Tuesday, May 20, 2014

The Dr. Advocate

As a student of health services and a consumer I want to be able to utilize healthcare that is quality and affordable.  For the sake of the article I am saying quality simply means can I go to the doctor with the expectation that I will get better. Will I be able to visit the doctor without having to enter into an indentured servitude contract?

I ran across an article by an anesthesiologist who wrote about playing at the top of her license.  Although she is an anesthesiologist one can quickly tell she is gifted with the pen. As her undergraduate education is in English. The title is Scope of Practice: Playing at the Top of my License. She did a simple workflow analysis of her day and asks how can she best utilize her time?  According to her estimate she spent 22 minutes doing things that others could do. I like looking at things from a perspective of how will it affect my pocket.

Regardless of what one thinks the doctor charges a higher fee than a nurse and certainly higher than the cleaning crew. We could certainly look at things from the perspective that if the doctor is changing canisters when patients are waiting to get treated we there is ineffectiveness in the process. Here is a comparison using Chicago as the location of a facility for no particular reason.

Worker Salary Per Minute   22 minutes Annualized
Anesthesiologist   $        412,000.00  $            3.30  $         72.63  $  26,146.15
Nurse   $          49,359.00  $            0.40  $           8.70  $    3,132.40
Janitor  $          29,968.00  $            0.24  $           5.28  $    1,901.82

I know that some would understand this reasoning intuitively but, I like pictures so I took the information from Salary.com for the Anesthesiologist, Nurse (LVN), and Janitor. We can see that if we look at this one procedure where she has taken 22 minutes of her time to change a canister, administer an IV, as well as filling syringes and label the medication.  I am not saying there is no value in the tasks but there certainly is a difference in cost. At almost 20 times the original cost there is certainly some room for adjustment around the anesthesiologist.

These same bureaucrats and administrators eliminate lower-paid personnel–desk clerks, transport orderlies, and dictation typists, for instance–to trim their budgets, with no regard for how much they prevent physicians and nurses from truly practicing at the top of their licenses. Someone still has to do the tasks that were previously done by those employees, and that someone, too often, is a physician or nurse.  Karen S. Sibert, MD

I wonder as a consumer that perhaps the other way around, lower paid personnel should be hired based around care and treatment. So that I can get my best bang for my buck.

As an extra there is a study done by Scala, Michael where attributes the changing of canisters at about 3 minutes time and a cost of $3.42 in 2011 dollars.

Friday, May 16, 2014

Is Medicare in a State of Crisis?

Image via USA Today

Is Medicare in a state of crisis? 

According to the Medicare Trustees report Social Security Insurance fund will be depleted in 2016. The Medicare Hospital Insurance Fund will be depleted in the year 2026. According to the Trustees Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has adequate time to prepare. (Social Security 2014) 

According to an article from Reuters Mark Miller upon exhaustion or depletion the funds available will only cover 75% of the expenses not a complete usage of funds. However this 75% coverage will be collected from payroll taxes and assets.  It can be hard to imagine a fund that is diminished to support payments in full.  According to dictionary.com a crisis is defined as a stage in a sequence of events at which the trend of all future events, especially for better or for worse, is determined; turning point.  (Miller 2012)

When I think about a trust fund I think of it in two ways I think of trust funds as either a source of supplemental income or as a primary source of income. In the case of elderly people with no other form of income I think of Medicare as the sole provider of payment as such a depletion or partial depletion of a fund that pays out 75% of the coverage is a critical issue. 

Are radical measures necessary to preserve the program?
There are ways that Medicare trust fund issues can be fixed by Increasing the social security tax, lifting the payroll tax cap, raising the retirement age, or reduce the beneficiaries by having a means test. (Brandon 2013)

There are an estimated 174 million persons in the United States with private health insurance 41.7 million with Medicare and 42.5 million people with Medicaid insurance according to the CMS. The total amount paid in 2012 for CMS was $993.7 Billion while out of pocket and private insurance paid out $1.2 Trillion. (CMS 2012)  Radical Changes are needed due to the amount of coverage utilized. In the worst case scenario it can be easy to imagine a population of 41 million without healthcare.  A majority of the population with no real ability to make an income or better yet more than half of the current Medicare enrollees are between the ages of 65 and 74, the older segments of the population are growing the individuals over the age of 85 account for a little above 10% of the population, but their use of the Medicare services and overall impact on the program are substantial. (Umas 2014)

How is Medicare funded now?
Medicare is funded by two trust funds, the Hospital Insurance Trust Fund. The Hospital Trust Fund is funded by payroll taxes paid by most employees, employers and people who are self-employed. Other sources include income taxes paid on Social Security benefits, interest earned on the trust fund investments, and Medicare Part A premiums from people who aren’t eligible for premium-free Part A. Because of how the Medicare Hospital Trust Fund is funded by payroll taxes it can be logical for the elderly to come to the conclusion that they have paid for their Medicare benefits versus being on a welfare system.

