NE Senior Leadership Meeting April 20, 2010

 The April 20, 2010 meeting of Senior Leadership Northeast was convened at the Colleyville Chamber of Commerce building at 9:05 AM by Chairman Ed Havran.

There were   individuals present representing   Northeast Tarrant County cities.

Minutes were approved as reported on the website.

Sunny Meeks with the Colleyville Chamber of Commerce welcomed us and reminded the group about the City Slickers 2010 meeting on May 16, 2010 at the Grapevine Convention Center.

Rebecca Barksdale from County Commissioner Gary Fickes’ office announced that Commissioner would host “Empowering Seniors 2010” later this year.  More details will follow.

Mr. Steve Jacob made a presentation titled “The Inconvenient Truth About Healthcare; It’s Just Too Expensive”.  His comments are summarized below.

A 2008 Pricewaterhouse study concluded that an estimated $1.2 trillion of the $2.2 trillion spent on U.S. healthcare is waste. It identified several culprits: defensive medicine, preventable hospital readmissions, inefficient insurance-claims processing, unnecessary emergency-room visits, and care associated with preventable diseases caused by obesity and smoking.

Two important economic principles contribute to this waste: supplier-induced demand and moral hazard. The problem is that in healthcare industry ,  the supplier creates the demand for healthcare spending. Consumers are shielded by the true cost since they pay about 22 percent of the costs out-of-pocket.

Stanford economist Victor Fuchs is fond of saying that Americans want to control healthcare costs, but oppose any policy effort to accomplish that. They have a visceral opposition to anything that would deny them any medical care they believe they should have. But the net effect is unlimited spending on healthcare which will  bankrupt those paying the bills.

Insurance companies are the cashiers between those who pay the bills and the healthcare providers and suppliers. They are limited to 15 percent of revenue for administration and profits. They pass along increases to employers, who pass them along to employees in higher co-payments, fewer benefits and lower wage increases. But employees do not feel it much because of payroll deductions are relatively painless and they do not feel wage suppression when they never had it to begin with. They, along with those with government health insurance, comprise most of the insured and are still relatively insulated from out-of-pocket costs.

Medicare is a great example of supplier-induced demand. Medicare spends nearly $11,000 per capita in Los Angeles and less than $6800 per capita in Minneapolis. Dartmouth tracks this and it is very revealing. For people in excellent health, average annual Medicare spending is about $3500 while for those in poor health per capita costs are more than $21,000. Health status explains about 30 percent of the cost differences by region, but not the rest. In high-cost regions, doctors are more likely to put you in the hospital, do more magnetic resonance imaging procedures and CT scans.

Take heart failure. In high-cost regions, you are put in the hospital where you run up costs and your life is endangered from hospital error. Take back pain. In some regions, you get an immediate MRI and even back surgery instead of what's called watchful waiting, which often clears itself up.

In The Great American Heart Hoax: Lifesaving Advice Your Doctor Should Tell You About Heart Disease Prevention (But Probably Never Will), cardiologist Michael Ozner says the annual 1.5 million U.S. angioplasties and coronary bypass surgeries – for which the price tag is $60 billion – neither save lives nor prevent heart attacks. Dr. Thomas Graboys of Harvard Medical School as second opinion: 162 of 168 patients did not need a cardiac catheterization. 74 of 88 patients were not candidates for cardiac bypass surgery. In follow-up several years later, the 60 who took his advice were still alive.

Medical professor Norton Hadler, author of Worried Sick: A Prescription for Health in an Overtreated America, says healthcare interventions rarely, if ever, improve longevity. He defines two types of medical malpractice. Type I malpractice: Doing something medically necessary unacceptably poorly. Type II malpractice: Doing something unnecessary very well. Hadler is especially critical of marketers who attempt to medicalize the inconveniences of life: insomnia, sadness, fatigue, being a brat. In marketing parlance, it is called “condition branding,” which redefines or creates a disorder that is alleviated by a particular product. Such “lifestyle” drugs help you cope with baldness, toenail fungus and anxiety.

Journalist Shannon Brownlee, author of Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, gives partial credit of overtreatment to Americans’ blind faith in technology and science, which is a major driver of healthcare inflation. About 34 percent agreed with the statement in a Harvard survey that modern medicine can cure almost any illness with the right technology. However Brownlee points out that 25-40 percent of autopsies show that patients were being treated for the wrong diagnosis – a figure is virtually unchanged from 1910.

