Segment 8 – Applying Our Values & Philosophy to Healthcare Reform

Segment 8 – Applying Our Values & Philosophy to Healthcare Reform

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This segment reviews traditional American values and philosophical principles that can help resolve the core dilemma that has stopped us from fixing US healthcare for years – the unresolved conflict between “social justice” and “market justice.”

In the first six Segments, we reviewed the relentless growth of healthcare spending. And how rising costs are literally built into the system as it is now.

In Segment 7 we talked about some landmines that lurk beneath the surface of fixing healthcare – power and politics.

In this Segment, we will look at traditional American values and at philosophical principles that can help us resolve the core dilemma that has stopped us from fixing US healthcare all these years.

Let’s start with the American traditions. Some of these have been a bit romanticized in our imagination. So we’ll look at each of them in more detail.

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Freedom of the individual is pretty clear. It brings to mind the pioneer spirit of early adventurers and settlers.

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There is a presumption for rugged individualism and against government entanglement. But even by the time of the Revolutionary War and Constitutional Convention growing colonial cities were developing governmental and civic services like fire departments and sanitation programs.

Free enterprise is a core American value. But here again, there are examples from earliest Colonial days of collective projects, such as the Boston Commons, schools, and toll roads that stood alongside freestanding farms and shops.

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Next is “Yankee ingenuity.” Americans are entrepreneurs, innovators, practical problem solvers. We have never been bound by tired old ideas from Europe or elsewhere. We come up with our own ideas and forge ahead with progress. We’ll come back to these concepts.

There is an American tradition to distrust government. But if we look more closely at what this meant to the Founding Fathers, it was not government itself that they distrusted. In fact, Americans never embraced anarchy; they always set up orderly civic structures in every settlement and colony. What they abhorred was tyranny, the concentration of power in the hands of a sometimes capricious and self-serving autocrat. Further, they distrusted any individual person wielding authority. And so the Constitutional Framers crafted a government with the right balance between too much and too little authority, separate branches, and checks and balances. Today’s institutions – including healthcare – will do well to build in the same kind of accountability, transparency and checks and balances, especially since so much money and power is involved.

And so I am going to rename this tradition, Distrust of Tyranny (and of Human Fallibility).

Lastly is our tradition to protect under the law outcasts, the weak, and the vulnerable. Colonial settlers were often themselves oddballs or failures, seeking the opportunity for a new life in America. They enshrined protections for themselves in law, notably the Bill of Rights.

Since a large group of Americans today express misgivings that government involvement in healthcare would be a betrayal of our Founding traditions, I would like to offer several more reflections.

Look at the principles listed in the Declaration of Independence and the Preamble to the Constitution – life, liberty and pursuit of happiness.

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More perfect union, justice, domestic tranquility, general welfare, and the blessings brought by liberty to ourselves and our posterity. These sound to me like values that would flow from a people who don’t worry about getting care when they become sick, and who willingly embrace practical healthcare reforms that advance the common good. This is a far cry from the notion that the Framers would have wanted to freeze us into their time – 1788, to be exact. I have a feeling that the Founding Fathers were too practical minded, ingenious and adaptable to lock themselves into even their own ideas. Rather, I think they would try to honor American traditions, compromise over seemingly different viewpoints, seek solutions that bring us together and bind us together, promote the common good, and maximize our freedom, wellbeing (or “welfare,” to use their terminology), and stewardship of our great blessings.

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Not to belabor this point, but I’d like to look back at Dr. Benjamin Rush, who we met in Segment 2 as a prominent doctor in the Revolutionary period who signed the Declaration of Independence. Recollect that he received his medical training at University of Edinburgh, the foremost medical school of that time, which in the European system was state-run. He supported publicly-funded mental asylums and is considered to be the father of American psychiatry. In 1794 he was inducted as a foreign member of Swedish Academy of Medicine, which is the historic root of Sweden’s modern-day national healthcare system. Rush supported public health and sanitation initiatives, such as rerouting Dock Creek and draining its surrounding swamp on the east side of Philadelphia to eliminate mosquito breeding grounds. He established a public dispensary for low income patients. And he founded the Pennsylvania Prison Society to protect rights of prisoners and promote their humane treatment.

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Based on this profile, I don’t think it’s a stretch to believe that this 18th century Founding Father might support innovative public and private partnerships ensuring healthcare for all citizens if a time machine could transport him into the 21st century.

Now let’s now look at what some healthcare philosophers in this century say about fair ways to run the system. The basic principles of healthcare ethics are autonomy (which is self-determination), justice (fair distribution of costs and benefits), beneficence (the most good for all), and professional integrity (meaning that society has a stake in the independence of doctors).

