The Primary Care Conundrum

Ask any health care wonk and they’ll tell you that within the larger health care crisis is a primary care crisis. There is more and more demand for primary care physicians – the person you probably call your “family doctor” – but America’s medical schools are producing fewer of them.

Why? Well in a word, money.

It’s not actually medical school that’s the problem. It’s what happens next. A newly graduated physician, carrying a big chunk of debt used to pay for medical school tuition, gets to chose their residency and, as such, decides what type of doctor to become.

In the U.S. we let medical students choose what to do. Not being dummies, most of them notice that diagnostic radiologists and orthopedic surgeons make three times what primary care doctors make, and choose their career path accordingly. Why the vast difference in compensation? Doing something to a patient – fixing a broken hip, reading an x-ray – has always been better rewarded more than talking to them about their high blood pressure or their son’s excema.

And while the taxpayer has subsidised teaching hospital residency slots to the tune of a more than $100 billion over the last two decades, the government doesn’t limit the number of those slots by specialty type. Most sensible countries do because they know that the more specialists there are the more specialty care gets done. And specialty care is very expensive. Which is the main reason we spend so much more on health care here than in other countries. In 1965, primary care doctors made up 50 percent of physcians; the other half were specialists. Today, about 70 per cent of America’s doctors have become specialists. Most other countries have the reverse ratio.

There were two major attempts to redress the imbalance in the 1990s. First, managed care plans like HMOs started paying primary care physicians a global fee to provide all care to their patients. In some cases this meant that primary care groups started acting as general contractors and ended up reducing the specialty and hospital care their patients received — and keeping more money into the bargain. In some markets, notably southern California, specialists saw their incomes drop dramatically. Politically this resulted in the ‘managed care backlash’. Patients and specialists complained, politicians and judges threatened, and insurers and employers who were paying for the HMOs backed off. Worse the insurers started cutting payments to the primary care groups and many doctors ended up bankrupt — having taken on insurance-type risks that they couldn’t manage: getting paid to treat a group with a range of illnesses and problems and incomes rather than one or two not-so-sick people with fat wallets.

The other attempt to improve the lot of the primary care doctor was the introduction of a physician payment scheme by Medicare called the Resource-based Relative Value Scale (RBRVS). The name underlined the intention. Payments to doctors were meant to be based on the relative value of resources used. So a unit of time spent managing patients and talking to them about exercise for high blood pressure, for instance, would be close in value to a unit of time cutting them open.

Unfortunately, America’s specialty societies hijacked the process and they now control the somewhat secretive RBRVS Update Committee, which advises Medicare on those payments. So specialty care and procedures remain much much better rewarded than primary care. In the nearly three decades after this problem was first recognized, it’s becoming harder and harder to find primary care doctors. It’s going to get worse; last year the number of medical students opting for primary care fell to an all time low.

So what’s the likely outcome? Medicare clearly will take a hack at redressing the imbalance in payments as part of whatever reform happens in 2009. But unless the specialists and the hospitals that live in symbiosis with them are ready to significantly and voluntarily cut their incomes and reallocate that money to primary care, there will not be enough money for primary care to solve the current shortfall. And the U.S. is not seriously going to tackle – let along address – this problem as a matter of public policy until the whole system breaks so severely that more people demand massive reform. Such a time is still at least a decade or so away.

In the meantime, the market will have a go at addressing the primary care shortage. but it won’t do it in ways that primary care doctors will like. You’ll continue to see an expansion in nurse practitioners in retail clinics in supermarkets and drugstores. And more and more people will become frustrated by the lack of availability of primary care docs in their neighborhood and will go online where they’ll find plenty of entrepreneurial companies offering Internet consults. Of course if an online consult is good enough – and it probably is in many if not most cases – why does that doctor need to be in the same town, or even the same country? Or if it’s a diagnosis that requires extensive medical knowledge, why can’t a computer do it as well? Why not indeed? You’ll see all this happening in the next few years as well.

In fact, the result of the primary care crisis may not be inspired reform. it may instead just end up causing globalization and technology outsourcing to come into physicians’ lives. Just like it has to auto workers, steel workers and call center clerks.

An Expert Dilemma

I want to ask your help. I have to make a financial decision regarding my health insurance and given the confusion of the system – one I’m supposedly expert in – I need advice.

