John Oliver buys – and forgives – $15 million in medical debt

John Oliver, host of Last Week Tonight on HBO, did something truly incredible recently. He purchased nearly $15 million in medical debt…and then forgave it all.

As wonderful as that act of generosity was, it was barely a drop in the bucket for the gigantic problem of medical debt in the USA.

Disclaimer: It only cost John Oliver $60,000 to buy this debt, but that’s still hugely generous.

The U.S. health care system: leading the world in all the wrong ways

The U.S. health care system: leading the world in all the wrong ways

For as much as the United States spends on health care, you would think that we would have the best care in the world. But we don’t. In fact, the United States health care system leads the world in medical errors, according to a 2005 survey by the Commonwealth Fund.

In fact, medical errors contribute to the deaths of 210,000 to 440,000 U.S. patients each year, making medical errors the third leading causing of death for Americans, behind cancer and heart disease. A more conservative 2010 estimate from the Office of the Inspector General for Health and Human Services put the number at around 180,000.

It’s time to get angry, and it’s time to take action to fix this problem.

Why YOU should care about health policy

First of all, I’d like to welcome you to my new blog site devoted solely to health policy. I’m currently a graduate student in health administration, and I’ve also spent years working in the health care industry in areas ranging from revenue cycle management to health insurance to my current job in the public health / information technology world. There are a lot of people out there who know more than I do about these things, and a lot has been written over the years. But I’ve picked up a thing or two myself, and I’d like to share.

But isn’t this topic something that should be left in the halls of academia instead of subjecting poor, unsuspecting readers like you to jargon like “Quality-Adjusted Life Years” and “Adverse Selection Death Spiral?”

I mean, why should academics and graduate students be the only ones who have to be bored by this? I say, “Share the misery.”

But seriously. I’m writing about this topic because I sincerely believe you need to read about it. And it doesn’t really matter who YOU are. Because no matter what we study in school, no matter what we do for a living, we’re all a part of this system. We all will receive health care at some point in our lives. Plus, some of us vote, and there’s no more contentious political issue today than reforming our health care system.

We all have a stake in what happens, and the more we know, the better off we’ll all  be. So let’s get started.

Still think we can solve health care with free-market principles? Just go to the ER.

I’m going to share a Fox News story that has its roots in the federal government’s intrusion in health care and how it led to a man’s death because he had to wait too long to see a doctor.

But it’s not the government intrusion into health care you’re probably thinking of. What really killed John Verrier was not the Patient Protection and Affordable Care Act of 2009 (commonly dubbed Obamacare, but I’ll shorten it to PPACA), but the Emergency Medical Treatment and Active Labor Act of 1986 (EMTALA).

You see, this is a story about how the government intruding in health care led to the tragic death of 30-year-old ER patient John Verrier. Verrier died in the waiting room at St. Barnabas Hospital in the Bronx  more than eight hours after he checked in. Apparently the hospital did not have a policy in place to check on people in the waiting room at the ER to make sure they were still present or alive — even after they called his name to be seen and he did not answer.

A little background: EMTALA requires all hospitals that participate in Medicare (which is essentially all hospitals period) to evaluate and stabilize any patient who comes to the emergency room, regardless of ability to pay. Sounds like a good idea, right? I mean, who wants hospitals to turn people with emergency ailments away or dump them onto county hospitals without being stabilized just because they can’t pay the bill? Sadly, the law had to be written because that’s exactly what was happening in the 1980s at an alarming rate. People died. There have even been plenty of cases post-EMTALA where hospitals have dumped patients due to the inability to pay.

Why would hospitals continue to dump patients after EMTALA said they couldn’t? Because, as Avik Roy of Forbes wrote, EMTALA is “one of the great unfunded mandates in American history.”

So what does this have to do with John Verrier’s death? According to a report on the case in the New York Post, a hospital employee said, “He died because [there’s] not enough staff to take care of the number of patients we see each day. We need more staff at Saint Barnabas.”

It makes sense, doesn’t it? If the federal government requires hospitals to accept all patients regardless of their ability to pay, then you can expect two outcomes:

1) A lot of people will get care and not pay for it. In fact, according to the Centers for Medicare and Medicaid Services, 55 percent of emergency room care goes uncompensated.

2) A lot of those people who need care but cannot pay for it will end up in the emergency room because, unlike at a traditional physician practice or an urgent care, the ER has to evaluate and stabilize them BY LAW even if they can’t pay. So a lot of people who end up in the ER have non-emergent conditions and would be better off if treated at a lower level of care…that is, if the primary care or urgent care practice would actually treat them since they don’t have to. A study in Health Affairs revealed that:

Americans seek a large amount of nonemergency care in emergency departments, where they often encounter long waits to be seen. (emphasis added) Urgent care centers and retail clinics have emerged as alternatives to the emergency department for nonemergency care. We estimate that 13.7–27.1 percent of all emergency department visits could take place at one of these alternative sites, with a potential cost savings of approximately $4.4 billion annually.

