Posted in Access to healthcare, advance-pricing, CPT billing, Direct-Pay Practice Models, Economic Issues, Free Society, Free-Market, Healthcare financing, Liberty, Organizational structure, outcomes, Policy Issues, Price Tansparency, Quality, Rule of Law, Uncategorized

Under-Appreciated Benefits of Markets

By Robert Nelson, MD

Honest price-transparent markets allow value propositions to surface and to be discovered.

Contrary to the outcries of many academics, intellectuals and utopian collectivist, free markets don’t create wide-spread abuses or anarchy in peaceful law-abiding Societies. The anti-market narrative attempts to impune the term “free” in free-markets by equating it with lawlessness and all manner of fraudulent activity; rather than acknowledging that “free” means maximal freedom from unnecessary economic distortions. One only has to look at the litany of government scandals (VA comes to mind) to conclude that vice is not intrinsic to, or a consequence of, the exercise of free commerce, but rather a malevolent side of human behavior.

Markets not only provide a functional platform for innovation and creative destruction, but can help suppress waste, fraud and abuse by aligning incentives such that mutually beneficial outcomes are the rule, not the exception. Markets that are willing to operate in the light of transparency are in stark contrast to systems where avarice and other human foibles seek cover behind complex non-transparent systems or within unaccountable bureaucratic hierarchies.

In healthcare, the behemoth we call the 3rd party payment apparatus (and regulatory morass that supports it) often creates an environment which, unlike a more transparent market-oriented approach, allows bad behavior to go unchecked longer.

To the extent that we view market transparency, and all the downstream benefits that result from full disclosure, as the best chance of uncovering AND discouraging human vice, then many of the bad actors and bad behavior will be found out more readily. This approach benefits all stakeholders in healthcare.

Also, transparent pricing & markets naturally lends to transparency in quality measures, and thus better value propositions.

We should embrace changes which incorporate as many intrinsic disincentives to bad behavior as possible, as well as maximize the correct incentives – which helps healthy & sustainable endeavors to thrive.

Posted in Access to healthcare, advance-pricing, CPT billing, Economic Issues, Employer-Sponsored Health Plans, Government Regulations, Health Insurance, Healthcare financing, Medical Costs, medical inflation, out-of-pocket costs, Policy Issues, Price Tansparency, third-party payments, Uncategorized

The Triumvirate of Healthcare Spending

by Robert Nelson, MD


1. Price distortion
2. Price Insulation
3. Price Confusion

Shared via PowerPoint on Android.

Posted in Access to healthcare, Economic Issues, Government Regulations, Health Insurance, Healthcare financing, Medicaid, Medical Costs, Medicare, Policy Issues, Reforming Medicaid, Reforming Medicare, Uncategorized

Deconstructing Insurance Coverage Myths in Healthcare is Fundamental to Controlling Costs.

by Robert Nelson, MD


The assumptions on which our modern era healthcare third-party payer systems are based, including Medicaid/Medicare, ignore the economic disincentives that plague its continued use. It creates a wide-spread Public Choice Theory dilemma on the demand side and way too much rent seeking behavior on the supply side. The result being an ever-increasing cost curve.

free-money1Public spending for healthcare flooded the market after 1965 and was FOLLOWED by precipitous increase in consumption, utilization and the unit costs (as supply did not keep up) and then rapid fall off of the percentage of out-of-pocket payments as % of expenditures. Public spending came first, and was a major cause (not a reaction) in accelerating healthcare inflation.

PublicVSOutofPocketThird-party financing drives up utilization and drives up unit costs. Ironically, this creates even more dependency on a system that by its nature pushes costs further out of reach of many Americans.

Third-party financing mechanisms have become both arsonist and fireman, and we are having trouble distinguishing who is who.

