom of cost savings.

So where is the money in healthcare, he asks? Well, 10% of the population consumes 64% of our healthcare dollars. Chronic conditions are responsible for 75% of these; coronary artery disease, congestive heart failure and diabetes head the list. 22% of cost is from potentially avoidable hospitalizations alone, for instance.

One wag has said that all healthcare is the result of failed prevention.

So the spinning arrow slows and ends up…on us. Docs have got to take more responsibility for these failings and show the way in education of the population to live in a more healthy way and in redesigning delivery of our services. And patients and docs need to be held accountable for doing their parts. If our population lived in even a simple, common-sense healthy way, our nation’s health bill would plunge.

Emanuel’s last point is the real kicker. We cannot redesign what we do without payment reform. “Deficit pressures are making cost control inevitable. It will only be successful if physicians stop looking to others to find solutions and focus on approaches that improve the care of patients with chronic illnesses.” There is that classic Pogo cartoon again; “We have met the enemy and he is us.”

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