Time Magazine had an interesting article explaining how and why health care bills are so expensive.  A for-profit system encourages waste, greed, and outlandish markups.  Executive compensation is ridiculous.  The article gives great details but here are some excerpts.

“Yet those who work in the health care industry and those who argue over health care policy seem inured to the shock. When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?”

“The result is a uniquely American gold rush for those who provide everything from wonder drugs to canes to high-tech implants to CT scans to hospital bill-coding and collection services. In hundreds of small and midsize cities across the country — from Stamford, Conn., to Marlton, N.J., to Oklahoma City — the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives. And in our largest cities, the system offers lavish paychecks even to midlevel hospital managers, like the 14 administrators at New York City’s Memorial Sloan-Kettering Cancer Center who are paid over $500,000 a year, including six who make over $1 million.”


“Taken as a whole, these powerful institutions and the bills they churn out dominate the nation’s economy and put demands on taxpayers to a degree unequaled anywhere else on earth. In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.”

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Bloomberg News had an interesting article on a recent study by federal health care inspectors which said U.S. nursing home industry overbills Medicare at least $1.5 billion a year for treatments patients don’t need or never receive. That is incredible.  The national for profit chains were the worse offenders.  78 percent of $105 billion in revenues went to for-profits in 2010, up from 72 percent in 2002.  The emergence of national for profit chains is fueling waste, fraud and patient harm in the $2.8 trillion U.S health care sector.

Thirty per cent of claims sampled from for- profit homes were deemed improper, compared to just 12 percent from non-profits, according to data Bloomberg News obtained from the inspector general’s office of the U.S. Department of Health and Human Services.

“The November study that found $1.5 billion in improper nursing-home bills — equivalent to about 5 percent of total Medicare outlays to the facilities — was by the U.S. Department of Health and Human Services office of inspector general.  It followed a 2010 OIG report that found for-profit nursing homes were nearly twice as likely as nonprofits to bill Medicare at the highest rate for patients of similar ages and diagnoses.”

Nursing homes employ more than 1.6 million workers, second only to hospitals in the health care sector, according to the Alliance for Quality Nursing Home Care, the trade group representing for-profit facilities.   Most of these workers are certified nurse aides who get no health benefits and are paid minimun wage.  Understaffing leads to burn-out, stress, and lashing out at residents.

The 10 largest for-profit nursing-home chains employed 37 percent fewer registered nurses per patient-day between 2003 and 2008 — and received 59 percent more deficiency notices from government inspectors — than nonprofits did, according to a study published last year in the journal Health Services Research.”

“At a nursing home in South Carolina owned by Life Care Centers of America Inc., an 80-year-old woman who couldn’t control her head or keep her eyes open was placed in a standing frame for 84 minutes of physical and occupational therapy just two days before she died — one in a number of Life Care overcharges for unnecessary care, according to civil fraud allegations filed in November by the U.S. Justice Department in federal court in Chattanooga.”

In a civil complaint unsealed last month, U.S. prosecutors accused Life Care of billing Medicare for unnecessary and sometimes harmful treatments at its 230 nursing homes between 2006 and 2012.

This is what happens when for profit chains put profits over people.

Other blogs have discussed this report here and here.


USA Today reported that home health care companies made an average 19.4% profit in 2010, a report shows, prompting the independent board that oversees Medicare to again ask Congress to lower reimbursement rates for these companies.  The Medicare Payment Advisory Commission (MedPAC) reports each March about trends in overall Medicare spending and how to save money. Their latest findings include:

•The government saved money by increasing the use of generic drugs for Medicare recipients. Beneficiaries who pay some share of their drug costs are more likely to use generics than lower-income patients who don’t have to pay, the study showed.

•Medicare Part D spending for prescription medications rose from $42.5 billion in 2006 to $59 billion in 2011.

•Medicare Advantage enrollment grew to 12.1 million beneficiaries in 2011. That counters predictions by opponents of the 2010 health care law who said Medicare Advantage payments would drop.

The home health care industry is fighting a proposed law that would require them to pay employees minimum wage and overtime. They argue that seniors will have to pay more money and will have to have several caregivers, rather than one who can stay all the time, because the companies won’t have the money they need to pay those benefits. But Mark Miller, MedPAC’s executive director, said the board expects the industry to see a 19.8% profit margin in 2013 from Medicare.