That said, people on my side of the issue should admit that we could lower overall health care costs (or at least slow their rise) by having a true single-payer plan and putting most doctors on fixed salaries in small cooperatives, thereby altering their incentives to spend on wasteful capital expenditures. (How many years would it take for costs to fall?) That's not, however, what we'll be getting, so beware the bait and switch. Under any plausible health care reform scenario, health care expenditures in America will rise rather than fall. If only we had a betting market on this...
Addendum: Here is Arnold's more direct reply.
I'll bite: nationalizing the health care system to an NHS style system would probably save money, at least in the short run. Obviously, if you paid doctors at the GS-15 rate, the system would cost a lot less.
But this raises a lot of questions:
- Is it politically feasible to put doctors on a GS-15 salary? I don't see it happening; just look at the way that the AMA has skewed Medicare reimbursement rates. And even if we did, I expect that over time you'd see a rather dramatic departure of top talent from the medical sector. Some doctors are purely motivated by a desire to serve humanity. Most aren't. The government has a problem attracting the highest caliber workers because high-caliber workers do not want to be paid on a civil service scheme--not only because of the low average wage, but also because the system is set up to reward seniority and credentials, not talent.
- Are government systems good at innovation? C'mon. The only vaguely innovative government sector is defense, which achieves that innovation by wasting money by the barrelful. Yes, yes, the VA computer systems. Against which, I give you . . . the rest of the government. I can make any idea look swell if I get to pick the single successful example and ignore the other failures.
- Will an American national health care system look anything at all like the idealized version debated on the pages of liberal policy magazines? No. It will look like Medicare.
- How much money do administrative costs suck out of our wallets? There are a lot of administrative costs in the private sector. Advocates for single payer like to argue as if the entire administrative overhead of private insurance companies is dedicated to denying valid claims and culling sick patients out of their files. But given that administrative costs are only 15% of private spending, and that most administrative costs are boring things like negotiating with doctors and processing claims, any savings here is likely to be a rounding error in the budget.
- How much of our capital spending is actually wasteful? Today's wasteful capital spending is tomorrow's cheap MRI.
Right now, just about half the healthcare dollars spent in America come out of government coffers. This is expected, in the not-too-distant future, to open up unsustainable holes in the budget. Single payer will patch those holes only if we can generate a dollar in reduced spending on the currently uncovered for every new dollar we want to spend on the sickly. The three general proposals to do so are:
- Reduce administrative costs
- Squeeze out pharma profits
- Preventative care
The only way we are actually going to save money on the system is to do less stuff. That is politically unpalatable. About which I'm kind of glad.
Is there any wonder that when society determines everyone should have a right to a pony, all of society will have to pony up?
teehee
Here's what I know:
We would greatly reduce healthcare expenses if people would eat right and exercise.
Here's what I can't figure out:
How do you get people to do this?
It seems that the short term gratification from sloth and gluttony beats out the appeal of a long healthy life ,(by a fairly wide margin).
Any ideas on a good health economic incentive package that'll tempt your average couch potato?
Most states have mandatory auto-liability insurance laws. Maybe the same principle could be applied to *catastrophic* health insurance so if someone has a heart attack the hospital will get their fair payment for saving the guy's life. "Normal" health insurance though is a different matter. Most routine care (child has a cold, annual physical etc...) should *not* be insured, although I could see a tax deduction for the middle class/subsidy for the poor for it... and perhaps some kind of subsidy for the non-rich with long term medical problems.
So, do the Europeans use pixie dust, or is it unicorn tears, to produce better health outcomes at a much lower cost? Because such a thing is clearly unpossible, according to Megan.
Yes, sam, getting healthcare is just like getting a pony. Recreational heart bypasses for all!
Of course, this line of non-thinking is easily debunked by comparison with Japan, which has the world's most avid consumers of health care. And yet their costs are still much lower than here in America.
I always wonder, when I read Megan's posts on health care, why she seems to think that health care is the one area in which cost-benefit analyses shouldn't apply. She inevitably assumes that more, better health care is better for society, without ever looking at the costs.
Megan writes: "And even if we did, I expect that over time you'd see a rather dramatic departure of top talent from the medical sector."
And? So?
Megan does not consider whether having "pretty good talent in the medical sector" at lower prices is better for society than having "top talent" at exorbitant prices. As usual, Megan simply assumes that our only societal priority is to have "top talent" in the medical field, apparently regardless of the price.
Megan continues: "Are government systems good at innovation? C'mon."
Again, Megan doesn't even consider whether having mediocre innovation at low prices is better for society than having good innovation at high prices.
For Megan, there is only one priority in health care: to make sure that we have the best, most talented, most innovative system. Well, I'm sorry, but shouldn't be the only priority.
I'd much rather have a pretty good, fairly talented, somewhat innovative health care system... at low prices.
That's what we should be aiming for. I don't think that any of the Democrats' plans even aim in this direction, but Megan's single minded focus on quality leaves a lot of the relevant considerations out.