Now realistically you’re not likely to be much good to me. Why do I say this? Well, the data says you’re dummies.

Last week Trizetto, a private tech company, put out a survey that said as much. While 80% of consumers surveyed were concerned about health care costs, less than a third knew how much their family spent.

It gets worse. Around 60% of Americans, including the vast majority of those under 65, get their insurance from their employer. How much are employers paying each year? Well according to Joe Public, not that much. Most don’t know or think it’s less than $5,000 per family. In reality it’s around $9,000.

But I’m not one of the blissfully ignorant who gets his insurance at the company trough. Well, not quite. And hence my cry for help.

As a solo consultant I buy my insurance in the gong-show that is the individual insurance market. It’s an convoluted process in which you attempt to persuade an insurance company that you are healthy and worthy of their lowest premium rate. About four years ago I succeeded in this endeavor and Healthnet issued me a high deductible policy at the low price of $99 a month. I’m paying nearly $200 a month now because of premium increases, but that’s still way less than I would have paid if HealthNet had decided that I wasn’t a good risk.

Now California, where I live, doesn’t do much to protect individuals entering the insurance market but once you’ve bought an individual policy, the insurer can only increase the rates with everyone in your age group. But if you let the policy lapse and then try to buy another — usually because you went back into the corporate world and then left again — they’ll re-examine your medical history. If anything has gone wrong – surgery, illness, funny blood work – you might see your rates increase by a factor of 4 or 5. More likely, you won’t get insurance at all.

That’s not currently my problem. This is: I got married.

My wife has a job and health care benefits. She put me on her company plan for an extra $50 a month.

This year my individual premium is heading to $250 a month. Now most of you are saying, why is he continuing to pay $250 a month when his wife is paying $50 to cover him on her plan? The obvious thing is to cancel my HealthNet plan.

But what happens if my wife comes to her senses and stops being my wife? If that happens I’d be better off keeping my plan at $3,000 a year because if I have to buy insurance again in a year or two, and they decide I’m not a good risk, it might cost me $12,000 a year!

It gets more complicated. If my wife stops working, we could buy into her company’s plan under something called COBRA for another three years. But if we decide not to do that we might have to re-apply in in the individual market as a family which means being underwritten again – and running the risk of being a bad risk. So, perhaps we wouldn’t be able to buy insurance, and we’d both be in deep trouble!

And like the rest of the dummies in the survey I don’t know how much my wife’s employer plan actually costs. When you pay for COBRA you pay the whole fee: the employer does not chip in. So I need to find out, and work out the possible future costs. And if you figure into that the relative chance of my not being married and therefore not being able to buy into my wife’s plan my $3,000 in “extra” insurance starts to make a kind of odd sense.

But this all begs a question: Why? The current health insurance system has so many complex wrinkles that an alleged expert (me!) is not sure what to do. There aren’t any good choices, and the decision analysis requires PhD-level economic forecasting. Which makes Republican nominee John McCain’s plan to force these decisions on more people, by giving tax incentives for people to drop their employer’s plan, a mite puzzling.

If this keeps going long enough, the political revolt may create a stable universal insurance plan that will cover me. OK now I’m really kidding.

So can someone tell this dummy what to do?

Health Plans Behaving Badly

Several of the same health plans have been busted by the agency that oversees them, the Center for Medicare and Medicaid Services (CMS) fraudulently marketing these Medicare plans to seniors by doing things like telling them that there were no premiums when there were, telling them that they didn’t need to change doctors when they did, and saying that various procedures which Medicare covered were also covered under these plans when they weren’t

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It’s A Sicko World

There’s so much wrong with Michael Moore’s Sicko that it’s embarrassing, especially for a health care pundit, to reveal the emotional punch it gives you. You know that your head is being bowled over by your heart, and you also know that it’s very, very cleverly done.

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Her Majesty’s Healthy Service

I was born a Brit but I moved to America in my mid-20s, fell in love with the sun and the fun in California, and never plan on going back. This apparently is bad for my health. On the other hand, perhaps I should move to Canada. Yup, both the Brits and the Canadians apparently are healthier than Americans.

