Fareed Zakaria has an opinion entitled Curbing the cost of health care.
“[T]he situation on the ground suggests that markets work imperfectly in this realm.”
Ya think?
He notes that France seems to get better results treating lung cancer at 1/8 of the cost. If my math is right, that means France spends 12.5 cents for every dollar we spend on treating lung cancer and gets much better results. He notes that Britain spends 1/5 what the U.S. does on diabetes treatment (20 cents per dollar) and gets better results.
This doesn’t seem to be the voice of a socialist hater of free markets. He seems almost apologetic. But one of the problems seems to be that the market incentives for health care providers aren’t in favor of efficiency or wellness.
France and Britain are better at tackling diabetes and lung disease because they take a systemic approach that gives all health-care providers incentive to focus on early detection and cost-effective treatment and that makes wellness the goal. “In America,” he said, “no one has incentives to make quality and cost-effective outcomes the goal. There are so many stakeholders and they each want to protect themselves.
We spend twice as much on health care as any other country and get outcomes that are the same or worse. That has to mean there are horrible inefficiencies in the system; and the market’s invisible hand isn’t doing a lot to sort things out. This isn’t a simple transaction where a consumer compares easily analyzed widgets and makes purchasing decisions based on clear information about quality and price or simply walks away from the transaction if there are no satisfactory offerings. Health care is complicated; quality can be subtle and delayed; price is only loosely based on cost and both are horribly opaque to the consumer. And, so often, the transaction is anything but voluntary. It’s often a matter of, literally, life and death.
I myself have an uneasiness about the Affordable Care Act. It’s a Rube Goldberg machine that might not work well if at all. But, for political reasons, it’s all we could get. The status quo is broken, cruel, and awful. Politicians demanding a return to the status quo (usually with a call for repeal and only vague mumblings about a replacement) are, at best, being petulant because “their side” lost.
Retail US price of a vial of insulin: Over $500.
Retail US price of an insulin pump: Not sure, I have heard it’s almost $9,000.
Retail US price of an infusion set (change every 3 days): $15.
Number of EU members who allow “Corn Sugar” into their food stream: 0
There’s PROFIT to be made by ineffectively treating Type-2 Diabetes.
There’s profit to made to induce Type-2 Diabetes and then more profit to ineffectively treat it.
Of course if we ate better and exercised more a lot of these problems would go away.
I think one of the points of the linked article was that healthier lifestyles aren’t necessarily a reason. The bit about the French noted how much more they smoked and, therefore, how much more common lung cancer was. Even so, they manage to treat it cheaper and more effectively.
I’m in favor of eating better and exercising more. People should put down the Cheetos and get off their asses and take a walk. But it’s not all moral failings – we should also design our cities so that taking a walk or run isn’t a matter of breathing in a bunch of exhaust fumes, diving into a drainage ditch when a car comes by, or dodging traffic.
If we’re going to have farm subsidies, we might be better off subsidizing locally grown vegetables instead of mass produced grains that are going to be used to make processed but tasty food-like substances.
So much room for improvement. But a lot of it is hard. And a lot of it involves disturbing interests that are vested in the current way of doing things.
so you are saying we just need a war to knock down 75% of the buildings and destroy 90% of the roads so we can rebuild more effectively to encourage a healthier life style?
I am going to predict there are some issues in French health care that make their treatment of lung cancer cheaper. Longer time to get in to see Doctors? Less access to machines? Less compensation to doctors? I am not trying to invalidate what you are saying here, but do wonder if our instant gratification life here in the U.S. (and other issues) would mean that we can’t duplicate France’s cheaper health care for lung cancer.
The fee for service system when it comes to healthcare as you have alluded to is inherently flawed. If you go to a surgeon, he will recommend surgery as this is how he is paid. If you go to a physical therapist he will recommend therapy and so on. We all know that the answer is prevention or “wellness” but that is a concept that still needs to be defined. Sure, eat better, exercise more, no high fructose corn syrup. But there is so much more to it than that.
When your only tool is a hammer, the whole world looks like nails.
Good analogy. American medical practice is siloed, with each specialty and subspecialty working their piece of the widget, er, I mean patient.
Many hospitals now have hospitalists that oversee the general care of a patient that is in the hospital for an episode of care. They consult with the specialists and allied healthcare providers to develop a general care plan for the patient. But once the patient is discharged, it falls back to a PCP that may or may not effectively manage a patient’s condition.
Many physicians and healthcare plans would like to make prevention and disease management a larger component of the patient focus. For healthcare plans, however, the incentives are not huge to focus on complex prevention strategies. It seems counterintuitive, and plans do have care managers. But in the employer-based healthcare market, employers change plans with such frequency that money spend on managing complex cases may cost them money and enrich the next plan that get’s the employer’s business.
See- when I look at health care, I see that ‘the whole world looking like nails’ is that the solution to all is insurance.
If anything, insurance appears to me to be the very thing that drives up the cost of care. My recent hospitalization only reinforced this. The first thing I was asked to do in the ER was to show my ID and insurance card. Mind you, they thought I was having a heart attack. No rush. But once that was settled, they ran an ungodly number of tests on me, and the sense I got- confirmed by my wife who is an RN & midwife- is that the insurance covers it, so they run ’em all.
That’s no way to keep the cost down. Moreover, I’m not convinced that anything was learned, except that the hospital has a great paper trail for CYA purposes. Nobody ever discussed cost, that’s for sure. When you have a system that says “Insurance will pay for A, B, & C, and will pay X, Y, & Z” I figure you can pretty well be assured that you will get A, B, & C whether you need it or not, and that it will cost all of X, Y, & Z.
