The Scam That Is/Are Our Medical Care System(s)

Anyone that has been forced to use Medicaid or Medicare, or even Tricare and the VA, knows how much waste, fraud and unsatisfactory our medical care systems really are compared to those who can afford the top of the line coverage and extras afforded the filthy rich.

Part of the scam is the way prices are set for services. The scheme uses a mechanism that looks at the "usual," "customary" and "reasonable" charges for a service according to the average charge in a region. The insurance companies, including the federal and state coverage systems, negotiate a price based upon those usual, customary and reasonable charges, and whatever discount they can muscle. The problem with this system is that no one is even asking if the price charged is equal to the service received, or a reasonable charge given all the factors involved.

For instance, a simple office visit can range from $40 to $150, depending upon the clinician involved, the insurance coverage employed and the type of physician. But, no one asks if that charge is really reasonable. It indeed may be customary because prices for services are always set by doctors and insurance companies, rather than what the market will actually bear. Even when doctors and other clinicians complain about the "price fixing" done by insurance companies, one has to examine what they are complaining about.

Consider that most medical practices see an average of 3-10 patients per hour. Even at the lowest rung of charges per patient, $40, that is $120 to $400 per hour. Even if the doctor is paying a couple of medical assistants (average national salary around $12 per hour) and a nurse (average salary for LPN is $20 per hour and BSN RN is $35 per hour), as well as an office administrator (national Average about $18 per hour), the total labor costs for the hour doesn't exceed $79. Even at the lower end of the scale (which would not pay those same salaries), this would make a profit of $41 for that hour.

But I do not know many doctors that charge $40 per office visit per patient. Most charge somewhere above $65 per office visit per patient. This would equate to $195 to $650 for that hour. At a minimum that would equate to $116 profit for that hour and at the upper limit $571 for that hour. But those of us that have gone to medical practices in the bigger cities know that, regardless of higher costs for real estate or not, a fee of $100 to $150 per office visit is not unusual, especially in New York, Chicago, Boston, Los Angeles, etc.

No one bothers to see if there is a quality of care in these very profitable interaction. In fact, after waiting a usual and customary 40 minutes for an appointment in the outer waiting area, most patients are not seen by the doctor or other clinician for more than fifteen minutes. There is a considerable lack of medical history taken by most physicians at the first meeting--for which they are paid a significantly higher fee--because they use surveys and information sheets and often do not bother to review them with patients in a complete manner.

But let's face it. Most patients are lousy medical care consumers. They do not enter the doctor's office with anything in mind except feeling better. They do not concern themselves with costs too much if they have good insurance, so the very nature of the costs have been allowed to rise in an exponential manner. Now that employers are shifting the costs back to the actual patient and their families, this dynamic is changing, but not fast enough. Besides, the medical and insurance businesses already have an established scheme and changing that would never pass muster with anyone that has a GOP, conservative or ultra-conservative ideation.

My own physician is a good example. He has been my physician twice and I consider him a valuable acquaintance as well as a clinician. I have known him since 1997 and I have a working relationship with him that is based upon mutual respect and acknowledgment of my past military medical experience. But his practice has gotten so busy that there are times when he enters the treatment room so frazzled and stressed that I have to make him take a moment or two to just decompress.

His front office staff are friendly, professional and competent, but his back office staff--those that actually do patient care--are lazy, incompetent and poorly trained, with one or two exceptions. He has two nurse practitioners working for him and they are very competent as well, but he is always running behind schedule because he is just too busy. He has been working on developing a business relationship with another physician (the last two doctors working with him left in untimely ways), but he is so damn busy he doesn't have the time to work on the issue.

In any given hour his practice is seeing 10-15 patients, generating $75 for the office visit, plus a fee for additional services and lab work. That means he is generating between $750 and $1075 per hour of operation. His office hours are from 8:00 AM to 6:00 PM, with extended hours until 8:00 PM on Tuesdays and Thursdays, and Saturday hours from 8:00 AM until Noon. On average, in a typical week, he is generating somewhere around $49,000 in revenue per week. This does not include the fees for hospital rounds and inpatient care. He takes about four weeks vacation, but there is some shifting of care to the other clinicians during those times. His annual revenues have to be around $2.2 million dollars just for the office practice alone. Since he is on staff at three local hospitals and does rounds before 8:00 AM everyday, and has anywhere from 3-10 patients in the hospital at any given time, he is generating an additional $600 to $2000 per week for inpatient rounds.

