I’ll post these two items here…

While this could have been included as part of Linky Friday, it probably deserves standalone recognition:

U.S. healthcare spending apparently grew more slowly last year than at any time in the past half-century—including the Great Recession—as Medicare squeezed outlays, millions of Americans continued to go without health insurance and those with health plans spent at a slower pace on hospitals, clinics and pharmacies. 

The nation spent $2.9 trillion on healthcare last year, an increase of 3.6% from the prior year and the weakest growth since 1960, after federal actuaries and economists revised recent estimates. That spending remained weak in 2013 was not surprising: U.S. health spending growth fell below 4% in 2009 with the recession that stripped private health insurance from millions of individuals. But newly revised numbers show an acceleration in 2012 to 4.1% before a slump last year. 

The slump is not expected to last with the start in January of health reform’s push to reduce the number of uninsured, some contend. Indicators of spending so far this year are mixed, however. Major hospital chains have reported fewer uninsured and healthier margins, particularly in states that expanded Medicaid. But quarterly national estimates put health spending growth below 4%. 

Also, Moody’s has released it’s 2015 Outlook for the not-for-profit hospital sector.  The report is available only to subscribers, but a summary can be found here:

 The outlook for the US not-for-profit healthcare industry in 2015 remains negative as financial and business fundamentals will remain weak over the next 12 -18 months, says Moody’s Investors Service. Growth in operating cash flow will be weak, operating margins will continue to narrow, and revenue growth will remain limited, says Moody’s in “2015 Outlook- US Not-for-Profit Healthcare — Cash Flow Settling into Low Level of Growth Amid Negative Outlook.”

Call it an open thread.  My thoughts on these issues can’t be boiled down to bumper sticker slogans, but I’ll try to share them as conversations arise in the comments section.  I’m a too busy for a full-length analysis of the subject.

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88 thoughts on “I’ll post these two items here…

    • um. or maybe they want to emphasize to people that there really is a tax penalty if you don’t have health insurance?

      naaah. gotta be that corporations are bastards.

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      • Of course corporations are bastards. But here, they’re being useful bastards working towards the public interest, as well as their own pocketbooks.

        Guys, this is setting up the incentives so that you don’t have corporations “accidentally killing” people. These are good incentives.

        (Plus Obamacare gets free PR from companies that want to make a profit.)

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      • Citizen,
        I believe in properly managed capitalism.
        I believe that an unregulated corporation merely sees ones and zeros instead of people, and that killing even its own employees can be in its best interest. And that’s not the worst thing a corporation can be into.

        I believe that we aren’t managing capitalism well enough in America, judging by the number of suspicious deaths that prove advantageous to particular corporations.

        On the other hand, we don’t have corporate tanks going around wrecking shit…

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      • Kim,
        They don’t have to drive tanks around. They just have to make you believe their good intentions align with your good intentions.

        And lets at least establish that what you are identifying as capitalism is a far reach from what I call free market. Capitalism has been so fckd up I don’t know how anyone defines it anymore (with a straight face).

        One of my gripes of anarchist capitalists is how heavily some reference insurance/insurance companies as an answer to so many issues.

        If I didn’t want power players making ugly in this world I would find ways to do without the need for them. I thought you tended to have that same view.

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      • Citizen,
        You want links to Mexico? Armed insurrection (of villagers) quashed (by the military) so that Mexico could continue to be part of NAFTA…
        Corporations may not need tanks, but some do have them…

        A free market is an oxymoron — or to be more exact, it’s an unstable equilibrium, prone to toppling over at the slightest gust of air. Every corporation wants to be a monopoly.

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      • Yes, free markets never work. They have no sway over the big bad monopolies or government. The way to not be mexico is to double down on mixing and growing corporation and state while centralizing at every opportunity.

        The answer to not eating shet sandwiches is to make a big pile of them and start jamming them in my mouth. I completely follow the logic and will shut up now.

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  1. Somewhat related is this story from VOX:

    http://www.vox.com/2014/12/2/7282833/sovaldi-cost

    The headline is “This drug costs $84,000: And there’s nothing the US healthcare system can do to stop it.”