Mr. Crabby Pants -
The last I heard, England was leaving hospital patients in ambulances to meet the '4 hour' window for treatment. While that clearly lowers costs, I can't quite see how that improves health outcomes.
More explicitly:
European systems explicitly ration care. The elites travel to the US to get care unavailable in their home countries. Hospitals in Canada routinely send their sickest patients to the US for healthcare unavailable in Canada.
I'm unclear how transforming our healthcare system to a European style system would improve it. Perhaps we could start by refusing patients from Europe or Canada.
Mr Crabby Pants:
Europeans lifestyles are far healthier than ours. They eat healthier meals in healthier ways. They are also more active physically.
DDP,
Europeans also smoke like chimneys and drink like fish. How does that fit in with the healthier lifestyle claim?
"The elites travel to the US to get care unavailable in their home countries. Hospitals in Canada routinely send their sickest patients to the US for healthcare unavailable in Canada."
Really? How often does this happen? Can you actually find more than one or two surprising anecdotes?
More to the point, even if hundreds of thousands of Europeans and, say, ALL OF CANADA was coming to the U.S. for healthcare, it still doesn't even come close to explaining why we spend 50-150% more per capita as other first world countries.
Do you really think they don't have really advanced medical care in Germany and France and Japan?
Why do you make excuses for a failing system? Are you employed by the health insurance industry?
No Mike, eating right and exercising will not save the system much money.
The big bucks are spent on the last year of life.
While eating right and exercising may mean that last year of life occurs at little later -- say at 85 rather than 80 -- it will still occur and require large scale expenditures.
Essentially the only way we can significantly reduce expenditures under either a public or private system is to let grandma and granddad die peacefully without making heroic efforts to prolong their life. All the libertarian solutions always come down to doing this by rationing through price.
When someone, liberal, conservative or libertarian comes up with another realistic way to keep expenses from rising let me know. I'll be glad to reason, but so far all I see on all sides is political posturing.
Here's an argument against national health care that I got from the comments of Arnold Kling's blog:
http://econlog.econlib.org/archives/2008/07/replying_to_tho.html
Deadweight loss of taxation (instead of prices) will be greater than any savings from administrative costs. Of course, the deadweight loss will be hidden. We'll just have lower growth.
There is no such thing as a single-payer health system, even in Europe. There will always be two health care systems: one for people with money, one for people without money. The one for people with money will always be superior, whether that means increased access to care, shortened wait periods, longer in-hospital stays, better rooms, whatever. This is already true in both Canada and Europe, and the people who can afford it routinely go to private clinics. Health care policy seems largely to be an attempt to make sure that the health care system for people without money is as good as it can be.
If you put doctors on a GS-15 salary, a lot of them would simply opt to go cash only. They'd make more money and do less work. Many are already doing that. Right now, the practice seems to be limited largely to primary care, but if the government serious considered switching to single-payer, you can bet your bottom dollar that the radiologists and other specialists who are currently making $400,000 and up would go private instantly.
There is no possible way of ensuring that everyone has equal access to health care, as people with money will always be able to find someone who will take that money. Any policy which does not assume this cannot succeed.
No Mike, eating right and exercising will not save the system much money.
The big bucks are spent on the last year of life.
While eating right and exercising may mean that last year of life occurs at little later -- say at 85 rather than 80 -- it will still occur and require large scale expenditures.
Essentially the only way we can significantly reduce expenditures under either a public or private system is to let grandma and granddad die peacefully without making heroic efforts to prolong their life. All the libertarian solutions always come down to doing this by rationing through price.
When someone, liberal, conservative or libertarian comes up with another realistic way to keep expenses from rising let me know. I'll be glad to listen, but so far all I see on all sides is political posturing.
Where do you get the 16% administrative cost for healthcare in this country? From the insurance companies?
The NEJM article on the subject (http://content.nejm.org/cgi/content/short/349/8/768) states that administrative costs are 31% of the total and other (easily googled)sources state that the US has six times the administrative costs of the Europeans. It seems that a lot could be done to alleviate this cost, but the insurers have no incentive to do so as it will cut into profits.
When Ronald Reagan de-regulated the health care industry, there was (by regulation) one short paper that had to be filled out for each patient to access the health insurance. This universal application could be filled out by one person (not the doctor usually)in a very short period of time. When deregulation occured the insurers realized that they could cause a death by paperwork and physicians, not being businessmen for the most part were caught in this paperwork jungle. The result is the industrialization of medicine causing the rapid expansion of support staff and a further escalation of countermeasures by insurers. That simple act cost us a lot of money.
"The only way we are actually going to save money on the system is to do less stuff. That is politically unpalatable. About which I'm kind of glad."
That is illogical. The sheer enormity of the expense means we are foregoing something, just not the things we've grown accustomed to. If there were a reason to believe that we've grown accustomed to practices because they are successful at improving or maintaining health, that would be good, but there is no reason to believe this.
