Healthcare Enlightenment

Here is another update on the high cost of American healthcare, for those of you who subscribed or commented on “A Simple Picture”. You see, I have had it pointed out to me twice now on other blogs by a self-declared “moderate” that I am not only “ignorant” about the subject, but of late, “exponentially ignorant”. He says that there hasn’t been time to point out specific areas of my ignorance, but assures me that such details will be supplied when time affords. So, in the meantime, please consider this part of my incremental and ongoing effort to assuage my ignorance.

Here is an article (emphasis supplied by me) from this weekend’s edition (11/11/11) of USA Today newspaper that gives me, at least, some insight as to why the present non-government healthcare system might not be the paragon of free enterprise that we need to keep following the intended repeal of the dreaded Obamacare. (It’s short, so I’ll just give you the whole thing here.)

“The Senate Finance Committee is probing medical testing companies to determine if they offer insurers heavy discounts in exchange for the insurers funneling all of their Medicare tests their way , Senate investigators and a former company employee have told USA TODAY.

Researchers also fear doctors may be ordering tests that don’t need to be performed so they can receive kickbacks from insurers.

Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, have asked five major health care companies — Cigna, Laboratory Corp. of America, Aetna, UnitedHealth Group and Quest Diagnostics— to send copies of lab service agreements, contract information and corporate communications, including documents provided in recent court cases relating to the practice.

Baucus is the committee chairman and Grassley its ranking Republican.

Cigna and UnitedHealth said they have received the letters and are reviewing them, and the other companies have informed Grassley’s office they have also received the letters.

“We treat such requests seriously, and plan to cooperate,” Quest spokeswoman Wendy Bost said.

Called “pull-through,” laboratories sign contracts with insurers offering extremely low rates for a medical test in exchange for the insurers verbally agreeing that their physicians will send all of their Medicare and Medicaid cases to those laboratories.

Earlier this month, the state of California settled with Quest for $241 million and LabCorp for $49 million after a whistle-blower lawsuit accused Quest of charging California’s Medicaid five times more per test than it did other customers. A similar case in New York is under appeal after a judge dismissed the case because a plaintiff released confidential information.

“The inspector general has raised a flag and recent court cases raise concerns,” Grassley told USA TODAY.

Andrew Baker, a whistle-blower who refused to participate in the alleged practice and eventually lost his business, said the issue needs to be raised to the national level.

“The practice is blatant manipulation of Medicare to grow your market,” Baker said. “We’re talking billions of dollars per year.”

The senators said they had looked into the California and New York lawsuits. In the meantime, there had been several reports, including from the Department of Health and Human Services inspector general and MedPac, showing the companies had been overpaid.

“The procedures given to Medicare and Medicaid beneficiaries should not be influenced by improper relationships between labs and insurance companies,” Baucus said.

Baker said both the insurance companies and the labs pressured doctors to send their lab work, and that doctors received kickbacks. The labs made more money off the Medicaid and Medicare cases because the government pays a fixed rate, and because those patients usually need more lab work than do privately insured patients because Medicare patients are older. Baker said he wrote a letter to his clients saying he would not participate, and for that, he lost his job. Quest later bought Baker’s company, Unilab.

Last month, Baucus and Grassley released another committee investigation that said home health care companies were unfairly manipulating the Medicare system to increase their billings.


Official photo of United States Senator Chuck ...

Senator Grassley, R - Iowa, via Wikipedia


I must say I’m relieved that Senator Grassley’s concern is raised at the notion that private enterprise might be skimming the government of billions of dollars. If that keeps up, we could be talking serious money pretty soon.

Now, someone will surely point out that if it weren’t for those pesky government give-away programs, Medicare and Medicaid, there wouldn’t be any temptation to cheat on laboratory charges, and they would be right, but if there weren’t any banks there wouldn’t be any bank robberies either, would there?  What the GOP plans to replace those tempting give-away programs with is unknown to me. I guess I’m ignorant of that too. I await enlightenment.

About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Democratic.
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17 Responses to Healthcare Enlightenment

  1. IzaakMak says:

    “Why am I NOT surprised?” – to quote another cynical old bird. Of course, I don’t have all those yachts, private jets, and Hampton estates to pay for. I just wish I could believe a government-run alternative would be more honest…


  2. PiedType says:

    It’s this sort of fraud and waste that need to be weeded out of Medicare and other government programs before they start talking about cutting benefits. There are plenty of savings to be had in cutting waste and fraud. As for the public option, that was the key element cut from Obama’s plan. If the Dems couldn’t push it through then, I don’t see it ever happening. And although Medicare seems to be working pretty well for me right now, I abhor the idea of government being involved in any way in my health care. (I know, go figure.)


