Archive | March 2010

Tanning Salons Fried by Healthcare Reform Tax

When earlier versions of the Health Reform Bill were being discussed, the Senate bill contained a 5% tax on cosmetic services (the “Botax”).  In 2004 a similar tax was passed in New Jersey, snuck through in the middle of the night.  That tax has collected revenues short of expectations, and efforts to repeal it, even by the bill’s original sponsor, have so far been unsuccessful.

The nationwide cosmetic surgery tax was opposed by the American Society of Plastic Surgeons (ASPS) as well as other societies whose members provide cosmetic services.  Normally these societies are rivals, especially those who are trying very hard to establish their members as equivalent providers of cosmetic surgical services.  (Side note, they are doing a very good job in this regard). 

Important points were made in the effort to get the cosmetic tax removed.  A majority of those seeking cosmetic services are women, thus the tax would discriminate unfairly towards them.  Today’s cosmetic customer is middle class, and has typically saved for, or is financing, their chosen service.  Other arguments such as a blurry line between cosmetic and reconstructive services, and using physicians as tax collectors, were also brought to bear. 

In the end, the cosmetic tax was removed from the Senate legislation.  In its place was put a 10% tax on tanning salons.  This tax is projected to raise about half the amount that the Botax was to provide, around $2.7B.  The actual numbers remain to be seen, but very often the projected numbers greatly overstate the realized amounts. 

The reality is that this tax will be borne by women; the (mostly) young ladies that use these salons, and the women who own them (two-thirds of these small businesses are owned by women).  There are real jobs at stake if the new tax reduces business and causes salons to close. 

The thought that this tax will eventually result in decreased skin cancer is a questionable assumption at best.  Tanning use, especially at a young age, has been linked to increased risks of skin cancers, including melanoma.  Annual expenses for treating skin cancer are reported at $1.8B, with $300M of that on melanoma.  However, the vast majority of these cancers are basal cell carcinomas in middle-aged and older fair skinned persons, whose cancers are related to lifelong sun exposure and advancing age.  Melanomas can occur in anyone, and don’t always appear on the skin. 

Linking the tanning tax revenue to lowering the cost of treating skin cancers is more than questionable, it is downright dubious.  What is not dubious is the correlation between lobbying effort (dollars) and results.  Though not exactly linear, a strong trend exists in this direction.  The International Smart Tan Network has around 3000 salons.  There are almost 7000 plastic surgeons, 12,000+ dermatologists, and at least another 10,000 assorted cosmetic surgeons/aesthetic practitioners.   None of them are starving, and many contribute to their respective societies.  Fair or not, one lesson is clear when it comes to lobbying efforts and policymaking:  if you don’t spend enough, you can get your hide tanned.



Health Reform Has Passed. Now What?

So Health Reform has passed, and the world has not come to an end.  It has been a very interesting process to observe, with twists and turns, ups and downs, and all sorts of drama.  It was criticized, debated, almost written off (after Scott Brown’s election), resuscitated, transferred out of the figurative ICU and finally passed.  The manner in which it was passed was not the same as with the passage of Social Security in the 1930s, and Medicare in the 1960s.  Those both had substantial minority party participation.

In any case, passage has occurred and regardless of political inclinations, the president must be congratulated for an achievement which has stymied other capable presidents for decades.  No, the reform is not perfect, nothing is.  Considering public policy, the initial effort must be seen as a beachhead.  You get something passed and you build upon it.  Over time, the idea is that good items will be enhanced, less effective ones will be diminished, and the eventual result should be better than the initial effort. 

In terms of the social good by allowing underinsured and uninsured persons to receive care, this has been a noble effort.  The current system does not do these people justice.  But the current system acts the way it does in large part by responding to monolithic stimuli which are in large part driven by over-bureaucratized systems of care.  This new system is very likely going to add additional layers to the problem.  It will also have a predictable effect on costs; they will increase. 

Over the short term, this is not unexpected, nor necessarily a huge problem.  However, the system must undergo substantial changes in order to bring about cost control, and effective measurement of outcomes.  Here is one way in which this might occur:

  1. Widespread Hospital-Physician Integration:  With worsening pressures on reimbursement (increases lagging inflation, volume increases no longer possible), independent small practices will close.  Larger group practices will become much more common.  New physicians will not even attempt solo private practices in most cases.  Practices that close will be folded into hospital systems.  This has been occurring for a few years now and is increasing in scope. 
  2. Large Employers “Self Insuring”:  Rather than writing huge checks to purchase comprehensive insurance for their employees, large companies may find it more cost effective to use a combination of employed primary-care providers to manage routine care, and supplement this with high-deductible insurance coupled to Health Savings Accounts.  That way, employees will use the company doc for small things, with insurance being tapped for the shattered knee or burst appendix.  The HSA will force patients to be more discretionary with their use of nonemergency services.
  3. Contraction of Hospital Supply and Regional Global Payments:  This is something of a guess, but once we have the majority of providers functioning out of large institutions as employees, CMS may start replacing the fee-for-service model with periodic block payments.  These would be made to hospitals and be based on the expected service volume/acuity, indexed to the local population size.  Hospitals will then have to determine what specialties to emphasize, the makeup of each department, and most importantly, cost effective protocols for managing each clinical problem.  CMS or similar overseers will monitor outcomes and make sure that payments are realistic.  Of course, this creates a whole new sort of system of incentives which can change behavior, but using data from fully integrated systems as well as from other countries can help manage this. 