We have not had a true market system in healthcare for years. We are not in a situation where good provision of healthcare has meant profitability. Expertly gaming the system makes for profitabilty. The practices to which we have grown accustomed are good for making money. It is precisely because we spend so much that provision of healthcare is getting squeezed out.
It seems that a lot could be done to alleviate this cost, but the insurers have no incentive to do so as it will cut into profits.
Say what? Cutting their expenses will cut into profits?
"Say what? Cutting their expenses will cut into profits?"
Ironically, yes.
While any individual insurer wants to keep costs low, the insurance industry as a whole works to keep costs high. The more catastrophic medical costs are, the more you need insurance. The more you need it, the more you pay.
While any individual insurer wants to keep costs low, the insurance industry as a whole works to keep costs high.
Are you suggesting that there's an antitrust lawsuit lurking there, or is there some other mechanism that gives this outcome? Keeping in mind that the question is about administrative expenses: actuaries, fraud investigators, and paper shufflers.
"We would greatly reduce healthcare expenses if people would eat right and exercise."
Mike G, this, as Spencer has said above, is almost certainly untrue. People like to say the same thing about smoking, that if nobody smoked health costs would be much lower.
This seems to make sense because we've all seen the smokers in the hospital dying of emphysema but, again as Spencer said, you are not going to prevent them from dying by getting them to quit smoking. You're not even going to get them to die more cheaply, especially not today when it seems medical science has advanced to the point where it can keep just about anybody alive indefinitely, for certain values of 'alive'. (Just see that poor girl whose name escapes me that the congressional Repubs went all crazy over a few years back.)
No, all you do is push the amazingly expensive costs of dying back a few years. And during those few years you get to spend money on routine medical expenses, at the very least, and more if they should use that time to develop some other chronic condition.
Nope, the only way to limit costs is to limit care. And despite what the leftists here and everywhere tell us, the European and other socialized health systems are not "just like what the middle-class and rich get here only free!" they are worse.
There is rationing. You do wait months for "elective surgery" where "elective" is defined to include joint-replacement and non-emergency coronary bypass surgery. You do get reduced care for the aged and others who buraeucrats define as "not worth the expense". You do end up with maternity wards that don't have enough beds so you have to fly folk half-way across the country during pregnancy.
And you do get bizarre sounding work-arounds like the patients in the ambulances to meet ER quotas: note that this isn't people doing crazy things, it's just people responding rationally to the incentives they are given. They were incentivized to meet ER quotas and they did. Sure, you could come up with regulations to thwart the "wait in the ambulance" ruse but the point is that you will never be as clever at thinking up the regulations as all the people are who have to follow the incentives you lay out. There will always be another bad outcome that you are rewarding without realizing it.
Our system leaves people out in the cold. No doubt. And it leaves out the poor more than the middle class. This seems unfair. But in Europe, the rich, as others have pointed out, still manage to take care of themselves, and it's everybody below that who gets to share in the suffering. Now perhaps sharing the suffering is preferable but given that one of the costs of that sharing is a near shut-down of progress, it doesn't seem worth it to me.
Because the one thing about the free-market is that stuff that only the rich got to take advantage of and which seemed so unequal and unfair yesterday are today's blue-light special at WalMart.
I firmly believe that the same would be true if we took the truly radical approach of opening a real market for health insurance and health-care. Pretty soon a reasonable basic level of care would be cheaply available, cheaply enough that we could just subsidize participation by those few unfortuantes unable to afford it. And meanwhile, the possibilities at the high end would be limitless and constantly falling in price down to the lower levels.
Just like it works in literally every other market we have.
It really drives me nuts the way leftist commenters constantly point to European models and claim that they get equivalent care for less money than we do here in America. First of all, there is no single "European" health care model. That aside, having personally grown up in the UK and having spent much of my post college life in France and Germany, I can say without hesitation that the QUALITY of healthcare in the US is, on the whole, far superior to that on offer in those countries. The biggest difference is precisely in the fact that health care is rationed out - in the UK no one even bothers trying to go to the doctor for a minor ailment because by the time you can get an appointment you have already recovered. Granted, some US hospitals are atrocious, but there is a reason most surveys find that Americans, though very dissatisfied with the cost of healthcare, have very few complaints about the quality of health care they recieve for said cost.
This is not to say that ours is a perfect system. It clearly is not. But we are most definitely not going to improve things by channeling US healthcare spending into a huge governmetn HMO. What our system needs is more competition and freer markets in health insurance. Our system is screwed up largely because there is already too much government intervention, not too little.
The solution for single-payer is to outlaw private hospital/clinics. For the rich to use the same government clinics as the rest of us. That'll teach em.
"Are you suggesting that there's an antitrust lawsuit lurking there, or is there some other mechanism that gives this outcome? Keeping in mind that the question is about administrative expenses: actuaries, fraud investigators, and paper shufflers."