    The drug treats Hepatitis C. There is discussion of another drug in the article called Nexium. Americans pay about 215 for a Nexium prescription. Everyone else pays less.

    I often wonder if Americans paying through the nose allows Europe to have their nice welfare states.

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    • Sovaldi cures Hep C and the lifetime cost is lower than the alternatives and does not end up with a liver transplant. We want to encourage companies to make more Sovaldis. If we priced like European countries did, we would likely get less of them or, alternatively, our prices would go down and everyone else’s would go up, maintaining an overall equilibrium.

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      • I agree that we need drugs like Sovaldi.

        “our prices would go down and everyone else’s would go up, maintaining an overall equilibrium.”

        I don’t see why this is a moral or ethical dilemma. I think it takes a very strange form of neo-liberalism or whatever exists on the right to say that Americans should pay through the nose so Western Europe can have socialized medicine and pay much less for drugs.

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      • Perhaps in someways but they also have the ability to negotiate for drugs prices with companies because of central agencies. Congress famously forbids medicare and medicaid from negotiating over drug prices which seems like a gift to the Pharma Companies.

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      • I think it takes a very strange form of neo-liberalism or whatever exists on the right to say that Americans should pay through the nose so Western Europe can have socialized medicine and pay much less for drugs.

        (Ahem) That’s not my way of neoliberalism.

        But to address the argument head-on, It think those who make that argument are trying to say two things (but I’m not saying I agree with it):

        1. People in the US look to western European and Canadian style universal health care as models, but such people don’t realize that the only reason Europe and Canada can do that is because the US already subsidizes much of the costs, at least when it comes to new medicines.

        2. A universal health care system in the US that limits the potential return on new medicines will take away an important incentive for developing said medicines.

        Again, I don’t necessarily with those arguments. (Well, I kind of agree with #2, assuming certain premises, but I don’t think that’s a reason not to try to ensure as much access to health care as possible.)

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      • People in the US look to western European and Canadian style universal health care as models, but such people don’t realize that the only reason Europe and Canada can do that is because the US already subsidizes much of the costs, at least when it comes to new medicines.
        Often say, never proven. Is it true? What’s the evidence? I’m not saying it’s wrong, but I simply see it asserted — over and over and over — without any actual evidence behind it. Given it’s pretty much the only decent argument for “Here’s why we pay more and should”, you’d think there’d be a lot of evidence behind it.

        All I know on the subject is that NIH grants and universities do the lion’s share of basic research, not drug companies.

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  2. We’re getting so much rain here that the highways have been flooded; yesterday I got soaked to the bone on my three-block walk from transit to work.

    I blame Obama.

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  3. Once again, I will repeat myself again.

    Will this policy create more healthcare (defined as the time of doctors/nurses/CNAs, etc and/or medical equipment/technology/medication)?

    Will this policy make it easier to provide healthcare?

    If the answer to the above questions are “no, it won’t” (even if the answer isn’t “well, at least it doesn’t make stuff worse”), then the policy won’t result in more healthcare being provided.

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      • Well i’m just a darn ol liberal so i don’t know the fancy ekonomiks. If the textbook says there is just one simple, clear and predictable way the market will respond then case closed. No worries.

        You should go tell those millions of people have insurance now due to the ACA that any healthcare they have received due to their new insurance doesn’t actually exist.

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      • I’m so glad to learn about econ. I’m an astronomy buff and the physics and chemistry is always so complicated with this exception or that event being unique. It’s nice how economics is so much more certain and easy to predict then those old softies, physics and chemistry.

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      • My (possibly mistaken) understanding is that there is something of an artificial cap on how many MDs we mint every year. Likewise RNs/LPNs (I have a friend trying to get into a nursing degree program & having a hell of a time because the schools local to her that offer them refuse to expand their programs, which makes competition fierce).

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      • IIRC, the AMA did something around the 1900s that radically closed the number of medical schools out there. Now a lot of the schools that closed were more or less making quack doctors. I think the standard of instruction was basically repeating two years of the same lectures. Most of which was anatomy.

        There are probably very good reasons to make sure that medical and nursing schools have strict accredidation standards but it is much more rigorous to get into medical school and the numbers are probably kept low by various means. When I was an undergrad, I think Organic Chemistry was considered a “make it or break it” class for the Med School hopefuls and a lot of people did not make it. The MCATs also serve as another barrier for entry etc.