As you can see, he is generating a lot of revenues. I am sure that the salaries of his staff, his two nurse practitioners and the office overhead takes a big bite out of those revenues, but he is making a salary that has to be over $300,000 per year. Now I know he works hard, and he is a good doctor, but he has trimmed the time he spends with his patients because of the need to generate such huge amounts.

Then there is the cost of radiology, physical therapy, and other services. The average cost of a CT scan (aka CAT Scan) is somewhere between $1200 and $3000, depending upon how new the scanning machinery really is in any particular office and center. What people do not understand is that most of these services are performed under the umbrella of a hospital or a hospital-sponsored treatment center. A good portion of the money used to purchase the equipment for performing these services, especially radiology and clinical laboratory equipment, are subsidized by state and federal grants, state and federal loans, or donations and grants made to the hospital in question. In many cases, 40% of the cost of a new MRI or CT scanning machine is paid for through our tax dollars. Many of these machines do not need to be replaced for ten years or more, which means that these machines were fully paid for within a year or two of purchase. So why is it that the cost of these services continue to rise, and despite the fact that many of these machines are paid for in such a short period of time, the fees remain at god-awful levels?

Then there is the issue of drug mark-up in the hospital. The old joke is that an aspirin in some hospitals can cost as much as $5 per tablet. Having worked in hospitals and pharmacy settings, with some experience working with supply methods, I can attest that these hospitals are buying generic aspirin and paying less than a third of the price that we pay retail. The same is true for most of the medications used during a hospital stay. So why is it that a pill that costs $3.00 per does retail can cost as much as $20 in the hospital?

Additionally, the cost per night in a very uncomfortable hospital bed ranges between $150 and $500 per night. Has anyone ever asked why these rooms cost so much? Most hospitals are not-for-profit organizations and are subsidized for any building or improvements they do by state and federal grants, loans and funding processes. It is because of this funding that the state and federal government mandates that no one can be refused emergency care. This has been the case since before World War II and was even increased during Johnson's Great Society campaign. While it may be true that the percentage of subsidy has been reduced over the decades since Johnson, the truth of the matter is that a large portion of not-for-profit hospital construction and annual operation is subsidized by our tax dollars.

Even a smaller hospital with only 60 rooms generates between $9,000 and $30,000 per day in room charges, if it is at full capacity. Given that any hospital might not be at full capacity, and in an effort to be conservative, if the hospital operates at an average of 75% capacity, the range of revenue remains between $6,750 and $22,500 per hospital day. Again, the fee charged is based on that usual, customary and reasonable formula previously mentioned.

Those fees are just for the bed. Television, telephone and meals are often extra. Even that seems to be a scam since most hospitals lease large telephone service lines and use either a PBX or, in more recent times, an Internet VoIP-based telephone system. In either case, the fees charged for telephone services are ridiculously higher than one would pay using a pay phone given the proportional costs involved in providing a phone in the hospital room. If the hospital is using a satellite or cable service for television, there might be a reason to charge a per hospital day fee for television. But most hospitals used over-the-air broadcast services for decades and charged a rental fee for each television, even though the rationale for doing so went out of reasonable charges way back in the early 1970s. Even a hospital safe television doesn't cost what it once did in the 1960s. So why are these fees so high? Now, to be fair, many community hospitals have lowered their fees for these amenities, and some have all but eliminated them, but most are still charging outlandishly marked up fees.

Then we can look at the amount of fraud in the billing process. Looking at the inpatient side of the equation first, recent reports by billing advocates indicate that the average inpatient hospital bill has five to ten overcharges or unexplained (and often for services not received) costs. In an ABC Evening News segment on this, one advocate from Michigan found over $80,000 in fraudulent charges for a major surgical stay in a Michigan University hospital campus. Since the bills for these services are sent via the US Mail, this constitutes mail fraud for each bill sent, punishable by up to ten years imprisonment and a fine of up to $50,000 per incident. Given the number of bills any given hospital sends out, the operators of these hospitals should be in prison for life. But no one is paying much attention to these issues... until lately.

