A (free subscription required) lawsuit filed against medical device manufacturer Medtronic claims the company paid over $50 million over four years to doctors for highly questionable “consulting services“. Some physicians were paid several hundred thousand dollars a year for a few days’ work. The suit, filed by a whistleblower, sheds light on what some view as the highly questionable practice of combining marketing and research efforts, with the apparent goal of “encouraging” consulting physicians to use Medtronic devices.
With technology adoption one of the major drivers of health care cost inflation this is a particularly troubling accusation.
According to an article in the New York Times describing the suit, physicians’ use of Medtronics devices was closely tracked, with dollar values attached to each doc;
“A spreadsheet compiled by Medtronic for a June 2003 meeting in Dana Point, Calif., indicated what Medtronic hoped to accomplish with each doctor attending an event, Ms. Poteet said. This list of 230 or so doctors included an estimate of the dollar value of the devices each doctor used in surgery, including the value of the devices made by Medtronic. One doctor is described as “a 100 percent compliant M.S.D. customer,” while others were cited for “special attention.” M.S.D. referred to Medtronic Sofamor Danek, the largest competitor in the spinal device market.
A surgeon in Phoenix, who used an estimated $400,000 in devices, favored a rival maker, Spinal Concepts, the spreadsheet said. Company representatives were urged to make overtures to him. “M.S.D. corporate involvement at this program,” it said, “would help us earn a bigger share of his business on a grand scale

A new report published in Health Affairs provides an excellent history of cost-shifting, gives an excellent analogy and and quantifies its impact on private payers.
Cost shifting occurs when providers, typically hospitals, recoup lost revenue resulting from underpayments by some patients by charging other patients more. The article provides an excellent statistical summary of the issue, noting that private payers reimburse at a rate that is around 122% of costs, while Medicare is about 95% and Medicaid even lower.
Of course, the uninsured are at the bottom, with reimbursement rates at about 5% of charges.
While I have a couple minor arguments with the article’s authors, the overall message is quite clear – those of us with private health insurance are subsidizing the care for those covered under governmental programs or with no coverage at all. Yes, Virginia, we do have universal access, we just don’t have universal insurance.
This gives the lie to statements to the effect that we as a nation can’t afford universal coverage. In fact, we do have it, and pay for it via these hidden taxes.
Taxes that are quite inefficient, that are inappropriately targeted, and that penalize employers who offer health insurance (at rates their employees can afford) at the expense of those who do not. This is leading some states (Maryland is the most prominent) to try to force employers to offer health insurance at affordable costs. This is an effort on their part to get some employers’ workers off the Medicaid rolls.
What does this mean for you?
As uninsurance and underinsurance increases, so will these hidden taxes, further adding to the burden placed on employers and covered employees.

While the rest of the country’s physicians have been fighting to keep their financial heads above water due in part to Medicare reimbursement issues, their colleagues in the northernmost state have been enjoying a rare display of Federal largesse.
Showing the power that politicians have, Alaska’s physicians actually were the beneficiaries of a $53 million increase in Medicare reimbursement over the last two years. Engineered by powerful Sen Ted Stevens (R), the program ran for 2004 and 2005, before ending at the end of last year. According to news reports, the idea was to see if the increased reimbursement would lead more docs to accept Medicare patients.
The Anchorage Daily News notes the impact on reimbursement is significant:
“The office charges $133 for a 20- to 30-minute office visit with a regular patient. Blue Cross Blue Shield and Aetna — both preferred insurance providers for the clinic — cover about $113 of the $133, Warner said. Medicaid, the government insurance program for people with low incomes, pays $77.61.
Starting in 2006, Medicare will pay the least of all. While the extra money was available, Medicare would cover $87.97 of $133, or 66 percent. Now that the money is gone, Medicare will pay $53.30 for the same visit, or only 40 percent, Warner said. The federal government allows patients to make up some of the difference but not all of it. ”
Perhaps the providers would have liked to trade a continued subsidy for a couple of bridges to nowhere. These bridges, both in Alaska, have been widely seen as evidence of Congress’ predilection to spend money on projects that benefit their own constituents at the cost of others’. The much-derided bridge project would have funded the subsidy for about eight more years.

Insurance Journal reports on changes in the way the State of Maryland will deal with investigations of potentially problematic physicians in yesterday’s edition. In a study conducted by the Baltimore Sun newspaper, 120 of the state’s approxinmately 17,000 physicians were found to have five of more malpractice claims in a ten-year period.
The review of the state’s policies was initiated when a new review board found the staff was swamped and overloaded, investigating too many situations where problems did not appear to be significant. In revamping the criteria, the review board decided to:
“investigate automatically only when doctors settle three cases for $150,000 or more each over five years. Pinder (head of the review board) said the board also reviews any doctor who resolves a claim about care in the past five years with a payment of at least $1 million”
There were 11 settlements over $1 million, and only 4 physicians met the three cases for $150,000 or more over five years criterion.
There are wide differences among the states in the criteria and process for investigating physicians, ranging from Nevada and Pennsylvania which investigate each and every claim, to Massachusetts which reviews any physician with three or more claims in a ten year period.