        There are some workarounds. The most famous examples being various medical schools operating in the Caribbean for people who could not get into medical school in the United States and maybe elsewhere.

        I also thought that the nursing shortage was over and we now have a glut but that could just be me.

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      • And you’re assuming supply stays stable because?

        This goes back to my original comment. Here, I’ll quote it:

        Will this policy create more healthcare (defined as the time of doctors/nurses/CNAs, etc and/or medical equipment/technology/medication)?

        Will this policy make it easier to provide healthcare?

        If the answer to the above questions are “no, it won’t” (even if the answer isn’t “well, at least it doesn’t make stuff worse”), then the policy won’t result in more healthcare being provided.

        To which Greginak replied by asking about the increase in demand without addressing the supply issues which my original comment was attempting to address.

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      • MRS,
        it has been my impression (from reading billboards) that you can get a nursing degree for free in Pittsburgh (for some after-school commitments, of course).

        Jay,
        Hospitals and medicine, like nearly everything else, is falling apart in this country. Our infrastructure is shoddy across the board (maybe less so in Colorado, it’s newer). But, I predict less supply in rural areas, and more supply in urban areas.

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      • Lemme check my economics textbook. It says here “Yes, the market will respond: It will raise prices.”

        This seems to assume that the market for medicine is a healthy competitive one where the only variables are “demand for doctors” and “supply of doctors.” If you add in the fact that most of those transactions go through monopolistic middle men, supply and demand for doctors become a lot less relevant than the behavior of the middle men. It’s like asking how breaking up a telephone monopoly could possibly provide more telephone services if it doesn’t create more copper wire.

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      • This seems to assume that the market for medicine is a healthy competitive one where the only variables are “demand for doctors” and “supply of doctors.”

        So let’s assume a somewhat corrupt market. Does this make things better than it was? It seems to me that it does the opposite of that.

        If you add in the fact that most of those transactions go through monopolistic middle men, supply and demand for doctors become a lot less relevant than the behavior of the middle men.

        From where I sit, Obamacare does more to deal with (and subsidize) the transactions than the health care.

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      • So let’s assume a somewhat corrupt market. Does this make things better than it was? It seems to me that it does the opposite of that.

        Yes, I think it does. The medical industry has many problems, but chief among them is the fact that most people don’t buy their insurance on an open transparent market. They’re essentially like cable companies. You get one choice, and somebody else makes it for you. Adding the exchanges and labeling plans so they’re reasonably easy for consumers to compare turns it into something that at least resembles a market. I’ve been betting that the market aspects of it are going to drive competition among insurers, and it looks like that’s what’s happening.

        Whether the improvements in efficiency that result from that competition are enough to fully offset all of the new undeserving riff raff who will be trying to use my medical care providers is yet to be seen, but it certainly doesn’t look like the bloodbath that the law’s critics predicted.

        From where I sit, Obamacare does more to deal with (and subsidize) the transactions than the health care.

        The existence of middle men and insurance aren’t a problem on their own. They exist in most industries. You buy your groceries from grocery stores instead of directly from farmers and your auto insurance company often pays body shops directly. The key difference is that those markets are transparent and competitive enough that those companies actually add value instead of being the turd sandwich dispensing money pits that medical insurance companies are.

        It would be amazing if we could all buy all of our health care directly from providers for cash with easy price comparisons and provider ratings, but absent that, a functioning insurance/broker market where the middle men add that value themselves would suffice.

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    • Question 1: Yes. For example, providing hospitals with incentive to reduce readmits and medical errors (which has been wildly successful as linked by Kimmi above) makes significant amounts of wasted healthcare available for beneficial use.

      Question 2: Yes. An easy example is electronic medical records.

      Another easy example that covers both are community clinics. It funds new clinics and supports existing ones in ways that allow for both more treatment and easier treatment than previously available. Particularly in under-served areas.

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      • Citizen,
        if you pay the hospitals based on how many “Diabetics” they can reach and at least counsel, the hospitals will develop mobile clinics to counsel diabetics and teach them how to monitor insulin.