In the doctor's office the scam comes in how a visit, procedure or treatment is coded. The procedure and billing codes systems are significantly difficult to understand and use. Most physicians narrow down a set of standard procedures and codes and create a "super bill" tailored to their practice. But the super bill (also called an "encounter form") will have several codes for a typical office visit. Some codes will result in more compensation than others. Most physicians are acutely aware of how the use of these codes changes the amount of revenue generated. Quite often the codes that generate higher incomes are indicated, even when the lesser revenue producing codes would have been more appropriate. But since this system relies upon the doctor to indicate which service was rendered, the game is in his hands.

Now, to counter the control a clinician has over this game, the insurance company negotiates fees and controls, including periodical reviews of charts to assure that the billing issues remain within the "normative standards of practice and billing." Medicaid, Medicare and many of the managed care organizations take this a step further and refuse to pay the bills as submitted, forcing the doctors to hire a billing and coding specialist (or use an outsourced service provider) that not only charges for the initial submission, but adds charges for handling those bills rejected by the insurance entities. Medicare and Medicaid are notorious for playing this game, especially towards the end of the fiscal year when funds are getting low and there is actually a danger of not being able to pay legitimate bills. Most managed care plans are so micro-managed by the insurance companies that there is a constant game of seeing who can squeeze the most money back into the profit coffers on both sides of the equation.

Making things even more crazy is the managed care approach of having fiscal managers--many of whom make a hell of a bonus at the end of the year--make medical decisions by approving and/or rejecting--mostly rejecting--treatment plans for patients. Many people have experienced the frustration of dealing with the rejection of a legitimate treatment plan offered by a doctor but refused by the MCO.

Of course this essay on the ills and whims of our medical care systems was inspired by the recent, and ongoing, reports that things are not going well with the way we conduct our medical business. The most recent of which involves the efforts--primarily offered by GOP proponents--to privatize the Medicare, Medicaid, Tricare and VA health care services. Throw into that mix the scams and poor care offered by almost the entirety of the nursing home, assisted living facility, home health care industries, and we have significant cause to be concerned about how badly we are being ripped off.

Of course, the insurance industry is deeply involved in lobbying against any measures that might make health care more affordable and cut into their huge profits. The hospitals and nursing homes are fully represented by lobbyists as well. But the real question is who represents the rest of us... the people that have to foot the bills whether it is through our taxes or our wallets? The entire privatization effort lends itself to profits for the insurance companies and the hospitals, cutting the revenues for doctors and clinicians while increasing the costs born by the insurance provider (our government or our employers in most cases), and increasing our out of pocket shares exponentially. It is helpful to remember that some of the first insurance plans in our nation cost between $6 and $36 dollars per year.

On top of all these issues is the undeniable fact that our health care is being diminished in quality, quantity and availability. Our public health systems are in crises, with an ever increasing rise in food borne illnesses, vector borne diseases, and a rise in infant mortality. This is especially true for minority groups, immigrants, homeless and the poorest among us. So much for Christian-based morality the the ultra-conservatives tout as being their motivation for all the cuts to actual services in our nation.

The Medicare Privatization Scam

If private health plans are supposedly so great at delivering high-quality care while holding down costs, why does the government have to keep subsidizing them so lavishly to participate in the Medicare program?

About a fifth of elderly Americans now belong to private Medicare Advantage plans, which — thanks to government subsidies — often charge less or offer more than traditional Medicare. As Congress struggles to find savings that could offset the costs of other important health programs, it should take a long and hard look at those subsidies.

The authoritative Medicare Payment Advisory Commission estimates that the government pays private plans 12 percent more, on average, than the same services would cost in the traditional Medicare fee-for-service program. The private plans use some of this money to make themselves more attractive to beneficiaries — by reducing premiums or adding benefits not covered by basic Medicare — and siphon off the rest to add to profits and help cover the plans’ high administrative costs.

Although the insurance industry insists that the subsidies are much lower and are warranted by the benefits provided, Thomas Scully, who headed the Medicare program for the Bush administration until 2003, told reporters recently that the subsidies were too large and ought to be reduced by Congress.

