The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Medical Cost Containment Drum Beat Continues

Posted by Alan on March 3, 2010

File this under “Better Late Than Never” but the drum beat aimed at focusing attention on the need to constrain medical costs in America continues.

Earlier this week I wrote about Sacramento Bee columnist Daniel Weintraub’s posting a reality check for California lawmakers that all the insurance carrier bashing they’re enjoying will do little to address the rising cost of health care. That post also reported on Warren Buffet’s advice to the president to do much more to rein in costs.

Then, yesterday, President Obama indicated he’ll be incorporating into the legislation he’ll be proposing later today some of the medical cost cutting ideas put forward by Republicans during last week’s bipartisan health care reform summit.

And the beat goes on. CNN has been reporting this week on extraordinary and wasteful costs in America’s health care system. $140 for a single Tylenol pill? $1,000 for a toothbrush anyone?

Some of the unnecessary expenses are mistakes made by the hospital that slip past health insurers’ claim examiners (a Georgia patient billed for 41 bags of IV solutions for an emergency room visit that lasted two hours in which just one bag was used). But some of the outrageous expenses are intentionally designed “to make up for lower payments the government pays through Medicare and Medicaid.”

The CNN report goes on to cite, however, a Pricewaterhouse Cooper’s Health Research Institute finding that $1.2 trillion of health care spending in the United States – roughly half – represents waste. This analysis includes in the definition of waste defensive medicine, preventable hospital readmissions, medical errors, and unnecessary emergency room visits. (The Congressional Budget Office has estimated that 30 percent of America’s health care spending is wasted or spent on low-value services using a less broad definition of waste.

There hasn’t been this much talk focused on the need to reduce medical costs since Dr. Atul Gawande wrote about the difference in Medicare spending experienced in two Texas cities, McAllen and El Paso. That was right before attention shifted to the misbehavior of demonstrators during Congressional Town Hall meetings and the debate in Washington pivoted to health insurance reform rather than health care reform. And I am not suggesting that the need to focus on medical cost containment undermine efforts to reform health insurance company behavior where that’s necessary.

Nor am I saying that the health care reform bill the President will put forward today does enough to attack skyrocketing medical care costs. But it will be a start. And it will do more than the proposal he unveiled last week or those previously passed by the Senate and House of Representatives. And that’s a good thing. Let’s just hope it’s the beginning of the effort to reduce health care costs and not the end of it.


15 Responses to “Medical Cost Containment Drum Beat Continues”

  1. altruance said

    Large-scale Comparative Efficacy Studies + Effective Tort Reform + Reasonable Utilization and Outcomes Review = Cost Containment

    This is right on the money. The problem is the following:

    Large-scale Comparative Efficacy Studies = Pharmaceutical and medical equipment makers loose huge profits.

    Effective Tort Reform = Lawyers loose ridiculous case awards.

    Reasonable Utilization and Outcomes Review = Doctor salaries get a haircut.

    With lawyers and health professionals as the top two lobbying industries coupled with pharma at number 9 the odds do not look good.

    • Altruance:

      A deeper probing of the problem to Cost Containment than you have presented:

      ***”Pharmaceutical and medical equipment makers loose (sic) huge profits.” Especially difficult to contain when the White House cuts Big Pharma “deals” behind closed White House doors, secretly, obliterating any chance of a “promised” transparency.

      ***”Effective Tort Reform”: There has been no Tort Reform discussed, nor will there be, and why would there be? 40% of the Member of the House, and 60% of the Member of the Senate are Lawyers. Thus, they remain the protected “Holy Grail”, not to be questioned, not to be touched, only to be revered.

      ***”Reasonable Utilization and Outcomes Review = Doctor salaries get a haircut.” Perhaps you haven’t noticed? Doctors, especially those working with Medicare (those who still are hanging on) have received not just a haircut, they have received a Buzz-cut! The situation with physicians pay for those working under any kind of Government Contract is so dire that even liberal news outlets like CNN are running specials on the numbers of physicians leaving the programs to retire early, leave government run programs (leaving their patients in the lurch, but hey…the Constitution does allow them to not have to go broke, if they can help it), or go to another field.

      You are correct. There will be no cost containment as long as the Sacred Cows; Unions, Pharma, and the LAHYAHS (Lawyers), are protected, and the “Art of Cutting Back Room Deals” eliminating any “Transparency” remains an art in which the Current Administration and the current Congress continue to excel.

  2. This is where the focus of this whole debate should have been from the start. Obama missed the entire point of Health Care Reform from the beginning.

  3. Chicago said

    we cannot give importance to something as inappropriate, we have many important things to be treated as health care, cancer, AIDS, chronic diseases, the earthquake in Chile, the tsunami caused by the same, finally I think it is much more important to the pain of those who suffer the daily, which is why in findrxonline indicate that there are thousands of people who suffer from allergies and require governments to help improve health care.