Posted in Access to healthcare, Consumer-Driven Health Care, Deductibles, Economic Issues, Employee Benefits, Employer-Sponsored Health Plans, Health Insurance, Health Savings Accounts (HSA's), Healthcare financing, Medical Costs, Medical Practice Models, out-of-pocket costs, Patient Choice, Policy Issues, Price Tansparency, Uncategorized

Deductibles and HSA’s: The Devil (and the truth) is in the Details | LinkedIn


HSA’s: The Good, the Bad and the Unexpected


The quote below is worth pondering.

We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).                                                                                  What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics Zarek C. Brot-Goldberg, Amitabh ChandraBenjamin R. HandelJonathan T. Kolstad

These findings seem to contradict, or at least not support, another large study that clearly show a trend towards substantial savings when patients are spending more of their own money or when trying to make their deductible dollars go further.

If the conclusions are valid and can be broadly applied, it would call into question a presupposition that most healthcare economists have held for quite some time: That being, when patients become medical consumers and are confronted with choices of how to spend their own money, they shop around and find better value and also don’t consume unnecessary medical services.

The summary of this newer study  published by the National Bureau of Economic Research seems to indicate that they don’t shop smarter, they don’t shop at all; but instead all the savings was from simply cutting back on all care.

This is potentially troubling on the surface. It appears to indicate that when presented with high deductibles, that patients just stopped getting as much care! Could this really be true?

Before we delve into the internals of this study, lets look at what other studies have shown. RAND Health researchers compared families before and after moving to a consumer-directed plan with similar families remaining in traditional plans to see how behaviors change in response to switching to a high-deductible plan.

  • In the most comprehensive study to date on this topic, researchers looked at claims and enrollment data for more than 800,000 households insured through 59 large employers across the U.S. in a study funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation. The analysis shows clear cost reductions, but with potential areas of concern for the long-term health of enrollees.”
  • Families with HDHPs had 17 – 21% reduction in health care costs
  • …”those in CDHPs initiated less care, and when they did, they used fewer or less expensive services in a given episode of care. Enrollees used 4.9 percent fewer name-brand drugs, made 6.5 percent fewer visits to specialists, and had 17.7 percent fewer hospital stays…”
  • Vulnerable populations are not adversely affected by use of HDHPs…“key finding is that in almost all cases, CDHP benefit designs affect lower income populations and the chronically ill to the same extent as non-vulnerable populations. These effects include significant reductions in overall spending that increase with the level of the deductible and greater reductions for high deductible plans when paired with health savings accounts (HSAs) in comparison to health reimbursement arrangements (HRAs).


Now let’s take a closer look at the newer NEBR study and see what it really tells us. Here is the description of the circumstances of this observational study: 

  • “Kolstad and his co-authors looked at the case of a large, unnamed company that shifted more than 75,000 workers and their dependents from a plan with no deductible to one with a $3,750 deductible. When the change happened, workers received a $3,750 subsidy to a health savings account — money they could spend freely on whatever health costs they incurred. The company also gave workers online tools to look up prices for doctor visits, tests, and other services they might need.”
  • Here are some data from the study: “Average per-patient spending fell from $5,222.60 in 2012 to $4,446.08 in 2013. That’s about a 15 percent decline in a single year — and it held true across all types of health services. Between 2012 and 2014, there was a 25 percent drop in emergency room spending, an 18 percent decline in physician office visits, and a 6 percent decrease in mental health services.” “But when the researchers looked at why spending dropped, they found it had nothing to do with smarter shopping. The average price of a doctor visit wasn’t dropping. Instead, under the high-deductible plan, workers just went to the doctor way less. The paper finds that “spending reductions are entirely due to outright reductions in quantity.”

This is an odd, but interesting study, at the same time. It was designed to judge patient’s responsiveness when given choices of how to spend their healthcare dollars and to see if they would be better shoppers due to having a high deductible. Yet the employer funds the HSA with amount equivalent to the deductible.

Stay with me… So they go from zero price barrier situation where we have no idea how much of that consumption was unnecessary where the employee is completely price insensitive… to a situation where they have a high deductible fully financed by their employer in form of an HSA that the employee owns. That is free money that grows forever tax-free unless they take it out for something other than qualified expense. If they cash it out, they pay penalty and the tax, but it is still their money.

