Jon Cohn, who I respect greatly, spends a lot of time on the money and time that insurance companies put into denying claims. This is undoubtedly true. But I have two caveats. First, some of that effort is a good thing: without it, there would be fraud. No, not the automatic denials so many insurers are fond of, and I'm not defending. But Medicare should probably spend a lot more effort rooting out excessive billing. And I don't know what percentage of claims denial consists of refusing to line the pockets of doctors and labs.
But the more important point is that I doubt this is the majority of their administrative costs, or even the difference between their administrative costs and Medicare's. I'm not trying to justify the bullshit automatic claims denial, but that's not actually a very costly process: a hospital submits a bill, they deny it, you yell at them. Nor is refusing to cover people with pre-existing conditions, or any of the other multifarious complaints of single-payer advocates.
Rather, private insurers have costs that Medicare doesn't have within the agency. Private insurers bill. Medicare does too, but the IRS has its own budget--hell, its own courts--which don't show up on Medicare's balance sheet. Private insurers negotiate with suppliers. Medicare does too, but most of the negotiation takes place between lobbyists and Congressmen who again, do not show up on Medicare's balance sheet. The Federal government has all sorts of these little items which relieve government agencies of reporting certain costs. But the costs remain.
My guess would be that these explicit costs are still lower than Medicare's. But then there are implicit costs to government fiat that markets don't have. As Tyler Cowen points out, taxation has deadweight losses, and Medicare is a tax on employment, which is something we are particularly anxious not to suppress right now.
The final point is that while people commonly think of administrative costs as "wasted", in fact, they are an important part of the market system. As Alex Tabarrok points out, and I have myself from time to time, many of the arguments in favor of national health care are literally socialist. And no, I am not using that term to apply to "anyone who is in favor of redistribution" or "government programs". But consider the following common arguments:
- National health care will be cheaper because we will reduce administrative overhead
- National health care will reduce wasteful competition in the form of me-too drugs
- National health care will reduce wasteful competition in the form of advertising and other marketing expenses
- National health care will allow us to rationally distribute care to where it does the most good rather than the current messy, wasteful hodge-podge
- National health care will use resources for production instead of profits
- National health care will achieve economies of scale in purchasing and record-keeping
- People will not overuse free goods because there are hard limits to desired consumption
But why were they discredited? That list looks really, really good on paper, even to my jaded libertarian eyes. A lot of the answer lies in the reason that we don't like monopolies--even though that list is just as true of monopolies as it is of the government. Monopolies, government or private, are risk averse, slow to innovate, and generally run things for the benefit of themselves rather than their customers. Hamstringing them with regulations can limit measurable outcomes, like excess profit-taking, but not unmeasurable ones, like the people who might have been cured by a drug the system didn't invent. And the political system introduces its own problems. As Robert Heinlein pointed out years ago, systems that have only positive feedback loops tend to fail catastrophically.
My critics will want me to explain why, then, Europe can do it cheaper. The answer is threefold. First, most European nations have better governance than we do--the American political system is a Public Choice disaster. Second, they pay people less money in a way that's hard to replicate here (and even if it wasn't, would be a one time savings that wouldn't check the rate of growth). Third, we're still driving quite a bit of product innovation. Our messy, organic, wasteful, unfair, irrational system allows experimentation, and they cherry pick the best results. If we stopped doing this, their system would stop looking so good.
Good post.
Just one comment on the deadweight cost of government: is there any reason to think that this is more than the deadweight cost to employers of providing their own insurance? It seems to me that some companies, like GM, would be much better off if there was no expectation of employer provided health care, and that in general companies would find it easier and cheaper to pay x% more income tax than to hire a bunch of people to negotiate contracts with insurance companies.
This isn't a valid comparison since you can eliminate employer based health insurance without the government taking it over. You accurately observe that the employment tie creates a net negative, and the government tie creates a net negative. Why don't we go with neither?
Or, in the case of decoupling health care insurance from employment, they'd just renegotiate salaries/wages one time and continue as normal - with no additional recurring deadweight losses from either what is guaranteed to be a more complicated tax code or negotiating with insurance companies.
Deadweight loss only occurs with involuntary transactions. The cost of providing your own insurance is just a cost.
Correct me if I'm wrong, but isn't that only true in an efficient market?
I was under the impression that monopolies/monopsonies can also impose a deadweight loss.
Health benefits are part of the compensation cost of an employer -- and compensation cost to the employer remains entirely unchanged if there is "national health care" or not.
An employer can pay employees compensation up to the value of their labor, call it $X. If the employer pays much less, competition for employees will force it raise the amount it pays -- if the employer pays much more, the employer will lose money and be forced to cut.
But as to how that value $X is apportioned between the different components of compensation (cash wages, retirement plan contribution, medical care, baby sitting services, company parties, whatever) the employer doesn't care, that's fully negotiable with employees --as long as the total cost doesn't go above $X.
Note well: Shifting an employer's health care cost to the government (that is taxpayers) doesn't reduce the value of the employees' labor to the employer, $X, at all. So it is not going to save the employer anything.
