> In the united states we can't successfully implement negotiation on drug prices for MediCare. They literally can't negotiate with their suppliers. By law.
On the flip side, Medicare sets reimbursement rates for services essentially by fiat[0], which can be below the marginal costs of providing service. Most providers cannot legally refuse to treat Medicare patients, so they are forced to accept the rates that Medicare sets (they have no ability to properly negotiate). Medicaid is a whole different system, but in this aspect, it also works the same way.
This turns into a system in which privately insured patients subsidize Medicare patients through their premiums[1] (separately from their tax money, which also goes towards Medicare)[2]. Medicare has no incentive to change this, because it allows them to increase their (effective) operating budget without requiring Congressional approval.
The reason Medicare drug price negotiation was blocked is that people (both pharmaceutical companies and policymakers) were afraid that it would turn out just like Medicare's "negotiated" rates for inpatient and outpatient services.
[0] And private insurers are legally prohibited from reimbursing less than Medicare does
[1] And uninsured patients receive the same (inflated) bills that private insurers receive. (Whether or not they actually pay their bills is a separate matter).
[2] If you've ever wondered why the sticker prices for inpatient services seem so high, this is the underlying reason. Privately insured patients and uninsured patients aren't just paying for their own care (and for the care of others in the same risk pool). They also have to cover the amount of money that providers lose on Medicare and Medicaid patients.
It's important to realize that what private insurance is billed is the same as what uninsured/self-pay patients are billed, but what private insurance pays is negotiated rates that are often pretty close to what Medicare is paying. There's a certain level of shell game going on in there.
> It's important to realize that what private insurance is billed is the same as what uninsured/self-pay patients are billed, but what private insurance pays is negotiated rates that are often pretty close to what Medicare is paying. There's a certain level of shell game going on in there.
Yes, private insurers don't pay entirely what they're billed. Though they still pay significantly more than Medicare pays. The negotiated agreements between private insurers and hospitals are almost always pegged at multiples of Medicare (e.g. "200% or 350% of Medicare rates for $X service").
> My understanding is that doctors can choose not to take Medicare patients.
Sort of. For example, most emergency rooms in which physicians have admitting privileges to an associated hospital are required to take Medicare[0]. And those emergency rooms are prohibited from refusing patients based on insurance status. So right off the bat, that's an enormous source of patients who could be publicly insured (Medicare/Medicaid) or uninsured, and they have no legal way to refuse them. (Once a patient is in the ER, if they need to be admitted, you can't (legally!) refuse to admit them based on their insurance status).
I'm kind of oversimplifying, because there are a lot of tricks that hospitals try to use to stop the bleeding - for example, Bellevue is a public hospital, and it operates an emergency room, but its private counterpart that is literally across the street does not. NYU can do some (perfectly legal) maneuvering to keep most of the patient population of Langone limited to privately-insured patients. As a result, Langone has undeniably better[1] care, despite having access to the same set of medical staff[2] and being associated with the same medical college.
It's true that private practices can refuse Medicare for outpatient services easily. And incidentally, many do. There's a reason that, except in "critical access" areas[3], most of the top physicians who operate purely private practices don't accept Medicare. However, private practices are a dying breed, so that's a moot point in 2017.
[0] Conversely, free-standing emergency rooms are prohibited from accepting Medicare. A rather cynical view of this would be that Medicare does not want to encourage free-standing emergency rooms, because it's much more difficult to use private emergency care to subsidize Medicare care than it is to use private inpatient care to subsidize Medicare care (the orders of magnitude in costs are vastly different).
[1] More expensive, but vastly better
[2] Well, sort of. Staff isn't shared between the hospitals day-to-day (a nurse at Langone will typically only work at Langone unless he or she also has a job at Bellevue), but the allocation draws from the same pool a priori.
[3] Rural hospitals that Medicare pays handsomely, because otherwise those regions would have no medical access at all.
> Staff isn't shared between the hospitals day-to-day
It probably is; it's quite common for fair numbers of hospital staff (e.g., OR staff that are needed only for certain types of procedures), AFAIK, to be provided by third-party contractors that provide service to multiple hospitals in the same area, and the same staff may work at different hospitals on different days based on need.
> It probably is; it's quite common for fair numbers of hospital staff
Sort of, yes - in NYC, nurses are almost all members of 1199SEIU, for example, and the shift-work nature of nursing makes it easy for them to be employed simultaneously by multiple hospitals. Though my point is that this is usually handled on an individual level (by the nurses who choose where to work), rather than the hospitals themselves directly coordinating staff schedules in tandem.
Oh it's absolutely complicated, but hilariously inefficient and corrupt on both a macro and a micro level. On every level you examine the system it's a bugfuck.
I see this argument in many places. Who dictates the cost of providing services? Why are these costs so high? My pet theory is the insane costs (money, time, high selectivity) of medical training and office overhead. Medical professionals feel entitled to $$ for their risk. Perhaps older specialists who didn't have these costs are spoiled. I would love to see how tuition amnesty would affect price elasticity.
