A recent Milliman Medical Index report shows that the average American family-of-four with employer-supported health insurance last year paid out-of-pocket medical expenses of $16,771, which represented 28% of their total annual income. No wonder the leading cause of bankruptcies is medical expenses, not toxic assets.
Milliman further reported that 34% “went” to doctors; 30% to hospitals; 17% to outpt services and 15% to pharmacy. While this may be true on some accountant’s ledger, these numbers are completely misleading. They enable the medical accounting fraud (no, Milliman did not commit fraud), which is a new and subtle “big lie.”
People infer from the information above that similar proportions apply to the nearly $2 trillion our nation spends on healthcare. By that reasoning, in one year: $680billion “goes to” the doctors (that is more than the US has spent on the entire Iraq war); $600b to hospitals (don’t they wish!); $340b to outpatient services; and $300b to for medications. Not true, not even close.
The medical accounting fraud ignores the roughly 40% of $2 trillion that goes into the healthcare system but never comes out: not to doctors; not to hospitals or big pharma; and certainly not to patients.
As shown in the list below, healthcare expenses can be classified into ten groups, ten reasons why it costs so much. Two of the ten add value: #1 and #2 improve the quality and length of our lives. Numbers 3 through 10 add no value. THAT is where you can save money without losing something we want. Some overlap like inefficiency and regulatory compliance. Others demonstrate a system not designed at all or worse designed to fail, and to fail us.
Actual Reasons For Healthcare Expenses [Note that the title does NOT read “ Appropriate Reasons For Healthcare Expenses”] 1. Treatments available now that did not exist before 2. More people living longer 3. Action without evidence 4. Cost of regulations and compliance 5. Inefficiency 6. Perverse incentives 7. Defensive medicine 8. Adverse outcomes and errors 9. Profits taken out of healthcare system 10. Embezzlement and fraud (outright theft).
Who perpetuates the medical accounting fraud?? All those who refuse to question their preconceptions and are afraid of the new, the different and what comes with it: change. The medical accounting fraud is a dirty little secret that is good at staying below the radar. However, we must expose this “fraud” that is ripping us off. The system is stealing us blind, a system we allow to persist even support.
We applaud when the government “cuts costs” in healthcare. They do not actually cut costs, they reduce MediCare payments so doctors will not accept MediCare patients because they cannot afford to.
Now California, drowning in red ink, needs to cut costs and how are they doing it? Sacramento plans to reduce payments that provide health coverage for kids, 940,000 of them. Such so-called cost cutting has two perverse results: it increases costs and prevents the system from caring for us.
There is some good news. Paraphrasing Dr. Bill Wiese of New Mexico, there is more than enough money going into healthcare. That amount could easily provide health services to 300 million people if it ever got to them! We need to redistribute our dollars taking them away from #3 through #10 so they can be used for #1 and #2.
The medical accounting fraud prevents real cost reduction andsimultaneously prevents care delivery.
Next blog, we need to look at how the medical accounting fraud is behind all the ill-conceived “health care reforms” currently being discussed in Washington.