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One philosopher who has applied these principles to modern healthcare is Paul Menzel from Pacific Lutheran University in Washington state.

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He has been writing on the ethics of the healthcare system since 1983, when he came to Washington DC to apply his philosopher’s methodology to the issue, until his retirement in 2012. Here are his view of the features of a fair system of healthcare delivery and financing.

  1. The system should provide costworthy care, and costworthy care only, no wasteful treatments.
  2. The system should provide financial protection to sick individuals who need care.
  3. The system should make health care equitably accessible to all.
  4. The system should equitably distribute the costs of care between the ill and the well
  5. The system should justly allocate the costs of care between the rich and the poor.
  6. The system should respect autonomy of patient choice.
  7. The system should respect provider choice.

Two other philosophers, one an ethicist and the other a doctor, have laid out fair, publicly acceptable ways to set limits on healthcare spending. There needs to be:

  1. Open, transparent deliberations
  2. Use of relevant criteria agreed on by all
  3. An appeals procedures for individual extenuating cases.
  4. Uniform standards and regulations applying to all delivery and financing systems.

Let’s end on a key philosophical controversy in the US – market justice versus social justice. Market justice means, in starkest form, that consumers can buy only what they can afford, and that giving them something they have not earned is ethically and economically wrong. Social justice sees equitable distribution of health-care as a societal responsibility, without regard to ability to pay. (Note that I am purposely avoiding the loaded words – “rights” and “privileges,” which tend to inflame this controversy.)

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It has been said that progress on healthcare reform is stymied by our country’s inability to choose one or the other – we’ve been caught between the two ideas of justice.

In the next Segment I will ask whether the two sides of the argument can come together. Does it need to be either-or? Or can we blend market justice and social justice? Can the US take what’s best from both the commercial business world and the public sector world?

My answer is Yes. And we’ll look at a successful plan that did just that 20 years ago.

I’ll see you then.

 

 

 

Segment 7 – Healthcare Power, Politics & Philosophy

Segment 7 – Healthcare Power, Politics & Philosophy

 

This segment reviews preconditions for having a focused discussion of healthcare reform necessitated by powerful vested interests, and it discusses how to overcome political polarization.

In the first six Segments, we have reviewed the relentless growth of healthcare spending. And how rising costs are literally built into the system as it is now. This review should give us some ideas on how to fix the system.

But before we talk about how to fix the healthcare system, we must first tackle some landmines that lurk beneath the surface. The landmines are power, politics and philosophy. They are the subject of the next 2 Segments.

In this Segment, we will discuss both preconditions necessary for a calm, focused discussion of healthcare reform as well as what I call “loaded” political words. Then in the following Segment we will look at traditional American values and principles that can be brought to bear on resolving the core philosophical dilemma that has kept us from fixing US healthcare all these years.

Let’s start with preconditions. The idea here is that healthcare now comprises 1/6 of the entire US economy. So, there are powerful interests, lots of money, and fierce political convictions that could derail any discussion before it even gets started.

So, I suggest setting preconditions to be agreed on beforehand. Only then can we calmly get into the meat of the discussion. Here are the preconditions.

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First, for purposes of discussion, let’s agree to keep dollar spending at the 2017 level – no winners, no losers, everything the same.

Second, let’s keep power the same. Keep the AMA, the hospital association, the VA, Health & Human Services, etc. No power struggles.

Third, strive to keep partisan politics out of the discussion. Make it a joint problem-solving project. Give credit where it’s due: to politicians or policy writers who contribute constructively. The motto is: “U.S. spells us.” Healthcare employs 1/6 of us and touches all of us.

Fourth, here’s where I will insert a viewpoint from my 40 years experience as a doctor: Human beings all get the same illnesses, all suffer, all are interconnected mind/body/spirits. I – like all doctors — have taken care of rich and poor, all races and nationalities, religious and non-religious, social outcasts and VIPs, saints and sinners. In a hospital bed or in the doctor’s office, we’re all the same. We should remember, “We’re all in this together”

Lastly, since healthcare is “too big to fail,” whatever is done should be done deliberately, slowly, with monitoring along the way and mid-course corrections when needed. If we accept these preconditions, we can have a Win-Win Discussion.

This kind of discussion should look at Facts, Goals, Values and lastly Methods, the actual Fix.

We have already discussed the Facts. The key facts are:

– the US health system has grown to 3.2 trillion dollars, representing 1/6 of the entire economy

– Cost growth is built into the system, has always outpaced inflation, and has resisted attempts to restrain the growth

– Healthcare spending is draining vitality from the economy, government and individual household budgets

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Here are the key Goals:

– We must stop excess healthcare growth beyond the natural increase expected from population increase, aging, and innovation.

