Healthcare Cost Curveball
We have our answer regarding the Patient Protection and Affordable Care Act (PPACA, or Obamacare). The individual mandate stands. But, as I have often pointed out, Obamacare doesn’t appear to have done much regarding “Affordable”. And yet, affordability is one of the key desires of Americans, and with good reason. We spend twice as much per-capita on healthcare as the next most spendy nation, yet we are not getting results that are twice as good. Clearly, we are getting less bang for the buck than are other countries.
But does that mean that the only path to affordability is single-payer? Or, if there are many paths, is that the best one? Some of my own recent experiences suggest that a move to single-payer may not lead to affordability at all, but Obamacare (plus a preceeding bill) may get us there — albeit not overnight — even if no new legislation is passed.
For most of my career, I have had medical insurance through my employer, and I chose a preferred provider organization (PPO) policy. As long as I selected a doctor from a pretty extensive directory, my medical expenses were essentially entirely covered. This gave me a great deal of power over my medical care — or, at least, the sense of a great deal of power. After all, it’s long been nearly impossible to determine which doctors are really great, and which ones are not. Recently, the power of crowd sourcing on the Internet has made the choices easier to make, but it’s still extraordinarily difficult to comparison shop for healthcare providers.
Nonetheless, I’m an American, and Americans love having the freedom to choose, even when we can’t be sufficiently informed to make the choice. I enjoyed having that freedom, too, and really appreciated it when I needed to have surgery. I was able to use Internet crowd sourcing to choose my surgeon, and I’m glad I did.
But life goes on, and I changed employers. My new employer didn’t offer a PPO, and I was instead covered by Kaiser Permanente. I remembered hearing all of the horror stories about Kaiser, and so I was not looking forward to the kind of care I had heard one received from them. But I discovered that the Kaiser of today bears little resemblance to the Kaiser of the 1980s. And along the way I came to appreciate some aspects of the way they manage healthcare.
My biggest surprise came when I went to see a specialist. In my PPO days, I would spend a good twenty minutes at the beginning of the appointment talking with the specialist about my symptoms, medical history, and what steps I had already taken with regards to the issue behind the appointment. I always hoped I didn’t forget to mention anything important, but I could never be certain that I covered everything relevant. And the specialist would often request medical tests that had already been performed, because he didn’t have the results and I either didn’t know they were needed or never got them myself. This didn’t usually increase my out-of-pocket expenses (because of the plan I was on), but it did increase the amount of time I spent in various medical facilities, and increased the number of times I had needles poked into my arms. And, of course, it also increased the amount of money spent by my medical insurer, which ultimately translated to more dollars spent by my employer.
With the Kaiser model, since all medical records are stored electronically in a single shared system, the specialist had already read my medical history, including the notes from my general practitioner, who had recommended that I see a specialist. The specialist had a couple of more detailed questions, but we spent far less time on the medical history, and more time on getting to the heart of the matter. I didn’t need to get redundant tests. And I didn’t have to worry about accidentally omitting important information. I finished my appointment more quickly than I had with PPOs, and I was less likely to have a course of treatment that would be contraindicated by some other medical condition for which I was being treated.
I still don’t like having a general practitioner who may veto my desire to see a specialist (that whole freedom to choose thing). And I wish I weren’t restricted to Kaiser’s doctors. But wouldn’t it be great to be able to get the benefit of the Kaiser medical record model without those HMO restrictions?
This was the goal of the Health Information Technology for Economic and Clinical Health (HITECH) Act, part of the American Recovery and Reinvestment Act (ARRA) passed in 2009. HITECH provides incentives for physicians to keep their medical records in a standard electronic format as electronic health records (EHRs). Obamacare extended HITECH by providing additional incentives beyond those stipulated in HITECH.
There were some teething issues with the early implementations of EHRs, but in the past couple of years the field of EHR providers has stabilized and matured. Physicians are now beginning to reap the benefits of going electronic — and so are their patients. As the network effect begins to take hold, the same shared-record benefits available at Kaiser become available outside the HMO world. Physicians glean more information about their patients before ever walking into the examination room, and are able to diagnose more quickly and accurately with fewer tests.
In short, almost everybody wins. Physicians have fewer liability concerns, since they are less dependent upon the reliability of information supplied by the patients from memory or rudimentary notes. Both doctors and patients have less wasted time. Patients retain the ability to choose physicians, and to choose when to see specialists. Patients’ outcomes are improved, reducing the likelihood of return visits to address preventable complications, which further reduces the amount of wasted physician and patient time. Insurance companies spend less per capita, yet those covered by their policies have better results.
None of this should be expected to address the underlying exponential healthcare cost increases, which are occurring globally, and for reasons entirely separate from those that cause Americans to spend more than anyone else on their healthcare. Nor are EHRs a single magic bullet that will fix everything that makes healthcare in the United States so much more expensive than in other nations. It should, however, do a great deal to bring per-capita healthcare costs in line with the rest of the industrialized world.
Imagine for a moment that national implementation of EHRs would reduce healthcare costs by 30 percent. It’s not hard to believe that it could; the Congressional Budget Office estimates that 30 percent of our medical costs arise from unnecessary tests and procedures. While I doubt that we’d eliminate all of those, the improved time efficiency and patient outcomes could easily cover the gap in remaining unnecessary test and procedure costs.
If we could reduce our healthcare costs by 30 percent, Americans would collectively save one trillion dollars per year — over six percent of our gross domestic product. About $800 billion of our healthcare costs are covered today by the federal government, so that would translate to a reduction of $240 billion per year from the federal budget. That’s 10 percent of the budget (excluding Social Security, which adds all sorts of complications), or 21 percent of the deficit. All without a decrease in the quality of healthcare.
So, while it’s true that Obamacare did little itself to cut the costs of healthcare, it still looks like it has helped lay the foundation. Our future will have greater efficiency and better outcomes, which will reduce our costs compared to the status quo. I, for one, look forward to that future.
- EHRs May Reduce Medical Malpractice Claims (informationweek.com)
- EHR Companies Need to Change, Fast (thebiopsy.wordpress.com)
- Why Don’t More Hospitals Use Electronic Health Records? (businessweek.com)
- Meaningful Uses of HIT? (pharmexec.com)
- Obama’s Other Healthcare Victory (forbes.com)
- Kaiser Permanente CEO: Health IT Must Focus On Quality (informationweek.com)
- The Influence of Health IT and EHRs (medcitynews.com)
- DataTrade Solutions Introduces Health IT Connect (prweb.com)
- EHR Quality Measurement In Its Infancy, Study Says (informationweek.com)
- How Government Healthcare Interference Got Started in the U.S. and What It Will Lead To (economicpolicyjournal.com)