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      • Dude! These are totally answers to my questions!

        I do think that more efficient re-allocation of health care is a good thing, though I can’t help but wonder about whether the amount of readmission reduction/medical error reduction will cover the 10s of millions.

        I don’t know the degree to which advancements in electronic medical recordkeeping can be put on the policy in question. My intuition is to say that we’re somewhere around where we would have been without the policy in question.

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      • Jay,
        we’re wasting about 15% of our health care budget on medical waste. Or we were, before Obamacare. It’s my understanding that Obama has saved oodles in medicare waste.

        It’s not “advancements” so much as “widespread use” and “emphasis on connectivity” (and also usefulness). Basically the medical community convinced the government to pay for interoperability and Health Information Exchanges. Because it’s a community interest.

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      • Kim
        You had me at crash the market upthread, I have my doubts about the profitability, (or breakeven) as our last clinic couldn’t keep the doors open in a self sustaining manner, and they really made a go of it.
        Diabetics around here learn from each other, many aren’t diabetics anymore.

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      • Citizen,
        um, what? Me bitching about the King of Saudi Arabia has not much to do with this discussion. Seriously, I was bringing up oil prices. And he’s flooding the market with oil. The price of oil is at such a low level that Iran can’t pay its bills. (not to mention punking the hell out of North Dakota, but I don’t think we’ll declare war for that).

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      • Not entirely, but (now-proven) incentives to reduce waste, plus (not-yet-proven-but-logical) incentives to provide preventative care instead of cures, plus building community clinics and other targeted services, plus increased access to clinics at places like drugstores/WalMart/etc. seems to be avoiding nightmare access issues for now. I certainly haven’t heard about such issues (other than as vague right-wing fears).

        The thing about electronic records is that they are clearly good but also VERY expensive to set up. The law required implementation and <a href="http://www.medicalrecords.com/physicians/meaningful-use-government-incentives-information"provided subsidies to make it happen. Not sure what leads you to believe those steps didn’t hasten adoption.

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      • If they manage to make a serious dent in waste, that’s just an unalloyed good.

        Preventative care rather than cures is a good thing but there is a strange dynamic that keeps showing up. Our medical science has gotten really, really good at dealing with acute problems. We haven’t gotten quite as good at dealing with chronic issues. We’ve gotten better, of course, but not at anywhere near the rate that we got better at acute. So the acute problems are getting solved and the chronic ones accumulate.

        I’m hoping that preventative care gets better at preventing (or seriously slowing) chronic issues. I don’t know quite what to think about that yet. I’m hoping that Dr. Cox’s “Everything we do here is a stall” is overly pessimistic.

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      • I think there is plenty of room for improvement in treatment of chronic conditions, provided that incentives are right. See, e.g., this article that has stuck with me.

        ACA is the beginning of a process of trying to get those incentives right. The incentives were horribly backwards before.

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    • My guess is that it won’t result in significantly more care provide, but more effective care – specifically, more relatively inexpensive preventive care, less terrifyingly expensive emergency care resulting from years of missed preventive care.

      It might end up slightly increasing, or slightly reducing overall health spending, but it will significantly increase overall health.

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    • Will this policy create more healthcare (defined as the time of doctors/nurses/CNAs, etc and/or medical equipment/technology/medication)?

      Yes, absolutely and the first way it has attempted to do this is through accessibility to health insurance. Bringing in millions of people into the healthcare system will increase demand for services, a demand that hospitals and health systems will want to meet through preventative medicine offered through their physicians because ER visits are costly to hospitals, especially when the patients can’t pay.

      Since the model is switching from fee for service to a more continuum of care model, as a commenter (dragonfrog?) mentioned, the kind of care we’re going to see is going to be more efficient or proactive rather than reactive.

      Will this policy make it easier to provide healthcare?

      Yes. Technology was one such example. Another example is because hospitals are more incentivized to keep people healthy, they are shifting away from providing certain services on their hospital campuses and to off-campus satellite facilities including stand-alone urgent care centers, and physicians setting up shop in retail strip centers. They are moving more into their communities to serve them on a preventative basis. Also, we’re seeing an increasing in home health services as well as the ability to teleconference with physicians without having to make a costly office visit.

