HEALTHCARE COSTS

I’m an economist by training and I want to discuss healthcare costs. We now spend $8,000 per person per year on all forms of healthcare, the highest in the world. As I’ve mentioned before, it’s 18% of our GDP. Belgium, France, and Switzerland come next with about 10 – 12% of their GDP spent on healthcare, but their per capita spend is about half of ours and their life expectancy is greater. In fact, we rank only 35th in the world for life expectancy.

According to a Congressional Budget Office forecast, at the rate at which our costs are growing, when my friend’s grandchild reaches 17 years of age in 2030, healthcare will account for 29% of our GDP. By mid-century when the grandchild will be 37 years old, 48% of our GDP will be consumed by healthcare. And here’s a stunning CBO forecast: when the “child” will be just slightly older than I at age 69 in 2082, healthcare will be 99% of GDP, unless something is done.

And don’t blame Medicare and Medicaid for all of this rise in healthcare costs. Even by 2082, these two programs will only account for less than 1/3 of the GDP vs. just 8% now. The real rise in healthcare costs is going to come from everything else, especially hospital expenditures and cost-shifting -- unless Obamacare succeeds in stopping this.

Even now, healthcare sucks all the air out of everything. Based on our surveys in the past decade, consumers THINK they are spending about 9% of pre-tax income on healthcare. When healthcare reaches 18% of their pre-tax incomes, they will DEMAND single-payer healthcare. For those who already spend 18% or more of their pre-tax incomes on healthcare, they find they’re unable to spend on entertainment, travel, vacations, food, savings are impossible, and purchasing a new car is largely out of the question. This could be a harbinger of things to come if healthcare costs are not curbed.

Although it’s called the Affordable Care Act, Obamacare is mostly about access to healthcare. But it may be a boon to cash-strapped hospitals which have been cost-shifting to the rest of us for years to make up for lost funds due to providing care for the uninsured and the under-insured. I live in New Jersey and we having been seeing about one hospital per year close its doors due to funding issues for the last 12 years. If those cost savings are realized AND passed on to the rest of healthcare, we should all benefit.

It is difficult to know just how much Obamacare will actually save us as so many states have opted out of insurance exchanges and the expansion of Medicaid rather than opting in. I personally think all the states will eventually come around. My evidence for this is the original implementation of Medicaid. Many states fought it tooth and nail. Only 5 or 6 signed on at first, but 20 did so by the end of the first year and then the rest eventually followed in some fashion. It was too expensive for them NOT to.

Just the Medicare provisions of the law are estimated to save $428 billion between 2010 and 2019.

But even under Obamacare, the rosiest forecast I’ve seen is that healthcare costs will still be 40% or more of our GDP by 2080 – still totally unsustainable.

PHYSICIAN SHORTAGE AND IMMIGRATION BILL

We have yet to see the new immigration bill and it may be introduced this week, maybe even while I’m standing here. It’s supposed to have provisions to allow in people with skills, perhaps qualified medical professionals who want to practice here, once they’re properly credentialed. We’ll see. It won’t be the first time we’ve opened our doors to medical help from abroad. Shortly after World War II, we had a serious shortage of specialists in this country and we helped to close that gap through our immigration policies and GIs – some of whom were already primary care physicians – who went back to school to become specialists thanks to the GI Bill. It was very common when I was a kid to hear about the “brain drain” as other countries complained about our aggressive recruitment of their physicians.

Maybe we can even get back some of the foreign students who trained here as undergraduates or grad students and speak English, before we gave them 60 days to pack their bags and get out.

But, as I mentioned, this talk is not about gloom and doom. Speaking of the physician shortage and very busy doctors, I’m reminded about the story told by the great Broadway comic, Jackie Mason. Apparently there were 3 guys talking with each other about there doctors and one says, “You know, my guys big … really big: you can’t get in to see him for three months.” To which his friend says, “Big? You think that’s big? You can’t get in to see my guy for six months!” The third fellow then steps in and says, “Well, then, I must have the biggest guy of all: no one’s EVER seen him.

ACOs

There’s growing interest in the role of the ACO – Accountable Care Organizations. Will they really free-up physician’s to practice real medicine while augmenting their efforts by other trained professionals or will it merely be rearranging the deck chairs on the Titanic? I can tell you that I went to well-run ACO practice about two weeks ago and they proudly had a poster explaining the concept of their office. I realized it was actually a marketing tool for them and a practice-builder.

Cigna has more than 50 of these programs in place in 22 states, covering more than 500,000 customers. According to their chief medical officer in a recent letter to the Wall Street Journal, “Early indications are that our accountable care programs help close the gaps in care, reduce unnecessary ER visits, increase preventive health visits and lead to better follow-up care for people after they’ve been discharged from the hospital. It’s hard to imagine anyone would see this as a failure.”

Others, however, have also referred to ACOs as being just “HMOs on steroids.”

NURSE PRACTITIONERS

This has engendered a topic for national discussion about the role of the nurse practitioner and how much autonomy to grant her – it’s usually a “her” about 95% of the time. How much supervision must she receive from a licensed physician, especially in a rural practice where her only link to outside help may be telemedicine? Can she have full prescribing privileges which many states still don’t allow?

PHYSICIAN SHORTAGE

I can tell you that a major topic of discussion where I come from is what will happen to quality when millions of people will now have access to healthcare, maybe for the first time, and we are facing a shortage of primary care physicians, nurses, and general surgeons? Massachusetts faced the problem of too many patients and too few doctors with the advent of Romneycare, but the issue dissipated in a few years. Others say, however, that Massachusetts is NOT a good example, because more than 90% people in that state had health insurance to begin with, unlike states like Texas, Arizona, California, and New Mexico with a quarter or more of their people not insured.

Basically, we need 45,000 more primary care physicians, over a million more nurses and 40,000 more surgeons before my friend’s grandchild turns 7 in 2020.

HEALTHCARE QUALITY

Healthcare is like a three-legged stool: one leg is about access, another is about cost, and the third is about quality. The theory goes that you might get two of these three legs but you won’t get all three. IF the exchanges are fully implemented – a big IF, given opposition to both the exchanges and the expansion of Medicaid in over 30 states – we should see access improved, cost increases may or may not be slowed, but there is much concern about what happens to the quality of care in the new environment. I know that quality has been a major concern at this meeting and for your organization long before that.

You can’t discuss healthcare quality without mentioning patient compliance with your instructions. There’s an idea gaining some ground back east after a successful study in Boston: let patients see their own medical records. First, it’s their right under HIPAA legislation. Second, if the Affordable Care Act changes the demographics of your practices, you’re going to have compliance problems with following instructions, coming back for follow-up visits, taking the right dosages, diet, exercise, and so on. The Boston study found that compliance with these factors actually got better when patients could see their own medical records. Third, and I know what some of you are thinking, that this will take too much of your time and that your physicians will hate the idea. But that subsided in the Boston study when physicians saw how well it worked. Furthermore, this definitely positions you as being patient-oriented.