  4. Rick said

    The CBO was requested to calculate Obamacare on the assumption of 10 years income and only 6 years spending and without the doc fix of $250 billion. Obama says this plan is fully paid for and brings down the deficit by up to $1 trillion over the next two decades using those CBO assumptions. A conservative estimate using honest assumptions places Obamacare at a likely deficit of $460 billion over the first 10 years and $1.4 trillion over then next 10. Our national debt is now $12 trillion and increases daily by $3.96 billion.

    The proposed Obamacare will send this country into a financial abyss, and it appears very few of you are concerned. Maybe one will explain why this is.

    • Because some of us are already in the financial abyss, and once things become abyssal, it’s not particularly worrisome to think they could get more abyssal.

      Rick, forgive me for asking a personal question here, but do you or any of your family members receive any form of “socialized” medicine–Medicare, Medicaid, veterans health insurance?

      If none of the above apply, do you work for a company that is generous enough to provide you with “corporate socialism”–i.e., partially subsidized health insurance benefits?

      When was the last time you went to sleep worrying about whether you could afford to continue covering your wife, sons, and self against the possibility of catastrophic illness?

      In the Maslow hierarchy of needs, it appears that you have the luxury of worrying about a future financial abyss as opposed to a very immediate one.

      Does this answer your question?

      • Rick said

        “Because some of us are already in a financial abyss, and once things become abyssal, it’s not particularly worrisome to think they could get more abyssal”

        So you think it’s not fair that some are in the abyss, you want all in the abyss.

        “Rick forgive me for asking etc etc”

        Even though it’s none of your business the answer is yes, I’m on Medicare.

        “If none of the above apply etc etc”

        I own an independent insurance agency and still active. I provide my employees with generous employee benefits including group health insurance and none subsidized.

        “When was the last time etc etc”

        I go to sleep each night concerned about increasing revenue enough to keep ahead of expenses. I not only go to sleep worring about my family, but I also worry about my employees. I think you should focus more on increasing your own revenue instead of crying all the time.

        “Does this answer your question”


        • I do find it awfully rich that so many of you old fart Tea Baggers who are on Medicare rant so incessantly about the evils of socialized medicine.

          I suspect you are worried about your grandchildren being “backrupted” by today’s debt.

          Your grandchildren, I am sure, are going to be a lot more worried about being bankrupted by health insurance costs when they grow up.

        • Jim, You are correct that Medicare is a form of Socialized Insurance. That’s one major reason that my father (a doctor, died in 1996) was against Medicare…his comment when asked by me was, “Now I’ll get paid whether or not my patient can afford it. I should only be paid when my patient can afford it, not when they can’t.” My father also made house calls until he retired at age 75.

          That said, we old farts (I go on Medicare in July, when I turn 65) have been paying into Medicare since it was enacted into law in 1965. I’ve paid full freight as I ran my own firm, and while I had to pay a goodly sum for my employees Medicare contributions as well as their health insurance, I didn’t have that “luxury”. I didn’t ask for Medicare, I didn’t want Medicare, but now I am entitled to it because I paid one hell of a lot of money for it my entire working career, and paid for others’ Medicare as well. Should I, or others now be denied? I think not.

          I am against Health Care Reform as it is currently being “written” as the Senate Bill (the model for the newest incarnation) calls for reducing Medicare Funding by $500Billion (one half the cost of the new Health Care Reform Bill) in the misguided and carelessly promoted idea that in doing so abuses will be curtailed. Of course, there is no language other than current language in law that calls for a better job of administration and management of Medicare making this component an insulting method of funding the liberal and progressive Democrats’ dream. Further, who will compensate all of the many millions of Americans who have paid into Medicare for over 40 years (me, for example) when benefits are of necessity cut, and more doctors than now leave the Medicare program because they simply can no longer afford to receive the low reimbursements for their work they have been told they will now receive? And many physicians are leaving Medicare, CNN, MSNBC, and other programs are already running specials on this unfortunate situation. FYI, and anybody else, Physicians have always been paid at inflationary rates two years behind current values as Medicare’s system of accounting and actuarials have always been poor. Additionally, physicians who work with Medicare cannot charge a patient more than 15% over Medicare’s allowable charge.

          Regarding those who are in the under age 65 group, many others who think as I, and I, feel that to penalize an individual 40% of their premium for carrying “Cadillac” coverage is simply punitive and is clearly a component of “sharing” money earned by one with others, a completely socialist philosophy, no matter how it is stated.

          I think it incredibly unfortunate, truly tragic, that you are among those who have been harmed by this economy. You join the ranks with several of my friends, and my son-in-law, my friends being 58 to 64 and who will never be able to replace their losses or even start over. That said, and acknowledged, when Obama took office we had 5 Million unemployed. Last year that number shot up to 10 Million Unemployed. The newest numbers, which do take into account those who have been forced into early retirement, those who no longer receive unemployment benefits, those who have simply given up after having looked for any kind of work for so long they have become completely dispirited, none of whom were being counted by the Obama Administration when they said that things were improving (No, they aren’t improving, they are far worse), those now unemployed are counted at 25 Million! Obama and his colleagues haven’t helped the economy and unemployment, they have made it worse.