The costs you typically see quoted are from the chargemaster that hospitals are required to keep. That's not what's actually paid, but rather the starting point for a negotiation (or what you are billed if uninsured).
One reason for the inflated chargemaster prices (e.g. $100 for a tylenol) is that payers (Medicare is a big one) simply negotiate by saying "I'll pay you 50% of your chargemaster". Then when the hospital updates their chargemaster, they tack on another 20% and the payer comes back and says "I'll pay you 25% of your chargemaster".
It's a vicious cycle where the chargemaster prices have no bearing on reality.
Perhaps we need to borrow a tactic from countries fighting currency inflation and introduce an alternate 'chargemaster' with more realistic (ideally public) prices.
Physician and staff salaries (outside of staff to manage insurance companies) are not what drive increasing medical costs. Most physicians don't make that much money, all things considered.
An insurer last month for a relative's pediatrics practice announced that they were having difficulties with their accounting system and so they would only be making a half payment on their outstanding AR (and naturally, they announced this problem right before the payment was due to be sent). My relative's practice has no practical recourse other than to wait for the full payment to be sent. This is not an uncommon occurrence. My relative's practice is regrettably not able to use the same argument for their bills that are due.
It costs my relative money to administer vaccines in their peds practice, i.e., most insurances pay less than what it costs to purchase and give the vaccine. My relative continues to offer many vaccines at a loss because they believe vaccines are one of medicine's greatest gifts and because they have good success in persuading unsure parents to vaccinate their children. From a pure numbers perspective, it is a mistake.
Insurance companies not paying physicians on time as agreed drives up costs. Insurance (Medicaid included) not paying what it actually costs for a procedure drives up costs. Insurance companies arguing against the best course of treatment for a patient, requiring additional staff to be hired in order to deal with the pushback, drives up costs.
When you say insurance isn't paying what it costs for a vaccination, what determines the cost of the procedure? Is it the vaccine itself? Office overhead? Liability insurance? I know pediatricians are generally overworked and underpaid. But, it seems we desperately need innovation on the cost side.
Maybe we need to drop kiosks into pharmacies that can read biometric markers, get doctor approval, and deliver vaccines.
> When you say insurance isn't paying what it costs for a vaccination, what determines the cost of the procedure? Is it the vaccine itself?
The vaccine itself. Medicare and Medicaid are notorious for this, as they have no mandate to cover marginal costs of supplies (and they have the ability to force providers to accept less than that).
So, depending on the practice, those providers could very well be losing money on every Medicare patient they treat before they even have a chance to think about paying for their office space, paying their staff, etc.
Yes, in my relative's case (being peds) it is Medicaid.
It's a really frustrating thing, as a physician you want to treat everyone, but accepting Medicare and Medicaid can really hurt the operation of your business.
Do you have any idea of the distribution of vacine prices between providers (ie hospital networks vs private practices)? Is there a large discrepancy, or do hospitals use this as a 'loss leader'?
> Practicing physicians are the most highly paid workers in America. In what way do they not make that much money?
Doctors take home a lot less than people think.
The "salary" numbers you usually see cited aren't comparable to salaries in fields like software engineering, because doctors still have to cover their own business costs (the big one is malpractice insurance, but other expenses like CME, etc. are all on their own dime). And these are almost invariably not tax-deductible, because AMT doesn't allow for deductions for business expenses.
In any case, physicians' earnings account for only about 10% of total medical spending in the country. In other words, even if every doctor decided to work for free and pay for all their business expenses out of their savings... we'd still be spending 90% of what we currently are.
On the flip side, Medicare sets reimbursement rates for services essentially by fiat[0], which can be below the marginal costs of providing service. Most providers cannot legally refuse to treat Medicare patients, so they are forced to accept the rates that Medicare sets (they have no ability to properly negotiate). Medicaid is a whole different system, but in this aspect, it also works the same way.
This turns into a system in which privately insured patients subsidize Medicare patients through their premiums[1] (separately from their tax money, which also goes towards Medicare)[2]. Medicare has no incentive to change this, because it allows them to increase their (effective) operating budget without requiring Congressional approval.
The reason Medicare drug price negotiation was blocked is that people (both pharmaceutical companies and policymakers) were afraid that it would turn out just like Medicare's "negotiated" rates for inpatient and outpatient services.
[0] And private insurers are legally prohibited from reimbursing less than Medicare does
[1] And uninsured patients receive the same (inflated) bills that private insurers receive. (Whether or not they actually pay their bills is a separate matter).
[2] If you've ever wondered why the sticker prices for inpatient services seem so high, this is the underlying reason. Privately insured patients and uninsured patients aren't just paying for their own care (and for the care of others in the same risk pool). They also have to cover the amount of money that providers lose on Medicare and Medicaid patients.