Addressing The Problem Of Cost

Ezra Klein recently interviewed George Halvorson, Chairman and CEO of Kaiser Permanente (which operates our largest HMO here in Colorado).  Both the questions and answers were insightful and on target in terms of addressing the cost conundrum that is so often glossed-over in the health care reform debate.

Mr. Halvorson pointed out that while many developed countries have some form of private health insurance, they also have medical fee schedules that are set by the government and are far lower than average costs for the same procedures in the US.  When average fees for various medical procedures in several countries are shown on graphs, the US bar looks like a giraffe standing in a herd of gazelles.

But Halvorson acknowledged that while fees in other countries are even lower than Medicare reimbursement amounts here in the US, half of hospitals here are losing money, and do so especially when they treat Medicare patients.  So it’s not as simple as just saying that we need to create set fee schedules that are more in line with those of other countries.

In addition, reducing fees would require winning the hearts and minds of an awful lot of doctors.  While it’s true that most doctors make more money than most of the rest of us, it’s human nature to resist a decrease in reimbursement for ones work (especially when they have to contend with soaring malpractice insurance premiums).  The primary care physician shortage is largely blamed on the fact that doctors who specialize can go on to earn far more money than those who choose primary care.  If we significantly reduce fee schedules across the board, will we see a mass migration to private-pay specialties like cosmetic surgery?

Obviously no single health insurance company can set out on its own to reduce reimbursement rates, since the result would likely be that doctors and hospitals would leave that network in favor of other carriers with higher reimbursement rates.  A government-set fee schedule makes sense (and would go a long way towards standardizing our health care costs), but it would likely face tremendous opposition from medical lobbying groups.  No doubt there would be plenty of muttering about how the government is meddling in the affairs of private businesses.  Although there hasn’t been much of a fuss at all about the government meddling in how credit card companies can do business, so I guess it depends on what business is being targeted.

During the interview, Mr. Halvorson noted that countries like Canada, where there is single payer health care, have what he called a “less robust care infrastructure” and he pointed out that as of a few years ago, there were more CT scans in St. Paul than in all of Canada.  He implies that more tests and scans is a good thing, a benefit of our own system. And yet, every performance report I can find places Canada higher than the US in terms of health care outcomes.  Perhaps we could achieve a lower fee schedule – without compromising quality – if we didn’t do so many tests and procedures.