Overutilization of Care,  Cost-sharing and Rationing

Most residents of Winnipeg are healthy, infrequent users of physicians and hospitals. Those incurring high health care costs are sick by every measure used. These high-cost users are drawn from every neighbourhood and every socioeconomic group, and their health care expenditures are driven by hospital costs. High-cost users who are residents of low-income neighbourhoods incur more hospital costs. Other research based on review of medical records has shown the acuity levels of hospitalized patients in the lowest socioeconomic group to be just as high as acuity levels of hospitalized patients in higher socioeconomic groups. Hence the greater use of hospitals by residents of low-income neighbourhoods should not be dismissed as "social admissions"; their high use is consistent with their poorer health status.

Patterns of health care costs were ^{*REF 3} driven by poor health and hospital expenditures. Policies aimed at reducing patient demands, such as user fees and medical savings accounts, are not likely to reduce overall costs. User fees discourage physician contact, not hospital use. Thus, user fees would discourage preventive contacts, particularly among the poor, a group in which pap smears, childhood immunizations and prenatal care are already known to be underutilized. Since the RAND study demonstrated that user fees discourage patients from seeking both appropriate and inappropriate care, their effects on even the healthy poor would be pernicious. Other studies published in late 2005 have shown that cost-sharing for prescription drugs is injurious to patients and costs the system far more in physician office visits and ER visits than the cost of additional pharmaceuticals. ^{*REF 6  *REF 7}

Physicians are the gatekeepers to hospitals, and the health status of the patient largely drives the decision to admit and, hence, expenditure patterns. Although higher income patients may be more articulate in asking for high-profile surgical treatments, overall those with the poorest health status show the highest hospital use and expenditure rates. And this was demonstrated in a 2006 study to be the case no matter what the income level. There is scope for decreasing hospital expenditures by focusing on evidence-based medicine, physician practice patterns and hospital management. However, user fees and medical savings accounts are unlikely to contribute to this process.

QUESTION: What feature of a UHC system specifically would have an effect on overutilization of care?

UHC systems are designed according to the health care needs of the population, they do not evolve spontaneously according to where entrepreneurs of the moment believe they can harvest some profit.  In a rationally-designed health care system the doctor would be encouraged to treat his patients appropriately - not necessarily scrimping on treatments. Over-prescribing doctors would be noticeable as statistical outliers in their prescriptions and medical panels could review the details of such outliers (often there would be a logically clear reason why a particular physician tends to serve a certain patient population). This would be a rational way to approach the problem. (see Congressional testimony). Further our current profit-driven health care system is also constantly challenged by overutilization, so that any new miracle technique is immediately a worry for increased costs. How is that any different? Also, with a UHC system we would either have one single risk pool, or at least a couple of very large pools. Large risk-pooling saves the money that AHP 's (Association Health Plans) only pretend to. ^{*REF 8}

UHC systems typically have far lower error rates and malpractice suits, so that providers of care will not feel the necessity to constantly "be on the safe side" by prescribing any test or treatment that might be seen as warranted in retrospect of a poor medical outcome. The lower error rates are result of much government oversight and decent staffing levels by qualified professionals (for example). Lower litigation costs also result from increased patient-physician bonding and trust (longer term relationships, relationship uncorrupted by incentives to withhold care). It is not true that Americans seek too much care generally. Even in our fabulously expensive system rates of hospitalization are lower than in most countries with lower costs and better outcomes.

A more serious problem is providing incentives for people to use medical care - since most people are actually excessively reluctant to go to a doctor. Underuse actually costs the health care system a great deal, since health problems not addressed frequently become much more difficult and expensive to resolve. It is immoral to discuss a theoretical need for rationing needed medical care while we remain complicit and silent paying twice the going rate for restricted and low quality care. Obviously, we have never been very concerned with affordability and even a well-designed UHC system will have to exclude certain "marginal medicine" (expensive, not very efficacious) treatments.  If you want to see such a system and have such a discussion, FIRST we need a system which includes all Americans.

QUESTION: But haven't we already seen in the USA that premium and employer cost escalation have been controlled by adding high-deductibles, doesn't that always reduce how frequently people will access care?

