Tag Archives: macroeconomics

Why Healthcare Costs Are What They Are

Healthcare is a commodity in this country, and one with the most inelastic demand possible. Therefore, marketplace behavior that would be intolerable in another setting flourishes here.

I would like to here offer a primer on payer/provider behavior. In my day job I do hospital operations. Rather than clutter up the page with footnotes and data, I encourage you to go do your own research. Here I only offer the starting narrative.

Unreasonable Things CMS and Other Payers Do


1. Run the CMS Recovery Audit Program. This program has the power to renege money from hospitals up to three years after claim payment. In turn, claim payment can happen years after date of service. Operationally, this means that CMS can come back years after a patient was seen and unexpectedly take the money back. One can imagine how challenging it is to keep a business solvent while knowing this could happen at any time. At one of the three health systems I have worked for, the RAC reached back eight years!

There is an appeal process, but it is prohibitively slow and relies on third-party contractors. Of course, CMS holds onto the money during the appeal.

Ostensibly, RAC exists because chart review shows that the clinical services rendered may have been more liberal than the data warranted.

Per Seema Verma: “Due to the size of the Medicare program – our systems process over one billion claims a year – we are able to review less than one percent of claims that Medicare receives each year, which means the Medicare program can be susceptible to more improper payments, fraud and abuse than in the private sector.”

In my observation, peak RAC angst happened in 2012.  The hardship was not just the administrative burden, but the backlog for appeals.  CMS wrote a check it couldn’t cash when it handed out audits it was not equipped to address the appeals for.

RAC’s contractors had inconsistencies in what they recovered. The contractors got paid regardless of the appeal outcome, so the incentive was to play fast and loose with hospitals and other providers.  I am pleased to report that these RAC program flaws have been corrected thanks to successful lobbying, but the betrayal still runs deep.

2. Create Ministry Plans that masquerade as insurance. Healthcare ministry plans, which are cost-sharing organizations that are not required to cover medical claims like insurance, are exempt from the requirements of the Affordable Care Act (2010) due to their religious affiliation.

Theses arrangements were born of a need for reasonably-priced help covering medical costs for people too young, healthy, or wealthy for Medicare or Medicaid coverage. Yet, these organizations often fail to fulfill claims, and when that happens there is no legal recourse. Bills may not be paid in a timely manner, or ever.

Because of aggressive marketing, ministry plans are at risk of becoming a public health hazard in the future. I would not recommend them to anyone I know.  Hospitals and other providers will negotiate with insurance carriers, but usually not ministry plans. These patients are considered self-pay, which is a vulnerable place to be if you cannot keep up with the costs.

3. Offer Medicare costs for Durable Medical Equipment that far exceed market value.

The bidding process that Medicare uses for the equipment offered through Part B is constantly being altered. The formulas are not explicit and have suspicious thresholds for supply and demand. This is why you see home medical equipment for sale at Walmart or Amazon for far less money. However, the promise of reimbursement (often after purchase) is what keeps families coming back for more, rather than using the open-market — especially if they are cash-strapped from managing a chronic condition.

Losing access to affordable home equipment means patients can no longer live at home, which can mean even more expenses.

Is it possible the price confusion is the result of the lobbying and government favoritism that could be taking place?

4. Medicare held for ransom by pharmaceutical costs. Medicare is totally beholden to drugs that do not have alternatives. It cannot negotiate prices. As a taxpayer, this affects you very much.

Unreasonable Things Hospitals Do


1. Build off-campus hospital outpatient departments (HOPDs).  These have the convenience of a doctor’s office (read: ample parking) but give you a hospital bill. Industry-wide, volume is shifting to outpatient care. However, these outpatient centers are held to the same credentialing standards as hospitals, and thus are expensive to run.  Even with the added outpatient volume, most every health system still makes its money on inpatients, but that could change someday.

These centers are profitable, convenient, and serve as brand ambassadors for the system. Since the integrity of the labs, radiation safety, physicians, etc, are hospital-grade, HOPDs are actually my recommendation for your care whenever possible. Just know that it is not less care, nor less money.

2. Leverage the chargemaster. While few pay what is on it, the list serves as the starting point for contracting. However, the lack of transparency in bill itemization prevents patients from making informed decisions; any item for sale on Amazon has more detail on value than a procedure being done to your body. Unless all hospitals in a given market begin sharing their negotiated rates, this will not go away. The chargemaster is a vestigial structure in a world where healthcare costs exceed inflation.

