Zero Uncertainty

The cost of medical care in the United States continues to increase at a rate above the consumer price index. The average annual percentage increase in the National Health Expenditure from 2009 to 2016 was 4.15%. The same number for the Consumer Price Index was 1.59%. The projected average annual percentage increase in the National Health Expenditure from 2016 to 2022 is 5.32%. Why does the cost of medical care continue to outpace the overall inflation rate? I believe it can be summed up in two words: Zero Uncertainty.

Radiologists that read mammograms tend to require zero uncertainty. If there is a hint of a suspicious lump on a mammogram, the radiologist will order additional views or different imaging. The additional views or imaging usually shows normal tissue. A letter is sent to the patient stating everything is normal, repeat in one year. The patient then gets a bill from the insurance company for $200 to $300 for the additional views that are not covered under their plan. The following year the same thing happens. The initial mammogram is not completely normal, but the additional views are normal and the patient gets the same letter from the radiologist and the same bill from the insurance company. After a few years, the patient quits getting the mammogram because it is always eventually normal and it costs $200 to $300 per year for a normal test. All due to the radiologist requiring zero uncertainty. For example, why not send a letter to the patient stating similar mammograms are normal 99.9% of the time, but for at least an additional $200 the patient can be 100% confident the mammogram is normal and let the patient decide if the additional 0.1% is worth the money.

The same is true in the hospital emergency department. I hear complaints from patients that go to the ER that, “The doctor didn’t tell me what was wrong.” Emergency Medicine physicians are trained to diagnose and treat about twenty-five conditions that will kill you quickly. They will run tests to determine whether or not you have one of those 25 conditions. If you don’t have one of the 25 conditions, they will send you to someone else to get a diagnosis. All they can confidently tell you is that you don’t have one of the 25 conditions. They work on zero uncertainty for those 25 conditions, and will order whatever tests are required to rule out the 25 conditions. That is all they want to do and are trained to do. They are not trained as primary care physicians. That is why emergency department bills are so high.

Everyone lives their life with a small degree of uncertainty every day. Every time you get into a motor vehicle there is a small but finite chance of having an accident. That does not stop us from getting into a motor vehicle. We accept the risk in order to obtain something of benefit, like getting paid for going to work. We never live our lives with zero uncertainty, yet most of medical care is built around zero uncertainty.

So what is the solution to the current increasing cost of medical care? 89.5% of medical care is paid by a third party, either an insurance company or a government program. In 2015, only 10.5% of medical expenditures were paid directly by the consumer. The decision making had been taken out of the hands of the consumer of medical care. The solution is to put the decision making back in the hands of the consumer and let them decide the amount of uncertainty with which they are comfortable.

Medicare is the 800 pound gorilla in the room. Medicare sets the reimbursement for all types of office visits and all procedures. Insurance companies simply follow Medicare reimbursement rates and usually pay 10 to 20% over the Medicare rates. It is the Medicare price fixing that has driven up the cost of medicine. Procedures are reimbursed much more than office visits. If you are a specialist that can perform procedures which are you going to want to do most of the time, procedures or office visits? Naturally, procedures, because the reimbursement is higher. Hire a nurse practitioner or physician assistant and train them to do routine office visits while you are doing the procedures. That is much more lucrative. If you develop stomach pain that is diagnosed as gastroesophageal reflux disease (GERD), the gastroenterologist will want to perform an esophagogastroduodenoscopy (EGD) to see if you have any erosions, ulcers, or more serious conditions. That produces zero uncertainty, but it is more expensive than trying an acid reducing medication like Prilosec for a few months to see if the problem resolves. That is much less expensive for a small amount of uncertainty. It is one that most patients would choose.

To start reducing medical costs, Medicare needs to put its enrollees in health savings accounts (HSA). The amount of money they receive each year would be based upon their diagnoses. They would use those funds for their normal office visits and procedures. They would also be covered under a catastrophic plan that would only take effect if they met all of the requirements for health maintenance. For example if they are diabetic, they would have to get an A1c test at least twice a year or risk losing coverage. That puts the burden on the patient and not the provider who has no control over the patient’s actions. If Medicare changed to HSA’s, the health insurance industry would soon follow. When that happens you will see providers improving their service in order to attract patients. Then you will start to get market competition back into the healthcare industry and the rate of increase in healthcare costs will start declining and may decrease to the level of the average consumer price index. That will be a benefit for all citizens.

Comments 3

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