While increased employee cost-sharing has led a majority of employers to feel that their health care costs are more under control today than they were a couple of years ago, more than 75% of them in Feb 2005 said cost-sharing causes consumers to forgo needed medical care and has a negative impact on individuals with chronic conditions. Over 40% of employers also believe that cost sharing reduces the productivity of workers Non-compliance with recommended medical treatment is particularly common among those with low incomes and those in fair or poor health, according to the survey. ^{*REF 5} Additionally two studies of late 2005 demonstrate that cost sharing for prescription drugs probably costs a lot more that it saves, when we examine increased physician visits that result and visits to the ER. ^{*REF 6  *REF 7}

A study published in Nov 2005 in Health Affairs showed that all the mechanisms of "consumer-driven" care and discouraging "overuse" of medical care could account for less than 3% of health care costs. Most exspenses and increases in costs could only be addressed by increased spending on public health/education programs and by increasing health coverage to encourage general timely medical treatment.

QUESTION: How can we move ahead in health care without recognizing that just a few people are burdening everyone with enormous costs?

A new book "At The Crossroads: The Future of Health Care in Vermont" by C. Hogan, D. Richter and T. Doran goes a long way to clarifying the conceptual confusion and pointing the way to meaningful reform. One of the authors' central insights can be encapsulated in a number. They point out that about 70% of health care costs represent costs of infrastructure. By infrastructure, they mean the hospitals, clinics and personnel that are always available to us whether we are using them at a given moment or not. It is important to address the costs of pharmaceuticals and other supplies, but they only account for about 16 % of health care costs. Reforming the health care system means taking a look at how we finance the health infrastructure.

The authors refer to this infrastructure as a "shared service." It is a service we expect to be on call for us whenever we are in need. It so happens that about 10 % of Vermonters account for about 70% of health care spending. And yet it would be impossible for that 10% to shoulder the entire cost of the hospitals, physicians and other fixed expenses that were there waiting for them when they got sick.

We spend most of our lives among the 90%t who are not piling up huge medical expenses. But we know that if we want those services ready for us when we need them, we must share the expense even when we are not using them. That is why we have health insurance.

QUESTION:  Recently we have seen the development of "consumer driven" health care.  Doesn't this take "cost-sharing a step further", and allow for savings by letting people initially limit their coverages?

Yes, this does take cost-sharing a step further and towards an even more disastrous consequence.  No one knows in advance what coverages they and their family will need in the future.  The insurance companies know that it is cheap to provide perks to healthy young patients, or to reduce their monthly premiums, if they can trim their coverages in case of chronic and severe acute illness (and no healthy client reads the full-length coverage plans).  As Princeton Prof. Reinhardt stated: 

People who argue that patients can shop around for cost effective health care in this market either wear blinders or consciously and quite cynically practice a cruel joke on Americans. The argument that transparency of prices would come automatically with a free market in health care can be discounted. After all, we have heard talk of "shopping around for cost effective health care" ever since Ronald Reagan proclaimed the era of "pro-competition" twenty years ago. Although Americans often do share in the cost of health care, the system's prices have remained opaque. If in two decades the market has kept prices hidden, why would we think it will make them transparent in the coming decade? And if we don't know the costs involved how are we to make informed choices?

I tend to liken our "market" for health care to a situation in which employers wish to see their employees come to work properly dressed and, therefore, agree to pay 80% of the "reasonable cost" of their employees' attire. Imagine now an employee going into a shirt shop in which all shirts are displayed in white boxes, each properly labeled "shirt." There may be information on the outside of the box on the color of the shirt (the medical specialty of the physician), but not on its size (the physician's treatment intensity or "practice style"), on its material (the quality of care), or on its price. The employee, however, is free to "shop" around for a shirt by picking one, perhaps with the help of the shop keeper, who may suggest a particular box (treatment). A month later the employee gets an almost incomprehensible bill whose only comprehensible line, framed in red, reads: "Pay this amount: $ 56.89." The employer paid the rest of whatever the store charged for the shirt. The shirt may or may not have fit the employee.

That, in my view, fairly describes the U.S. health care retail "market" as it exists today and as it will exist in the coming decade. To pretend that this is a market that even vaguely resembles the model trotted out in economics textbooks is, in my view, inherently dishonest. It is also cruel.

QUESTION:  It's clear isn't it, that some sort of rationing will need to be put into place, since we can't offer everyone unlimited health care for all conceivable ailments?

There can be no meaningful discussion on this topic until the discussants are aware of the basic facts of financing health care in the U.S.  see Financing .  Once the waste and private extraction are appreciated and corrective steps taken, then we might be able to discuss what we as a society can afford.  We cannot discuss this while we continue presuming that we need to keep spending twice the value merely to keep the health insurers and pharmaceutical industry happy and flush with funds (and while only considering patient care as a secondary effect).  In the view of Project EINO we should also first agree that health care is a right for all Americans, and that it is certainly among our highest priorities, assuring justice, operative democracy and the best opportunity for all Americans to contribute productively to our collective well-being.