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Busboys On The Street

Everybody’s a critic but some critics – particularly those with real-world experience – shouldn’t be ignored. My last pair of columns discussing the uninsured and San Francisco Supervisor Tom Ammiano’s proposal to get city employers to cover their employees health care costs caused a moderate amount of fuss. One San Francisco restaurateur told me in a series of emails that the new law would put essentially him out of business. I think he’s actually wrong, but he does point out why, politically, pay-or-play is so tough, and also why it’s bad public policy. So let’s talk about the Incanto problem, and then we’ll hint at some solutions.

What’s the Incanto problem? Incanto is a fine restaurant in San Francisco’s Noe valley neighborhood. By San Francisco standards it’s not particularly expensive, but it’s not cheap eats. Furthermore, restaurants like this are one of the main reasons why San Francisco is such a great place to live, and we don’t all sell up and move to (insert name of podunk town here) instead. Incanto’s owner Mark Pastore took issue with my remark that pay-or-play wouldn’t be that disastrous because many of the businesses that would be forced to pay for their employees health insurance couldn’t move, and would stick their prices up instead. Here’s Mark’s experience:

There are limits (in economics the concept is known as price elasticity) to increasing revenues by raising prices. In my own restaurant, which is considered one of the better restaurants in the Bay Area, our prices increased slightly in 2005 (3-4%), however our total revenues declined slightly versus the prior year.

In other words the consumer wouldn’t deal with the price increase, costs went up and profits went down. Now the marginal dollar that was no longer being spent at Incanto got spent somewhere, presumably not on dining out, or, if so, at a cheaper restaurant. Now, that may not matter to economists or health care consultants too much, it matters like heck to Mark and his fellow owners. So even though I can cite evidence that these forced wage increases on a city or national level don’t impact unemployment overall, they may cause an adjustment in employment. This will necessarily be exacerbated in the San Francisco proposal where employers with fewer than 20 employees won’t have to pay into the insurance fund, and therefore will have a big cost advantage over those that do. So you can expect an enormous amount of opposition to this from people directly affected, who will make their feelings very well known, whereas it’s hard to identify businesses that will gain (even if some do).

The ordinance may avoid his Gavness’ veto — don’t forget that Newsom ran a group of restaurants but is also responsible for the city budget — much of which goes on the spending on the uninsured at SF General hospital. If it does, you can expect that lots of restaurants that were 40 tables and 25 employees suddenly lose 20% of both. Lots of other small businesses will get smaller and split into two, delivering a mini-boom for creative lawyers and accountants.

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Pain All Around

For our next adventure in the American health care system we are going to look at a heated debate in San Francisco, one that nicely sums up the problems with the health care systems but fails to answer – really – the tough questions.
City Supervisor Tom Ammiano is demanding that that city businesses with 20 or more employees begin providing insurance for anyone who works more than 18.5 hours a week. It’s a political stake in the ground that Ammiano – who led the fight to have employers give spousal benefits to same-sex domestic partners – seems to intend as his political legacy.
But there are some practical politics at work here, too. To be sure there’s lots in the mix (Ammiano has enjoyed lots of support from the city’s unions, for instance), but it won’t have escaped the attention of the city’s more moderate politicians that one of San Francisco’s major liabilities is its general hospital. Like many cities, San Francisco is a health care provider. And SF General is located close to the poorer end of town. As we’ll see, that means – like urban hospitals across the country – it doesn’t enjoy the same clientele as say Sutter’s Cal Pacific hospital over in tony Pacific Heights. So getting employers to insure their employee isn’t just a feel-good idea that plays well politically; it’s a bottom-line issue as well. As we’ll see, If more low-wage earners showed up at SF General with health insurance their care would cost the city (and its taxpayers) much less.
But Ammiano’s proposal is a band-aid, not a solution. And while it’s political appeal – saving the city money – may well get his proposal adopted by even by business-minded moderates on the Board of Supervisiors, it’s not getting at some of the real problems with the health care system.

It’s not just uninsurance that’s the problem. Large numbers of Americans are significantly under-insured too. The under-insured tend to have either limited coverage for the first several thousand dollars of care, or have certain conditions excluded from their insurance, or in a small number of cases they have a policy but it doesn’t cover real catastrophes. Many university policies that cover students are like this–they often top out at less than a few hundred thousand dollars, which may not be enough if something goes badly wrong.