So, here’s the perfect storm that led to the death of John Verrier. The unfunded mandate of EMTALA has led to a lot of  uncompensated care at hospitals, so it’s not surprising that hospitals like St. Barnabas don’t dedicate enough staff to the ER — it’s a loss center for them.

From my years of graduate-level study in health administration, I have my suspicions that management best practices are to staff the ER just enough to not violate EMTALA…walk right up to the line, but don’t cross it. Here in Indianapolis, we have a county safety-net hospital called Eskenazi Health. The previous facility was called Wishard Memorial Hospital.

And, according to one of my professors who would be in a position to have firsthand knowledge, there was a common saying among staff and management at private hospitals in the area: “Tube ’em to the Wish,” which meant that the hospital’s policy was to evaluate and stabilize an indigent patient just enough to not violate EMTALA and then dump the patient at the county hospital.

So, back to the understaffed ER at St. Barnabas and John Verrier’s deadly wait, it’s certainly worth considering that EMTALA played a role in his death. He was complaining of a rash, which on its surface would not seem like a life-threatening medical condition, but he was waiting for hours and hours just to be evaluated.

But, of course, I’m not suggesting that we stop requiring hospital emergency rooms to treat everyone without regard to their ability to pay — I’m suggesting that if we mandate something, we need to pay for it. After all, I’m not sure whether John Verrier was insured or not…so simply repealing EMTALA might have killed him too.

And that’s where the other federal law in this story — PPACA — can make a real difference. By passing EMTALA in 1986, we as a country established the idea that health care is a right and not a privilege and not a commodity that can be allocated by Adam Smith’s invisible hand. We just refused to acknowledge the price of this belief because we didn’t want to pay it. But of course there is always a price — there is no free lunch. It comes up in higher hospital bills and higher health insurance premiums for the rest of us. It comes up in hospitals being declared tax exempt because of the amount of charity care they provide to indigent patients.

By addressing the problem of millions of Americans being uninsured, we can reduce the problem of uncompensated care for hospitals that leads to understaffing AND we can give people with non-emergent conditions more appropriate care alternatives where payment will not be a barrier to treatment. PPACA is certainly not a complete answer to the problem, but it’s a big step. Maybe if Ronald Reagan had extended insurance coverage to all Americans back in 1986 instead of just mandating that hospitals see everyone in the ER without regard to ability to pay, then John Verrier and so many others in his situation might have lived.

Perverse incentives and unintended consequences everywhere

I’m a big fan of the books Freakonomics and SuperFreakonomics, co-authored by economist Steven Levitt and journalist Stephen Dubner. I especially like them in audiobook form because the reader, Dubner, throws his voice into a high shrill to demarcate when he is quoting someone else. But I digress.

The books consist of a series of anecdotes that are shocking, bizarre and occasionally inspiring. In the prologue to SuperFreakonomics, the authors tie all of the stories together with this theme. “People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.”

I firmly believe that government has an important role to play in making society more just, equitable and civil than it would otherwise be. Whether it’s a police force protecting citizens from the threat of crime or Social Security protecting the elderly and disabled from the threat of poverty, the government is in a unique position to solve certain problems that might otherwise go unsolved.

Yet both of these books include story after story of well-intentioned government policies that went terribly awry because their authors did not predict how they would play out in the real world. In a scathing indictment of government intervention, the authors point out that Franklin Roosevelt — the progressive hero who brought us Social Security — chose to donate his personal funds to the private sector research on curing polio while he was sitting in the Oval Office instead of relying on Uncle Sam. Roosevelt suffered from polio himself, so his contributions to the organization that ultimately became the March of Dimes were the ultimate example of his personal health incentives outweighing his incentives for political gain. Even though he did not live to see it happen, Roosevelt bet on the right horse because it was a private sector team led by Jonas Salk that ultimately invented the polio vaccine.

If you’ve spent any time with me at all in recent years (or if you have read some of my other blog entries), you will know that I am particularly passionate about health care reform. Indeed I was quite pleased when the Supreme Court decided to uphold the Patient Protection and Affordable Care Act, albeit by the narrowest of margins. I see this as an issue of justice since more than 50 million Americans have no health insurance, and millions more are underinsured.