– To do so will require fundamental reform of the system, not just tinkering with public finance and private insurance

– Since healthcare is “too big to fail”, a key goal is Avoid short-term disruption, again proceed slowly.

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The last things to discuss before we get to specific Methods – what I am calling the Fix of healthcare – are Politics and Values.

We all know that our country is polarized to an unhealthy extent. This has contributed to political paralysis – not getting anything done. I’m not a political scientist and cannot tackle the whole subject of healthcare politics.

But I do want to look at what I call “loaded words” that creep into our debates on healthcare. These words lock us into a closed, rigid mindset and can shut down discussion.

Let’s look at a few “loaded words” and suggest more neutral words to help keep the discussion open-minded.

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First is “socialized medicine.” This terminology stirs up the negative connotations of the so-called “Prussian menace” after World War I and “Red scare” after World War II. A more neutral term would be “publicly financed medicine.” The truth of the matter is that currently almost 50% of healthcare is already publicly financed through Medicare, Medicaid and other government programs. The issues behind the loaded words, which do need thoughtful discussion, are accountability; and also advantages and disadvantages of uniformity and nationwide scale, instead of the current fragmented system.

The next loaded terms are “free market” and “competition.” The connotations are freedom from government interference, freedom from politics, consumer freedom, and efficiency. The grain of truth behind the terms is that the law of supply and demand does drive down prices to a balance point in pure markets. The reality, however, is that healthcare is not a pure market, as we saw in Segment 5. Also, markets sometimes leave aside consumers who are poor or powerless, which includes many of the sick. A more neutral term is commercial market.

Next is “rationing.” The connotation is forcibly withholding something from an individual. A more neutral term is “limit-setting” or “prioritizing.” We will talk more about this in the next Segment, and about the need for patients’ to consent to limits on their health service or health insurance. The reality is that we already have de facto rationing by zip code, income level, government budgeting, and hospital technology policies. Prioritizing is not bad – it’s necessary.

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Another loaded word is “choice.” The connotation is that the government will interfere in choice of doctor or into the doctor-patient relationship itself. This was one of the scare tactics used by the insurance association in 1993 to bring down the President Clinton’s health reform plan. But the reality is that insurance network plans restrict patient choice of doctor more than government rules do. In addition, doctor inclusion in Medicaid – and other insurance plans, for that matter — is often a matter of the pay scales set by Medicaid or insurance companies, not the choices made by patients.

And the last loaded term I’ll mention is “big government.” The connotation goes back to President Reagan saying, “Government is not the solution to the problem; government is the problem.” We always hear about the Army’s 100-dollar toilet seats (in 1986 dollars) and the disastrous roll-out of the Obamacare website.

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And the truth is that government is big and can be just as flawed as any big institution. However, national government, unlike private companies, is legally transparent and accountable. Also, Government can fulfill some functions more effectively and efficiently than some private sector piecemeal approaches. Here are examples: FAA, FDA, FCC. Currently the military enjoys a high regard. Some examples of public-private partnerships are the moon shot, internet and healthcare research. Medicare has an enviable customer satisfaction rating of 77%.

The reality is that we are now a nation (and world) of big institutions – for-profit, non-profit, government, academic. All have institutional governance and administrative challenges, which are studied by the disciplines of public administration and business administration. Public administration and business administration tell us how best to run big institutions so as to fulfill their mission and to remain accountable and transparent. More neutral terms instead of “big government” are: public sector programs or taxpayer-funded program.

So we have some better neutral terminology to use for discussing healthcare to avoid inflammatory polemical words.

In the next Segment we will look at American values at stake in health care. We will also look at what philosophers say is a fair way to run US healthcare.

I’ll see you then.

 

 

Trump continues his war on Americans’ health care to pay for his tax cuts

https://www.americanprogress.org/issues/economy/news/2019/03/11/467108/trumps-fy-2020-budget-exposes-false-promises-misplaced-priorities/

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After repeatedly trying and failing to repeal the ACA legislatively, President Trump and congressional Republicans have resorted to attacking and weakening the law through executive action, federal waivers to the states to undermine Medicaid expansion, and budget proposals to gut funding levels.

Once again, Trump’s budget proposes massive cuts—$777 billion over 10 years—from repealing the ACA and slashing Medicaid.

Like in his previous two budgets, Trump goes beyond these two measures to attack traditional Medicaid, seeking to restrict federal funding on a per-beneficiary basis or transition to block grant funding. Both of these things would lead to a significant decrease in federal funding and could cause millions of people to lose their health care coverage.

