3 ways to help contain health care costs

By Dr. Hugh MacMenamin

Expenditures for health care have spiraled out of control in the past and will continue to do so into the foreseeable future. Twenty years ago, we spent 10 percent of the national gross domestic product on health care - $714 billion. In 2008, we spent 16 percent of GDP - $2.3 trillion.

Even though we spend far more per capita on health care in this country, we still rank behind other countries in World Health Organization (WHO) ratings. These expenditures are not sustainable.

Whereas it is laudable to provide health care insurance to more of our citizens and to prevent insurance companies from denying coverage to those who need it, the health care bill recently passed by Congress does not address cost containment. Initial projections by the federal Office of Management and Budget (OMB) showed some promise for lowering costs but more recent projections are less optimistic.

U.S. health insurance companies that are for-profit organizations have a goal to provide a return to shareholders. Their margin, in general, for administrative, marketing and profit is about 20 percent. Medicare, on the other hand, operates with a 3 percent to 5 percent administrative margin. European countries, such as Germany and France, which provide health care through insurance companies, limit profits to 5 percent. Their health care systems rank higher than the U.S. system, by WHO standards.

Patients generally are unaware of the cost of a medical transaction. They will receive a complicated “explanation of benefits” (EOB) after an encounter with the health care system. However, the patient is responsible only for the portion not covered by insurance, Medicare, etc. Many insurance companies, including Medicaid, cover the whole amount, leaving the patient to say, “I didn't have to pay anything” for an encounter that may have cost the system $20,000. Insurance companies seem to like it that way.

Not many people are aware of the differences in costs among medical providers, hospitals, radiology, physical therapy services, etc., because, as patients, we don't have to put our hand in our pocket to pay.

So we have the same situation as the $500 hammer in the military - the $50 aspirin in the hospital. When the insured patient pays little or nothing out of pocket, there is no incentive to consume less services. You will notice that our excellent hospitals in Cedar Rapids compete for patients by marketing on television and other media but not on price, like most other businesses.

So how do we solve these problems? Rationing? Longer waiting times for services?

I would propose that we:

1, Limit insurance companies to a 5 percent margin and make all insurance companies “not for profit.” Why should shareholders profit from people's illnesses?

2. Bring the patient back into the decision-making process when consuming health care. If we have to cut costs in order to save, who better than the consumer (patient) to “shop” for their own health care. Percentage co-pay would make the most sense. For example if the co-pay is 15 percent for an MRI scan, then the patient is incentivized to seek the less-expensive MRI scan in the area. This, in turn, incentivizes the medical provider of MRIs to keep costs down to compete (MRI scans in Japan cost $100 to $200). In addition, the patient is incentivized to discuss the necessity for these medical services with the doctor.

3. Stop marketing/advertising prescription pharmaceuticals and medical devices. Pharmaceutical companies have realized enormous profits through marketing directly to the public. It is illegal in most countries to market prescription pharmaceuticals to the public.

Let's start the discussion so our health care system's cost doesn't bankrupt the country.

Hugh MacMenamin is an orthopedic surgeon practicing in Cedar Rapids for 26 years at Physicians' Clinic of Iowa; he is past president of the Linn County Medical Society. Comments: macmen

aminhugh@yahoo.com