The U.S. Health Insurance Crisis: ‘Blame the System, Not the People’

RAND sociologist provides Pasadena League of Women Voters an "aerial view" of the current U.S. medical care and insurance landscape

Published : Friday, October 6, 2017 | 5:36 AM

Right Photo: Senior Sociologist Peter Mendel

Despite criticisms, and political arguments aside, the U.S. still has some of the best healthcare in the world. The trouble is providing it equitably to every American man, woman and child.

Rand Corporation Senior Sociologist Peter Mendel, speaking before the Pasadena area League of Women Voters at the Women’s City Club on Thursday, said there is a great variation in the quality of U.S. medical care, as well as in the costs of it. Those uneven costs, often overly-high, drive health insurance premium pricing.

“Unaffordable health care is at the root of unaffordable and dysfunctional insurance,” said Mendel during his sobering and informative presentation.

And, said Mendel, in his presentation, if costs continue to escalate, insurers and other payers, whether employers or government, will try even more strategies to shift more of the costs to consumers, to cover less, and to exclude high-cost individuals

Fixing out-of-control healthcare costs involve a lot of private and public efforts, and is actually a large, “unsung” part of the Affordable Care Act (ACA), said Mendel.

“We spend a lot on healthcare in the U.S.,” explained Mendel, “twice the average of other developed countries.” According to Mendel’s research, healthcare spending in the U.S. continues to climb, as skyrocketing healthcare costs have been a problem in the U.S. for more than 40 years now.

According to Mendel, total U.S. healthcare spending as a share of the economy is currently 17% of the nation’s Gross Domestic Product (GPD), and is expected to rise to 20% of the GDP by 2020. Health care inflation has generally outpaced the general inflation rate, 3.4 percent in healthcare, versus two percent inflation from 2005-2015.

These escalating healthcare costs a burden to individuals, employers, and society, creating flat disposable income through the early 2000s, slowing down economic competitiveness, crowding out funding for schools, infrastructure, and other necessary investments, as well as creating and then serving, large vested interests, such as pharmaceuticals.

As Mendel noted, since the early 2000’s, most of the increase in the cost of health care insurance is due to health care prices going up, and prescription drug prices are currently increasing the fastest of those.

And although overall hospital use going down, hospital costs still makes up nearly half of overall health care spending, said Mendel.

Despite so much spending, the U.S. is nowhere near the top ranking in delivering quality care to its population. It’s below the middle of countries in the world, for example, for life expectancy, quality of primary care, and quality of acute care.

The only area in which the US is not low, but rates higher than the average, is in the area of heart attack survival.

Adding to the equation, adults in 12 metro areas of the U.S. received only 55% of their recommended care (2003) with disparities between health institutions, along with disparities by geography, income, gender, ethnicity and race. In fact, Mendel reported, prices vary two- to three-fold within some states and metro areas in 2015, with much of the variation not related to patient needs or care quality.

There is simply a lot waste in healthcare, said Mendel through administrative complexity , failures of care delivery and coordination, overtreatment, pricing failures, fraud and abuse.

“Much of the waste is driven by the way US health care is organized, delivered, and paid for,” said Mendel.

Utilizing a fee-for-service payment, explained Mendel, means paying providers for volume of service, rather than paying for quality of care or keeping patients healthy.

In addition, said Mendel, “The people who reduce costs often do not receive any of the savings, because there are no incentives to reduce unnecessary care or shift to less expensive but equally effective treatments.”

As Mendel laid it out, U.S. healthcare is simply not a “natural” market.

“In ‘naturally performing’ markets, one can judge when one needs the service, one can judge the quality of service, and knows how much the service costs” noted Mendel. For competition to work, incentives and rules that level the playing field and encourage healthy competition are needed, such as public measurement and reporting of quality; financial penalties for low-quality care, medical errors, and unnecessary readmissions, along with the demonstration, testing, and implementation of innovations, such as what it being done at the Center for Medicare & Medicaid Innovation-CMMI, and the patient-centered Outcomes Research Institute (PCORI), said Mendel.

Hammering home his theme, the problems with the U.S. medical insurance system are system-based, not people-based, said Mendel, with “lots of stepping on each others toes, overlapping initiatives and requirements from private & public organizations.”

In addition, said Mendel, “Too much of physicians’ and other professionals’ time is now spent on reporting, billing and adminstrative tasks, rather than providing care.”

Added Mendel, “The key is to incentivize efficient care while not discouraging needed care and still maintaining appropriate clinician discretion. Progress has been made, but we’re still muddling through.”

And the various GOP plans to replace the ACA? According to Mendel, his research shows that they would reduce federal spending on health care, but with little or no attention paid to the underlying costs of healthcare.

As underlying costs rise, said Mendel, an “unfettered” market approach will require families and employers to shoulder the burden, meaning they will get less insurance coverage and care at higher costs, moving backward to the heavy-handed “Managed Care” of the 1990s.

Still, Mendel told the group, many healthcare leaders believe that current value-based purchasing and quality improvement efforts will continue, but there is a “volatile political climate” out there.”

According to Mendel, leaders and voters must insist that any changes in health insurance tackle the underlying cost, quality, and unaffordability problems of US healthcare, “not just shift or ignore problems.”

In addition, the consolidation of hospital, physician, and insurance companies; a looming long-term care crisis, and not addressing root causes of health problems, do not bode well for American medical care.

Other developed countries spend more on social and related services than healthcare, said Mendel, and Americans may get better health as a country by “redirecting resources to address housing, food insecurity, violence, and other ‘upstream’ social and economic determinants of health, all of which contribute to the nation’s physical health.”