But why would the authors of the study anticipate a drop in the cost of the average doctor’s office visit due to “smarter shopping” when the deductible payments are coming from an account funded by someone else’s money? Who’s the smart one now?

Recall from above that the employer funded the HSA fully and in advance. And for those that made a prioritized decision not to go to the doctor as much as they did in the co-pay only scenario, they got to keep that deductible money because they own the HSA forever, as opposed to an Health Reimbursement Arrangement (HRA) or Flexible Spending (FSA) which are both use-it-or-loose-it propositions and unused funds are retained by the employer.

Here is something else to consider. Were there even any cash-friendly or alternative practice such as DPC available for them to chose? If the network was fairly tight with high level of provider participation, I would not expect posted CPT prices to vary all that much. And they likely ran all encounters through the billing cycle so they were billed out at the regular CPT posted rates.

Access to healthcare is often defined by how much of another person’s money is used to subsidize it; rather than focusing on reducing the real price or ways to be more efficient!

Also, notice that the employees moved from a zero deductible plan to a fairly high deductible plan. We really have no way of knowing how much unnecessary or redundant care they might have consumed under the zero deductible plan, so we can’t speculate except to say it is hard to believe very much thought was given regarding necessity under the old plan when out-of-pocket cost were basically just co-pays.

If I were the employee in that situation, here is my thought process when it comes to spending my HSA money: If I really need medical care or want to get something done or want a certain test, who cares how much it costs, I’m not out anything really. And, If I don’t really need care, I get to keep the “free” money in an account I own forever even if I change employers . 

The design of the health plan causes a situation where there is simultaneously both price insensitivity when spending was needed AND an incentive not to spend as much due to the fact that the employer funded the deductible and because of the savings vehicle chosen, that being an HSA. Is it any wonder the study results show that the employees did not learn to price-shop?

This employer-funded HSA is extremely important when analyzing what happened. Remember, they went from essentially nearly free care to an employer-funded HSA that covers their entire deductible… and an HSA is the EMPLOYEE’S money once it hit the account.

So the design of the plan resulted in the employer essentially paying the employee NOT to consume medical services! And when they did spend their deductible dollars, they had no incentive to care about price because it was “free” money basically like a pre-paid gift card!

The study authors apparently failed to recognize this reality and instead proclaimed that high deductibles don’t lead to better consumers, just less consumption!

Let that sink in. One one hand the employees simply made a choice that favors their own economic self-interest by accumulating someone else’s cash in their HSA if care wasn’t really necessary in their view; and on the other hand they spent freely if the need arose for the same reason.

And how many people honestly would let their own health suffer when they could have used someone else’s money to pay deductible expenses? So what does that tell you about how much potentially unnecessary care was consumed in the zero deductible plan? Furthermore, there is no data indicating anyone suffered because of less consumption under the high deductible plan.

Now if they had offered employee a percent of savings in any given expenditure, paid as cash award, then you bet you would have seen some savvy shoppers.

Let me be clear, HDHPs are not the answer to controlling healthcare cost and will not result in a total alignment of priorities and incentives. Do they help move the needle in the right direction? I think yes. But the answer lies in establishing a real non-insurance market for routine care that is free of the baked-in inflation and price confusion/dishonesty of our billing protocols. Only a market with real prices will allow consumerism to work its magic. We are not there yet.

Based on the design of the health plan in this study, it is impossible to conclude that high deductible plans don’t produce smarter shoppers, because their was an incentive NOT to spend built into this particular plan and there was no reason to care about price because the deductible was funded by employer money. It their attempt to neutralize the potential negative effect of the deductible on medically necessary utilization, the plan design made the outcome a foregone conclusion. But the study does show that the employees outsmarted the authors of the study by simply acting in their own self-interests and exercising good judgement.