Furthermore we need to be very clear about the objectives and methods of those who are currently at work rationing health care ^{also Ref*1} in the country, working diligently at it for all of us -but without any public scrutiny or accountability (other than accountability for increased share value of their corporations). We need to be clear about "their work". We need to replace their work with some regulation of how our health care dollars will best be spent to achieve maximum benefit of good health for the American people. For example, who has looked at the benefit to Ameica's health of covering everyone for needed care vs. the current unlimited pursuit of technological and pharmaceutical novelties?

As to offering "unlimited health care technology and treatments to everyone" that's simply absurd and no one, certainly not Project EINO is advocating for that. As a society, making use of our best expertise, we will definitely to make decisions about what treatments and procedures are efficacious and which represent "marginal medicine" (hypochondriacs need involvement from psychiatry and social work).

QUESTION:  Okay, but even agreeing about there being a proper time and place for this discussion, we are still going to need to discuss how we will ration health care at some point (before any UHC plan is implemented), right?

First of all, rationing is properly used only to designate needed and scarce resources.  This might pertain to kidney transplants, but never to facelifts, or to treatments which are not medically necessary.  Second, we are definitely rationing health care much more tightly at present (and extremely unjustly so) than we will have to after implementing UHC - since we spend twice per capita what all the other industrialized countries spend.  So passing UHC legislation will allow us to back-off from rationing, it will not be a commitment to impose rationing.

That being said, certainly we might have to come to some agreement on how many heart and kidney transplants we can afford and who would qualify for those "scarce resources".  However the big word in that sentence is "WE".  Not health insurance executives (motivated by their own greed and shareholder profit), but the public and our most trusted, devoted public health and medical experts should come to these determinations (in an open, accountable manner).  So even in this case where a resource is truly scarce, we will be ushering in an era with much greater public accountability and fairness about who gets these scarce resources. Will we exclude some treatments as "marginal medicine"? Yes, but its unethical to have such a discussion now while we continue to have so many Americans excluded from all needed care.. 

QUESTION: So Project EINO admits, then, that there will be some scarce resources and the necessity for some kind of rationing?

Exactly as we stated above, there will be far less rationing and distribution of scarce resources according to some civilized discussion and broadly accepted goals.  Even these ideas are already widely accepted (though too frequently corrupted).  It is already established that transplants not be awarded on the basis of wealth and power.  We might adopt plans in specific cases to prioritize the queue for such resources according to youth, lack of other serious health conditions, or even how many dependent children an individual might have.  

It is unimagineable that we would come to a broad agreement following our open discussion that such transplants be awarded to the wealthiest and most politically connected individuals.  Generally (though not regularly in the case of transplants) that is the trend in how America distributes health resources today. Let's get a hand count of those people who want to continue rationing on this basis!! Clearly, there will also be some treatments and new technologies that come along that will be beyond our consideration, "marginal medicine". These can be discussed AFTER we have designed a system that will care for all Americans.

QUESTION: Is there any problem in focusing UHC work on careful restriction of costs (affordability of care)?

The strategic limitations of approaching UHC from the scarce resource point of view has been very well demonstrated by the recent history in Oregon. Oregon, which once led the nation in innovative efforts to expand health coverage for its citizens, has now fallen to the bottom tier of states when it comes to health insurance for working families, according to a spring 2004 report issued today by the States Health Access Data Assistance Center. Oregon's great innovation however was in taking the "overutilization myth" of UHC to an extreme and devising a list of which procedures and medications could be covered under each and every possible circumstance (not listed, not covered). Their rationed UHC experiment has been a disaster. Highlighting Oregon's "Cover the Uninsured Week 2004," found:

• One in five working-age Oregonians (20.5%) are now without health insurance, placing Oregon 38th of the 50 states in health insurance coverage for adults.
• More than half of Oregon’s uninsured (51.9%) have children in their households.
• Almost one in four of the uninsured adults (24.5%) were unable to get needed medical care in the past six months.
• There is a huge discrepancy in adult uninsurance rates by race: 17% of whites v. 49% of Hispanics are uninsured.
• Having a job is no guarantee of health insurance. Nearly 18% of employed and self-employed adults in Oregon do not have health insurance.