Ah, I was considering the entirety of medical care provision, so my comment was probably inapplicable. Even so, there would be no potential antitrust suit. For the most part, medical insurance providers merely need to keep government from significant interference in order to keep costs spiralling upward. Our cultural biases - death is unacceptable at any age, erring on the safe side is worth any expense - do the rest.
Our cultural biases - death is unacceptable at any age, erring on the safe side is worth any expense - do the rest.
Indeed, although we'd have that problem even in the absence of insurance; insurance merely conditions us to expect that other people to pay for our extravagant fear of death. And indeed, catering to that fear is quite profitable.
Crusader, I'm not sure if you were being facetious or not, but that is in fact exactly what they did in Canada.
Recently their Supreme Court ruled that this was no longer allowable as you couldn't forbid someone to get care from a private clinic if the government was unable to provide them with care. And in the case in question, the care was not available from the government's system.
Of course, that will be less of a concern once we've adopted a similar system and there is no expensive, cutting-edge treatments for anybody to hear about being developed in the country to the south. Rather, we'll just soldier on, happy that our government has given us free health-care and never noticing that the price we've paid for it is all further medical advance.
Bob - don't you understand? It's all about sticking it to the greedy evil rich. Not providing excellent health care services. That's of secondary importance. Revenge for the lower classes!
The Europeans also enjoy a high level of security for a fraction of what the U.S. spends on defense. I wonder how that could be?
Now I know you're being facetious, Crusader.
Carry on.
Allow me to be the first to endorse Ryan Davidson's arguments and linkage.
Having just heard another NPR piece gushing over Euro-health paradise (Switzerland this time), I feel it all the more important to emphasize the cash-only alternative for most stuff. Insurance coverage for each visit to any doctor is as foolish as car insurance that covers oil changes and gasoline.
In the latter, you could imagine the insurance companies scrutinizing each oil change and fuel purchase. "Did you really have to drive to the grocery store every day, Mr. Sixpack? Can't you learn to video conference with Grandma instead of taking those long drives into the countryside? Don't you know how much your desire to travel costs all our other policyholders?"
Squid - the US does not subsidize European national defense. After all, who does Europe need to defend themselves against? Europe is peaceful and safe. Unlike the Americans who launch wars of agression(Iraq, Afghanistan) based on "sexed up" intelligence of phantom WMDs....
Think about it!
Cut the military budget to $0 = we'll have peace and balance the budget. Then we have universal health care and sing Kumbaya with Emperor Obama.
Bob, Spencer
I understand your point about the greatest healthcare expense is when you're dying but I have my doubts about that stat and here's why.
First, I always found that reference a little dubious. I'm going to spend an enormous amount on people that die from cancer or car accidents.
I'm not going to spend nearly as much on people that die because of old age. Would it be unreasonable to say that if they are lumped together I'm skewing the numbers a bit?
Second, If you eat right and exercise you will dramatically reduce the instances of heart attacks, strokes, diabetes, and hypertension, (to mention a few).
All of these conditions are largely preventable. So, all the money spent on medication and treatment for these diseases comes off the books permanently.
Also, since healthy people do not usually go to a doctor, (although this may be more of a guy thing), demand for medical services drops. This tends to affect the price.
I don't mean to say this is the entire solution but it should be looked into seriously. I don't think it is unreasonable to say that if I compared the couch potato to the gym rat the lifetime bill for the couch potato will be a hell of a lot more.
See, now I want to vote for Crusader for something...
Rock on.
Mike G,
Could you point us to the study that shows that eating right and exercising "dramatically reduce(s(s) the instances of heart attacks, strokes, diabetes, and hypertension, (to mention a few)." I know that there are studies showing a decrease in these problems if you stop smoking, but I suspect that there are no comprehensive long term studies showing that there is a universal benefit from exercise and diet. (There was a study that showed rigorous dieters risks of disease were higher than moderately fat people, however.)
I would like to know if this is really true. I have no doubt that living a clean lifestyle will prolong your life, but it does not prevent you from dying and assuming everyone who lives a clean lifestyle is not run over by a bus, there will still be high costs at the end of life including things such as heart disease, cancer, dementia, and other chronic illnesses. In fact, I seem to remember a study that stated that allowing people to eat themselves to death saved money in the long run. (I'll look that one up this evening.)
Mike G, I see your perspective but I think you're wrong for several reasons. Here's some:
1) On the no-doctors for healthy people (even as a guy thing) this makes me think that you're a 20-something guy. When I was a 20-something guy, I felt much as you do, that doctors are something for sick people and people who don't take care of themselves. Now that I'm not a 20-something guy (though I still take care of myself relatively well) I find that doctor visits come up more often than you might hope for. Bodies get old, bodies break down. Even very well tended bodies. Only a very genetically lucky few will get through a lifetime without some kind of relatively serious medical expense or another.