Will this be the future?  Will such changes cause the emergence of a two-tiered healthcare system?  Its impossible to know for sure, but items #1 and #2 have already been occurring.  Item #3 exists in some foreign systems, and is sort of like a fully integrated system such as Kaiser or the VA.   The emergence of a second tier healthcare system will depend to a great extent on how difficult it is for providers to leave the current system once they are more fully integrated.  It is likely that the system will be designed to make it difficult to be on the outside.

Senator Coburn Calls Health Bill “Malpractice”

Senator Tom Coburn weighed in on the health-care bill today, and he made some very good points.  As a disclaimer, I too am a physician and by definition can’t be unbiased.   Some comments on his points:

“The fundamental problem in health care is cost.” 
            He is absolutely correct.  Our system has very good quality, but access is a big problem.  Those without insurance, or with a form of underinsurance such as Medicaid, find it difficult or impossible to get access to care.  Care cannot even be guaranteed in emergency situations, since many emergency departments have experienced difficulty having adequate specialists on-call.
            Expanding Medicaid will increase costs but will not increase access, since reimbursement rates already are unrealistically low, and will have to be cut even further under this plan.  Fewer providers will accept Medicaid patients, leading to “coverage” but no access.   

“Supporters argue that the bill will save taxpayers $100 billion over 10 years, but this estimate is a sham.”
            Policymakers must have felt that it was essential to hide the true cost of the bill, in order to avoid widespread sticker shock.  I won’t go into the analysis of the financials, but it is a good question whether having more people insured will lead to lower future costs.  The idea is that having insurance leads to having routine care, and small inexpensive problems are treated before they become large and expensive ones.  Our current system doesn’t manage costs well with the exception of fully integrated systems such as Kaiser Permanente.  With or without reform, this problem will continue to grow.  With the aging of the Baby Boomer generation, costs are going to go up no matter what is done, and eventually we must face the reality of scarcity of healthcare resources.  Fortunately, there is a huge amount of “fat” in the system which can be excised without harming quality.  The difficult part is that the current incentive structure does not make this very likely to happen.

“…a recent poll by… found that only 1 in 10 physicians said Congress should push the current bills through, while nearly two-thirds of physicians said Congress should start over…”
            Forcing the current bills through will lead to a huge expansion of federal involvement in health care, and will have many unintended consequences.  The more that the system is entangled with regulations and interference, the more inefficient and snarled it will become.  This is because the various stakeholders will assess the terrain, and take action to obtain the most advantageous position.  This is what has already occurred over the last 45 or so years, so there is little reason to think that it will not continue.  An inefficient and snarled system does not serve patients in an effective manner.

If there were an easy answer to the problem, it would have been provided already.  It may be better to tackle this huge problem in small pieces, rather than attempting a sweeping overhaul.  There are many areas within health care that can be singled out, their problems analyzed and experimental reforms devised.  Successful efforts can be expanded to other areas, unsuccessful ones can be abandoned. 

 In surgery, this advice is given to new graduates: “Don’t try to hit home runs, try to hit singles”.

Doctors Lose Billions in Uncollected Co-Pays

Anyone who has ever managed a medical practice can tell a familiar story; it can be difficult to collect what a practice is owed beyond the co-pay collected at the time of visit.  Given the complexity of the myriad private payers with which medical practices interface, it can be almost impossible to ascertain what is owed in terms of deductible prior to the patient’s visit.  As mentioned in a July 2009 article by Anne Zieger, the consultancy McKinsey & Co. has estimated this annual total at between $14-30 billion.  It is suggested that real-time claims estimate technology can allow the front office to make sure they know what the practice will be owed at the time of visit, but right now most practices do not make use of it.  Instead, once the claim disposition is received from the payer, the practice attempts to collect the remainder due. 

This problem is likely to increase since higher-deductible plans are becoming more common, in order to avoid the higher premiums which would otherwise be required.   High deductible plans shift more of the cost onto the patient.  With uncollected deductibles, costs are shifted onto providers as well.  One simple solution, although not allowed under current provider-payer contracts, is to simply reserve appointments with a credit card, in the manner of a hotel.  Any deductible due can be simply billed to the card.  This isn’t a perfect solution, but it would be far simpler and less costly (in the short term) for practices to implement this kind of policy.  Rather than installing complex real-time technology to collect what the practice is already owed, they can make sure that they get it in full at the time of service. 

For non-participating providers, the credit card hold policy is an option.