Obamacare has been in place for barely a week, and already the medical journals are publishing editorials and opinion about it. The New England Journal of Medicine (NEJM) is particularly interested in health finance reform in America, and has been publishing a lot of speculative material on the Affordable Care Act (ACA) for a long time now, but this week it has three editorials in the same issue all discussing various specific aspects of the challenge of funding healthcare in the USA. These three editorials serve to show how complex health financing policy is, how hard it is to iron out all the flaws in any system, and how much reform is still needed in the USA. To the extent that it’s possible to characterize the editorial policies of a peer-reviewed medical journal, I think it’s safe to say that the NEJM is broadly supportive of health system reform in the USA, and supportive of Obamacare but probably generally hoping for better. Certainly articles about America’s reform journey over the past few years, along with research into specific aspects of health system challenges in the USA, have been getting a big run in the NEJM.

The first of the editorials, The ACA and High-Deductible Insurance, describes an unexpected (to me) and unfortunate side-effect of the ACA: the introduction of new, cheap insurance plans with very high deductibles of up to $10,000 per patient. The NEJM describes these policies as “blunt instruments” and suggests they are the fault of Congress focusing on market-based cost controls. These high-deductible cheap plans are necessary because the ACA will mandate all Americans must have a form of health insurance, but many individuals not able to get employer-funded plans will simply not be able to afford standard plans, so they will need to buy cheap high-deductible plans. The editorial points out the potential costs of this and gives a fairly strong judgment of its worth at a population level when it says:

previously uninsured people might effectively become underinsured, and their aggregate health and economic outcomes might not improve substantially. The United States seems destined for a “bronze” health insurance system that could create financial burdens high enough to cause adverse outcomes in vulnerable populations.

Their argument in support of this is that there is some evidence that high-deductible plans discourage use of discretionary and essential health care, which means that basically a group of working poor are being forced to take up a product (health insurance) that they can’t afford to use and that is essentially just going to act as a safety net for extreme emergencies only. The editorial also points out that there isn’t actually much research on high deductible plans and their effects, and the USA is about to embark on a big experiment with these instruments. My view, of course, is that the American people are being sold short by the politicians’ naive distrust of socialized solutions, and its refusal to properly fund this essential service: so instead of having a properly run and well-subsidized single-payer system for all the working poor (i.e. an expansion of medicare/medicaid to cover a very large part of the population) the govt has opted to force those poor people to fork out for a very poor quality product. I guess given the shenanigans in the House and Senate over the past two weeks, no one should be surprised.

The editorial suggests an interesting, almost libertarian solution: that employers should facilitate payments into health savings accounts (HSAs) for these working poor. HSAs get favourable tax treatment and could basically be used to cover the deductible part of the health care plans, reducing their negative effects on healthcare access. But reading the list of recommendations in the editorial, it seems to me that they are all very poor attempts at putting lipstick on a pig, which either end up costing the working poor more, or falling back on vague and hopeful benefits from poorly-researched policy ideas. I don’t blame the authors, because I guess that’s what you are left scrabbling to do when you are dealing with a political class as timid and out of touch as that of the USA.

The second article, finely entitled The Thousand-Dollar Pap Smear, describes some of the crazy ways in which the US health financing system works to drive up costs. This article has a very well-crafted introduction, which first points out that the physician author has actually seen bills of $600 or $1000 for a mere pap smear, and then links the cost of smears to the broad sweep of cervical cancer protection in the modern world:

Cervical-cancer screening is one of the 20th century’s true public health successes. The incidence of a disease that once caused more deaths among American women than any other form of cancer has decreased dramatically since the introduction of routine Pap smears in the 1970s. In the modern era, most deaths due to cervical cancer occur among women who have never been screened or who have gone decades without screening. One of the main factors in helping to conquer this once-dreaded disease has been the availability of a cheap, effective screening test that can detect disease early, while it’s still very treatable. Yet increasingly, in my roles as the chief medical officer of a community health center and as a family doctor seeing patients in that system, I hear from women who are choosing to skip their screenings because of skyrocketing costs.

She then describes how it is possible for a pap smear to cost $1000, and it’s a pretty embarrassing process. Part of the blame for this lies with physicians and part with the pathology companies, who have developed new and cunning ways to ensure that the physician orders, by default, tests that are not needed. They use systems of defaults and check boxes, and do their best to keep the actual pricing opaque:

Costly tests that once would have required physicians to submit multiple collection vials and specimens can now be ordered with the Pap smear simply by clicking a single box in the electronic medical record. Nothing at any point along the way alerts either the clinician or the patient to the high costs of these tests or to the fact that there is little medical evidence to suggest that they are useful for most patients.

The author compares this behavior to that of pharmaceutical companies. It’s also an example of how little control ordinary patients have over health prices, and how invulnerable the system is to individuals’ price negotiations. In many cases, the women receiving the smear don’t know what tests are being done – they just assume it’s the pap smear they asked for or had recommended to them – and are shocked when they receive the bill. The risk from this is that women won’t undergo the pap smear, because they can’t control the price they end up paying. As we will see in the next article, negotiating over price is difficult.