This study does teaches us four important things:

  1. People can easily be paid to do nothing to accumulate someone else’s money (legally).
  2. We tend to spend “free” money or other people’s money with less discrimination than when it is our own.
  3. Access to healthcare is often defined by how much of another person’s money is used to subsidize it; rather than focusing on reducing the real price or ways to be more efficient!

  4. Never take a headline at face-value or believe a study without reading it yourself.

Source: Understanding Healthcare Economics: The Devil (and the truth) is in the Details | LinkedIn

Posted in advance-pricing, CPT billing, Direct-Pay Practice Models, Economic Issues, Health Insurance, Healthcare financing, Medical Costs, medical inflation, Medical Practice Models, out-of-pocket costs, outcomes, Policy Issues, Protocols, Quality, Tax Policy, The Triple Aim, Uncategorized

How to Control Healthcare Costs: Know Why They are High


by Robert Nelson, MD


The formula for excessive Healthcare spending:

Most healthcare $$ resources tied up in premiums/billing cycle + lack of price transparency + Patients chasing benefits + Doctors chasing billing codes + No incentives to care about costs + Small Direct Pay market + Treatment Bias + Defensive Medicine + Unwise public policy and tax laws =

EXCESSIVELY HIGH SPENDING with low health value and low economic value.

Learn it.

Affect change where you can.

Pass it on.

Posted in Access to healthcare, advance-pricing, CPT billing, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Education, Employee Benefits, Employer-Sponsored Health Plans, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, medical inflation, Medical Practice Models, Policy Issues, Price Tansparency, The Quadruple Aim, The Triple Aim, Third-Party Free Practices, Uncategorized

The Change We Seek We Must Create

lightbulb.solutionsThe reach and effectiveness of healthcare innovation and change is ultimately staked to how we pay for healthcare in aggregate. Building economic paradigms with more attractive price-value relationships will be the conduit through which change will emerge.

1.Employer education & engagement about the benefits of alternative health plan design based on maximal uncoupling from the BUCAHs.

2. Promoting opportunities for physician independenc apart from the price-concealing contractual third-party payment arrangements, and their co-conspirators, the giant NFP hospital systems.

3. Promoting / facilitating specialty and ancillary service cooperation / agreements which provide them revenue alternatives to the standard price-gouging CPT insurance billing protocols.

Posted in Access to healthcare, CPT billing, Disease Prevention, Doctor-Patient Relations, Doctor-Patient Relationship, Economic Issues, Evidence-based Medicine, Health Insurance, Healthcare financing, Medical Costs, Medical Practice Models, Medicare, Patient Safety, Policy Issues, Prevention, primary care, Protocols, third-party payments, Uncategorized

Over-reliance on Health Insurance Can be Hazardous to Your Health: A Case for DPC

By Robert Nelson, MD


Despite its own admission that Flu Vaccine is, at best, only 40 – 60% effective at reducing risk of Flu-like illness, the CDC repeatedly lists receiving the Flu vaccine as “step one” in prevention. This recommendation also acknowledges the caveat that the effectiveness of immunization will be less if the vaccine is not well matched to the dominate circulating strains of Influenza in any given Flu season. Yet Medicare has deemed it so important that they cover it at 100% despite its low cost and not-so-stellar prevention record.

Given that the mode of transmission of Flu is mainly person-to-person contact, it should not be a surprise that the next bit of preventive coaching that the CDC offers to patients with suspected Flu (and probably the most important admonition) is to STAY HOME.

“…people should stay away from sick people and stay home if sick.”

This advice to “stay home” is very important to curb the spread of the Flu, because it is quickly passed by large-droplet particles that result from coughing, sneezing or blowing your nose. The range of these briefly airborne particles is about 6 feet. But once they land on a surface, these virus laden particles can remain infectious for many hours. Considering the short incubation phase of about 2 days, Flu can spread exponentially if a short time.