Like in last year’s budget, he encourages states to take Medicaid away from jobless and underemployed Americans, including laid-off workers, people who are going to school, and those who are taking care of children or family members. Medicaid is a lifeline for millions of Americans—including children, veterans, people with disabilities, and individuals affected by the opioid crisis. Tearing down this vital program will make it more difficult for people to access the health care they need to find work, including by preventing people with disabilities from accessing the long-term services and supports they need to participate in the labor market.

After he repeatedly promised to protect Medicare as a candidate, Trump makes changes to Medicare that would shrink the program by $845 billion over the coming decade.

 

 

 

12 health systems with strong finances

https://www.beckershospitalreview.com/finance/12-health-systems-with-strong-finances-031219.html

 

Here are 12 health systems with strong operational metrics and solid financial positions, according to recent reports from Moody’s Investors Service, Fitch Ratings and S&P Global Ratings.

1. Dallas-based Baylor Scott & White Health has an “Aa3” rating and stable outlook with Moody’s. The health system has strong cash flow margins, and its favorable demographics will contribute to volume and revenue growth, according to Moody’s.

2. Newark, Del.-based Christiana Care has an “Aa2” rating and stable outlook with Moody’s. The health system has solid margins and a robust balance sheet, according to Moody’s.

3. Durham, N.C.-based Duke University Health System has an “Aa2” rating and stable outlook with Moody’s. The health system is a leading provider of tertiary and quaternary services and has solid margins and cash levels, according to Moody’s.

4. Chicago-based Northwestern Memorial HealthCarehas an “Aa2” rating and stable outlook with Moody’s. Moody’s expects that the health system’s operating model and comprehensive IT systems will enable it to execute growth strategies while maintaining strong margins.

5. Winston-Salem, N.C.-based Novant Health has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency expects Novant to continue generating strong cash flow margins in favorable markets.

6. Boston-based Partners HealthCare has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The health system has an excellent reputation in the clinical and research spaces, a long track record of fundraising, and adequate balance sheet measures, according to Moody’s.

7. St. Louis-based SSM Health Care has an “AA-” rating and stable outlook with Fitch. SSM has a strong financial profile, and Fitch expects the system to continue growing unrestricted liquidity and to maintain improved operational performance.

8. Appleton, Wis.-based ThedaCare has an “AA-” rating and stable outlook with Fitch. The health system has a leading market share in a stable service area and strong operating performance, according to Fitch.

9. Cincinnati-based TriHealth has an “AA-” rating and stable outlook with Fitch. Fitch expects the health system to maintain good operating ratios, leading to liquidity growth.

10. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The system’s strong brand and position as the only academic medical center in Iowa will continue to translate into strong market share and high patient demand, according to Moody’s.

11. York, Pa.-based WellSpan Health has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position in south-central Pennsylvania and a strong financial profile, according to Fitch.

12. Yale New Haven (Conn.) Health has an “Aa3” rating and stable outlook with Moody’s. The health system has a leading market position in Connecticut, with a broad reach for tertiary and quaternary patients from throughout the state, and strong brand recognition, according to Moody’s.

 

 

Trump’s 2020 budget proposal: 5 healthcare takeaways

https://www.beckershospitalreview.com/finance/trump-s-2020-budget-proposal-5-healthcare-takeaways.html

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President Donald Trump released his $4.75 trillion budget for fiscal year 2020 on March 11. The proposal, titled “A Budget for a Better America: Promises Kept. Taxpayers First,” calls for reductions to Medicare and Medicaid over 10 years and includes provisions related to drug pricing and many other health-related issues.

Below are five healthcare-related proposals in the president’s budget:

1. Discretionary funding for HHS. The budget requests $87.1 billion in discretionary spending for HHS, a 12 percent decrease from 2019 funding levels.

2. Efforts to curb HIV. Keeping with President Trump’s promise in his State of the Union address to end the spread of HIV in the U.S. over the next decade, the budget plan calls for HHS to receive $291 million next year to help curb the spread of the virus. A large portion of the funding — $140 million — would go to the CDC to improve diagnosis and testing for HIV in areas of the U.S. where the virus is continuing to infect people not getting proper treatment.

3. Broad overhaul of Medicaid. Under the budget, nearly $1.5 trillion would be cut from Medicaid over 10 years. However, the budget seeks $1.2 trillion over the next decade for block grants or per-person caps that would start in 2021, according to The Washington Post. The budget plan would also end funding for Medicaid expansion.

4. Medicare funding changes. Under the budget, Medicare spending would be reduced by an estimated $800 billion over 10 years. The budget would reduce the growth of various Medicare provider payments and includes changes aimed at addressing waste and abuse in healthcare and lowering drug prices, according to The Washington Post.