Gosh Mike,
I hope you are okay?
Yes, I hope are ok. But could you pay your charges out-of-pocket? Be thankful that you have healthcare benefits coverage.
There are ways to keep the cost down. Emulate the healthcare systems of other Western democracies that provide universal coverage at far lower costs with better outcomes.Generate market power by creating purchasing alliances among payors. Global healthcare budgets for providers. Capitation, although providers have proven very poor in managing the cost of their patients.
But we have a healthcare delivery system where providers have huge market power, payors (except for Medicare and Medicaid) have little market power, and individual consumers have no market power or even pricing information.
If we assume that employers would just as willingly pay employees the extra amount they already provide to the insurance companies, simple math says we can all afford our insurance charges out-of-pocket. Otherwise, insurance companies would lose money and pay more in claims than they receive in premiums.
Perhaps the above comment doesn’t need to be stated, but people do tend to forget that health insurance premiums > benefits.
I wonder if there is a sort of “stickiness” to health insurance benefits as compensation that’s not present with straight up cash compensation. You can sort of hire the next guy at $0.50 less per hour. I imagine it’s tougher to target a reduction in health benefits so precisely or by one employee at a time.
Good question. If we sassume that employers pay more for health care now than they would if we unlinked the two, it really changes the dynamic of health care reform quite a bit.
Insurance is a risk hedging scheme against loss, which is uncertain. Most employers would pocket their premiums. A few would make only a downpayment on an ED trip, exhaust their assets and file for bankruptcy.
From an underwriting perspective employer-based health insurance once made sense. You have groups of people pooled that did no come together for the purpose of seeking health benefits. There were new employees coming into the pools and others leaving the pools.. So you avoid adverse selection. But over the the years as more employers (small employers, low wage employers) dropped coverage, sicker employees and families concentrated among employers with generous benefits (often government jobs) and their medical losses exploded.
(should not have used the word “all” above and should have replaced it with “on average”)
Granted, this was a few years ago (1993 about). I think I have most of the details correct. My daughter was on a school term in Italy. She got sick there and had to see a doctor 2 times. Since she had a chronic condition, we were prepared that this might happen and we had the name of a specific doctor she should see if she got sick. She had to see him in a hospital-based clinic. The doctor arrived on a motorbike. He weighed her and took her temperature himself. He performed a test and faxed the results to her doctor in Indiana, along with his preferred treatment. Her doctor here agreed with the treatment plan. The Italian doctor told her to go to the pharmacy and buy a particular antibiotic, take it and come back in ten days, but call him if she didn’t feel better. The antibiotic was one we were familiar with as she had taken it by Rx before. It costs Hundreds of $$ here. She bought it over the counter in Italy for about $15. She got better. The hospital sent us a bill for about $100 and we wired them the money from our bank.
“He notes that France seems to get better results treating lung cancer at 1/8 of the cost.”
“Seems to get better results?” So do they get better results, or don’t they? What do they consider “better results?” Is their treatment “Well, if you have what is Stage 1 in the US, you get treatment. If you have any stage more advance than that, you get nothing.”
Personally I’m all for single payer. I’m planning within five years, we will have single payer. Government should own and run everything that has to do with healthcare: Hospitals, employees, pharmaceutical research. This should allow for much cheaper costs. No more greedy hospital CEOs or doctors making huge amounts of cash. If the POTUS is capped at $400K/year, then hospital admins and doctors with specialties should be capped at $200K/year. Think of the tens of millions saved right there.
I can’t wait. I should have easily over six-figures saved, plus a paid-off home. I’m hoping single payer rolls around so I can quit my OK paying job ($50K/year) that I really don’t care to work (too many weekends and Holidays) and do something else that is easier and doesn’t include so many weekends and Holidays, or the possibility of getting put on a night shift. I figure the less I make, the more I win because tax hikes are going to have to be huge to continue to pay for the status quo. Status quo is what everyone will demand, so my ideas for slashing costs (full nationalization of the entire system) likely won’t happen.
Since France is such a great model of how things should be, I found another thing we can mimic…negative interest rates for government bonds!
http://hosted.ap.org/dynamic/stories/E/EU_FRANCE_FINANCIAL_CRISIS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-07-09-10-45-53
“In Monday’s bond sale, the treasury sold three-month bonds at -0.005 percent, and six-month bonds at -0.006 percent. The treasury agency says it’s the first time they have registered negative yields.”
With all the savings in healthcare, one has to wonder why doesn’t their government have the money to pay even a tenth of a percent on their bonds?
Negative bond yields are a sign of financial strength, not weakness in the Euro zone. German bonds recently sold at a negative yield, also.
http://articles.marketwatch.com/2012-05-24/markets/31831692_1_treasury-note-euro-zone-conventional-bonds
France is paying a yield on the bonds. But investors have bid the prices up where the premium on the instruments exceeds the yield.
For an enlightening “insider’s view” of healthcare costs check out truecostofhealthcare.org by Dr. David Belk.
I think we’d do better if we could separate health insurance from employment, and make it possible to obtain policies that you could maintain as long as you wanted – even when moving between states and changing employers and family situations.
This does seem to be an area where the interstate commerce clause would actually apply – there legitimate federal authority for legislation in this area.
I don’t know how to wave the magic wand to make this possible, though – the inertia of the current situation is massive.
Also, a continuing plea – let’s be specific and differentiate among:
= Health Maintenance
= Health Insurance
= Health Care
Always bugs me when people talk about Health Insurance without considering whether there will be actual Health Care to go with it, as if the insurance is an end in itself.