      For me, the wild card here is what I see as a shift away from HMO/PPO insurance plans to high deductible plans (I’m moving from a PPO into a high deductible plan next year). A high deductible plan will protect well enough against a hospital visit, but will be people want to go to a doctor when they’re sick but may not want to pay the full amount out of pocket? That I don’t know.

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      • Bringing in millions of people into the healthcare system will increase demand for services

        Oh, I agree with that! Believe you me. I just don’t see what the obvious mechanism is for supply increasing beyond “well, since demand goes up, the price will go up and, after the price goes up, the people who see that they could make money in the medical field will respond accordingly”.

        If it were as easy to become a doctor as to become an MCSE, that’d be one thing.

        Since the model is switching from fee for service to a more continuum of care model, as a commenter (dragonfrog?) mentioned, the kind of care we’re going to see is going to be more efficient or proactive rather than reactive.

        Well, I imagine that that would be measurable. We’ll see.

        They are moving more into their communities to serve them on a preventative basis. Also, we’re seeing an increasing in home health services as well as the ability to teleconference with physicians without having to make a costly office visit.

        Well, with the aging of the population, this is a good thing, I guess.

        will be people want to go to a doctor when they’re sick but may not want to pay the full amount out of pocket? That I don’t know.

        This, too, should be measurable.

        My attitude towards the PPACA remains what it was a few years back: I don’t oppose it because I think it’ll be socialist or whatever. I oppose it because I think it won’t work. It’ll result in the price going up where it can and shortages happening where the price can’t go up.

        When I look at the two links, I see a story about healthier margins in the first one and unsustainable losses in the second. I imagine that the two hospitals are in two different parts of town.

        We’ll see what happens next year, of course.

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      • You’re welcome to your opinion, but it seems not to change much in the face of evidence. We’ve been discussing various ways additional care is being provided (and there is no evidence of massive shortages like you expect).

        I just don’t see how there’s a question that the ACA is working. Uninsured rates are way down and cost increases are the lowest in a long time. Without reports of access problems. What definition of “working” is the law failing to meet? And how has your opinion remained stable for that long?

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      • Nevermoor, from what I understand, the websites to sign up for the exchanges didn’t go live until this year. That is: this is the first year of the program. Am I incorrect about that?

        If I am correct about that, then I imagine that we have at least a couple of years of transition following, for example, the first year where people have to deal with such things as the penalty… which is, as I understand, next year.

        and there is no evidence of massive shortages like you expect

        I didn’t say “massive shortages”, I merely said shortages. I imagine that those shortages will begin to follow such things as not-for-profit organizations see their margins narrow and, if I’m correct, disappear followed by them going negative. Once these organizations close their doors, we’ll start to see what I’d be willing to call a shortage. I imagine that others will be able to point to the organizations in the nice part of town and point out how well they’re doing and, therefore, there are no shortages.

        We’re still in the first year of the program. There’s a lot of things that are going to happen between here and the first time that someone explains that the system would be working a lot better if only it were better funded.

        I only wish that something that wouldn’t work would fail as quickly as you think I should think this should be failing.

        We’d save a lot of time.

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      • We are now entering year 2 signups, so websites went live (or, depending on the state, “live”) last year. We’ve seen millions enrolled and using their healthcare for a year. You’re right that we are pre-penalty, but I’m not sure how adding a stick to the carrot will make the law work less well.

        If I’m understanding you right, the failure scenario is that there are so many people with healthcare that there isn’t enough supply for that demand, which will lead to hospitals going bankrupt and closing their doors over the next couple years. Or perhaps that hospitals who have grown fat off of non-insured users will take a hit when those users pay lower insurance-negotiated rates. And that those hospitals will be in poor parts of town (despite the fact that the main beneficiaries of the ACA are lower income folks who get either expanded medicare or heavy subsidies). Am I misstating your concern? Because it seems plainly illogical to me but I can’t see what I’m missing…

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    • If the answer to the above questions are “no, it won’t” (even if the answer isn’t “well, at least it doesn’t make stuff worse”), then the policy won’t result in more healthcare being provided.

