razz
10-7-13, 1:58pm
I don't know how many of you receive John Mauldin's newsletter. I enjoy the perspective that he gives me of a fairly conservative, IMO anyway, view of impacts, economics etc of public The most recent letter was an eye-opener for me in understanding the impact Obamacare in terms of the Cleveland Clinic decision-making and planning. I offer just the highlights.
For the record, Canada is having a similar conversation re costs and changing the long-term view of healthcare.
"There is no doubt that the single most contentious topic I can bring up in a small group discussion or speech is the Affordable Care Act, otherwise known as Obamacare.
I will aim to dwell simply on the economic ramifications of the implementation of the bill as it exists today. We are changing the plumbing on 17.9% of the US GDP in profound ways. Many, if not most, of the changes are absolutely necessary.
This letter has grown out of a rather lengthy, ongoing conversation I have had with my very close friend and personal doctor, Mike Roizen, about his perceptions of changes that his institution, the Cleveland Clinic, and others like it have to make concerning the delivery of medicine in the near future, and the Clinic's expectations regarding the income they will receive for providing their services.
.
Mike first became famous for developing the RealAge concept of a healthier lifestyle today.
The views he expressed in preparation for this letter are his, not necessarily reflective of anyone else's at the Cleveland Clinic.
[B]We want to make something very clear right at the beginning. The US healthcare system as it stands is dysfunctional and can no longer continue as it currently operates. With or without Obamacare, profound change is required to deal with the dysfunctionality, and that change will happen, one way or another. Obamacare is simply one method for “encouraging” that necessary change.
The US currently spends 17.9% of its total GDP on health services (http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS).
By contrast, the Netherlands spends 12% of its GDP on healthcare; Switzerland, Germany, France, and Canada about 11%; New Zealand 10%; Sweden 9.4%; and the United Kingdom 9.3%. As we travel through these countries, there is frequently a clear, if anecdotal, perception that people are healthier than in the US.
Dr. Jeff Brenner in Camden, New Jersey. found that 1% of the patients in Camden were responsible for 30% of hospitalization costs. By some estimates, 5 percent of these patients account for more than 60 percent of all healthcare costs.
Again, the fundamental changes that are necessary in the US healthcare system are going to happen with or without Obamacare. The system is simply dysfunctional. ACA is just accelerating the process. This is the business reality that hospitals all over America face, not just the Cleveland Clinic.
Over the next five years we will go from volume-based reimbursement in medicine (based on the number of procedures or patients a provider sees) to a value-based system (being paid the same amount per patient no matter how well or sick she is.
Thus, what is certain is that more people will be cared for and at a lower cost. There will also be a shortage of skilled medical providers. These shifts will occur irrespective of Obamacare but will be greatly influenced by it.
Take these factors.
1. The overall cost of medical care and the increased incidence of chronic disease: In 1960, the US spent 5.2% of GDP on medical care. By 1970, medical care claimed 7.2% of GDP, and its slice of the pie continued to widen, to 12% in 1990, and to around 17.5-18.5% now. Over the next six years, the projected increase in chronic disease stands to boost medical costs another 3% of GDP (if cost per process remains constant), and the aging of the population is likely to account for an additional increase of 1% of GDP. .
2. Cost transparency and reference pricing: A hospital system like the Cleveland Clinic currently bills about $18 billion for medical services and collect around $6 billion. (We do not know the exact numbers for the Clinic.) It costs such a system around $5.5 billion to provide all the services, and thus they are able to invest $500 million in plant, equipment maintenance, and new equipment at the Clinic. An institution like the Clinic gets this revenue by collecting from Medicare about $0.23 on the dollar billed, from Medicaid about $0.18 on the dollar billed, and about $0.38 on the dollar billed for the aggregate of commercially insured patients.
The present U.S. medical insurance: 1.concierge care for 1.5%, 2. Medicaid system- 5 to 15%, Medicare - 40% and a commercial system- 35 to 42% of the population uses. (About 15% are now uninsured.)
3. An increased government role in paying for care:
4. Increased coverage: 40 million more people will be covered nationally, at a reimbursement rate below our cost
5. Limited highly skilled medical workforce: The increase in the number of patients hospitals serve and a reduced reimbursement per patient will mean that hospitals need to re-engineer care in ways that impact personnel.
The prediction is these hospitals will be paid approximately 5% fewer total dollars next year and 25–35% fewer dollars in 2018, while treating a growing number of patients. Since more than 60% of their costs (in many institutes the figure is more than 80%) are for personnel,
Reduce the incidence of chronic disease. Since 70% of our healthcare costs are occasioned by the abuse of alcohol and other substances (especially tobacco!), physical inactivity, poor food choices and overly generous portion sizes, and unmanaged stress,.
There are many potential triggers to [deal with this] in Obamacare,
The Cleveland Clinic will have to reduce overall costs 5-10% (average 8%) per year for the next four years. That is no small feat.
This failure of health coverage is primarily due to the variations between states, as government coverage begins at different income levels in different states (26 states having rejected the expansion of Medicaid funded by Obamacare).
Hospitals will have fewer employees.
If you reduce the revenues of 18% of the economy by 6 to 8% every year for 4 years, you are forcing a reduction of about 1.4% of GDP over the entire economy.
Further, it is fairly evident that the US has too many hospitals.
While Obamacare incorporates many potential triggers that would accelerate incentives for wellness, it is not clear how quickly these will be deployed.
