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Thursday, March 3, 2011 10:15 am

Living too high off the hog

Springfield’s booming health care economy can’t keep living like this

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Springfield has become to sick people what Decatur is to soybeans, a major regional processing center in which raw materials are processed by the latest in high-tech machinery into novel products such as tennis-playing octogenarians and bankers with a 60-year-old’s bank account and a 30-year-old’s heart. According to published reports, this year the local medico-insurance industry might for the first time employ more people than state government. That is not enough for folks like mayoral candidate Sheila Stocks-Smith, who believe (as she put it in her press conference the other day), “Springfield has to do more to position itself to attract that sector of the economy to our community.”

My hearing isn’t what it used to be, but to my ear that sounds a lot like the businessmen a century ago telling each other that the industrial future of Springfield lay in its coal mines. The fat seams of money that health care providers have been mining might run out sooner than they think. Consider for a moment what is driving this boom in applied biology:

  • A fee-for-service model that pays physicians for treatments rather than for cures.
  • Over-using patients (mainly those with multiple and chronic conditions) who consume vastly disproportionate amounts of medical services, often by visiting different emergency rooms and different physicians, getting treatment from (and racking up bills at) each that the others know nothing about. A typical result was reported by Atul Gawande in The New Yorker of Jan. 24: Data from 250 private health plans covering 100,000 people showed that just five percent of them accounted for 60 percent of the spending.  
  • A hodgepodge of public and private insurance providers that exacts substantial costs in paper-pushing. In fact, administrative costs account for the increment of difference in the cost of U.S. health care compared to most European nations that use a simpler single-payer system.
  • Among the many offenses against fairness and common sense built into the federal tax code is its failure to tax as compensation the benefit provided by employer-sponsored heath insurance. Subsidizing company insurance this way disguises the true cost of going to the doctor from the people who have it – and if you make any service seem cheaper than it is, people naturally will use it even when they don’t need it.
No other developed nation spends more for health care or gets less for the money than the U.S. The bill has been rising faster than the per-capita gross domestic product for 40 years, and by 2040 will consume some 40 percent of GDP. Such careless allocation of health resources is not sustainable, and armies of cost-cutters are massing to attack this waste on several fronts.

Better recordkeeping means that disproportionate users of care will be identified and helped. Wider use of “comparative effectiveness analysis” will spread information about the most effective treatments. In the private sector, fewer companies can afford to offer gold-plated health plans, or find they don’t need to in a buyer’s job market, so goodbye ten-buck doctor visits.

For its part, the State of Illinois is finally beginning to control Medicaid costs. By 2015, half of the state’s 2.8 million Medicaid recipients are to be enrolled in what amounts to managed care, that by coordinating care through a single primary care provider should better focus treatment. Comptroller Judy Barr Topinka has argued that if old people are provided the help they need to leave expensive nursing homes and move back home, it would lop another $100 million off medical costs.

In Washington, deficit-cutters have finally noticed that the money the federal treasury does not receive because private-sector workers do not pay taxes on compensation in the form of their company-provided health plans amounts to more than a quarter of a trillion bucks a year. And while in its present form the Obama health plan will expand the ranks of the covered, and thus open up new opportunities for the pill-pushers, expansion was sensibly linked to cost-saving – not merely cost-cutting – that attempts to limit ineffective treatments in order to redirect resources toward effective ones.

Doing more with less will be good news for patients, for taxpayers and for most businesses. It is not likely to be such good news for a Springfield medical industry that has grown fat from a diet that is much too rich. Health care will remain robust enough to sustain Springfield’s economy (if not always its patients) over the short term. The longer-term prognosis is not so positive. Before building a future that depends on it, local leaders ought to demand a second opinion, just to make sure.  

Contact James Krohe Jr. at peptobiz@mindspring.com.

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