With these facts in mind, does a typical crowded waiting room in an urgent care facility or doctor’s office during Flu season make any sense at all? Those who have been tracking this know that the number of patient encounters this year for Flu-like illnesses is off-the-charts high.

Yet despite Grandma and the CDC telling us to eat our chicken soup and stay home, we see the opposite behavior by many patients. It seems odd to me that people would do this voluntarily, let alone eagerly, if they had a reasonable alternative for treatment. But it seems there is a paucity of alternatives and/or an unwillingness to utilize them.

Yet most of my colleagues agree with the CDC’s advice and few would argue that it is too cavalier or risky or depriving patients of adequate care. The subset of patients who are at high risk for Influenza-related complications are well delineated and can be selected out for more intense screening or special follow-up.

Let’s take a deeper dive into the reaction from large group providers. First, here is what they DO NOT DO.

I am unaware of any major vertically-integrated providers of outpatient medical services, who relies on insurance payments as their main source of revenue, which has signage on their door or any published educational information that discourages patients from filling up the waiting room; this is despite the obvious risks to patients and others! And most insurance-based practices do not overtly offer reasonable common sense screening protocols via phone, email or secure texting designed to triage those who need to be seen promptly and who can/should stay home.

Now consider how over-booked insurance-based practices and nurse advice hotlines respond to multiple patient calls about Flu-like symptoms? Too often is goes like this…”Oh, it sound like Flu, you should go to the urgent care to be tested and get Tamiflu if your flu test if positive!”

There are major flaws in this knee-jerk institutional advice which lead to bad decisions and a lot of unnecessary testing & treatment. First, the sensitivity of Rapid Influenza Diagnostic Tests (RIDT) is not high enough to be a reliable exclusionary test. And when prevalence of Flu is high, the predictive value of a negative test goes down as the predictive value of a positive test goes up (telling you what you already suspect). And when the clinical symptoms of the Flu strain are well known, the predictive value of the clinical symptoms in the face of exposure is often as accurate as testing (as proven by subsequent RT-PCR). Second, the benefit of Tamiflu in curbing symptoms after 24 hours of fever is less than impressive. While it does cut down on viral shedding, which may be its main attribute, the false sense of security that many patients attribute to the medication may lead to them returning to normal activity too soon or be less than diligent about taking adequate precautions. Third, if they do actually have the Flu, then by urging them to “get checked” we have potentially exposed other patients and the medical staff unnecessarily. And if they don’t have the Flu, they may catch it while waiting to see the provider for what is likely to be an unwarranted visit. Indeed, much of the intervention that is pushed, and expected, serves only to propagate and prolong the public health threat that we are alleging to mitigate.

Why do patient behaviors and practice patterns deviate so drastically from the common-sense advice that we all grew up with, the same advice that the CDC stresses? Once you over-come a few misconceptions about risks, along with setting some follow-up parameters, it all comes down to a misuse of what could otherwise be a useful financial tool that we call health insurance.

More specifically, it is the inefficient way we use health insurance for routine care that is ultimately responsible for the misuse. I call this process “Fee-for-Coding”. As my friend and colleague, Jed Constantz, is fond of saying…“this leads the patient to chase the benefits and the doctor to chase the codes.”

These two distractions arise from the perverse economic incentives faced by the provider and the patient within the Fee-for-Coding system. The consequence being that only perfunctory consideration is given to the clinical utility of the intervention because the financial incentives are not properly aligned; this often leads to inappropriate or excess interventions, inappropriate referrals, delayed care, or care rendered in the wrong venue.

Fee-for-coding (FFC) has wreaked havoc in healthcare due to three intrinsic characteristics, all of which increase costs and over-burden resources. Our FFC/CPT billing system causes: 1) price insensitivity on the recipient’s part leading to indiscriminate and excessive consumption on aggregate. 2) Misaligned incentives on the provider’s part leading to over-testing and over-treating. 3) Lack of important value-determining price signals between buyers and sellers due to lack of advance pricing capabilities.