I.e, workers are not going to go to IBM, "Hey, you just tuck all those savings into your profit account, we'll all be happy to work for less pay from you than before, less than we are worth". They are going to say, "We have the exact same value to you as before so give us the exact same compensation, we'll take what you used to pay for medical care now in cash, bigger retirement plan contributions, and tickets to arena football games."
The CBO recently released a paper on this, exploding the myth that national health care would reduce employer costs and so make US businesses "more competitive".
It seems to me that some companies, like GM, would be much better off if there was no expectation of employer provided health care...
Companies in general wouldn't benefit at all. The specific companies that would benefit are those that are incompetently/ foolishly paying more than $X, paying their employees more than they are worth. Those companies now are heading for bankrutpcy or other serious problems -- but if the govt steps in to pick up a good part of the compensation they pay, they'll be saved! saved! They offload compensation cost on taxpayers until they get down to paying only $X. Yeah, they win. Did you say "GM"? UAW?
But of course the losers in that situation are the other companies not paying more than $X. The capably managed, financially responsible companies get hit with the tax bill that bails out the inept losers, who gain. IBM and its employees get hit with the tax bill to bail out GM and the UAW.
BTW, remember the key thing about the deadweight cost of taxes is that it rises by the square of the rise in the tax rate. So if taxes go up 10% the deadweight cost of the taxes goes up by 21% (1.1^2).
That's the cost-benefit hurdle that a govt expenditure must pass to pay off and be worth it: It must improve welfare by more than (1) the cost of the tax in dollar terms, PLUS the deadweight cost of the tax that rises exponentially as the tax rate rises.
How many cost-benefit analyses have you seen in those terms for any government spending program?
Megan thinks Socialist Europe has vastly better government than we do.
I'll keep that in mind.
I'm also curious to know which metrics give rise to this conclusion.
To be fair, she said "governance" not "government" - I suppose there is a subtle difference.
Better governance of the healthcare industry, I assume. The US government in general isn't a public choice disaster any worse than Europe's, but in healthcare it's just an ugly mess.
That makes less than no sense, because she's arguing against us being like the Europeans in healthcare governance.
Granted, the general argument that
1) The Europeans do it better so
2) We shouldn't do it like they do
Doesn't make sense, but you've taken away the cover.
Downpuppy, Megan isn't saying the Europeans method is superior, but rather that they are better than us at that particular method. (I'm not 100% sure that's the case, I think you also have public choice nightmares in Europe, but that's not directly relevant to you comment or the rest of my reply.)
If the Europeans are better at us at doing a lot of things through method X (in this case single payer health insurance, or more generally large government solutions), than we won't get as much benefit, and may not get any benefit (it could be a net cost) by using method X.
European nations have better governance than we do
Is there a bigger cultural difference between Boston, Miami, Houston and San Francisco than between Frankfurt, Munich, Berlin and Dresden?
I say that because perhaps we think their government is "better" in that it more closely matches the preference of the population. It's easier to please all of Germany, Denmark, Sweden, than it is to please all of the US. The preferences of the people in Boston and San Francisco differ greatly from the preferences of Houston and Miami.
Perhaps we see this lack of responsiveness as governance being "worse".
When Megan says that European countries have better governance than we do, I think what she is referring to is the susceptibility of US politicians and regulators to capture by well funded interest groups, not whether European governments are more responsive to majority preferences. Having lived in Europe for several years, I think this is largely true, though unions in Europe have a huge amount of influence that rarely results in "better" governance. But in other respects money (and the interest groups and lobbyists that distribute it) just isn't as important, so it is fair to say that in Europe it is generallye asier to craft rules and regulations that don't benefit narrow interests groups at the expense of the greater good. The sad truth is that any health care legislation that makes it through the US sausage factory is likely to be an absolute mess of interest group giveaways and compromises that in the end only makes our health care problems worse - kind of like the current climate change bill.
dsr,
Even considering how corporatist Europe is? Corporate Europe has done a much better job of insulating itself from competition - both foreign snd domestic than US corporations.
Living in Europe I can tell you life is fine and I'm happy. I can also tell you I see a lot of ads, newspaper articles, etc. that all blatantly tell you how political party X is bribing you with something to make you vote for them again in the next cycle. It is much much much more blatant than in the US. Although, the case could be made in the US they don't talk about it as much, and just pay off their supporters in other ways after the election anyway.
But I can't count the number of newspaper articles and ads which tout: increased welfare payments (regardless of income or need), free services, more time off, reduced rent prices, etc. etc.
When you see a bill board by a political part that says: "More welfare checks for moms" (literally!) or "Free Day Care for All" (really!) you expect it to be blatant pandering. But when the newspaper parrots these ads with 2 page articles listing all the pluses and no minuses of this free money you just have to shake your head.
Of course, people are still living a good life here. So it either means the system works or eventually it will come to a crashing halt.
