Hurricanes and housing busts have already battered South Florida's image as an earthly paradise. But Miami's reputation for dysfunction is on display again this spring as the Obama Administration shifts health-care reform into high gear and a spate of studies slams the Magic City as the poster child for exorbitant medical costs. This week the Milliman Medical Cost Index listed the 2008 average private-provider costs for a Miami family of four $20,282 as the highest among the 14 major U.S. cities it studied, adding that more than 40% of that amount came out of Miamians' own pockets. That echoes recent analyses by Medicare, Dartmouth College and Families USA, a consumer group that estimates that over a million Floridians spend more than a quarter of their household incomes on health care.
While Washington tries to figure out how to slash $2 trillion from the national millstone of health-care costs, Administration officials say almost a third of those savings could be achieved by targeting Miami and other warped medical markets like it. Miami's inordinate health-care outlay 20% more than the national average "is not a pretty picture," says Kate Fitch, a principal and health-care consultant for the Seattle-based Milliman Inc. consulting firm and a co-author of its Index. That's especially true since Miami-Dade County also has one of the country's lowest median incomes ($43,495). "If the [Miami] area's practice patterns continue as they are," says Fitch, "employees there could be approaching a breaking point." (See the most common hospital mishaps.)
Miami's cost problem isn't a medical supply-and-demand issue. In fact, it's just the opposite, says Linda Quick, president of the South Florida Hospital and Healthcare Association. As a result of the deluge of doctors and hospitals that have moved to the retiree mecca since the 1960s and '70s, chasing the lucrative Medicare business as well as the area's population boom, South Florida has an "excess capacity of health-care providers and institutions," Quick notes. And to make sure they all get a piece of the action, they've created a wasteful and ill-coordinated system of health-care redundancies, from unnecessary MRIs to inpatient treatment that too often could have been cheaper outpatient treatment. Miami-Dade, for example, has one of the nation's highest hospital readmission rates and more MRI machines than Canada.
What Miami does have a shortage of is primary-care physicians and that comparative lack of preventive care has created too much reliance on more expensive specialized and emergency care. To its credit, Florida has begun to address the problem by making primary care a focus of the new medical school at Miami's Florida International University. But a bigger problem is Florida's refusal to require its doctors to carry malpractice insurance a major concern given how lax the state's medical-practice standards have been historically. More than a third of South Florida's physicians are uninsured, largely because coverage itself has become so expensive on the peninsula (although the state does require that they set aside at least $100,000 of their own assets as self-insurance). As a result, those doctors are often more concerned with covering their rear-ends against malpractice, by ordering excessive tests and treatment, than with providing the most efficient care. "We've seen too large an increase in defensive medicine here," says Quick. (See pictures of Miami.)
And then, because this is Miami, there's fraud. Miami-Dade in recent years has seen a boom in Medicare and Medicaid scams. Last week Spain arrested and sent back to the U.S. a Miami man wanted by the FBI for allegedly submitting more than $10 million in false claims for his Hialeah medical-supply company. Last month the U.S. Department of Health and Human Services reported that while only 2% of the nation's Medicare recipients live in South Florida, the area received the highest reimbursements for medical supplies like inhalation drugs about 20% more than the second highest recipient area, Cook County, Ill., which contains Chicago and is itself no slouch when it comes to fraud of this type. Florida Senator Mel Martinez, the ranking Republican on the Special Committee on Aging, has called hearings on the matter this month.
Reports like the Milliman Index, however, point up the just as troubling relation between high health-care costs and low-wage demographics like Miami's. Cities and regions with higher income and education rates tend to have access to more efficient health-care plans. In turn, they bear health-care costs that, while they might seem high in places like New York City (which is second behind Miami in the Milliman Index), are usually more in line with what residents can afford and require relatively less out-of-pocket contributions. Locales like Miami, by contrast, often offer residents "less access to [health] benefits packages with lower cost-sharing," says Kathleen Stoll, deputy executive director of Families USA in Washington. "Where you have lower income, it tends to follow, unfortunately, that you also have higher out-of-pocket expenditure." (See five truths about U.S. health care.)
As a result, Congress is looking into solutions like health-care-coverage premium subsidies for lower-income Americans. But that still won't address the out-of-control health-care costs in areas like South Florida. This month Medicare chose Miami as one of 14 cities to take part in a project to reduce unnecessary hospital readmissions. And because South Florida's population is largely elderly, more local health-care reformers are urging doctors and hospitals to examine costly and often pointless treatment for dying patients. A 2008 Dartmouth study suggested that South Florida hospitals generate especially high bills for such cases.
But as Fitch of Milliman notes, the most urgent prescription is to get payers and providers in cities like Miami "to be more penalized and incentivized" on the cost-savings front. Even if health-care plans stopped paying hospitals for unnecessary inpatient stays, others says, that kind of abuse still won't end if the plans don't also stop paying patients' doctors for visits during those stays a major moneymaker for physicians. Those doctors should instead be motivated, financially or otherwise, by plans to focus more on preventive health-care treatments. Either way, when it comes to reforming health-care albatrosses like Miami, Washington will probably have to summon up more carrots and sticks than it ever imagined.