  3. John Erickson says:

    Interesting info. Just checking in so I can follow things.


  4. hlgaskins says:

    “You see, I have had it pointed out to me twice now on other blogs by a self-declared “moderate” that I am not only “ignorant” about the subject, but of late, “exponentially ignorant”.”

    We’re all uninformed, which is worsened by the fact that we’re all biased. Even those of us who’ve been given the opportunity to be informed, choose ignorance, to support bias, and facts be damned. We’re all right in our own minds, even when we’re wrong.


  5. ansonburlingame says:

    OK, here we go, again.

    We all I hope agree that Medicare waste, fraud and abuse (JUST for Medicare with no figure available for Medicaid as well) is $70 Billion per year. That is 14% “right off the top” of that $500 Billion per year program.

    I would assume that the alleged “kickbacks” for lab tests are part of that $70 Billion. OK, fix, meaning eliminate, the kickbacks and $70 Billion goes down to $X billion per year. Any idea what that number might be as well as the “new” and lower percentage of Medicare (alone) waste, fraud and abuse?

    Is this a REAL money saving situation or are we just “pissing in the ocean” of the total waste, fraud and abuse surrounding government run programs of all sorts. I wonder how many “labs” used Abramoff or thousands like him on K Street today, to support their “concerns” in this matter as well?

    Now let’s examine “bulk buying” as a way for companies to make money (with no illegal kickbacks involved). I bet the MO State Police have a “contract” with some auto maker to “bulk purchase” police cars and other “official vehicles”. I see lot’s of Fords with lights on the top. Is that a “bulk buying contract”? Probably and what is wrong with such I wonder? The State police save a ton of money and Ford makes a ton as well. Is that immoral or should it be made illlegal?

    Sure prosecute any illegal kickbacks in such cases, but abolish a “bulk buying” process, are you kidding me?

    Build the first nuclear submarine in a given class and it costs a “ton of money”. But if say 20 such submarines are eventually built using “bulk buying” for say EB (General Dynamics) the overall cost of each ship plummets, dramatically, 10’s even maybe 100’s of millions per later ship.

    Hell’s bells, one of the huge proposed cost savings of a Public Option HC program is “bulk buying” by a monopoly, usually consider an anti-trust violation, unless government does it!!!

    So what is this blog really all about? Is it bulk buying, which I think is a good idea or illegal kickbacks which I do not support? Attack the first and government and companies lose money. Fix the second and yes $70 Billion goes down to $X Billion (less the cost of prosecution as well).

    So does this blog proposes some real cost savings or are we just “p………. ocean” over a moral flaw by some crooks?



  6. Jim Wheeler says:

    @ Anson,

    Despite your suggestion to the contrary there is nothing in this post to criticize the concept of bulk-buying of services or any other component. In fact, such practices are the only way I have seen that any health insurer, including Medicare and Medicaid, has been able to use to lower costs. If Congress had seen fit to extend the authority to do that with drugs for the two big programs, healthcare costs would be much cheaper, but under pressure from industry lobbyists they declined to do that. Similarly, there is nothing in this post approving of illegal kickbacks. I would have thought that was obvious.

    The message I intended to send with this blog was that when the profit motive is foremost in a massive industry like healthcare, profit will often trump the welfare of its clients. In a system with the Public Option the industry is encouraged to lower prices through meaningful competition among insurance companies. With prices set by true competition I believe that the chances of abuse would be lower. In a single-payer system, the profit motive is eliminated, doctors are placed on salary, and clients’ best interests are placed first in priority. Again, opportunities for fraud would be diminished. At least, that is the ideal.

    I am not so naive to believe that any system will be perfect, but I am convinced that our present system invites the kind of waste and fraud detailed in this post.


  7. hlgaskins says:

    “I would assume that the alleged “kickbacks” for lab tests are part of that $70 Billion.”
    No one knows how much of the cost of Medicare, and Medicaid is from kickbacks. The $70 billion that you’ve cited is a best guess estimate based on what we know to be true. The $70 billion doesn’t include Medicare being gauged by big drug companies and numerous other charges. Then there’s the estimated 50,000 million uninsured who have no means to pay for medical services filling our emergency rooms with late-term illnesses. who do you think is paying for them?

    Imagine how much our military bill would be if we turned it all over to Haliburton and Blackwater. We already have a profiteering military industrial complex dipping into our nations till, but those dipping into the healthcare pie are bleeding us dry. What’s even worse is that a large portion of our legislation is in all of their pockets.