Physician Dennis Gottfried, who wrote Too Much Medicine: A Doctor’s Prescription for Better and More Affordable Health Care, wants to ban direct-to-consumer (DTC) advertising for medications and aggressive promotion of pharmaceuticals to physicians because both result in prescription of more expensive, less effective drugs. About 31 percent of patients who see DTC advertising ask about the drug, and a significant portion of them want it even though they are clueless to its effects. Unfortunately, a significant percentage of doctors comply because they do not want to lose a fully insured patient.

There is enough money in the system to cover everyone and not ration care. U.S. spends 2.5 times more per capita than the average industrialized nation and our health outcomes are, in most cases, worse. We need to start paying for quality rather than quantity of care which the current system incentives.

 The moment of truth is in the doctor's office. Ultimately, we all pay.

PREDICTIONS

This brings me to my final point: The bubble is going to burst. The most uttered health-policy cliché is: “This is not sustainable.” And it's not. Make no mistake, there will be healthcare reform when it gets bad enough.

In about 10 years, one of two scenarios will play out, and it will depend on which party is in power. By that time, it is projected that $1 out of every $5 will be spent on healthcare.

At that time, one of two comparatively radical solutions will emerge, depending upon who is in power. It will make this round of reform seem awfully tame, even quaint.

If conservatives are in power, you will see an effort to control costs through the demand side to try to make consumers more cost-conscious. It might look something like the Health Americans Act, a bipartisan bill that was introduced in early 2007 by Oregon Democratic Sen. Ron Wyden and Utah Republican Sen. Robert Bennett. Business would give employees a one-time raise equal to health-insurance benefit. Consumers buy their own insurance from state or regional purchasing pools, premiums would be collected with federal income taxes and there would be an individual mandate. The CBO scored it as budget neutral, everyone has skin in the game and U.S. businesses would become more competitive without the albatross of health insurance. I believe this was -- and is -- a promising approach.

If liberals are in power, you will see a European-style universal healthcare system – and I think this is more likely. Given a choice, I think U.S. politicians do not have the political will to thrust the responsibility of personal healthcare finance on U.S. taxpayers. The U.S. government is too paternalistic. It would not be “socialized medicine,” which is more of a political slogan than reality. In Canada, Taiwan and Australia, the government pays the bills but physicians and hospitals are private – which mirrors our Medicare system. In Japan, the Netherlands, Switzerland and France, the physicians, hospitals and insurance companies are private. It would be universal healthcare, American style.

Demographic Trends

Workforce shortages, leading to greater reliance on mid-level clinicians and retail clinics. Texas ranks 43rd in the ratio of physicians to population. Some of the specialty shortages include surgeons, emergency room physicians, geriatric and pediatric specialists to treat the old and the young, dermatologists and psychiatrists.

Aging client base. There is no need to go over the statistics on this one.

The debilitating effects of obesity. An estimated 15 million Texas will be obese by 2040, according to the state demographer. That triples the current number, based on the steady growth in population and waistlines. Demographer Karl Eschbach projects the percentage of obese Texas adults to rise from about 29 percent in 2010 to more than 42 percent by 2040People have to be willing to put down their knives and forks. But according to a national poll last year by the American Dietetic Association, 79 percent said they are satisfied with the way they eat and 73 percent do not want to give up their favorite foods. An astounding 41 percent say they do not know or understand diet and nutrition guidelines.

Political and economic trends

We will get more of the same.

Rising uninsured rate, because more employers will opt out because of cost and employees are increasingly declining coverage because they are bearing a rising share of the premiums and absorbing larger co-payments. The economic burden of health insurance went up more rapidly for small businesses than larger ones from 2000 to 2005. Small-business health insurance share of payroll grew from 8.4 to 10.8 percent during that period – an increase of almost 30 percent. More personal medical bankruptcies will stem from that.  The 170 million Americans who get health insurance through their employer have had the cost of their premiums increase 30 percent while their incomes increased only 3 percent from 2001-2005, according to the Robert Wood Johnson Foundation.

Healthcare costs will continue exceed the general inflation rate, with healthcare taking a greater share of the budget for state government, the federal government and private businesses because there are no incentives to slow it down. An analysis by the journal Health Affairs last week indicated the government will eclipse the private sector next year as the primary financier of healthcare. By 2019, we will be spending more than $13,000 annual for every American, compared to about $8,000 last year. Population aging and a weak economy is fueling this trend furiously.