The Supplementary Medical Insurance Trust Fund is funded by funds from Congress, and by premiums from people enrolled in Medicare Part B (Medical Insurance) and Medicare prescription drug coverage (Part D). Some of the other sources of funds are interest earned on the trust fund investments.  (CMS 2013)

Why do elderly people feel that Medicare is an insurance program and not a welfare program? Is this perception accurate?
Because Medicare is supported by paying into the system this is money that has been set aside versus money that is just given away. According to Merriam Webster welfare is defined as: a government program for poor or unemployed people that helps pay for their food, housing, medical costs, etc. Much in the same way that private insurance is paid for with premiums could be perceived as insurance however, through the payroll tax currently at 6.2% and caps makes Medicare cheaper than other health insurance premiums. When dealing with perceptions it depends on where the perspective comes from. If one has been paying about 6.2% of their payroll in a private investment fund with gaining interest one could expect to see significant returns, possibly more than enough to cover healthcare beyond the age of 65. (SSA 2014)

Should there be a Medicare program at all? Why should the government be involved in providing insurance to elderly people?

In 1963 Lyndon B. Johnson wanted to add adequate protection for the aged against the cost of health care. The problem was that health cost increase greatly in old age, when at the same time, income almost always declines. Prior to Medicare, only a little over one half of those aged 65 and over had some type of hospital insurance; few among the insured group had insurance covering any part of their surgical and out of hospital physicians’ cost.  Also, there were numerous instances where private insurance companies were terminating health policy. Estimates put the first year enrollee numbers at 19 million.

In 1965 Medicare and Medicaid were enacted as Title XVIII and Title XIX of the Social Security Act, extending health coverage to almost all Americans aged 65 or older and providing health care services to low-income children deprived of parental support, their caretaker relatives, the elderly, the blind, and individuals with disabilities. Seniors were the population group most likely to be living in poverty; about half had insurance coverage. (CMS 2012)

Until 2003 President George W. Bush signed into law the Medicare Modernization Act in 2003. (SSA 2014) The Medicare Prescription and Modernization Act (MMA) made the most significant changes to Medicare since the program began. MMA creates a prescription drug discount card until 2006, allows for competition among healthcare plans to foster innovation and flexibility in coverage, covers new preventative benefits, and makes numerous other changes. In 2006, the new voluntary Part D outpatient prescription drug benefit will be available to beneficiaries from private drug plans as well as Medicare Advantage plans. Employers who provide retiree drug coverage comparable to Medicare’s will be eligible for a federal subsidy.
Does Medicare have detrimental effects on the market for healthcare or on the market for health insurance?
A 1992 study in the Journal of the American Medical Association examined hospitalizations in Massachusetts and Maryland. The study found that Medicaid and uninsured patients were statistically more likely than privately insured patients to be hospitalized for avoidable conditions such as pneumonia and diabetes. (Dayaratna 2012)
Today there are plenty of news articles highlighting the uninsured figures. Some of the research has estimates at 47 Million persons in the United States without insurance.  Not having Medicare in place would add an additional 41 million to the uninsured numbers.  (PBS 2008)

Are these economic effects, offset by the positive effects of the Medicare program for the elderly? What about the positive effects of caring for the elderly for society?
According to the Heritage Foundation article titled Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured

A 2007 study in Health Affairs examined access to specialty services for patients who receive primary care from community health centers.[14] The study found that Medicaid recipients have significantly more difficulty accessing specialty care than privately insured patients.
A 2012 study in Health Affairs examined physicians’ willingness to accept new patients. Using survey data from a nationally representative sample, the study found that nearly one-third of physicians nationwide will not accept new Medicaid patients. Doctors in smaller practices, as well as doctors in metropolitan areas, are among the least inclined to accept new Medicaid patients.[15] The authors’ results suggest that this reluctance may largely be a consequence of Medicaid’s poor payment rates to doctors. (Dayaratna 2012)

It can be easy to draw the conclusion that healthcare insurance versus not having health insurance results in a lower quality of health while having private health insurance is better than having our Medicaid or Medicare. 
Are there any externalities here?
Some of the externalities or side effects from Medicare might be lower payment reimbursements, and lower quality of service. With a population of 41 million they have the ability to affect the market with the types of services they require. Based on the way that Medicare is funded I would think of this program as a positive benefit because they are helping a population by having the same population pay into the program usually before using the benefits.  


Brandon, Emily (2013) 5 Ways to Fix Social Security, US News Retrieved from

Centers for Medicare and Medicaid Services (2012) National Health Expenditures Table

Centers for Medicare and Medicaid Services (2012) About  

Dayaratna, Kevin (2012) Studies Show: Medicaid Patients Have Worse Access and

Eskow, Richard (2012) Social Security and Medicare: Six Myths Debunked Crooks and
Liars Retrieved from: http://crooksandliars.com/richard-rj-eskow/social-security-and-medicare-six-

Miller, Mark (2012) Is Social Security Really, “Exhausted?” Not at all, Reuters Retrieved

Public Broadcasting Station (2008). Critical Condition. Retrieved from: PBS Website

Social Security (2014) Trustees Report Summary, Retrieved from

Umas, Ben (2014) Medicare Benefit Population AARP Retrieved from

Sunday, May 11, 2014

A quick look at For Profit Healthcare Versus Not For Profit Healthcare in the US

According to the American Hospital Association there are roughly 5724 total hospitals in the US comprised of 2903 Nongovernment Not-for-Profit Community Hospitals and 1025 investor owned hospitals and 1,045 State and Local Government owned Hospitals (AHA 2013) Not-for-profit hospitals are organized under Section 501(c)(3) of the IRS tax code and, as such, are exempt from federal and state taxes and generally from local property and other taxes. Not-for-profit hospitals also have access to tax-exempt bond financing and have tax-deductible status for gifts and contributions (Barton 2009). Some issues according to the Barton text is that not-for-profits receive more from their communities in tax exemptions than they return to their communities in services.

