FDR: It All Depends On Whose Child Has The Measles

This evening, as my wife and I visited a local Kaiser Foundation Hospital, the air stank from wood smoke. I found myself surprised that Kaiser hasn't taken steps to discourage wood burning in fireplaces in the Silicon Valley.

In earlier posts, I talked about "cost-shifting." That occurs when an insurer, or the government, or a medical facility saves money by shifting the cost of services to someone else, usually another institution or even the patient. It seems unfair, doesn't it? If it impacts us, it doesn't just seem unfair, we complain loudly that it is unfair.

The reason I introduced this blog with the stench of wood smoke is that it exemplifies an unrecognized cost-shift component of our health system. The people burning paper, debris or wood in their fireplaces shift the cost of being warm from themselves to the public. If someone has asthma and decides to open a window, or even worse, take a walk in the brisk polluted evening air, those fireplace fumes can trigger an unexpected very expensive emergency trip to the hospital with an acute - potentially fatal - asthma attack. Smoke up the fireplace triggers asthma which requires substantial costly resources to treat.

Not all cost shifting is done by insurers, government agencies, hospitals or health care providers. Some of it is done by people who, in the mirror, look just like us. But of course, when it's our pocketbook which is at risk, we convince ourselves that it is OK, just as when it's our measles unvaccinated child who spreads his infection to another susceptible child, it's OK too.

Words Do Count - As Obama Should Know

Senator Obama's web site (http://www.barackobama.com/issues/healthcare/)speaks of his health care plan on several levels of complexity. The "At a Glance" section talks of "Quality, Affordable and Portable Coverage For All", "Lower Costs by Modernizing The U.S. Health Care System", and "Fight for New Initiatives". The next level of complexity describes. in vague terms, such items as guaranteed eligibility, comprehensive benefits, affordable premiums, co-pays and deductibles, subsidies, simplified paperwork, easy enrollment, portability and choice and quality and efficiency. It goes on to describe a "National Health Insurance Exchange," employer contributions, children's mandatory coverage, expansion of Medicaid and SCHIP, and flexibility for state plans. It proposes to lower costs by modernizing the US Health Care System, ensure that providers deliver "Quality" care, lower costs through investment in electronic health information technology systems, lower costs by increasing competition in the insurance and drug markets, and fight for initiatives which appears to be a mix of politically appealing verbage.

Skip to "Background Questions and Answers On Health Care Plan" and discover that all of this will cost "us" taxpayers a mere $50-65 billion a year when fully phased-in. The basis for this number is not made clear: is it conjecture? Is Obama proposing an adjective laden piecemeal patch to the current system?

Not long ago we were told that $70 billion dollars (if my recollection serves me correctly) would cover our costs for the war in Iraq. It didn't, it won't and neither will Obama's health care proposal cost what it says in print on his site. He should provide a realistic tabulation of costs versus savings.

Obama's site does not explore the impact of his proposal on the economy, especially on the small businesses which are the lifeblood of American industry. It does not explain the impact of globalization on the offshoring of employment which allows major companies to get out from under health care insurance costs (and their pension costs) and shift them to others. It does not explain the risks of tinkering with a $2 trillion plus economic sector which, if it implodes, will make the current housing recession look like childs' play (health care is a major employer) as well as destroying the function we now have in our dysfunctional health system. Obama offers a simplistic fix.

In my opinion, Clinton and Obama suffer from a common defect. Each believes that she/he knows precisely what is wrong and exactly how the American people want their health care system to deliver services. My analysis is that they are wrong on both counts and that it would be better to start by having national bipartisan hearings to find out what is wrong and what the people want in the way of a health care system. Enough with the patriarchal approach - let's really have a sensible program for improvement founded in reality and the compromises which the American people will accept.

Cost Shifting: From Airlines to Health Care

The concept of cost-shifting is easy to understand: once upon a time, when you flew from New York to San Francisco, your fare included an edible meal. Then the fare went up. That was not cost-shifting. But when the airline took away the meal and made you buy it yourself or go hungry, the airline cost-shifted dollars you paid for your meal to its bottom line.

In health care, it's a bit more difficult to understand. If you incur a hospital bill and your payer has to pay more for the same services than another payer, part of the costs of hospitalization have been shifted to your insurer (and probably to you if you have a copayment requirement). If the government doesn't pay the full beneficiary bill, based on fancy higher-mathematical calculations (read - "guesses") to justify paying a lower amount, the government has shifted costs to your insurer and to you. If your HMO says that you have to leave the hospital on the second day after hospitalization, when you still are pretty sick and can't take care of yourself, and your family has to stay home from work to take care of you, the HMO has shifted costs from itself to you and your family and perhaps your employers. And if the uninsured in the emergency room can't pay their bills, you and your insurer and the government will have to subsidize their care. Neat, huh?

Now, let's take it a step further. If you work for a small employer and have several co-workers who have incurred high health care costs, the premium for health insurance at renewal time may go up disproportionately, making your employer look somewhere else for coverage. Not only has the initial insurer rid itself of what it considers an adverse actuarial risk, but if another insurer takes on your company, the first insurer may have moved an adverse risk to a competitor. A number of years ago, when an aggressive national HMO took on bartenders (and, if my memory is correct, grave-diggers) in one city, its competitors were joyful: they knew their insurance experience with those occupational groups was awful and were glad to get rid of them to the new competitor in town. Incidentally, the HMO eventually went into bankruptcy. Apply the same way of thinking to the decisions of hospitals to move from high-cost low-reimbursement areas (center city) to low-cost higher reimbursement areas.

So, in health care, cost shifting is a way to increase profits, move costs to someone else's pocket, disadvantage your competitor and game the system. Cost-shifting is a monetary concept, not a quality-related one.