To remedy the number or uninsured and to make sure that they’re not just replaced by the highly under-insured, Ammiano’s proposal requires employers to spend as much as the city does – $345 monthly each – on insurance for employees. Not surprising, that element of the program is what has employers really up in arms and is the least likely to be written into law.

I explained last column why the presence of the uninsured allows the health care system to go on raising its prices willy-nilly, and how that hurts the rest of us. But today I’ll touch more on who gets directly hurt by uninsurance and how that relates to what’s being discussed here in San Francisco.

How many uninsured people are there? The number has actually been remarkably stable in the US over recent years. Employers have been dropping benefits coverage rapidly, Medicaid – that’s you the taxpayer – has made a valiant effort to pick up the slack by expanding coverage, especially for children. Don’t forget that we have a universal single payer system for the elderly called Medicare, so there are no uninsured older than 65. (That’s one reason we don’t have a universal insurance care system for the rest of us, but that’s a subject for another day).

What’s important is that the uninsured are not a stable bunch. Roughly 8% of Americans are hard-core uninsured, and have been that way for 2 years or more. The 45 million (or 16% number you hear often) is a snapshot. That’s the number of uninsured right now. But there are a hell of a lot more people cycling through that number; the best estimates are that over a two year period, some 80-90 million people will be without insurance for a brief – a few months – period. So effectively some 30% of American adults have experienced being uninsured.

Who are they? We have seen them and they’re us.

Kaiser Family Foundation has done a fantastic job quantifying the uninsured for years. 81% of them are working or are in a family that has at least someone working part-time. They are more likely to be poor and/or ethnic minorities, but there’s a sizable contingent from households who earn significantly more than poverty level incomes. Seven percent of those in households earning three times the Federal poverty level or more are uninsured — even if those of you paying mortgages in San Francisco may not realize that $60,000 a year is not a poverty level income!

More importantly, what’s the impact of uninsurance? Not surprisingly the uninsured get less access to care and have less money spent on their care than the rest of us (about 50% of the average).  And they are far more likely to skip recommended or necessary care, not be able to pay their medical bills, or not fill a needed prescription. And as you can imagine, given that prevention is better and cheaper than cure in virtually every sphere of life, this does come back to haunt them. The Institute of Medicine estimated that 18,000 deaths a year can be attributed to uninsurance. So skipping your medical insurance because you don’t remember being unhealthy is not such a great idea.

But there’s is another, less obvious, group that suffers from uninsurance. It’s health care providers. And as with everything else, in health care the distribution of hurt is not even. Providers who are geographically located in areas where there are more likely to be more poor and minorities – say, the Southern reaches of San Francisco near the Latino-heavy Mission and Excelsior neighborhood – are more likely to have the uninsured showing up on their doorsteps seeking help. So much so that there’s actually a Federal designation for hospitals like SF General which enjoy what the industry euphemistically terms a “poor payer-mix”. The designation is called “disproportionate share hospital” (known as DiSH) and like most Federal designations it comes with dollars attached, in this case via the Medicaid program. And most of these dollars go to the big inner-city hospitals and rural hospitals that you’d expect they’d end up at.

But of course there are not enough dollars to make up the difference. If you look at the profit margins of hospitals that receive DiSH money compared to those that cleverly chose to locate in affluent suburbs near patients with good insurance, you’d see that the safety-net hospitals barely scrape by while the rest make 3% margins in a bad year and 6-10% in a good one. (Don’t worry, those numbers get buried deep enough in the non-profit hospital accounting world so that no one notices). And hospitals in the suburbs – or nice neighborhoods like Pacific Heights – are on the mother of all building booms right now, so that they are ready for the time when the baby boomers hit Medicare in 2010.  Yes, unless you don’t intend paying taxes in the future, you’ll be paying for that too. 

There’s way more to this. But in summary Ammiano’s proposal is a doomed local attempt to fix something that just escaped reform at the state level last year and the national one in 1994. But that story will have to wait till next week. For now realize that uninsurance does actually matter in more ways than you’d might think. And ponder the realization that the type of person likely to be uninsured (young, poor, a minority) is also the type of person not likely to vote.

Editor’s note:This entry was written by Matthew Holt but, for technical reasons, posted by Spot-on editor Chris Nolan.