      I don’t concede that the answer is, indeed, “no, it won’t.” But even if it is, we have to look at the quality of the care and the expansion of coverage. Not only, “[w]ill this policy make it easier to provide healthcare?,” but also, “will this policy make it easier for people who used to not be able to acquire health care actually get health care that’s more affordable to them (even if others do indeed end up paying more).” There’s a tradeoff, and it’s not completely reducible to the dynamic that suggests. I’m willing to accept certain inefficiencies or cost shifting provided that more people who couldn’t afford health care before now can afford it.

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      • I agree that we’re going to have a redistribution of care, certainly. I just don’t know that it’s going to stay redistributed.

        I imagine that the future has a lot of people fully covered but huge chunks of them unable to see a doctor.

        But, again, this is something measurable.

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      • To expand. If the consequence of this redistribution is that someone has to wait a week or two longer for a regular check up, then that’s probably an acceptable price to pay. If the consequence is that someone has to wait several months for the same check up, then that’s probably an unacceptable, or at least acceptable price.

        If we get into things like very necessary but non-emergency surgery, then the stakes and the importance of wait times probably get higher.

        I do realize it’s easy for me in the abstract to suggest what is an acceptable wait time for someone else.

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      • Maybe it is presumptuous of us to suggest that expanded coverage for everyone justifies making some people wait longer.
        Then again, how presumptuous is it to suggest that speeding up my wait times justifies stripping coverage for many others?

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      • That’s the rub, isn’t it? It depends on how severe the consequences truly are and who pays. I’m ambivalent about the medicaid expansion, for example, if it means that more and more doctors will refuse to take medicaid patients. (I stand to be corrected, but I understand doctors legally can do that, at least in non-emergency situations.) In such cases, the poorer will pay in increased wait times.

        I personally don’t think–or at least I hope it’s not the case–that the tradeoff described by is as stark as he seems to present it (“I imagine that the future has a lot of people fully covered but huge chunks of them unable to see a doctor”), but it’s a possibility, and no matter how much I support the ACA, it’s a possibility I can’t just deny.

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  4. Everyone talked as though the problem was that insurance companies wouldn’t pay for things.

    What if the problem all along was providers overcharging?

    What if “healthcare spending grew slowly” and “hospital revenue outlook is weak” are what we want to see, because it means that prices are falling despite the increasing numbers of customers?

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    • Jim,
      there were specific, individual insurance companies that wouldn’t pay for things. It actually was a pretty widespread practice on the “individual insurance” front. This was an Issue We Fixed with Obamacare.

      Is there an issue with providers overcharging? Judging by the amount of medicare waste Obama has been able to chop out, yeah, there was. [this is not an Obamacare thing. Executive action, executive branch only. Reminding you all that the next president does matter.]

      I think that healthcare spending growing more slowly IS what we want to see. It was growing Way Way faster than inflation, after all, and that’s just not supportable. Plus, I’d rather see the money going into new shiny things, rather than just being pumped into keeping the elderly alive (or medical billing, which causes a lot of waste, both in time and paper).

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      • “waste” is not “overcharging”.

        When I see my insurance Explanation Of Benefits and it shows that a $457 charge was “negotiated” down to $200 before any money even changed hands, does that mean that the provider is just gonna eat a $257 loss?

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      • No, it meant the charge was inflated — generally to cover the costs of people who used care, but couldn’t pay.

        That 257 dollar ‘loss’ was the hospital trying to charge you for people who couldn’t pay. Which is why trying to make sure everyone has insurance is kinda critical, so hospitals can actually charge based on services and not triple your bill to cover the nice, but uninsured, couple that just had a 250k preemie.

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      • No, it meant the charge was inflated — generally to cover the costs of people who used care, but couldn’t pay.

        This is the “hospitals are nice and only charge what they really have to” theory of hospital behavior. I lean toward the theory that like everybody else, hospitals will charge what the market will bear. If they have a good year recouping costs, I highly doubt you’d see it reflected in lower sticker prices across the board.

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      • tf,
        there is competition between hospitals,at least in urban areas. Some would lower prices, but a smart businessman doesn’t plan based on good fortune, but based on bad. (so it takes a good surplus before they’re willing to lower prices).

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      • I meant that to say, “(citation needed)”.