2) On dying of "old age", you seem to feel that the avarage old person has fairly modest medical needs until one day they just pass peacefully away in their sleep and the grandkids are told that G'ma went to visit Fluffy on the farm. (Okay, I'm reading in that last bit, but I just find the euphemisms around death too amusing to pass up a chance to work one in.) But this is not the case. As I said, bodies get old, bodies break-down. Your average old person is on all kinds of medication. Medication for their heart, not necessarily because they ate too much red meat and didn't jog enough, but because you're average human heart wasn't engineered for 80 or 90 years of use. Ditto with the other major systems. In addition to the medications, you obviously have the regular doctor visits (to the whole rainbow of specialists) to prescribe and monitor those medications.
Also nn the wearing-out side of the spectrum, you have joint replacements of various kinds, which pretty much become mandatory at some point, if you like using your joints. The hyper-active runner-types prob. need even more of these than the average bear.
And even if they are relatively healthy, compared to a smoker who died a horrible death over a couple of years, you're talking decades more of routine expenses. And you're also talking about those expenses increasing every year, unless they are Jack Lalane. (Would that we were all Jack Lalane but I think genetics have at least as much to do with his health as his amazing workout regimes do.)
As an aside, the money you spend on people who die in car accidents will likely still be spent even if you institute the health gestapo to make sure everyone eats their daily ration of lima beans. Unless we institute a 20-mph speed limit and pad all the highways.
In short, being old is a lot more expensive than you think it is. Even for relatively healthy old people. And it's getting more expensive every day as we find new ways to slightly improve the lives of the old or slightly extend the lives of the old for the low, low cost of something exorbitant sounding.
Yes, dying of cancer is expensive. But here's the things about it: 1) it's relatively fast compared to old age and 2) your odds of getting cancer in any given year are not zero (yes, even if you are a paragon of healthy living. I'm thinking of poor Cathy Seipp, a writer who died of the worst kind of lung cancer despite doing absolutely everything you would advise someone to do for their health) and just like non-zero odds of anything, the longer you spend, the higher the total cumulative odds become. That is, if the person doesn't die of lung cancer because they never smoke, or a heart attack because they ran every day, that doesn't mean they won't contract pancreatic cancer in the years they've amassed from the healthy living.
For prostate cancer in particular, I've heard that it's pretty much a question of when a man will have trouble -- not if.
Bob, Spencer
I understand your point about the greatest healthcare expense is when you're dying but I have my doubts about that stat and here's why.
First, I always found that reference a little dubious. I'm going to spend an enormous amount on people that die from cancer or car accidents.
I'm not going to spend nearly as much on people that die because of old age. Would it be unreasonable to say that if they are lumped together I'm skewing the numbers a bit?
Second, If you eat right and exercise you will dramatically reduce the instances of heart attacks, strokes, diabetes, and hypertension, (to mention a few).
All of these conditions are largely preventable. So, all the money spent on medication and treatment for these diseases comes off the books permanently.
Also, since healthy people do not usually go to a doctor, (although this may be more of a guy thing), demand for medical services drops. This tends to affect the price.
I don't mean to say this is the entire solution but it should be looked into seriously. I don't think it is unreasonable to say that if I compared the couch potato to the gym rat the lifetime bill for the couch potato will be a hell of a lot more.
Mike G,
Could you point us to the study that shows that eating right and exercising "dramatically reduce(s(s) the instances of heart attacks, strokes, diabetes, and hypertension, (to mention a few)." I know that there are studies showing a decrease in these problems if you stop smoking, but I suspect that there are no comprehensive long term studies showing that there is a universal benefit from exercise and diet. (There was a study that showed rigorous dieters risks of disease were higher than moderately fat people, however.)
I would like to know if this is really true. I have no doubt that living a clean lifestyle will prolong your life, but it does not prevent you from dying and assuming everyone who lives a clean lifestyle is not run over by a bus, there will still be high costs at the end of life including things such as heart disease, cancer, dementia, and other chronic illnesses. In fact, I seem to remember a study that stated that allowing people to eat themselves to death saved money in the long run. (I'll look that one up this evening.)
Squid said:
The Europeans also enjoy a high level of security for a fraction of what the U.S. spends on defense. I wonder how that could be?
It's not for the reason you think, Squid. The US could enjoy the same level of security we enjoy today (probably greater, actually) for far less money than we currently spend. Cutting our defense budget by about 75% would have zero negative impact on our security. It would probably improve things because there would be less adventurism and consequently less blowback.
The years of Europe being protected by kindly Uncle Sam's big umbrella are long past.
