Sean Khozin, MD, MPH

• U.S. annual healthcare spending = $2.3 trillion
  • $7600 per person
  • 16% of the gross domestic product (GDP)
  • Annual spending is expected to reach $4.2 trillion in 2016, about 20% of GDP
• In 2007, health insurance premiums increased by 6.1%, two times the rate of inflation
  • Annual premium for an employer health plan covering a family of four ~ $12,100
  • Annual premium for single coverage ~ $4,400
• Over the past 30 years, health insurance premiums have increased by 300% after adjusting for inflation
  • During the same period, inflation-adjusted corporate profits increased 200% after taxes but the average hourly earnings of workers decreased 4%
    • This means the cost of higher premiums is passed on to employees in lower wages
• The health insurance industry diverts over $150 billion out of the system in profits and related activities each year
  • The industry increases profits by applying downward pressure on demand and access to care. This includes implementation of strategies to deny or restrict coverage and services to patients and reduce or deny reimbursement to providers for rendered services
  • The third party payment system has led to the consumption of 31% of U.S. healthcare dollars in needless administrative costs
  • Over $350 billion per year can be saved by eliminating or substantially reducing third party administrative hassles
• Physicians receive ~ %20 of healthcare dollars
  • The typical medical practice is %40-%70 overhead
  • On average, each physician spends ~ $50,000 per year on malpractice premiums
  • Many physicians owe $100,000-$300,000 in student loans
  • Physicians’ take-home income represents a very a small fraction of total healthcare spending despite the fact that they are in the frontlines of care
    • Reductions in reimbursement to physicians will not have any tangible effects on overall healthcare spending and will be counterproductive, leading to increased patient loads, further weakening of the doctor-patient relationship, and physician and patient disenchantment

One of the best solutions to rising healthcare costs and uneven access to care is to create direct channels of communication between doctors and patients by reducing the undue influence of the middlemen.

More info: Health Affairs, JAMA, WSJ

Medicare Advantage refers to private Medicare plans that are run by insurance companies such as Aetna, Humana, and UnitedHealthcare. These plans have proven to be very profitable for these companies. For example, they currently account for about 48% of Humana’s annual revenues. Unfortunately, this has translated into higher costs to tax payers and poor coverage for the beneficiaries. Originally intended to save money, the government is now paying insurers as much as 128% of the amount Medicare usually spends per patient. Insurers have also been accused of abusive marketing tactics to senior citizens to lure them into purchasing these plans. All the presidential candidates now agree that the Medicare Advantage program has proven to be a failure and that government funding of private Medicare plans should be cut or entirely eliminated.

The Centers for Medicare & Medicaid Services (CMS) announced on April 7, 2008 that they want to pay 3.6% more to these wasteful private plans while they push for cutting payments to medical providers who are in the front lines of delivering lifesaving care. This is clearly a bad idea. The Axis of Waste is at it again.

More info: Senior Journal, Forbes

Since the controversy over the ENHANCE trial and the drug Vytorin, Schering-Plough’s stock has taken a hit. On April 2nd, the company announced the launch of their productivity and transformation program to confront their new challenges. “We are taking the tough actions that are needed to respond to a tough situation,” said Fred Hassan, Chairman and CEO about the program. A day later, the company announce laying off 10% of their workforce, about 5,500 employees.

Although the media has certainly blown the results of the ENHANCE trial out of proportion, Schering-Plough should have been more transparent in the handling of the results, which were reportedly kept secret even from some of the key investigators involved in the study.

More info: Schering-Plough Press Release

“The significant problems we face cannot be solved at the same level of thinking we were at when we created them”
Albert Einstein

We need an innovative paradigm, a disruptive attitude, and a new way of thinking to heal our ailing healthcare system.