        No you don’t. You only need to see that the hospital WILL voluntarily join insurance networks (I’m speaking private networks, not Medicare or Medicaid) that pay 257 dollars less for that procedure. If it was below their actual cost, they wouldn’t join those networks.

        Hospitals lose enough money through the ER and other uncollectable debts for services — they’d not exist if the ‘adjusted charges’ that Aetna or Cigna paid didn’t cover the work.

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      • I’m a little confused here because you said that the extra $257 was the hospital trying to cover its costs for uninsured patients, and then you turned around and said that what they actually got paid covered everything they needed, and we’re back at “so where did the extra $257 come from them”.

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      • I think it’s a pretty simple story.

        Hospitals know that people are not shopping by price, and that few people will ever pay full “rack” rates, so there is no incentive to keep those rates low. Insurers, on the other hand, have leverage because hospitals need their insured population. So hospitals negotiate rates that are more real.

        This way, insured people think their insurance is getting them a great deal, and uninsured people have a high bill from which to negotiate a discount. Just think of it like shopping at certain department stores. Sure there’s a “price” listed on each item, but it exists primarily to be discounted by anywhere from 2-5 independent reductions so you feel like you’re being a smart consumer and getting a good deal.

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    • The problem was both, and other things.

      The problem on the cost-of-healthcare side was that we paid way more than anyone else per-procedure for way too many procedures. The problem on the access-to-healthcare side was that the individual market was full of overpriced phony insurance that had every incentive to deny claims (and didn’t promise to cover much in the first place) which led to bankruptcies, job-lock, and all kinds of other problems.

      “Healthcare spending grew slowly” is the explicit goal of the program (and why it was graded to be a net budgetary positive). As for hospital revenue, I’m not shedding any tears. Plus, the worst-hit hospitals tend to be in non-Medicare-expansion (i.e. far-right) states. Can’t blame the law’s design for that.

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      • As for hospital revenue, I’m not shedding any tears…Can’t blame the law’s design for that.

        Cuts to Medicare and charity care were part of the design of the ACA so, in some sense, yes, we can point to the law and see this as a direct consequence. In fairness to your position, these direct consequences have been known for some time. The major not-for-profit health systems have institutional bureaucracies that make companies like GM look like Silicon Valley by comparison.

        However, add declining inpatient admissions on top of reimbursement cuts and now you have a revenue stream that’s very hard to project but is going down. At the same time, the hospitals have to aggressively cut costs, which they’ve been doing, in order to maintain key operating metrics like operating margins (which in the not-for-profit world are 5% if not less), days cash on hand, cash to debt, etc. etc.

        While the not-for-profits are not profit driven, they are very balance sheet/credit rating/cost of capital driven. Operating margins are going to drive that because it’s going to impact key cash and debt ratios (days cash on hand, cash to debt, debt service coverage, etc.). The concern is that the transition from the old operating model to one that can survive in the post-ACA environment may put enough negative pressure on weaker hospitals to cause credit downgrades.

        The reason to concern yourself with credit downgrades is that demand for medical services will soar given the demographic changes and changes to the laws pertaining to health insurance. Meeting that demand for services will require hospitals to spend substantial amounts of capital on all sorts of different things, whether that’s building new buildings (including replacement hospitals), executing an ambulatory care strategies, devoting capital to facilities set up in retail locations, acquiring physicians practices, etc, hospitals are not funding those improvements from their balance sheets. They raise debt in the tax-exempt municipal bond markets.

        Lower bond ratings means a higher cost of capital. If the goal is to contain costs, lower interest rates are better than higher interest rates. While the AA-rated systems may be ok, the decent yet challenged BBB systems could lose access to those markets if they fall below investment grade. The ability to provide the best patient care through a sustainable business model depends on access to capital.

        I don’t shed tears but being in the trenches the way I am, I take a less partisan view of all of this.

        Plus, the worst-hit hospitals tend to be in non-Medicare-expansion (i.e. far-right) states. Can’t blame the law’s design for that.

        The law was designed to require states to participate in Medicaid expansion until the Supreme Court rightly ruled otherwise (I guess no one heard of Printz v United States). On humanitarian grounds, I don’t support what some of the states are doing and expect that trend to change once the uproar becomes loud enough and the hospitals lead the charge.