3. Use the phrase, “Special Procedures” to refer to interventional radiology. All procedures are special! Seriously though, there is a history to the evolution of the terms, but the definitions are not clear, and you often see signage for both in the same hospital, referring to the same place. No strong consensus can be reached, thus perpetuating the frustration.

4. Not easily share medical records. Hard to think of a solution that won’t require intervention at the federal level. The large electronic medical record vendors in the nation oppose required interoperability, under the laughably-thin excuse of “patient privacy.” Non-sequitur: the government already has your social security number.

5. Perform futile resuscitations, and otherwise overtreat at the end of life. Statistically speaking, patients over 80 with a non-shockable heart rhythm who have cardiac arrest without witnesses (and thus for an unknown length of time) have a nearly nonexistent chance of leaving the hospital alive. Yet, CPR is expected. Families may not always think through what comes after. CPR is traumatic and painful for everyone involved, and if successful, could be just the beginning of a life compromised by feeding tubes or ventilators for someone already in poor health. In addition to thinking about when to stop trying to intervene on a body wanting to die, perhaps we also need to ask ourselves when to even start, and just who benefits. Is the family acting self-servingly by not letting go?

6. Surprise bills. Sometimes the hospital accepts the patient’s insurance, but one or several specialists treating them there do not.  According to studies, about 20% of in-network ED visits result in an out-of-network bill.

Hospitals frequently must contract with for-profit speciality groups to staff specialities like neonatology, anesthesia, obstetrics, radiology, and emergency medicine. These are not hospital employees. The groups these doctors do work for may or may not have negotiated reasonable rates with the same insurers as the hospital the patient is in.

Some states have a mediation process for emergencies, but few patients know about it.

The specialist shortages that are the raison d’être for the outside groups could be explained by the barriers to entry for a medical education (mainly cost + the opportunity cost of time), but that is a topic outside of today’s scope.

7. Tax-exempt status for dubious “community benefit.” Charity care is not required in order to be designated a not-for-profit health system; the company can do fluff things like health fairs, which are basically marketing, or surveys. Whether these community services make up for the lost tax revenue is highly debatable. This is how we end up with nonprofit hospitals that are actually highly profitable — in some cases even more profitable than their for-profit counterparts.

Inequality Series Part III: Think Globally, Resent Locally

A reduction in global inequality has meant an increase in national inequalities.

The Asian middle class has experienced a heartwarming increase in income and purchasing power since the mid 1980s, while the wealthier (in absolute terms) American middle class has seriously stagnated.  This article discusses the urge to draw causal influence.





Capital and What To Do With It: Part II

This is a continuation of Part I.

How about influence and capital? Both in Pikkety’s book, and in a quick tally of the major contributors to political campaigns, data shows that in this country money tends to buy influence. But does that mean that you will have an impact on Humanity’s Direction? Not necessarily. Sure, you may be able to influence a senator, but what has Congress done for anyone lately?

Simply speaking, we feel that you shouldn’t envy those at the top. They’re probably shady and you’re probably going to be much happier if you get yourself into the Upper Middle Class like we are over here at ModCon. We care more about being happy and raising good kids than the amount of vacation homes we own.

However, all that wealth could be used for good. The likelihood that you will have a significant impact in making the world a better place is definitely easier if you have vast sums of money to support your efforts. That was one of few great things about the last Gilded Age: in the early 1900s we had horrible conditions for the common man, but access to vast resources gave men like Andrew Carnegie the ability to do things that would have been unlikely otherwise. Railroads were built. Libraries were constructed. The US became the Big Man on Campus. Was it worth it? No question: yes.

We see similar expensive efforts today in the news on a regular basis. Entrepreneurs are working feverishly behind the scenes to make space flight a tangible reality for all human beings. Bill and Melinda Gates are well on their way to curing polio for good. As many shrewd conservative thinkers are pointing out, investments in philanthropic research are becoming more impactful than many government investments. Publicly-traded companies are using their vast sums of Financial Capital to create free internet for all, clean energy for most, and better education for our youth. In a nutshell, these members of the super rich elite are making the world a better place. As a Conservative, we know that Government has it’s faults. Businesses and Social Institutions these days are picking up the slack where government is unable or unwilling to intervene. Many of us here at ModCon work for benevolent companies that try to deliver goods and services to citizens to make their lives markedly better. Being associated with that daily transfer of money into quality of life is pretty awesome to be a part of.