    Our national debt isn’t being solely caused by social services, it’s cause by unscrupulous profiteers who’ve become smarter at taking government money than the government is at stopping them. In fact I submit that well reasoned social services actually saves money. I second Jim’s call for a healthcare public option. If republicans believe that the benefit of a free market is open competition, then tell me, where is the competition in healthcare? Drug companies patent medicines and then once the patent’s run out they bundle it with another medication and patent it again, litigate the expiration of their patents, or raise prices in advance of patent expiration.

    Anson, this is a complicated issue that can’t be factored with one or two known issues “in the public eye.” It requires intensive review by truly impartial interests or our healthcare system will “break the nations back.”


  8. ansonburlingame says:

    To both,

    You said, HLG, “it’s cause by unscrupulous profiteers who’ve become smarter at taking government money than the government is at stopping them.” I agree. But just how many of such “crooks” are “out there” as a percentage of people taking government money?

    Is the 14% wasted on Medicare a good number for ALL government spending? I have no idea but if it does apply then we “waste” some $532 Billion per year (out of $3.8 Trillion spent each year). Now how many “fat cats” get a slice of that roughly $500 Billion “industry”. Is a welfare Mom cheating on food stamps a “fat cat”. On a moral basis is she not equally “immoral” as a “fat cat banker or hedge fund manager”?

    The simple fact is we have no idea how much government money is “wasted, frauded or abused”. I worked for General Dynamics for 18 months at the corporate level and NEVER saw a HINT of such crap. I worked for a major contractor for DOE for several years at the corporate level and again NEVER saw such crap. It was all about smart, hard working men and women doing their best to run a business, comply with the laws, very complicated laws and with tons of lawyers watching out for any hint of illegality. I also saw highly paid PR staffs watching carefully for the next outragous “leak” that could send the company down the tubes, rightly or wrongly.

    I spent a whole career in or very close to government related programs with $Billions at stake, every day. I NEVER ran into what was obvious to me an “unscrupulious profiteer”. Yes I saw some “sleazy bastards” along the way but no one that could be prosecuted. And some of the “sleaziest” ones that I saw in my last two years in uniform were themselves in uniform and residing in the Pentagon with lots of “star” on their collars. And then we saw a President whose sexual proclivities were pretty damn “sleazy” as well but such was “not impeachable” as well, either.

    I wonder if “blow jobs” in public offices and on public “time” correlate in any way to the 14% of waste, fraud and abuse in Medicare. Now that is an interesting question for a statistician!!!

    I also wonder how many “blow jobbers” Abramoff might have had at his disposal to send to Capital Hill or apartments nearby!!!!!



  9. ansonburlingame says:

    To both, again,

    Forget the percentage of “blow jobs” given or received. The problem is our government wastes far too much money. There are crooks in every industry and such crooks will indeed “get” some part of the pie available.

    Soultion, if you are worried about wasted money? Put less money on the table to be stolen. Spend ONLY $ 2 Trillion a year and we thus “lose” $280 Billion a year (14%), plus or minus. And if you think more laws can reduce that percentage, well listen to Abramoff again, today.



  10. afrankangle says:

    Sure we share Senator Grassley’s concern, but I appreciate your point about bank robberies.

    On a side note. We recently cruised the Caribbean. Our dinner table had couples from Ohio (us), Massachusetts, Texas, and Canada. Toward the end of the cruise, Mass asked Canada about their thoughts regarding their health care system. Canada responded “Great” and explained. BTW … Texas remained silent.


  11. ansonburlingame says:

    Now that is an interestin.g “link”.

    Someone on a cruise ship thinks their free medical care is “Great”. A “Texan” remains silent

    THERFORE we should all join hands and support “free” HC. Am I missing something here??



  12. ansonburlingame says:

    OH, by the way

    I am all in favor of “free” health care for every soul on earth.

    I just cannot despite really trying hard, to figure out how to pay for such HC. But then I don’t read all the “links” provided to clarify that simple point, either.



  13. hlgaskins says:

    “Toward the end of the cruise, Mass asked Canada about their thoughts regarding their health care system. Canada responded “Great” and explained.”

    “Someone on a cruise ship thinks their free medical care is “Great”. A “Texan” remains silent”

    There was no mention of free in that conversation, and for a good reason, Canadians pay about the same amount out of their pockets for healthcare just as we do here under our messed up system. When my wife and I lived in Edmonton Alberta, in 1981-86, we were paying about $75 a month or about what I pay now. The difference is that it’s still about the same in 2011, and the annual costs as part of their national budget has risen very little in that time.


    Try READING before commenting!


  14. ansonburlingame says:

    Great HLG,

    Now go put a Candian “unfree” system in place and convince me we can pay for it as well as still get “good” HC as most Americans get today, I will be on your side, with or without reading a bunch of links. Just tell me, in simple terms how to pay for a system that currently costs $2.5 Trillion a year.

    I am all ears.



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