5. Medical research. The plan includes a proposal to cut $897 million from the National Cancer Institute’s budget and an additional $1 billion in cuts to other institutes that do medical research, according to Politico.

Read the full budget plan here.

 

 

How will you do in a Job search?

How will you do in a Job search?

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Abstract: This article is the first in a series that explores the critical success factors of being successful in a competitive recruitment process.  Getting a ‘gig’ as an interim requires essentially the same method as landing a permanent job.  The primary difference is that the cycle time from initial contact to the decision on a potential interim engagement is much faster than it is when a permanent candidate is under consideration.  The articles on this topic are focused on helping the reader improve their probability of success in fiercely competitive recruitment, and all recruitments are competitive.

I have been involved with a lot of recruiting, and it is impressive that not only are individuals with executive talent significantly different, but their job seeking abilities are equally disparate.  In some cases, it is disheartening to witness how poorly some of these ‘professionals’ are prepared to compete head’s up in a talent search.  There have been cases where I knew a candidate and knew them to be much better than they came across in interviews.

I place most of the blame for poor job seeking performance at the feet of the incumbents, but I have been equally disappointed at how poorly some executive recruiters AKA headhunters prepare their recommended candidates to be successful in a competitive executive search AKA a beauty pageant.

In many respects, a search is a beauty pageant, hence the name.  All too frequently, the candidate selected is the one that is most charismatic to the decision maker(s) and not necessarily the best credentialed, experienced or qualified.  Sometimes personal biases, ulterior motives or politics influence executive search outcomes.  I believe that one of the reasons that some executives do so poorly in searches is that job hustling is not something they regularly do so their interviewing skills and other skills necessary to advance in a search are not well developed and practiced.  Getting yourself hired is a much more intense, skill dependent process than I believe many candidates appreciate.  This is especially true if you harbor disdain for selling.

Time after time, I have participated in executive recruitment where unprepared candidates spent the majority of their time just being themselves and treating their interview (at-bat) as a casual encounter like you would expect in a bar.  Zig Ziglar and others argue that most everything in life amounts to selling.  Like any other skill, the skill of selling (yourself) requires study, practice, and development if it is to be executed successfully.   Candidates that come up short in these competitions frequently blame recruiters or hiring decision makers instead of taking a look into their mirror.

If there was ever a time that your success selling is critical, it is when you are trying to sell strangers on the concept that hiring you will advance their personal and corporate objectives.  It is hard to tell where the adage came from, but sources suggest that people buy for only two reasons; solutions to problems or good feelings.  If you intend to successfully convince the hiring decision maker that you are the correct choice among a strong field of competitors, to which of their motivations do you want to appeal?  If you do not believe that a hiring decision maker is choosing the candidate, they feel will best make their life easier or themselves more successful, you are naive.  What do you do when you are the decision maker on a recruitment?

Some hiring decision makers are not very sophisticated, and as I have facilitated searches, I have observed them making bizarre, irrational or emotional decisions when choosing a candidate from a search pool.  For example, I witnessed a C-Suite candidate getting ruled out of a search because his wife had a visible tattoo on her leg.  Others are more deliberate and analytical, and they will make a more objective, reasoned decision.  What kind of decision maker are you up against?  How can you tell?   Of course, this assumes you ever make it past step one.

Executive recruitment, especially a retained search is like a funnel or a pyramid.  The recruiter starts with a large number of applications from initial sourcing and gets down to less than ten that are presented to the client.  If the initial sourcing turns up 300 potential candidates which is common and you put your pony into the show, you have about a 10% chance of getting to a phone interview with the recruiter and then about a 30% chance of getting an interview with the hiring decision-maker.  The cumulative probability that any candidate will make it to an in-person interview in a hospital is around 3% or less.  Everything being equal (which is never the case), your probability of being selected after an in-person interview is about 20% to 30% making your overall probability of being hired in any particular search at around 1% or less.  The question is, what do you need to do to raise your game to come across as a better alternative than 99% of the competitors you will be up against in your next search?  There are at least four candidate controllable areas that could make the difference the next time you decide to pursue an opportunity inside or outside your current situation.

Qualification for the job

While it should be rote to assume that a candidate in a search is appropriately qualified, that is often not the case.  If you are not qualified and you know it, save yourself and the recruiter some time, don’t waste it by applying for a job you cannot win.  Qualifications include education, experience, relevance to the situation and credentialing.  It is too late to start working on any of these requirements when you become aware of an opportunity.  In other words, if you desire career advancement, start preparing yourself NOW.  If you wait until opportunities present themselves, you are late before the process even begins.