        THE worst hit hospitals are in red states? Even assuming you’re right, there are plenty of hospitals that were struggling long before the ACA went into effect and will continue to struggle because of the high Medicare/Medicaid payor mix. Struggling hospitals affiliated with larger health systems (i.e. Trinity Hospital located on the South Side of Chicago is affiliated with Advocate Health) will remain open if only because the rest of the system has the financial wherewithal to support the hospital.

        However, even in urban or rural markets, hospitals that aren’t part of a larger system and don’t have strong balance sheets behind them are going to struggle no matter where they are. A few years ago, we worked on a transaction involving a single hospital system in New Jersey. The hospital served an indigent population and was only able to show break even numbers after receiving $15 million or so in state aid to keep it open. Medicaid expansion was not going to save this hospital.

        We can talk about the worst hit hospitals but there are plenty that aren’t among the worst hit that are going to have a difficult time surviving in the post ACA environment operating independently. The hospital I referred to above was acquired last year by a strong health system.

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      • Dave,
        just a quick thing: consolidation was happening before Obamacare, and the economies of scale haven’t changed — all that much, with the new law. Are they accelerating change? sure. But, end of the day, you wind up with most of the care you used to have — provided at far less disease prone places than hospitals.

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      • I think that the economic reality that hospitals are now facing will force those that need to take action into action. Hospital CEOs may have had an idea that this day would come, but to be able to convince a Board of Directors on a major move like being acquired without being able to show that it’s the only possible recourse seems small to me.

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      • You clearly have more direct exposure than I have. What I can’t tell from your comment is whether the ACA is making the problems you identify worse (and if so, how). Increasing coverage, for example, should make things better as hospitals no longer provide as much uncompensated ER care.

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      • What I can’t tell from your comment is whether the ACA is making the problems you identify worse (and if so, how). Increasing coverage, for example, should make things better as hospitals no longer provide as much uncompensated ER care.

        One thing we know, and made sure to remind us when he posted a series of links, is that the previous model was unsustainable. No matter what problems were going to arise, we’re moving away from a problematic system and towards a model that will address the problems we’ve had. How that ultimately shakes out we’ll have to see.

        The Medicare and Medicaid cuts are going to make things worse, at least in the short run. However, this isn’t an unintended consequence. We’ve been talking about it for years and now hospitals are trying to deal with it.

        Where I think it may be worse…

        1. I am bearish when it comes to the ACA’s impact on hospitals that serve largely Medicare and Medicaid patients (especially the latter), even with expanded access to Medicaid. The weaker hospitals are still going to face financial pressure and they’re the ones with the least wherewithal to take hits and self-generate capital.

        Assuming that the states won’t let acute care facilities that serve indigent populations shut down if that’s the only option, the three solutions will be (1) state aid; (2) acquisition by a not-for-profit; or (3) acquisition by a for profit.

        2. This: Slower growth in private health insurance spending, aided in part by the growing prevalence of high-deductible health plans, contributed to the sluggish health spending growth in 2013

        One thing that I’ve heard a lot about it, especially from the doctors that I see (if not for me, my kids) is how many people they know that are moving over from HMOs or PPOs to high deductible plans. My company no longer offers a PPO and the only plan available is a high deductible plan. I know several other people that have had this happen to them as well.

        In some ways, it may be a good thing to make people accountable for the healthcare costs that they incur, which a high-ded plan does; however, people that may not have a lot of money may not choose to see a doctor for certain things when they really need to and end up in the ER anyway.

        As easy as it is for some people to blame insurers and employers, anyone that thinks that insurers or employers were going to eat the increased costs of plans that became more expensive due to ACA compliance is naive.

        Again, the prior business model wasn’t going to work anymore. It was getting ridiculous. At the end of the day, if the ACA forces the hospitals to innovate and the delivery of healthcare improves, I’ll be more than happy to ignore the government’s obnoxious Commerce Clause argument for the individual mandate (good riddance) and acknowledge the benefits that the law provided. While I’m not drinking the Republican Kool Aid, I’m not sure where this ends up. Time will tell.

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