To put that in perspective, these are not small changes, as a system like the Cleveland Clinic will go from a system that now creates revenues of $6 billion a year to a system that is reimbursed around $4.4 billion for the same services; and other institutions are probably somewhere in that range of revenue reduction."
For the record, Canada is having a similar conversation re costs and changing the long-term view of healthcare.
"There is no doubt that the single most contentious topic I can bring up in a small group discussion or speech is the Affordable Care Act, otherwise known as Obamacare.
I will aim to dwell simply on the economic ramifications of the implementation of the bill as it exists today. We are changing the plumbing on 17.9% of the US GDP in profound ways. Many, if not most, of the changes are absolutely necessary.
This letter has grown out of a rather lengthy, ongoing conversation I have had with my very close friend and personal doctor, Mike Roizen, about his perceptions of changes that his institution, the Cleveland Clinic, and others like it have to make concerning the delivery of medicine in the near future, and the Clinic's expectations regarding the income they will receive for providing their services.
.
Mike first became famous for developing the RealAge concept of a healthier lifestyle today.
The views he expressed in preparation for this letter are his, not necessarily reflective of anyone else's at the Cleveland Clinic.
[B]We want to make something very clear right at the beginning. The US healthcare system as it stands is dysfunctional and can no longer continue as it currently operates. With or without Obamacare, profound change is required to deal with the dysfunctionality, and that change will happen, one way or another. Obamacare is simply one method for “encouraging” that necessary change.
The US currently spends 17.9% of its total GDP on health services (http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS).
By contrast, the Netherlands spends 12% of its GDP on healthcare; Switzerland, Germany, France, and Canada about 11%; New Zealand 10%; Sweden 9.4%; and the United Kingdom 9.3%. As we travel through these countries, there is frequently a clear, if anecdotal, perception that people are healthier than in the US.
Dr. Jeff Brenner in Camden, New Jersey. found that 1% of the patients in Camden were responsible for 30% of hospitalization costs. By some estimates, 5 percent of these patients account for more than 60 percent of all healthcare costs.
Again, the fundamental changes that are necessary in the US healthcare system are going to happen with or without Obamacare. The system is simply dysfunctional. ACA is just accelerating the process. This is the business reality that hospitals all over America face, not just the Cleveland Clinic.
Over the next five years we will go from volume-based reimbursement in medicine (based on the number of procedures or patients a provider sees) to a value-based system (being paid the same amount per patient no matter how well or sick she is.
Thus, what is certain is that more people will be cared for and at a lower cost. There will also be a shortage of skilled medical providers. These shifts will occur irrespective of Obamacare but will be greatly influenced by it.
Take these factors.
1. The overall cost of medical care and the increased incidence of chronic disease: In 1960, the US spent 5.2% of GDP on medical care. By 1970, medical care claimed 7.2% of GDP, and its slice of the pie continued to widen, to 12% in 1990, and to around 17.5-18.5% now. Over the next six years, the projected increase in chronic disease stands to boost medical costs another 3% of GDP (if cost per process remains constant), and the aging of the population is likely to account for an additional increase of 1% of GDP. .
2. Cost transparency and reference pricing: A hospital system like the Cleveland Clinic currently bills about $18 billion for medical services and collect around $6 billion. (We do not know the exact numbers for the Clinic.) It costs such a system around $5.5 billion to provide all the services, and thus they are able to invest $500 million in plant, equipment maintenance, and new equipment at the Clinic. An institution like the Clinic gets this revenue by collecting from Medicare about $0.23 on the dollar billed, from Medicaid about $0.18 on the dollar billed, and about $0.38 on the dollar billed for the aggregate of commercially insured patients.
The present U.S. medical insurance: 1.concierge care for 1.5%, 2. Medicaid system- 5 to 15%, Medicare - 40% and a commercial system- 35 to 42% of the population uses. (About 15% are now uninsured.)
3. An increased government role in paying for care:
4. Increased coverage: 40 million more people will be covered nationally, at a reimbursement rate below our cost
5. Limited highly skilled medical workforce: The increase in the number of patients hospitals serve and a reduced reimbursement per patient will mean that hospitals need to re-engineer care in ways that impact personnel.
The prediction is these hospitals will be paid approximately 5% fewer total dollars next year and 25–35% fewer dollars in 2018, while treating a growing number of patients. Since more than 60% of their costs (in many institutes the figure is more than 80%) are for personnel,
Reduce the incidence of chronic disease. Since 70% of our healthcare costs are occasioned by the abuse of alcohol and other substances (especially tobacco!), physical inactivity, poor food choices and overly generous portion sizes, and unmanaged stress,.
There are many potential triggers to [deal with this] in Obamacare,
The Cleveland Clinic will have to reduce overall costs 5-10% (average 8%) per year for the next four years. That is no small feat.
This failure of health coverage is primarily due to the variations between states, as government coverage begins at different income levels in different states (26 states having rejected the expansion of Medicaid funded by Obamacare).
Hospitals will have fewer employees.
If you reduce the revenues of 18% of the economy by 6 to 8% every year for 4 years, you are forcing a reduction of about 1.4% of GDP over the entire economy.
Further, it is fairly evident that the US has too many hospitals.
While Obamacare incorporates many potential triggers that would accelerate incentives for wellness, it is not clear how quickly these will be deployed.
To put that in perspective, these are not small changes, as a system like the Cleveland Clinic will go from a system that now creates revenues of $6 billion a year to a system that is reimbursed around $4.4 billion for the same services; and other institutions are probably somewhere in that range of revenue reduction."