Resume or CV

Your resume is arguably the essential tool needed to get a job.  Your resume is you and speaks for you in those critical first seconds when the appeal of your CV or lack thereof gets you ruled in or out of the first round of consideration.  I have read sources that say that you are lucky if your CV spends thirty seconds in front of a reader before a decision occurs as to whether or not the candidate moves forward.  I have been in this situation when a net is cast, and before you know it, there are hundreds of CVs to review for a position.  After the first twenty or so, the review process speeds up dramatically.  Developing a winning resume is beyond the scope of this article, but you should not underestimate the power of your CV to move you forward or get you eliminated from a search – long before you ever have a chance to speak for yourself.

Contact me to discuss any questions or observations you might have about these articles, leadership, transitions or interim services.  I might have an idea or two that might be valuable to you.  An observation from my experience is that we need better leadership at every level in organizations.  Some of my feedback is coming from people that are demonstrating an interest in advancing their careers, and I am writing content to address those inquiries..

If you would like to discuss any of this content, provide private feedback or ask questions, you can reach me at ras2@me.com.

 

Segment 6 – Why Healthcare Cost is a Problem

Segment 6 – Why Healthcare Cost is a Problem

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This segment reviews the impact of relentless increase of U.S. healthcare spending on the economy, politics and society.

In Segment 4, we showed some statistics on relentlessly rising healthcare spending. And in Segment 5 we looked at the Perfect Storm — how rising costs are literally built into the system as it is now.

In this Segment, we will ask the question, So, why is it so bad for health spending to increase? After all, health care is good and noble. By the way, it also creates good-paying jobs.

My answer is that healthcare spending is good, of course, but only up to a point. Past a certain point it is not worth the cost, it sucks money from other important purposes, and it fuels social and political unrest.

Let’s look at each of these arguments. First, are we getting our money’s worth?

Here’s the slide from the last lecture showing the benefit from each additional dollar spent. This is what economists call “marginal benefit.” If you’ve already spent 1,000 dollars, what more do we get by spending 10 or 100 more dollars? The answer is, we get less and less, the more we spend.

On the left side is the column of highly valuable health services like public sanitation and immunizations. For very few dollars spent, we prevent disease and save lives. The next column, moving right, are routine services that give good value for the money spent, like kidney dialysis, chemo for treatable cancers and heart bypass up to age 70. The next column are lower-value services like keeping dying patients in uncomfortable ICU beds. Then we reach a cut-point where we get no added benefit from extra spending, what economists call the “flat of the curve.” This is unnecessary testing, treatments, or drugs, which are wasteful. Here is a list of examples.

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Doctors and specialists have recently gotten together to identify some worthless habits of care that can be eliminated. They call it the Choosing Wisely campaign, and are trying to get all doctors to break the habit of getting these. Here are some other examples.

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The last column shows that sometimes giving too many treatments or drugs can actually be harmful. As a geriatric specialist taking care of the elderly, I can tell you that over my years of practice I have definitely cured more people by stopping unnecessary drugs than by overprescribing.

The bottom line is that most experts agree that the US is not getting any more bang by spending more bucks, and in some cases actually doing more harm than good.

The next reason is that health spending is taking money away from other equally important purposes. This is what economists call “opportunity costs.” By spending an extra dollar on healthcare, we are missing the opportunity to buy better education, business investment, housing or infrastructure.

The third reason is budget squeezes. Healthcare is driving up Medicare and Medicaid, for example, which increases the federal budget deficit. It also squeezes states’ share of Medicaid costs, driving up taxes. It squeezes corporate expenses, cutting into investments and employee pay. This also hurts US competitiveness abroad, and it drives some jobs overseas.

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And the last reason I’ll give is its effect on take-home pay. I showed this graph in Segment 3. The RAND think tank calculated that between 1999 and 2009 Americans were 30% more productive and got 30% more wage compensation, but all of that increase went into health premiums (shown in red), not into take home pay (shown in blue). Healthcare costs are making us feel poorer.

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I think people are finally getting angry about so much healthcare spending. That’s one big reason they voted for Donald Trump, hoping he could do something dramatic to fix it.

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I am worried that if left unchecked, soaring healthcare costs will cut into defense spending, drive up the national debt, and ultimately weaken us as a nation.

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And so, what is the conclusion?

The conclusion is that exorbitant spending is the problem. Health spending eventually leads back into your wallet, and my wallet, and our grandchildren’s wallet in the future.

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In the next episodes we will discuss how to stop the excessive spending. This will require us to fix the whole healthcare system, not just tinker with insurance, Obamacare markets, and Medicaid. We will also look at some of the ethical issues and the political challenges involved. I’ll see you then.

