The one reality about the healthcare reform debate is that both the liberal and the conservative arguments contain their share of myths. From the right we are told that malpractice lawsuits cause the enormous increases in heathcare costs, and from the left we are told that cost increase due to health insurance company bureaucracies, but neither of these claims are true.
There are also some myths about what is increasing the cost of care, those specifically are:
1.A From the right-wing (and a little the AMA), we are told malpractice causes enormous cost increases. However, other than a few specialties (obstetrics and surgical), malpractice isn’t much higher than it was 20 to 30 years ago. Even including those factors, Malpractice (again per several studies) only accounts for one-half of one percent of the inflation level per year.
Malpractice DID spike upward in the early 2000’s, but that was due to relative under-charging in the preceding 5 years AND losses in the stock market unrelated to the cost of health care. Malpractice insurers sought to recover losses by charging doctors more – not because malpractice losses increased.
Further the offered solution, tort reform, offers to limit awards as a measure to reduce ‘frivolous’ cases. However, if baseless cases were the problem, they’d not get large awards, meaning, frivolous cases don’t get millions in awards. Insurers are trying to get protection against truly large awards to people for truly egregious acts by doctors.
That’s not trying to stop frivolity. It’s trying to stop having to pay large claims even as they collect large premiums. Regardless, malpractice simply isn’t that significant in any meaningful way an expense to be driving health care inflation.
1. B. The American political right now also suggests privatizing all insurance, meaning taking it away as a benefit from employers and requiring all citizens to pay for it privately. The idea is to expose citizens to costs to help control expense. This idea is beyond unworkable.
First, the average American does not make enough to pay their own health insurance in whole out of pocket (something like 54% of wage-earners make less than $50,000/year) – so making this requirement real would undoubtedly both drive people off the insured roles (thereby driving up costs for everyone else) AND have a severely deflationary effect on the health care industry as a whole.
Second, it’s not as if employers are likely to ‘make up’ the benefit costs by paying people more – and no one on the American political right I’ve heard to date says they should.
Third, it assumes (very wrongly) that Americans ‘over utilize’ because of cost disassociation – while cost disassociation ALLOWED costs to rise – it’s about 40 years too late to make this idea work – doing so would be disastrous, but moreover, it’s patently untrue. Americans pay co-pays, coinsurance, and deductibles and have to pay some cost for nearly every service. As the article points out, in fact the highest spenders pay dramatically higher out of pocket expenses (as a proportion of income) than do the lower 95% of spenders.
HSA’s (Health Savings Accounts) coupled with high deductibles were the ‘golden bullet’ of the right-wing 5 years ago. They’ve been tried, and inflation has NOT abated meaningfully. They are affordable to a very small set of Americans and address a problem (over utilization) which frankly doesn’t exist, by requiring a portion of payment (WHICH DOES) from patients. In truth HSA’s unless they achieve a dollar for dollar savings, inject patient money into an already inflationary system
2. From the left, we are told that the issue is the complex administrative bureaucracies and in general adversarial attitudes of insurance companies leading to the need to hire vast administrative staffs at hospitals and clinics. While this does certainly cause inflation, estimates are that it causes up to 15% of the inflation we see in the market, again the truth seems to be somewhat less than the hype.
First, insurance companies, all of them but one that I ever dealt with to any extent, hire examiners and auditors (and managers) to process claims. They aren’t out to give away money, but they administer programs within the strictures of the law. They price the premiums to make a profit based on an assumed amount of health service activity. I never, not one time, EVER heard anyone suggest slowing/delaying/losing a claim as a course of action. I acted as the patient’s advocate when I was an auditor and appeal reviewer, and I was supported, without question, by company Counsel and management – every time, all the time.
Second, nearly all of the administrative burdens insurance companies placed on doctors and hospitals were put there to RESTRAIN costs – not to increase them. To do so would be self-defeating for insurance companies. It would be horrid business practice to require a doctor to increase costs 50% to comply with pre-certification or second surgical opinion (or referral) requirements that might save 20%. The bottom line is, HMO, Pre-Cert, SSO, etc.. DID have a retarding effect on inflation.
The greatest amount of inflation in medical costs came from 1960 to 1985 – a period when few to zero administrative controls were in place. The second greatest wave (that of the period from 1995 to 2002) occurred as doctors (and hospitals) have left HMO’s/PPO’s in droves due to their belief that the relationships simply don’t pay ENOUGH. So, both the left AND the right have meme’s about what the problem is.
Gutting malpractice claims will merely lead to people who truly suffered a loss getting screwed by the system instead. Going to ‘single-payer’ alone won’t control costs adequately either, and switching everyone to HSA and dumping their employer contribution will only result in massive, uncontrolled deflation – an economic calamity to be sure.
So, in looking at the current proposed solutions, revising malpractice laws or going to ‘single-payer’ would help, but not enough, one to an infinitesimal degree (malpractice reform), the other somewhat more, but neither addresses the problem.
The other meme’ to deal with over-utilization – which claims the poor (or immigrants) etc.. go to ER’s frivolously. It is funny that the primary complaint of some seems to be that if the less advantaged or victimized in society merely didn’t complain about catastrophically bad treatment and they didn’t get sick, we’d be just ducky.