The majority of hospitals in the US are the not for profit hospitals comprising 50.7% of the total. The government run hospital rate is around 18% not accounting for the federal, prison, psychiatric, or long term care facilities.  While the proprietary for profit hospitals make up approximately 17.9% of the hospitals in the US.  (AHA 2013)

According to Barton in our text book the sources of revenue for Hospitals are the following: 36.9% from private health insurance 28.2% from Medicare 17.2% from Medicaid 11% from State and local government  4.6% from other private insurance and 3.3% out of pocket. (Barton 2009) If I were just to consider the sources of revenues It is easy to come to the conclusion that a majority of hospitals receive funding from the government in one form or another. However, I can understand how this situation offers benefit to the community by servicing to both private and government insured persons. It would be redundant to duplicate services in one geographic location according to this sentiment.

According to Trussell , “The results of his study indicate that when capital structure is proxied by leverage and is measured as the book value of debt- to-assets, there is no significant difference between proprietary and not for profit organizations beyond that which the profitability, risk, growth, and size of the organizations can explain.” This is significant in the fact that we would expect because of the tax structures and sources of income for the capital structures to be different.” (Trussell, 2012).This means that regardless of where the money is coming from the revenues use similar and if there is an issue in the cost benefits of the not for profit sector then there is an issue in the for profit sector as well.

Some comparative studies of cost and performance have been done between the types of hospitals. Cost per Adjusted Patient Day, show data from the state of Washington and Northwest geographic area, ($2,081 for not-for-profit and $1,826 for government) hospitals, followed by small ($3,297 for not-for- profit and $2,504 for government) and large ($2,426 for not for-profit and $2,865 for government) hospitals (Coyne 2009). Looking at the cost per patient per day for non for profit hospitals seems to be more efficiently run in the not for profit hospitals as evidenced by cost per adjusted patient day.

In a study of hospitals in an urban setting of California, the most interesting result is the difference in cash flows between the two organizational types. Both measures of cash flows are significantly different. The results show that non-profit hospitals are good at managing their cash flows by generating cash quicker than they spend it. The same was not observed in the FP hospitals. The FP hospitals spend money quicker than they collect it, which puts them in a potential negative cash flow position. This is a significant finding that has implications for FP hospital management. (Plante 2009).  After reviewing that the cash flows in not for profit comes quicker than they collect it. I question if this is a result of fundraising and tax free donations that are given to these entities versus a for-profit institution or government institution not having access to funds. Given that the author also notes that the not for profit hospitals provide more community programs than for profit hospitals I would argue for the not for profit hospitals as providing more benefits, but I would still question if the benefits were more efficient than the for profit institutions.

After reviewing some of the information from fragmented regional studies I have come to find that not for profit hospitals makes up a majority of the hospital systems in the US and when compared to the government systems they typically perform better in Cost Adjusted Pay. With revenues and Capital structures appearing similar I would recommend a sample of hospitals around the country to confirm the similarities between capital structures and patient cost nationwide.  Barring the huge exception noted earlier and looking at the research and numbers I am now more interested if the actual issue of efficiencies of hospitals whether for profit or not for profit is similar across different business industries.


American Hospital Association (2013). Fast Facts on US Hospitals Retrieved from:

Barton, P. L. (2009). Understanding the U.S. Health Services System (4th ed). Health
Administration Press.Retrieved from http://devry.vitalsource.com/books/978-1-56793-374-1/S5.2/11

Coyne, J. C. (2009). Hospital Cost and Efficiency: Do Hospital Size and Ownership          
Type Really Matter?. Journal Of Healthcare Management, 54(3), 163-176.
Plante, C. (2009). THE DIFFERENTIATION BETWEEN FOR-PROFIT AND NONPROFIT HOSPITALS: ANOTHER LOOK. Research In Healthcare Financial Management, 12(1), 7-17.
Song, P. E. (2013). Hospital Ownership and Community Benefit: Looking Beyond Uncompensated Care. Journal Of Healthcare Management, 58(2), 126-141.
Trussel, J. (2012). A Comparison of the Capital Structures of Nonprofit and Proprietary
Health Care Organizations. Journal Of Health Care Finance, 39(1), 1-11
Vélez-González, H. (2011).

Vélez-González, H. (2011). The Role of Non-Financial Performance Measures in
Predicting Hospital Financial Performance: The Case of For-Profit System Hospitals. Journal Of Health Care Finance, 38(2), 12-23