Now, not everyone is being so beneficent. However, the point we here at ModCon are trying to make is that the world is different now. To compare the Gilded Age to the Internet Age is folly. We are not turning a profit on child laborers for gain anymore, for example. Companies and individuals accumulate wealth and resources while also providing purpose and financial independence to those of us lucky enough to work for a decent wage. Living in this era allows the superrich to create Impact for Everyone. We now live in the Information Age. We can study problems with better Data, track progress easier, and measure Impact better. We can do more good with less, if you know the new system. Continue reading Capital and What To Do With It: Part II





Capital and What To Do With It: Part I

Recently, French economist Thomas Pikkety published a landmark book entitled Capital in the Twenty First Century. Regardless of what you think about its conclusions, it’s groundbreaking stuff. We here at the ModernConservative are big fans of economics, specifically macroeconomics. In our opinion, the moving around of dollars and cents in this world is as close as we can come to tapping into humanity’s heartbeat and planning it’s direction for the future. Money takes into account the best and the worst of society and boils it down into the one thing that we love after God and Family here at ModCon: Data. Track the  Data right, and Truth opens itself up for you like a perfect, holy blossom. The search for Truth has defined humanity throughout the centuries, and Pikkety does his best to simplify his accountings of tax records over decades to come up with his idea of Truth in our modern age.

Spolier alert: As always, the Truth is a bitter pill to swallow.

We won’t get into the technical jargon of his book, but in a nutshell Pikkety believes that wealth in our modern society is becoming increasingly concentrated. The rich, specifically the super rich, are able to hold on to vast sums of money much easier than the upwardly mobile are able to acquire it. He believes that the superrich not only are able to buy yachts and supercars with this Financial Capital, but are also able to influence the power structure of our society. In essence, Financial Capital is far outpacing the Human Capital in regards to power in our society. You could be a smart twentysomething from an upper middle class family, but your contribution to humanity’s direction will most likely be outpaced by a another twentysomething from a wealthy family. Or at least your earning potential will be.

Now, we’ve heard this in the news before. The rich are getting richer, the poor are getting poorer. That we are entering into a New Gilded Age. In Pikkety’s terms, the “drift towards oligarchy” begins with the rapid accumulation of wealth by the superrich and the passing on of that wealth to their heirs. It is alarming, but unfortunately it is the Truth. Many old-guard conservatives deny this fact, but they are fools. To deny this basic concept in a time where everyone feels it in the air is to doom Conservative Thought into the realm of the obsolete. Wake up, people. This is happening.

So what should we do as Modern Conservatives? Should we fill the airwaves with misinformation and political spin in the attempts to discredit this theory? Should we continue to promote the false idea that this wealth is inherently tied to performance–and therefore deserved? We here at ModCon don’t think so.

Instead, let’s focus on what’s really important: Impact.

Impact is a more difficult concept to figure out. Sure, it’s very easy to detail that wealth is being concentrated, but what does one buy with that wealth? Can it buy you happiness? Sadly, no. Study after study has shown that after the threshold of $75,000 – 100,000, Happiness takes a precipitous plunge. If your income is below this threshold, as you rise up in the ranks you become increasingly more happy in your newfound security and access to resources. Anything higher than this, and the trappings of modern wealth begin to take hold: Selfishness, Laziness, and a disconnect from the Common Man.

Can this type of wealth guarantee your children’s success? Again, the Data proves otherwise. Sure, your children will be cultured by taking ski trips to the Alps or having tuition paid for at the college of their choice. However, income tends to stay the same or drop from one generation to the next if you’re too rich.

More importantly, if you were to base success on the pride of your son or daughter’s profession, the Data shows us that most doctors, pHDs and “job creators” of our society tend to begin from humble beginnings. The more likely scenario of wealth is that your children will associate with other affluent snobs and end up perpetuating their own wealth, rather than furthering your name or the success that you created by being a job creator…

Part II: Stay tuned for the doctor’s prescription!