Contrast that conundrum with a real scenario I had today which highlights the utility and effectiveness of patient-centered care rendered outside the confines of the third-party payer contract: A Direct Primary Care arrangement with ability to provide home visits when needed.

A married couple who are members of my practice also pay membership fees for their sons and spouses who work part-time in their family business. The husband’s mother, who is 88 years old and in reasonably good health, lives with them. She has a doctor in South Carolina whom she sees rarely for routine check-ups. She does not have a local physician and is not a member of my practice. She slipped getting out of the shower today, hitting her head on on corner of the wall resulting in a 3 cm scalp laceration without any other apparent injury; she is not on anti-coagulants and had no clinical signs of concussion. When they got to the local Urgent Care facility, they were told she could be “evaluated” but they would not stitch or staple any wounds above the neck! You know, kind of like a “dental monitor” who diagnoses cavities, but doesn’t fix them! They were advised to go to the ER or another UC that might possibly suture the cut if needed.

Did I mention that it is Flu season and the waiting rooms are packed full of sick people?

Following this revelation, her daughter-in-law sent me a text about the situation to see if I would be willing to see her. By this time, they had arrived back home. I called to discuss her injury and it seemed reasonably certain that there were no serious symptoms and no orthopedic injuries. I agreed to evaluate her at home to avoid an ER visit for what seemed to be a fairly minor, although time sensitive, injury which required evaluation the same day. I reminded them that I did not submit bills to Medicare and that my fee would be $80.00, and I would waive the travel fee since they were member patients.

So, after a brief discussion and history and brief exam, plus 5 staples to close the scalp wound and a 45 minute round trip… she is convalescing at home. The family is vigilant and they have my number for 24/7 access if questions or new symptoms.

Had she presented to ER, it may have meant a couple hours in the waiting room and exposed to all manner of illnesses. And based on her age and medical-legal influences, there is about a 40 – 50% chance that a head CT scan would have been ordered. So the bill would have been $1,000 – $1,200 on the low end, or up to possibly over $3,000 on the high end if CT was performed. Not to mention a very high chance of contracting Flu given the current high levels in the community.

Alternative payment models like Direct Primary Care (DPC), sometimes called membership medical care or insurance-free cash practices, don’t have to depend on billing encounters in the office to drive revenue. This liberates the physician and staff to provide the right care at the right time via the right modality; whether that be in-person, over secure texting app, phone, video or even a house call.

With DPC and similar practice models, the artificial constraints and moral hazards of insurance based Fee-for-Coding disappear, replaced by the satisfaction of helping to solve our patient’s problems as life happens and within a non-rushed, lifestyle friendly atmosphere.

Posted in Access to healthcare, advance-pricing, Economic Issues, Free-Market, Health Insurance, Healthcare financing, Influence peddling, Medical Costs, medical inflation, Medical Practice Models, Policy Issues, Price Tansparency, Reforming Medicaid, Reforming Medicare, Uncategorized

Same Transparent Price to Any Willing Buyer

By Robert Nelson, MD

Within many of the posts regarding the challenges facing healthcare, someone – usually out of frustration – will inevitably pose the following: “So what is the solution?”

Well, the answers won’t be found in repeating partisan talking points. Especially the ones based on economic fallacies and socio-economic myths, so often repeated they have become dogma for the healthcare surrogate we call a “health plan”, despite its sub-par effect on mortality and health when compared to other socio-economic factors. This industrialization of healthcare has been orchestrated to be over-priced by pundits and politicians, on the right and the left, who pander for influence, money and votes. They claim that we need more of it, covering more items for more people. By design, it crowds out more cost-effective alternative sources of funding. It is the ultimate healthcare inflation machine.

The solution is to utilize different financial strategies for different segments of healthcare, using tools to maximize their effectiveness. This begins with the deflationary & stabilizing effect that real prices have when they are known in advance for the vast majority of healthcare services exchanged between buyers and sellers, most of which takes place in a non-emergent scenario.