 

 

 

Segment 5 – Why Is U.S. Healthcare So Expensive?

Segment 5 – Why Is U.S. Healthcare So Expensive?

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This segment reviews the “Perfect Storm” of reasons for unrestrained increase of healthcare spending in the U.S.

In Episode 4, we zeroed in on what I call the Real Problem with healthcare — relentlessly rising costs.

In this Episode, we will look at why the US spends so much on healthcare. As you can imagine, there are many reasons, not just one. In fact, it’s a perfect storm of bad reasons. We will also look whether we are getting our money’s worth.

Here’s the list. Part 1 & Part 2.

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We will go through each one.

Natural Spending Drivers

Let’s start with some natural drivers of health spending, which are understandable and expected. First, as the population grows, so will health spending. Likewise, as the proportion of older people increases, so will spending. We also expect health spending to increase slowly with inflation. New technologies and medicines increase cost, but we hope will give dramatic benefits. For example, during my 40-year practice lifetime I have seen the introduction of new drugs for diabetes, blood pressure, and virus infections including HIV and flu. I have seen new ultrasound, CT and MRI diagnostics. I have seen cardiac caths, by-passes and joint replacements. These new things are expensive but well worth the cost.

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But health spending grows from 1-1/2 to 4 times the rate of inflation, much more than would be explained by natural drivers, as we saw previously.

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Fee for Service Payments

So, let’s look at the other reasons. First and foremost, to my way of thinking, is fee-for-service. Doctors in the US – unlike other countries where they are salaried – get paid for piecework. If a surgeon doesn’t operate, he doesn’t get paid. If a specialist doesn’t have a patient scheduled, HE doesn’t get paid. Money is a powerful incentive. So we should not be surprised if doctors increase their own volume of services, many times unconsciously.

Health Insurance Hides Cost

The next big reason is our health insurance. Until recently premiums were paid by the employer and out-of-pocket copays were minimal. Healthcare felt free to most of us. Most of us had no idea what our care was costing the system, and cared little. Talk about a perfect storm!

Imperfect Market 

Why didn’t market forces keep down costs and spending. Many politicians and reformers think competition as the simple solution to the healthcare cost problem. But economists will tell you that healthcare is not a pure market;  they refer to it as “imperfect.” The reasons are first that no one knows the true price of anything. Have you ever tried to sort out a hospital bill? Ridiculous!

Second, markets rely on buyer and seller having equal footing to negotiate, but most patients dare not quibble with their doctor. Doctors get their feathers ruffled when patients challenge their advice. Third, to make matters worse, patients are a “captive market” – they are often suffering, frightened for their life, and desperate for immediate relief, not exactly a strong bargaining position. Fourth, doctors can control demand. There’s an old joke about the level of eyesight loss that needs a cataract operation – if there’s one doctor in town it’s 20/100, if two doctors it’s 20/80 and if three doctors in town it’s only 20/60.

Administrative Costs

Next is administrative costs. Some economists estimate that up to ¼ of all health spending is for administration, not actual care. This is not surprising knowing how complicated we make our delivery system and financing system. Other countries have one delivery system and one payment system. US has 600,000 separate doctors, 5,500 separate hospitals, and 35 different insurance companies, not counting Medicare and Medicaid. Doctors used to drown in papers; now we spend up to 2 hours doing computer work for every hour of patient care. Don’t you love it?

For comparison, Medicare reports only 2% administrative costs (but some other costs are hidden elsewhere in government).

Inefficiency & Waste

Some other spending drivers include inefficiency. I include in this category unnecessary tests and treatments, as well as wasted effort due to incompatible computerized record systems – there are 632 separate electronics vendors in the US. If airports ran this way, each airline at each airport would have its own unique air traffic control computer that did not connect with each other. All in the name of free market.

Regards unnecessary treatments and procedures, a doctor at Dartmouth named John Wennberg pioneered using Big Data in the 1980s to look at numbers of prostate operations in each individual ZIP code, and found that surgeons in some regions were operating 13 times for often in highest areas than the lowest. Since prostate disease is relatively constant everywhere, this can only mean that doctors practice varies widely – the highest utilizers are doing too many operations.

Monopolies

Next is monopolies. Many small- and medium-sized towns and rural areas can only support one hospital. This creates monopolies with no market forces whatsoever to hold down charges.

Cost Shifting

Cost-shifting means that uninsured patients come to the ER for care. Since the ER doesn’t get paid, the ER shifts the Uninsured cost into the bill for INSURED and Medicare patients. The cost-shifting itself doesn’t increase the costs, but getting care in an ER instead of doctor’s office is the most expensive possible place for care.