The largest private enrollment is in health maintenance organizations, which typically deliver care a bit more cheaply than standard Medicare and should not need their 10 percent subsidies, on average, to compete. The biggest subsidies — averaging 19 percent above cost — go to private fee-for-service plans, which are the fastest-growing part of the Medicare Advantage program. Unlike the H.M.O.’s, which at least manage a patient’s care and bargain hard with doctors and hospitals, these plans ride on the coattails of standard Medicare, typically providing access to the same doctors and paying them at the same rates. Thanks to the big subsidies they get, such plans are often a good deal for beneficiaries, charging less for the same benefits or adding benefits without raising prices.

The main losers are the beneficiaries in the standard Medicare program, whose monthly premiums are roughly $2 higher to help pay for the subsidies, and the taxpayers who pick up part of the tab. The subsidies also erode the long-term solvency of Medicare, which needs to rein in costs, not increase them with handouts to insurance companies.

When the Democrats first won control of Congress, it seemed possible that they might eliminate the subsidies — saving some $54 billion over five years — to finance a $50 billion expansion of a health insurance program for low-income children. But the insurance industry has mounted a furious lobbying campaign to head off any cuts.

Oversight of Nursing Homes Is Criticized

Federal health officials impose only minimal penalties on nursing homes repeatedly cited for mistreatment of patients, Congressional investigators say in a new report.

As a result, they said, some nursing homes cycle in and out of compliance with federal standards and pose a continued threat to the health and safety of patients.

“Some of these homes repeatedly harmed residents over a six-year period and yet remain in the Medicare and Medicaid programs,” said the report, to be issued next week by the Government Accountability Office, an investigative arm of Congress.

The Department of Health and Human Services “fails to hold homes with a long history of harming residents accountable for the poor care provided,” the investigators said.

Congress established stringent standards for nursing homes in 1987. In 1998, the G.A.O. reported that “homes can repeatedly harm residents without facing sanctions.” Since then, President Bill Clinton, President Bush and the nursing home industry have announced many initiatives to improve care.

But in its new report, the accountability office says that little seems to have changed at the worst-performing homes. The Bush administration rarely uses its authority to deny payment to homes with a history of compliance problems and typically imposes fines far less than the maximum of $10,000 a day, the report said.

In Michigan, federal investigators found that a nursing home was still open even though it had repeatedly been cited for “poor quality care,” poor nutrition services, medication errors and employing people who had been convicted of abusing patients.

At a nursing home in California, the report said, a patient choked to death, in part because the equipment needed to save his life, a suction machine, was broken. This home “cycled in and out of compliance four times,” was cited for more than 170 serious deficiencies and was still in operation late last year, the report said.

In Turnabout, Infant Deaths Climb in South

For decades, Mississippi and neighboring states with large black populations and expanses of enduring poverty made steady progress in reducing infant death. But, in what health experts call an ominous portent, progress has stalled and in recent years the death rate has risen in Mississippi and several other states.

The setbacks have raised questions about the impact of cuts in welfare and Medicaid and of poor access to doctors, and, many doctors say, the growing epidemics of obesity, diabetes and hypertension among potential mothers, some of whom tip the scales here at 300 to 400 pounds.

“I don’t think the rise is a fluke, and it’s a disturbing trend, not only in Mississippi but throughout the Southeast,” said Dr. Christina Glick, a neonatologist in Jackson, Miss., and past president of the National Perinatal Association.

To the shock of Mississippi officials, who in 2004 had seen the infant mortality rate — defined as deaths by the age of 1 year per thousand live births — fall to 9.7, the rate jumped sharply in 2005, to 11.4. The national average in 2003, the last year for which data have been compiled, was 6.9. Smaller rises also occurred in 2005 in Alabama, North Carolina and Tennessee. Louisiana and South Carolina saw rises in 2004 and have not yet reported on 2005.

Whether the rises continue or not, federal officials say, rates have stagnated in the Deep South at levels well above the national average.

Most striking, here and throughout the country, is the large racial disparity. In Mississippi, infant deaths among blacks rose to 17 per thousand births in 2005 from 14.2 per thousand in 2004, while those among whites rose to 6.6 per thousand from 6.1. (The national average in 2003 was 5.7 for whites and 14.0 for blacks.)

The overall jump in Mississippi meant that 65 more babies died in 2005 than in the previous year, for a total of 481.