How complex is U.S. health care administration?

Brookings Institution economist Henry Aaron described the U.S. health-care system as “an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”

For example, Johns Hopkins Health System in Baltimore deals with about 700 different health plans, employers and other payers. Each payer has an annually negotiated rate for each service. Each also has different payment cycles and eligibility rules that must be tracked. The sheer complexity creates its own redundancies in several Hopkins departments, which the organization calculated to be more than $40 million annually.

Simply moving money from the payer to the provider based on negotiated rates is extremely expensive. Billing and insurance-related functions can account for more than half of administrative expense at a hospital or large physician practice. For an insurance company, the share can exceed 80 percent. Health-care clerical workers outnumber physicians 9 to 1, and registered nurses 3 to 1.

The U.S. spends about three times as much on health administration and insurance per capita as Canada. Brookings economist Aaron estimated in 2003 that the U.S. would save more than $213 billion annually if it had a single-payer system similar to that nation’s.

The complexity of the health-care system places an enormous administrative burden on physician offices. For example, many economic sectors other than health care devote 100 or fewer full-time equivalent employees (FTEs) to collect $1 billion. By comparison, the median number of physician-office FTEs to collect $1 billion is 770. For a 10-physician practice, those extra FTEs cost $250,000 annually.

Even the rich fear retiree health costs

Even the affluent are spooked about their future health-care costs.

Merrill Lynch surveyed its clients with assets of more than $250,000. The company found that more than 3 out of 4 listed medical expenses as their No. 1 concern in retirement. About 2 out of 3 said they had not estimated retirement health-care costs. Not coincidentally, the vast majority plan to continue to work past retirement age.

Seniors spend about 10 percent more of their incomes on health care than working-age adults, even excluding prescription-medication costs. The elderly have greater medical needs, and their fixed incomes are less capable of absorbing rising medical costs.

Health care is a major retirement expense, and rising at a significantly higher rate than consumer inflation. According to Fidelity Investments, health-care expenses for those 65 or older rose more than 4 percent in 2010, compared with 1.1 percent for consumer prices overall. Retirees are paying 56 percent more for medical expenses than in 2002. Health-care expenses average $535 a month, second only to food costs.

The Center for Retirement Research at Boston College estimates that a married couple age 65 will spend $197,000 out of pocket for their remaining life expectancy. The figure rises to $260,000 when nursing care is included.

The good news is that health reform will close the “doughnut hole” in the Medicare Part D prescription drug benefit. Medicare beneficiaries pay out-of-pocket for medication after the initial coverage limit is met and before catastrophic coverage begins. In 2009, Medicare did not cover the first $295 of prescription expenses or those incurred between $2,700 and $6,154 annually. The latter gap gradually will close by the end of the decade.

The bad news is that Medicare inevitably will shift more costs to retirees in future years. Retirees spend about 10 percent of their income on health-care expenses. That is expected to rise to 19 percent by 2040.

The absurdity of fast-food calorie labeling

A study of the usefulness calorie listings on fast-food menus reflects lack of regard for customers, sloppy legal compliance and the futility of corralling the compliance of companies who do not want to be transparent.

Researchers studied calorie counts for 200 food items on menu boards in the Harlem section of New York City, where a menu-labeling ordinance has been enforced since 2006.

For the most part, the labeling was useless. For example, a bucket of chicken was listed as having 3,240 to 12,360 calories. That is quite a range, and the calorie count did not indicate how many pieces were in that count. A submarine sandwich had between 500 and 2,080 calories. It was up to the customer to figure out what that meant and how to get into the lower range. Combination meals had the same problem. The menu assumed you would eat everything you ordered.

Few of us take calculators to fast-food restaurants and attempt to discern exactly what we are eating. Calorie listings should be for individual items and be as specific as possible. The study reflects a poorly written ordinance and businesses that disrespect their clients.

The recession’s continuing toll in California

Medical debt is an under-recognized household burden. In 2009, 2.6 million Californians had some form of medical debt, which 400,000 more than in 2007, according to the UCLA Center for Health Policy Research.

Access to care is normally measured nationally by the percentage of Americans who are uninsured. This deflects attention from people who are underinsured or dealing with burdensome medical debt. The typical benchmark for being underinsured is paying 10 percent or more out of pocket for health care. People under financial strain often forgo needed medical care.

Unlike other expenses, medical costs are difficult to budget for. The uninsured are especially disadvantaged because they receive bills up to 2.5 times what public and private insurers pay. Unlike individuals, health plans can negotiate lower prices for treatment costs. Only 1 out of 8 uninsured families can pay their hospital bills in full.

Nearly half of the uninsured did not fill at least one prescription in the past year and more than half had medical problems for which they did not seek care. One out of 5 had medical debts exceeding $8,000. They lose one-third to one-half of their assets to medical expenses when tragedy strikes. According to a government study, most uninsured people have “virtually no” savings and had media financial assets of just $20.

Medical bills are playing more prominent roles in personal bankruptcies. Medical expenses contributed to nearly two-thirds of bankruptcies filed in 2007, according to a Harvard research study. The share of bankruptcies associated with medical bills increased 50 percent between 2001 and 2007.