In any event, this relates to health care not at all. Anyone actually interested in health care reform should start with the excellent article on the subject Paul Krugman and Robin Wells wrote for the New York Review of Books in 2006. They address the question of how a national health care system can control costs in great detail.
http://www.nybooks.com/articles/18802
Agree that the main cost savings from single payer in other countries come from doing less stuff (also paying Doctors less). Agree that is highly unlikely that the U.S. is going to be as strict on costs. Disagree that this is a huge problem - we are a richer country and can buy more. Disagree that we should never try to do less - we need to get better at saying no to treatments with marginal benefits and high costs (at least so far as public spending goes - if you are willing to put down your own cash you can pay what you want, if you buy insurance it depends on your contract, but I don't think insurance should be morally obligated to cover something really expensive just because maybe it might help - that opinion is probably out of line with U.S. majority opinion).
I'm on the fence as to whether government can play a productive role in slowing the exploding growth in costs. It certainly does not now - see Medicare. However, as per Matt Yglesias' post on the matter, it may be the only institution that can - HMOs don't have the credibility too. Some States have tried a system I think might be a good idea; set the single payer health care budget ahead of time, use that and get good estimates of how many procedures and their cost you expect in a year, prioritize based on expected benefit and then plan to authorize for single payer payment in a way that should meet that goal(yes you will still probably overrun, but not so much). Then if people think they need more expensive health care they have to raise the spending limit - not just argue that this procedure should be authorized. In short try to make the money limit and trade offs more explicit. I am not sure this will work, but best idea I have at the moment.
U.S. will not, and should not, make private payer health care illegal. Hence there will still be plenty of room for continuing innovation funded by the rich, initially for use only for the rich. Which is good - I want someone to invent the next MRI machine or baboon heart transplant. What I don't want is someone to go bankrupt because their kid has leukemia.
Medical bad luck shouldn't be as financially ruinous as it currently is - that is why I favor single payer.
It's not for the reason you think, Squid. The US could enjoy the same level of security we enjoy today (probably greater, actually) for far less money than we currently spend. Cutting our defense budget by about 75% would have zero negative impact on our security. It would probably improve things because there would be less adventurism and consequently less blowback.
That theory was already tested, with very similar parameters to the ones you propose. See also: 1990s. Does your conceptualization of "less blowback" somehow accommodate 9/11?
Your arguements against "universal health care" do not make sense. I wholeheartedly agree with one of the respondents - better to have a pretty good system at low cost than to have a stellar system at astronomical costs that a good portion of our people can't even afford to access.
In terms of the GS-15 salary: That's not altogether feasible, at least not as you propose it. It's not fair to have a 35 year old emerge from years of training w/$250K in debt and stick them w/the tab. We would have to pay them back for their education if we were to go that route. And in terms of "opting out" for Cash, you just add a stipulation (like the one that ALREADY exists today in Medicare) that if they chose to accept payment from the national system, they must take the rate paid. If everyone is covered by the plan, they can't afford not to. That being said, we have to be fair AND prudent. There would be a FEW who opted for cash payment, but how many people do you know who can afford the $10K for minor surgery all the way up to the hundreds of thousands for treatment of Cancer? This market would be TINY.
Govt systems ARE good at innovation. Who do you think comes up with MANY the new drugs that are given to Big Pharma? The NIH.
You're calculation on the administrative expenses take only a portion of the true costs into account. For every claim clerk at an ins company, there is someone else at the provider (hospital, md, etc) who had to prepare the claim, respond to the rejection, etc...If we has a single payer, the whole process would be tremendously streamlined...and that's only ONE example...there are many more.
Your last point about the "Cheap MRI of tomorrow" goes back to my first point - better to have a pretty good system at low cost than to have a stellar system at astronomical costs that a good portion of our people can't even afford to access.
Your analysis of the issue doesn't even take into acct the many many more relevant concerns about quality, etc.
Mike G,
May I point you in the direction of these 2 articles...
"Lifetime Medical Costs of Obesity: Prevention No Cure for Increasing Health Expenditure":
http://medicine.plosjournals.org/perlserv/?request=get-document&doi=10.1371/journal.pmed.0050029
"The Health Care Costs of Smoking":
http://content.nejm.org/cgi/content/full/337/15/1052
Anyone know of other studies showing that healthy people cost more in the long-run?
Wow, there is some seriously hinky stuff going on with the comments tonight. But anyways...
Lily, thanks for the links on the overall health impact of unhealthy living.
Anybody else think KBASK is some kind of troll? I mean, no one could actually believe that the NIH actually creates the drugs that Big Pharma sells, could they? Is it possible to be that out of touch with reality and still able to use the internet? No, I'm pretty sure that's some pathetic attempt at trolling.
At any rate. Good discussion, good times. Thanks all!
"how many people do you know who can afford the $10K for minor surgery"
Anyone who buys a $30k car when they can get by with a $15-20k one.
This is a bit dramatically put, but essentially true. If one wants to 'ration' health care costs, let's remember that those who will be affected the most will be the older set. A first cut of the stats are here.
So going to some form of single-payer system, encouraging people to be 'healthier', etc. is all very nice. But as the population ages, a greater and greater share will go to that top ten percent. So any discussion of reasonable rationing will have to address this issue. Yes, yes, I know, it's always been the case that the young and healthy subsidize the old and infirm. And that's how it should be (self-disclaimer: yes, I do have a dog in this hunt.) The question is, to what extent should the elderly be subsidized?
