Study sez: Pay us more moneyz, plz
Thursday, December 11 2008
Charlie Baker has a post up at THCB about “cost shifting”, the new horror in health care. What’s that? You’ve never heard of “cost shift”? Then has Charlie got a study for you…
…[The study] indicates the cost shift is worth a $51 billion differential in hospital payments, and a $40 billion differential in payments to physicians.
So get this: private insurers pay X for hospital and physician services. Medicaid and Medicare pay Y. The difference between X and Y – $91 billion – is “cost shift”. It’s not that insurers do a lousy job of managing costs, it’s not that hospitals are great at extracting cash from commercial insurers – it’s ’cause big old mean gub’ment is “shifting costs” onto insurers. Got that?
So to the study, which was commissioned by AHIP, AHA, Blue Cross – who are no doubt totally impartial and just doing this in the best interests of all mankind. Keep in mind that the alleged mechanism is that government doesn’t pay enough, and so hospitals charge commercial payors (i.e. insurers) more to make up the difference. So what counts as enough? “Operating expenses.” And who gets to say what those operating expenses are?
The hospital estimates are based on 2006 AHA Survey data.
The hospitals get to say, and of course not a cent of what they spend is wasteful or inefficient. So what counts as an operating expense? Maybe things like paying down the $1.5 million prostate surgery robot that can’t be shown to have any better outcomes than standard methods but does cause higher levels of “regret” (and the surgery might have been unnecessary anyway)? $51 billion dollars seems like a lot of money – but it works out to only 5 or 6 robots for each of the 6,300 hospitals in the AHA data.
Look at it this way: even though I only get paid about $20,000 a year and somehow survive on that amount, I estimate my true operating expenses at around $100,000 a year. So that’s $80,000 a year in operating expenses that my employer “cost shifts” onto someone else by not paying me enough; if I could somehow convince commercial insurers (or anyone) to pay me $80,000 a year, you bet I would.
So much for self-reported expenses; that they are somehow useful metrics is just the least of three spurious assumptions in this document. Here’s the study again:
We estimate that the cost shift is responsible for 10.7% of total health care spending for the family, or an additional $1,788 annually.
See: you could save money by not having to pay for poor people and old folks! But that’s assuming, and only assuming, this $1,800 trickles down. Assumption number two is that commercial payors are going to pass on these savings to their clients. Consider this: if your health insurer cleared 10% of its revenues as profits, how much of that would end up in your premium?
Meanwhile, if Medicare and Medicaid end up paying more to providers, where does that money come from? Taxes. So either you believe that the market is the most efficient provider of health care – in which case we should pay for Medicaid and Medicare services entirely through cost-shifting; or you believe the market is not most efficient, in which case who cares what commercial insurers pay? But somehow you will save money if Medicaid and Medicare pay more for their services, because the study says so.
So that’s two assumptions – but number one with a bullet:
In the absence of the cost shift, commercial payers would have paid $37.8 billion less.
Make sure you get this one straight: commercial insurers know full well that hospitals are charging them more than Medicare and Medicaid for the “same” services. Those insurers are powerless to demand reduced rates for themselves. But – when the government starts paying more for Medicare and Medicaid, the hospitals are going to stop charging commercial insurers all that money, instead of buying more robots. Hospitals want to do the right thing and give that money away to commercial insurers – but they can’t because it’s government’s damn fault.
So that’s the study: Hospitals want to be paid more money so they can give that money to commercial insurers, who will in turn give that money back to their clients – Fed-Ex’d overnight on airplanes flown by porcine pilots, no doubt. Which money their clients will then have to pay in increased payroll taxes. But just so you know: “cost shifting” is a $90 billion problem. Study sez.
One Ping