          What could the Obama Administration, and the Congressional Democrats have possibly been thinking when they began this ludicrous, ill-timed Health Care Reform project that will, if passed into law, put even more people on the unemployment lines and cause greater angst and anger, than instead having FIRST attacked Unemployment and the Economy? In my opinion, Jim, that was a huge sign of an inability to lead, either by the Obama Administration or the Democratic Controlled Congress.

        • Oh, and Jim, I am not a “Tea-bagger”, nor any of the other new adjectives that have evolved, I am and have been long before it became popular, an “independent”. I think that both of the major parties are so corrupt that neither can be trusted behind a closed door, not the Republicans, and not the Democrats.

          We live in very corrupt times, and each of the party’s has contributed to the dismal climb back up that we are facing.

        • Rick said

          Jim, an improved attitude might make you successful. Focus on increasing your income instead of constantly crying like a child.

  5. Roy Hobbs Jr. said

    CNN has been reporting this week on extraordinary and wasteful costs in America’s health care system.


    Deflate the numbers accordingly and this report could have been cut and pasted from Employee Benefits Weekly in 1978, 88, 98, and 2008. Almost word for word. And about every 8 to 12 years the next wave of political hacks steps forth with brilliant, and fresh pieces like this, with all the breathless urgency of a soap opera diva.

    And never, ever does anybody ever address the basic unfairness of the tax code that has contributed to an over reliance on work place provided and employer-funded health insurance. Simply stated, health insurance premiums are fully tax deductible to an employer but not to an individual except for the amounts in excess of 7% of AGI. Yes there are certain gimmicky exceptions and avoidance vehicles such as Section 125 premium reduction plans (which took the feds over 30 years to issue final regulation on) certain medical savings accounts, and convoluted, highly regulated HSAs, and some other tax avoidance schemes which I won’t bother going into here. Suffice to say, these are all schemes and workarounds a serious flaw in the tax code, that the Feds refuse to fix.

    All of these gimmicks instead of the one fell swoop of the pen giving individuals the exact same tax break as employers. That simple. But it has never even been publicly discussed on any ongoing basis. Why?

    The answers are multitudinous. And you being close to the never-ending debacle in DC can certainly cite any number of reasons too. Obviously it would be a huge revenue loss for the IRS and a huge expense to health insurance carriers heavily vested in employer sponsored plans trying to transition to an individual market environment and its attendant costs. And the likely demise of poorly and agenda driven health and welfare plans just for openers. It seems that too many parties have vested interests in maintaining the status quo in employer sponsored insurance, and have no desire for individuals to enjoy the same tax avoidance benefits as employers.

    Even the ridiculous payroll tax-credit subsidized COBRA under ARRA still requires the insured to pay taxes on his/her 35% of the required health premium. How stupid and self-defeating is that? Its a tax credit in the left pocket and taxable in the right. That is how ridiculous this whole “health care” and “health insurance reform” debate is. Trusting the schmoes in Washington DC and the State Capitol buildings to oversee health care reform is akin to having Moe, Larry, and Curly promoting themselves Event Planners.

    In the early 70s, the late Senator Kennedy was the featured speaker at a meeting of the Commonwealth Club in San Francisco. A luncheon meeting structured similarly to the National Press Club luncheons in D.C. I attended that luncheon and after his “banquet circuit” homily on the urgency of “National Health Care” he agreed to take questions from the audience. I only remember one question, but it stuck with me, even though it was almost 40 years ago. The exchange was short. The EmCee read the question into the microphone and then stepped back:

    Question: “Senator Kennedy. You have outlined your plan for National Health Insurance this afternoon. What role do you see insurance companies playing?”

    Senator Kennedy: “None”. “Next Question”.

    Why in the world would anybody trust an institution that reveres, rewards and even lionizes this type of thinking. And why would anybody with half a brain grant life and death authority over such a huge segment of our economy and an even larger segment of everyday life and death decisions of this country’s populance, to such people.

    The quote of a not so famous, but equally colorful Senator comes to mind when he stood on the steps of the Capitol in 1993 when the passage of Hillary-Magaziner Care seemed imminent and grumbled into the tv cameras. “..Over my cold, dead body..”

    And thats what Texas Senator Phil Graham said when he was asked what the chances of “health care reform” passing through the Senate were.

    I understand this may seem a little strident, but frankly, after close to 40 years of political and bureaucratic rhetoric, I am too old to care about the sensitivities with those who believe that the federal government can do any damn thing well other than run a war, cordon off some nice national parks and build big damns. They pretty much screw everything else up.

  6. Nosedoc said

    Large-scale Comparative Efficacy Studies + Effective Tort Reform + Reasonable Utilization and Outcomes Review = Cost Containment

  7. JimK said

    If the democrats propose cost containment it is called “rationing” but when it becomes a republican idea it is called cost containment. Therefore to mute the cry of government “rationing” of healthcare, President Obama’s adoption of “cost containment” measures had to be qualified as a republican idea.

  8. Malcolm Cutler said


    These moves certainly sound like your “third way” to accomplish reform.

    The cost containment steps, and their importance, if kept in focus have real promise to achieve bi-partisan solutions to health care reform.



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