On another front, this is where a lot of prophylactic measures make themselves felt: I run, eat very little red meat, take my vitamins, etc not from any bizarre notions of hanging on to youth (well . . . maybe a little :-) By comparison to my peers); I do all of those things because I'm deathly afraid of looking like my relatives who haven't been taking care of themselves. The 65-plus age set that still drinks martinis at cocktail hour and smoke more than a pack a day, that never exercise, that think that no meal, breakfast included, is complete without meat. Those guys are looking _bad_. I don't know any other way to put it. There is a definite diminution of the mental faculties(my personal nightmare). There are a lot of canes, walkers, wheelchairs in use. Oxygen masks. twice- and thrice-weekly medical appointments. And on and on . . . Yes, the last years of life can be very expensive. But those costs can be ameliorated if there has been systematic preventative behaviour in the decades leading up to the last one.
There is an obvious sf reference here, btw: Bruce Sterling's "Holy Fire". There's a lot of fantastic medicine available. But only if you've been good for a long, long time. Still and all, not a bad world.
What about increasing the supply of doctors -- by increasing the number of Med schools?
by increasing the immigrants of medically trained persons, especially from OECD countries and Europe?
by allowing consenting adults to get "medical treatments" from non-licensend practioners of alternative therapies? (snake-oil? Close fraud issues here.)
Has the number of Med schools kept up with inflation since the 50s? I'll bet it hasn't.
What about increasing the supply of doctors...
I've see this suggested for lawyers, too, who are out of reach for most Americans even without any eeeeeevil insurance companies or wasteful administrative expenses. The problem is that there is a limited number of people capable of being good doctors (or lawyers). Increasing the number almost certainly means adding lots of lousy docs without affecting the number of actually competent ones. I'm doubtful that we should consider that an improvement.
You can get 90% of the health-care outcomes for 50% of the cost, but that last 10% will cost you the other 50%.
It's why Canadian health care costs are so much lower and the outcomes are similar, but not the same. We lose that last 10%.
If Americans are more concerned about that last 10% than they are about the halving the costs, then, bless their hearts, that's what they should get. It's what democracy is all about.
On the other hand, Americans selling Americans on Canadian style health-care (which I like) should at least be honest about the trade-off. Of course, being honest about trade-offs isn't a way to get popular support...
The solution is to cure aging. Seriously.
Doesn't each increase in the number of insured people actually drive up health care costs, in the same way that running the Treasury printing press runs up inflation? It seems that with more money in the system, it's gonna get spent somewhere.
I read an article a couple of months ago (can't remember where, sorry) that talked about the evolution of medical insurance from something that would cover a "hit-by-a-truck" situation, to something that covers hangnails. Seems that this change drives up costs (alternately, allows for new treatments).
Re: Doesn't each increase in the number of insured people actually drive up health care costs.
Depends on if the people are healthy or not. Insuring more sick people drives up health costs. Insuring more healthy people does not; in fact it decreases the per capita costs (per covered individual that is).
Most sick people have some form of coverage, perhaps Medicare or Medicaid for the seriously and chronically ill. The majority of the uninsured are young and healthy. Bringing them into the system will have the financially salutary effect of widening the base of healthy people across whom the costs of the sick wil lbne spread.
Re: That theory was already tested, with very similar parameters to the ones you propose. See also: 1990s. Does your conceptualization of "less blowback" somehow accommodate 9/11?
We could have spent ten times what we were spending on defense and 9-11 would still have happened. How do you defend against fanatics with box-cutters? Certainly not with high tech gizmos and massive armies. What was needed was more vigilance, and a competent administration in charge, not more money.
Re: It's why Canadian health care costs are so much lower and the outcomes are similar, but not the same. We lose that last 10%.
Shouldn't that show up in your overall vital statistics then? I can see that a much smaller fraction (say, .5%) might be undetectable, but if 10% of your population is perishing for want of better healthcare your life expectancy figures should reflect that fact.
Of course Megan has the total Administrative Costs completely wrong as the 15% to 16% is what it costs the insurance companies. The cost of 3rd party payment for the providers is easily that amount again. Even large hospital groups do not have the scale to manage the process efficiently. There are consultant groups that try to help mid-sized physician practices get to 15% of revenue but rarely drop below 20% in a multi-discipline practice. These BIR (Billing and Insurance Related) costs are a major component of the friction that makes health care so much more expensive in the US and an area where real progress could be made.
All right, dammit, is the OECD chart in the Krugman-Wells article ( http://www.nybooks.com/images/tables/20060323img2.gif ) correct or not? If so, what's the explanation? How do Canada, France and Britain possess longer life expectancies, lower infant mortality, and a comparable supply of doctors, nurses and hospitals for a much smaller per capita cost?