The authors were blunt: “The U.S. health-care financing system is broken, and not only for the poor and uninsured. Middle-class families frequently collapse under the strain of a health-care system that treats physical wounds, but often inflicts fiscal ones.”

Lead researcher David Himmelstein, who advocates a single-payer system, said in a statement: “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy. For middle-class Americans, health insurance offers little protection.”

Three-quarters of those filing for bankruptcy had medical insurance when they became ill or injured. Many found that they were underinsured and had large out-of-pocket expenses. One-quarter of employers cancel coverage immediately when an employee suffers a disabling illness, and another quarter do so within a year. Medical bankruptcy is rare in developed nations other than the United States. Besides having better medical safety nets, Europeans pay about half as much as Americans do for out-of-pocket expenses.

Some conditions are financially devastating. According to the study, people with multiple sclerosis paid an average of more than $34,000 out of pocket in 2007. Those with diabetes paid nearly $27,000 and those with serious injuries paid about $25,000.

Himmelstein also examined the impact of the 2006 Massachusetts health-reform law. The percentage of bankruptcies tied to medical bills changed little after reform, indicating that federal reform will not have much effect.

Himmlestein said, “Massachusetts’ health reform, like the national law modeled after it, takes many of the uninsured and makes them underinsured – typically giving them a skimpy, defective private policy that’s like an umbrella that melts in the rain. The protection’s not there when you need it.”

Other researchers say such bankruptcy figures are overblown. They estimate that medical bills contribute to less than 20 percent of bankruptcies and primarily affect those with incomes closer to poverty level.

A study of medical financial burden and mortgage foreclosures found a strong link. Seven of 10 homeowners had a significant medical episode in the two years prior to foreclosure proceedings. More than one-third had outstanding medical bills greater than $2,000 and 1 out of 8 used home equity to pay for care.

 

The rising tide of arthritis and fake knees

It is stunning that about 1 out of 20 adults 50 and older have fake knees. The demand for knee replacements have doubled in the last decade, rising to 600,000 in 2009.

Two opposite factors are fueling this trend: baby boomers who want to “fixed” to be able to pursue active lifestyles, and the fact that people are carrying more weight longer.

About 50 million Americans – or about 1 out of 5 U.S. adults – have been diagnosed with arthritis. That number is expected to rise 1 out of 3 adults by 2030 the entire baby boomer generation becomes elderly. About half of those over age 65 have arthritis.

Arthritis is also the nation’s most common cause of disability. Nearly 21 million Americans say they have activity limitations because of the condition.

Two-thirds of diagnosed arthritis patients are under 65. Of those, about 4 out of 10 have work limitations because of it.

The lifetime risk of developing knee arthritis that causes pain is 45 percent. That rises to 57 percent for those with a past knee injury, and 60 percent for obese people.

Arthritis is composed of more than 100 rheumatic diseases and conditions. Osteoarthritis, the most common form, mostly affects the cartilage. Cartilage is the slippery tissue that covers the ends of bones in a joint. Healthy cartilage allows bones to glide over each other and absorbs the shock of movement. In osteoarthritis, the top layer of cartilage breaks down and wears away as people age. This allows bones under the cartilage to rub together.

Rheumatoid arthritis is an autoimmune disease that can develop at any age. Common symptoms for both include pain, aching, stiffness, and swelling in and near the joints.

In 2003, the total cost of arthritis was $128 billion, including $81 billion in medical costs and $47 billion in lost earnings. The condition results in nearly one million hospitalizations annually. Nearly half of the hospital discharges are for knee replacement procedures.

Exercise is an effect way to combat arthritis. However, those with the condition find physical activity a challenge. More than half of U.S. adults with diabetes or heart disease also have arthritis. This impedes chronic-disease management. More than half of women and about 40 percent of men with arthritis get no physical activity. Fewer than 1 out of 7 men and 1 out of 12 women met the federal physical activity guidelines of 150 minutes of moderate exercise a week. Exercise can reduce pain, lessen joint stiffness, increase strength and increase mobility. This is contrary to a common myth that people with arthritis need to rest their joints.

 Self-management education initiatives such as the Arthritis Foundation Self-Help Program can teach people how to manage arthritis more effectively. Research has shown the program helps reduce depression and fatigue, and reduced pain by 40 percent.

Weight loss is also an important component of arthritis management. A loss of 15 pounds can cut knee pain in half and reduce disability.  About 2 out of 3 arthritis patients are overweight or obese, which puts excess stress on joints.

Health care’s post-recession toll

According to the Congressional Budget Office, the rate of unemployment has been above 8 percent since February 2009, making this stretch of high unemployment the longest since the Great Depression. The CBO expects it to remain there until 2014.

Health care, long considered immune from economic cycles, have felt this deeply. About 10 million lost employer health insurance between December 2007 and June 2009. About 40 percent of Americans had trouble paying medical bills in 2010. More than half of patients delayed care because of cost in 2011. Even 1 out of 4 insured households had problems with medical debt. All of this has contributed to a slower rise in medical inflation.