As a final parting shot, the author points out something that is genuinely amazing about the US system, and which makes it even harder to argue for the benefits of price control through individuals negotiating with their doctor:

The final step in creating these astronomical bills for women without health insurance is that some laboratories charge uninsured women vastly inflated amounts, while offering insurers steep discounts from these “usual fees.” Although some laboratories offer discounts to uninsured patients, others do not, leading to the phenomenon well documented in other areas of medicine in which the uninsured pay premium rates, often having to set up multiyear payment plans for services for which a health maintenance organization would have paid a fraction of the charges.

This has always struck me as crazy, but seems to be  a common problem in the USA: prices are not fixed by the cost of providing the service, but are based on what the company is able to gouge from the patient. In the case of uninsured women, women relying on HSAs, or women obtaining insurance from a private, individually purchased (rather than workplace or group-purchased) insurance plan, they have no group negotiating power, and the laboratories simply charge them more because they can. The same bill sent to a health insurance company would be sent back with a sneer – or wouldn’t be sent because the company had negotiated a bulk rate – but for a woman negotiating alone, the price is fixed as high as possible. Most ordinary consumers of healthcare are unlikely to even realize they are being gouged, let alone have the power to negotiate.

The final editorial ties this together with a discussion of the similarities between out-of-pocket payments and treatment side-effects. This article points out the high cost of out-of-pocket payments in the USA, and gives some hideous examples:

The Center for American Progress has estimated that in Massachusetts, out-of-pocket costs for breast-cancer treatment are as high as $55,250 for women with high-deductible insurance plans; the out-of-pocket costs of managing uncomplicated diabetes amount to more than $4,000 per year; and out-of-pocket costs can approach $40,000 per year for a patient with a myocardial infarction requiring hospitalization.

Some of these out-of-pocket costs are above the median income of the USA, so there is no way that the majority of the population are going to be covering them from petty cash – you’re looking at years of savings, remortgaging houses, or other distress financing, to cover diseases that are common in the life course. And these costs are being paid by people with insurance plans – they have already paid into some kind of risk pooling mechanism before they wear these costs. In research in developing nations, we refer to these effects as “financial catastrophe due to out-of-pocket payments” and “distress financing related to healthcare costs,” and most developing nations are working on universal health coverage plans to try and eliminate these payments. Yet Obamacare intends to do nothing about this aspect of the system: the working poor in the USA will be able to afford nothing better than these high-deductible plans. The article suggests that physicians should start including discussion of out-of-pocket costs in their routine discussion of the risks and benefits of the treatment, and gives several reasons for this, some of them directly related to health. These include:

  • Patients often don’t raise the costs initially, but bad experiences with costs may lead them to reject subsequent treatment suggestions, avoiding essential care before they know what it will cost (or because they can’t trust the cost, in the case of the $1000 pap smear)
  • Patients who know the costs in advance can prepare, and avoid the worst forms of distress financing
  • Often there are cheaper alternatives to the standard treatment, or special plans (research projects, government support) that can be used to reduce the burden of payment; discussion of these issues upfront can help patients to choose a care package they can afford

I’m really surprised that in a society with as much upfront payment and as much fear and concern about health costs as USA (and where health costs are so high!), physicians don’t routinely talk about this in the consultation. I remember my local dentist here in Tokyo had a tick box on the registration form when I first visited that asked if I wanted to only receive treatments fully funded by my insurance plan. Surely US doctors should be doing this? But apparently, despite years of debate about health financing, it’s not routine in the clinical visit. The editorial also points out that there is a real lack of information, so often even clinicians can’t work out clearly how much a procedure will cost (see, again, the $1000 pap smear); some States have even passed special laws to help with this! How is it possible to be an informed consumer if a) the person providing the service is reluctant to talk about the price, b) the person providing the service controls all knowledge about alternative products, and c) the person providing the service can’t tell you how much it will cost? For people on high deductible plans, this minefield of price negotiations is going to come straight from their pockets. It’s fairly obvious that in this situation many people would forego care before they even know its price – it turns a visit to the doctor into a kind of gambling game, with only negative outcomes. Who wants that?

My guess is that this issue is going to come to the fore over the next few years as millions of people enrol in health insurance that can’t help them. The Democrats now own Obamacare, and the way they have set it up means that they now also own all the problems that the private market presents to the millions of people who will begin to experience it for the first time. I guess this means that sometime in the next few years we will see a concerted attack on high deductible plans. That is going to be impossible though, unless the government is willing to engage in a bit of socialist interference in the market. If they don’t, will Obamacare deliver benefits worth the huge political battle it took to implement? And if they do, will the USA be able to present a largely free market solution to the challenge of universal health coverage? My guess is that the answer to both of those questions will be “no,” and the USA will either continue to struggle with a broken system, or finally bite the bullet and go for a full universal health system. Sadly, probably, the broken system will prevail.

Still, at least since this morning’s vote on the debt ceiling we at least get to see how the story ends. I’m glad I’m not part of the narrative, though!

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