I can readily believe two parts of their solution:
(1) Lowering administrative costs:
"In 2003 Medicare spent less than 2 percent of its resources on administration, while private insurance companies spent more than 13 percent.
"At the same time, the fragmentation of a system that relies largely on private insurance leads both to administrative complexity because of differences in coverage among individuals and to what is, in effect, a zero-sum struggle between different players in the system, each trying to stick others with the bill. Many estimates suggest that the paperwork imposed on health care providers by the fragmentation of the US system costs several times as much as the direct costs borne by the insurers." [See Mark in the immediately preceding thread message.]
(2) Natural economies from "having a single health care organization provide individuals with what amounts to lifetime care. For example, the VA has taken the lead in introducing electronic medical records, which it can do far more easily than a private hospital chain because its patients stay with it for decades. The VA also invests heavily and systematically in preventive care, because unlike private health care providers it can expect to realize financial benefits from measures that keep its clients out of the hospital."
I wonder, though, about their third solution: "The ability [on the part of other nations, Medicaid and the VA] to bargain with suppliers, especially drug companies, for lower prices."
Ms. McArdle, as I recall, has been saying for some time that this is made possible only because so many drugs are developed in America, and WE inevitably absorb the initial necessary development costs while allowing other nations to hitchhike on the lower mass-production costs because of their governments' ability to bust our companies' patents.
Marcia Angell, however, questions whether those necessary development costs are really that high in the 7-15-04 NY Review of Books ( http://www.nybooks.com/articles/17244 ):
"...[T]he magic words, repeated over and over like an incantation, are research, innovation, and American. Research. Innovation. American. It makes a great story.
"But while the rhetoric is stirring, it has very little to do with reality. First, research and development (R&D) is a relatively small part of the budgets of the big drug companies -- dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States...The prices drug companies charge have little relationship to the costs of making the drugs, and could be cut dramatically without coming anywhere close to threatening R&D.
"Second, the pharmaceutical industry is not especially innovative. As hard as it is to believe, only a handful of truly important drugs have been brought to market in recent years, and they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH). The great majority of 'new' drugs are not new at all but merely variations of older drugs already on the market. These are called 'me-too' drugs. The idea is to grab a share of an established, lucrative market by producing something very similar to a top-selling drug. For instance, we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol, and the newest, Crestor) on the market to lower cholesterol, all variants of the first...
"Third, the industry is hardly a model of American free enterprise. To be sure, it is free to decide which drugs to develop (me-too drugs instead of innovative ones, for instance), and it is free to price them as high as the traffic will bear, but it is utterly dependent on government-granted monopolies -- in the form of patents and FDA–approved exclusive marketing rights. If it is not particularly innovative in discovering new drugs, it is highly innovative -- and aggressive -- in dreaming up ways to extend its monopoly rights...
"[D]rug companies no longer have to rely on their own research for new drugs, and few of the large ones do. Increasingly, they rely on academia, small biotech startup companies, and the NIH for that. At least a third of drugs marketed by the major drug companies are now licensed from universities or small biotech companies, and these tend to be the most innovative ones...
"In 2001, the ten American drug companies in the Fortune 500 list (not quite the same as the top ten worldwide, but their profit margins are much the same) ranked far above all other American industries in average net return, whether as a percentage of sales (18.5 percent), of assets (16.3 percent), or of shareholders' equity (33.2 percent). These are astonishing margins. For comparison, the median net return for all other industries in the Fortune 500 was only 3.3 percent of sales...
"Drug industry expenditures for research and development, while large, were consistently far less than profits. For the top ten companies, they amounted to only 11 percent of sales in 1990, rising slightly to 14 percent in 2000. The biggest single item in the budget is neither R&D nor even profits but something usually called 'marketing and administration' -— a name that varies slightly from company to company. In 1990, a staggering 36 percent of sales revenues went into this category, and that proportion remained about the same for over a decade...
" '[M]arketing and administration' is a gigantic black box that probably includes what the industry calls 'education,' as well as advertising and promotion, legal costs, and executive salaries -- which are whopping."
According to her, these factors are what really allow Medicaid and the VA to bargain for lower-price drugs: "The industry charges Medicare recipients without supplementary insurance much more than it does favored customers, such as large HMOs or the Veterans Affairs (VA) system. Because the latter buy in bulk, they can bargain for steep discounts or rebates. People without insurance have no bargaining power; and so they pay the highest prices."
True, or not?
Bruce, that is exactly true. In fact, I would say that one of the valid categories of government expenditures is research into new pharmaceuticals. Not the least because companies will spend billions to research, develop, and market viagra analogs(and inundating me with demeaning advertising in the process) But they will not spend hundreds of millions for drugs that are truly life-saving.
I don't fault them for failing in the latter category, btw. They are under no particular obligation to help the poorer markets around the globe. Nevertheless, I think we can all agree that developing, say, improved anti-malarial vaccines is a Good Idea.