Yet I am a person who tries to listen to the ideas of those who do not share my views. And I have heard a lot of objections to the law. The strongest one that I have heard, though, was the law of unintended consequences. Levitt and Dubner made the best case for this when sharing stories of other government policies gone wrong in decades past. For example, the authors demonstrated how the Americans with Disabilities Act actually discouraged employers from hiring disabled people because they feared lawsuits if they were to ever discipline or fire a bad employee who happened to be disabled.

So, if government is not the answer, what is one to do when faced with a difficult societal problem — especially one as complex and emotional as health care? Simply accept the problem as inevitable?

PPACA is undoubtedly fraught with problems. One unintended consequence of the law has already cropped up: some insurers have responded to the law’s prohibition against denying coverage to children for pre-existing conditions by not offering child-only policies at all. (This is a temporary problem since the law prohibits this practice for all ages starting in 2014 — insurers surely cannot stop selling policies altogether.)

But why would insurers make this tradeoff, even in the short term? Why would they stop selling policies to the parents of healthy kids just because they will have to cover sick kids too? Because health care itself is expensive, and the sick children who can now qualify for insurance are really expensive to cover.

This turn of events should not have come as any surprise to smart policymakers because when there is a lot of money on the line, rational humans invariably will game any system. This goes for insurers, hospitals, doctors, pharmaceutical companies, medical device manufacturers and patients. There is no way to make everybody happy. Any meaningful reform will have big winners and big losers.

Many smart patients will likely choose to pay the individual mandate penalty and go without health insurance until they get sick because the penalty is less than the cost of insurance and the insurance companies will be required to accept them regardless of health status. The higher premiums these gamers will create for everyone else will become what economists call anegative externality — a consequence of one person’s actions that is borne by another person. At least the penalty provides some counterweight to that natural inclination.

So why doesn’t the law go harder after making health care itself cheaper so insurers won’t have such a strong incentive to deny coverage to sick children? Sure, there are some provisions in the law like comparative effectiveness research, accountable care organizations, and health information technology investments, but I suspect the real reason for the kid-gloves approach to costs in the system is because politicians respond to incentives too.

When President Obama and congressional Democrats started working on this law in 2009, they knew that they would face a tough political fight. It was made tougher by Republicans who decided it was in their best political interests to oppose the law unanimously, no matter what provisions it contained. Plus, as politicians who run for re-election, everyone owed a sort of legislative debt to whoever contributed to their campaign funds if they hoped to continue raising said funds.

Since we have already established that health care is expensive, any attempt to reduce costs is invariably going to lead to some belt tightening. And, as humans who respond to incentives, everybody wants somebody else to do the most belt tightening. Are health insurance companies earning too much profit? Are pharmaceutical and medical device companies to blame? What about those high-paid doctors and huge hospital bills? Naturally, with that much money at stake, the biggest players were willing to sink millions of dollars into lobbyists and advertising campaigns to protect their interests.

So, President Obama struck deals — some might say dirty, backroom deals — with PhRMA, the American Medical Association and the American Hospital Association by shielding them from deep cost cutting provisions in exchange for their political allegiance. The Republicans were no better — they partnered with America’s Health Insurance Plans, the U.S. Chamber of Commerce and the Medical Device Manufacturers Association to campaign against the law since these players had so much to lose and the Republicans. Rather than making deals across the aisle, both sides drew lines in the sand and built up their arsenals for an ugly, televised fight that included phrases like “death panels” and “pull the plug on Grandma.” No matter what your ideology, the second half of 2009 was a low point in American politics.

This is another important concern — is it possible for anyone on either side of the aisle to do honest policymaking anymore? Won’t even the most well-intentioned bill authored by the most honest legislator ultimately be corrupted by the time it reaches the President by lobbyists who have become so endemic to the political process?

Perhaps the federal government has a role to play after all, but it is not the role that anybody on the left or right expects. It is neither a role of command and control and micromanagement nor a role of laissez faire, but a role of creating the right incentives for people to do the right thing.

Maybe we should offer big incentives for health insurance companies to cover people with pre-existing conditions instead of penalizing them for denying it. Maybe the pharmaceutical industry should be required to prove the cost-effectiveness of their drugs before the FDA along with safety and efficacy data. Maybe the government can issue huge award checks for the best ideas to solve the health care cost problem.

Maybe the federal government can dispense money to each state government (proportionate to their populations), give a few simple constraints on the results they must achieve (like covering 95 percent of their residents and not denying people for pre-existing conditions) and then create 50 laboratories for health reform plus regular workshops so that state lawmakers can learn from each other’s successes and failures. If one state can achieve the results at a lower cost than what has been allocated, they get to refund taxpayers the difference. And if you don’t like what your state is doing, you can easily move to another state.

I don’t have all the answers. Whatever the government does — or doesn’t do — there will certainly be some unintended consequences.