Hospitals have felt this downturn deeply as well. According to the American Hospital Association, 90 percent say charitable giving is down and do not expect it to recover until 2014. Two out of 3 have delayed capital projects and 1 out of 4 have cut services.

The question is whether the slowdown is structural or cyclical. Health-care spending generally rises when the economy improves. However, there is evidence that the rapid rise in high-deductible health plans is becoming a factor. Those with high-deductible plans are 3-4 times more likely to delay care. About half of that foregone care is considered an “unmet need.” Self-diagnosis is becoming increasingly common in U.S. households.

The underappreciated effects of air pollution

Three major studies this week underscored the dangers of air pollution, even at what the government deems safe levels.

The studies – here, here and here – show higher levels of air pollution are associated with greater risks of stroke, heart attacks and cognitive decline.

Air pollution is a deeply underappreciated risk to health. More than half of the U.S. population lives in areas where either the ozone or particle pollution – or both – are often dangerous to breathe.

Ozone is the primary ingredient of smog. Unlike the beneficial ozone layer in the upper atmosphere that shields the sun’s ultraviolet radiation, ground-level ozone attacks lung tissue by reacting chemically with it. Ozone is formed when nitrogen oxides (NOx) and volatile organic compounds (VOCs) come in contact with heat and sunlight. NOx are emitted by power plans, motor vehicles and other sources of high-heat combustion. VOCs sources include motor vehicles, chemical plants and factories.

Particle pollution is a mix of tiny solid and liquid particles. Particle pollution is visible when trucks spew a dirty stream of exhaust. Coarse particles, defined as those between 2.5-10 microns, are created by mechanical processes such as construction, demolition, mining and agriculture. Fine particles, less than 2.5 microns, primarily are created by chemical processes such as burning fossil fuels in factories, vehicle exhaust and burning wood.

A recent study calculated that air pollution is a greater threat to the risk of heart attack than cocaine. The reason is that many people are exposed to unhealthy air, compared with the relatively small number of those who use cocaine. Other factors with a lower heart-attack risk included extreme physical exertion, excess alcohol use and depression. Traffic and air pollution account for about 1 out of 8 heart attacks worldwide.

In an accompanying editorial, Dr. Andrew Baccarelli pointed out: “The important message here is that while an individual’s risk from air pollution is moderate or small, each of us is exposed, making the amount of risk intolerable for the entire community.”

Air quality is improving. According to The American Lung Association, the nation’s 25 most-polluted cities improved their air quality in the previous year and 15 registered its best-ever lowest pollution levels.

However, ozone exposure even at levels deemed safe by current air standards can negatively affect lung function. There is direct correlation between higher ozone-level exposure and decrease in lung function.

Ozone pollution  can shorten life. Conversely, a drop in particle pollution between 1980 and 2000 lengthened life expectancy in 51 U.S. cities by an average of five months. Particle pollution is associated with increasing the risk of asthma, diabetes and chronic obstructive pulmonary disease (COPD).

Those most sensitive to the effects of air pollution are children, the elderly, people who work or exercise outdoors, and those with existing lung diseases such as asthma and COPD.

Ways to minimize pollution’s effects include staying indoors on poor air-quality days, keeping windows closed near busy roadways, use recirculated air in cars, and avoid exercising during morning and evening rush hours.

Health care budget as sacred cow

The recently released $3.8 trillion budget essentially gives a pass to Medicare and Medicaid. President Obama relies on a liberal political tactic: brute cuts to providers, without regard to quality or attempting to address the 30 percent of health-care spending that is of no benefit to patients.

Health care continues to get a pass, despite the fact that is approaching 20 percent of the gross domestic product and is expected to account for 40 percent of the increase in the federal budget over the next decade. There is no health-care budget, in the sense that it is limited. These costs simply are accommodated. No other part of the budget operates this way. Neither should health care.

Health literacy: Going in the wrong direction

The Obama administration is showing a disappointing lack of courage by shying away from one of the best provisions of health reform: requiring consumer-friendly summaries of what insurance plans are offering their customers.

The insurance industry has been complaining about the cost of doing this, and the administration seems to be listening because it does not want to seem to be imposing costly regulations in an election year. Arguably, insurance companies should have been doing this all along. This is simply a no-brainer. Consumers are being asked to become more engaged in their health and the cost of care. Not giving them the tools to do this is going in the wrong direction, with or without regulations.

One-third to one-half of U.S. adults do not have the literacy skills to navigate the health-care system. Studies have shown that poor health literacy is associated with higher rates of hospital readmissions, treatment complications and death.

 Health literacy is the capacity to obtain, process and understand basic health information and services to make appropriate health decisions. Reading comprehension and understanding numbers are the key components.

 This problem is not entirely the patient’s fault. Anyone can have difficulty navigating densely written medication-insert instructions or medical-consent forms loaded with jargon and technical language. More than 300 studies have found that such health-related reading materials are written beyond the average reading comprehension of U.S. adults.

 

However, even my highly educated friends openly admit they refuse to read their health insurance information because it makes no sense to them.