New-Technology Policy

The FDA new-technology policy means that FDA rules say that it will approve any new drug or treatment if it shows even the slightest statistical benefit, no matter how small. Some cancer drugs are approved that extend life by only a few weeks. Some medicines are approved, even if the number needed to treat is 100. For example, for some new cholesterol medications, 100 patients need to be treated for 5 years before we see even 1 heart attack prevented. That’s a lot of patients, and a lot of doses, and a lot of dollars. By comparison, since half of appendicitis patients die without treatment, and almost all with appendectomy surgery survive and live happily ever after, the calculated number-needed-to-treat is only 2. So appendectomies are a good valued, but cholesterol medication (for otherwise healthy people) is questionable value.

Non-Costworthy Marginal Benefit

Here is another way of looking at value. As we go from left to right in this graph, we are spending more and more on health care. The more we spend, the higher the cumulative health benefit, at least to start. The first section (Roman number I) are very high value interventions like public health, sanitation, immunizations. The next section (Roman number II) are good value routine health treatments, including kidney dialysis and first-line chemotherapy for treatable cancers. But when we reach the third section (Roman number III), the benefits level off. Bypass surgery is less effective for older patients (and more risky); dying patients don’t survive in intensive care units and are miserable with tubes and futile breathing machines. If we spend even more we reach section Roman numeral IV in which no additional benefit is gained, just a lot of extra testing, treatments or drugs – these are wasted dollars. And if we keep spending more yet, we actually do more harm than good, and can even have deaths on the operating table or reactions to too many drugs. The US is well into section IV and in some cases section V. A lot of other richer countries think that they have already reached the point where spending more will give no benefit or possibly do more harm than good, even though they spend less than the US.

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In the next episode we will look at the ramifications of so much health spending on the US economy, politics and society. We will look at some potential threats if we do not start to control costs better.

I’ll see your then.

 

Segment 4 – Healthcare Costs

Segment 4 – Healthcare Costs

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This segment reviews the relentless growth of healthcare spending in the U.S.

In Segments 2 & 3, we looked at the history of medical care in the U.S. and the birth of employer-based health insurance, along with landmark enactment Medicare and Medicaid. We looked at failed healthcare reform initiatives. This history tells us how we got today’s remarkable advances in medical technology but lackluster health system performance overall.

In Segment 4, we will zero in on the perennial problem of rising costs. We will look at how healthcare costs have grown over time and how we compare to other countries.

Then in Segment 5 & 6, we will ask, why is healthcare so expensive in the US, and is it worth the money? And we will talk about the effects of exorbitant healthcare costs on politics, economy, society and even our future success as a nation.

I call healthcare costs the Real Problem.

Let’s start with a startling fact. Between 1999 and 2009 Americans’ productivity grew by 30%. According to a Rand study, average Americans’ total monthly compensation grew from $6,350 dollars to $8,260 dollars. But all this increase went into healthcarepremiums (shown in red), not into their paychecks (shown in blue).

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Even though employers paid out more for the average American family, we felt no richer. The culprit was the health system.

Here are some more statistics that show the extent of the cost problem.

The first graph compares healthcare inflation (red bars) with general inflation (blue bars). Health care consistently outpaced general inflation, some times by a lot such as 2007, 2009 and 2015.

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The next graph shows growth in healthcare spending as a percent of total gross domestic product. This graph goes up to 2014 at 17.4% of GDP. The figure for 2015 was 18%, for a total of 3.2 trillion dollars. This is one-sixth of the entire US economy, directly employing one of every 9 workers, according to NY Times.

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Let’s compare the US with other countries. This first graph shows that in developed countries, health spending goes up as income goes up, until income reaches $100,000 and then levels off. Except in the US, where we spend an inordinate amount on healthcare.

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Here are the totals for developed countries – blue for public spending and red for private. US is on the left, head and shoulders above the rest.

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So, what are the repercussions of all this healthcare spending?

We already talked about its effect on paychecks. Healthcare also adds to the cost of goods; for example GM says that healthcare adds 1500 to 2000 dollars to the cost of every automobile in the showroom. This affects both the consumer but also corporate bottom lines. It is also affecting budgets of state and local governments, including pension fund health costs.

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Health costs have also taken an increasing chunk of federal spending, growing from around 7% after Medicare was passed in 1965 to almost 29% now of the entire federal budget. It competes with defense, education, and infrastructure.

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Why are costs so high? And why so much more in the US than in other countries? The answer is a perfect storm of bad reasons.

We will cover these in Segment 5. I’ll see you then.