The Fix Is In

– Want to know why American health care costs are so high?   Read this:

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The hidden public-private cartel that sets health care prices.

Living in Massachusetts should, by all indicators, mean having access to good health care. Following the landmark passage of a health insurance mandate in 2006, the state today enjoys the nation’s lowest percentage of uninsured citizens. Major cities like Boston have the nation’s highest numbers of doctors per capita and anchor some of the world’s largest and most prestigious medical centers. And Massachusetts isn’t stingy—it spends more on health care per person than any other state. Yet, as a remarkable NPR documentary reported last year, patients calling Massachusetts General Hospital—ranked the fifth best in the nation by U.S. News and World Report—were informed that Harvard’s massive academic hospital was no longer accepting new patients needing primary care. And that problem isn’t limited to Massachusetts General—it’s occurring throughout the state. Despite near-universal insurance, oodles of doctors, reams of cash, and no dearth of bright minds, the average person in Massachusetts can’t find a new primary care doctor.

The nation soon may face the same fate. To have any hope of meaningful national health reform, therefore, we must address the perverse financial incentives that created and continue to inflame this problem.

The root of the shortage can be traced to 1985, when a Harvard economist named William Hsiao developed a scale to measure the relative value of every single one of the thousands of services provided by doctors, a job later compared to measuring “the exact amount of anger in the world.” For example, Hsiao’s team deemed that a hysterectomy required 3.8 times more mental effort and 4.47 times more technical skill than a psychotherapy session. In 1992, Medicare formally adopted Hsiao’s concept; private insurers followed suit. Today, this relative value-based system sets the prices—and therefore drives the priorities of American medicine.

Here’s how it works. Doctors do a job—like placing a coronary artery stent, reading an EKG, or spending an hour examining and diagnosing a patient with a complex problem like insomnia—and earn something called “relative value units.” In 2009, according to Medicare, the stent guy scores about 24 units for his relatively quick procedure, the EKG person gets 0.5 units for the 10 seconds his job requires, and the poor internist gets only 2.5 units for his hour of time. Figuring a doctor’s total take per task is straightforward: Medicare adds up a doctor’s total RVUs, multiplies the total by a fixed amount (roughly $40 right now), and writes the check.

– More…

– Research thanks to Hans D.

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