We Americans will not get to laugh at the rest of Europe anyway as our spending habits in the last decade have doomed us to the same fate anyhow.
samX - This comes as someone from Massachusetts that some familiarity with the social safety net. In this state there are any number of federal and state programs to help those in distress. Safety net hospitals, transition and permanent housing, mental health services, drug treatment, job training, education funding - literally thousands of programs. The big difference is in America we don't pride ourselves on these programs, we publicize them less and as a result people aren't aware of them.
I'm just curious why Europe is so much prouder of these programs than we in the US are.
What many European countries have in common is complete destruction after WW2. They had to repair healthcare from nothing. Who was going to do that? Only the government could marshal the $ needed, it seems to me.
As a consequence, European hospitals, clinics, etc. are owned by the government. That is impossible here.
You can't equate a single-payer system in US where the rest of the industry is for-profit with European s systems that are vertically owned and integrated by the government.
Are there any national health insurance plans in Europe that would be comparable to our hybrid healthcare economy?
That's not true. Britain's NHS is pretty much government-run. In France, the government is the payor, but the hospitals may be public or private facilities and doctors have private practices, either entirely or as a supplement to, say, an academic appointment. That public-private mix of hospitals and doctors is similar throughout the rest of western Europe (and Canada, as well).
The fundamental problem with Medicare is that it is too generous. Medical care must be rationed more fairly. As it stands, Medicare allows those 65 and over access to a bottomless pit of medical expenses. If you are under 65, lose your job and insurance, and you need your tooth pulled, sorry charlie. Only the oldsters whatever they want whenever they want.
Don't forget that part of the cost savings for Europeans comes from cultural issues (better diets and habits) and from the reasons you listed above. They move a lot of costs off their medical insurance P&L's by outsourcing it to other government agencies. Many European countries subsidies higher education. Doctors in the US rack up large debts to pay for school and just the basic necessities of life while in school. They then use their higher incomes to pay off these bills. The doctors higher income is a medical expense. European doctors receive greatly reduced schooling and live on the government dole while a poor student. These are counted as welfare and educational expenses.
cultural issues (better diets and habits)
I'd like to see some reaseach, but I'm under the impression that culturally, Europeans are far less likely to demand heroic intervention for people of advanced age.
I live in an apartment building with 3 80-90 year old ladies, no elevator, several flights of stairs, none have a car, and all walk to the grocery store around the corner.
There is no doubt this kind of living has a positive impact on aging/health. I lost 15lbs in the first month of living here (although I think it was as much because snacks are expensive and I'm too cheap to pay for them). Either way that also benefits health.
There are a lot of positive things about the European system. But it seems to me, what we are trying to do with our medical reform/health care legislation is copy exactly the -worst- parts about the health care system in Europe and tack it on to our already screwed up system.
I think that it is important, when comparing statistics, to compare apples to apples. I've seen a little research in this comparing health outcomes for treatment of cancer and seen the US stand above most European countries. This isn't a definitive, just some more evidence.
This is about the zillionth time I read the "where would the world be without our incentives to private research?" without a shred of evidence. Oh, well. It's a popular argument. It makes us feel good about ourselves. Who cares if it's true?
Actually, there is an abundance of evidence on this point. Covering your ears and repeating "no evidence! no evidence!" does not make it so. Here's a recent sample.
http://fraser.stlouisfed.org/publications/erp/page/8649/download/47455/8649_ERP.pdf
That's not evidence, that's spin. "Evidence" usually includes numbers and facts.
For example, evidence indicating that biomedical research in the US accounts for less than 6% of our total healthcare spending:
http://jama.ama-assn.org/cgi/content/abstract/294/11/1333
Spin? Not an academic paper, admittedly, but there are "numbers and facts" there. If you prefer something more academic, see:
http://ostina.org/downloads/pdfs/bridgesvol7_BoehmArticle.pdf
Of if you'd rather, here's Tyler Cowen commenting on that article:
http://www.nytimes.com/2006/10/05/business/05scene.html?pagewanted=print
My argument wasn't that the US spends its health care dollars efficiently, only that the US healthcare system manages to account for a dispropotionate amount of the world's health care innovation. That is simply a fact that advocates of radical health care reform need to deal with. Not impossible, obviously, but it does cut against the "Europe does health care better" argument. Trust me, I've lived in several European countries, and they may do it cheaper, but I'll take my overpriced US health care any day.
Omnissiah and dsr, thanks for the links.
As a foreigner, I am very happy that the USA is spending far more on health care if in the process they keep up the medical innovation that the rest of us can sponge off.
And I can't understand why the rest of us non-Americans don't shut up and be happy about it. Come on guys, don't spoil a good thing by encouraging the US to change. Tell the yanks how bad our systems are, and encourage them to have even more competition especially at the high end, cutting edge stuff.
You're cutting our own throats when you tell the USA to be like us, think about it.
Nimed -
I believe the reason is because the U.S. is the generator of almost all new pharmaceutical therapies (over 90%). I don't know how much we generate new surgical and procedural interventions, but my guess is above 80%.
Do you disagree or have any sources that specify otherwise?
Joe
"This is about the zillionth time I read the "where would the world be without our incentives to private research?" without a shred of evidence."
If you were to have a discussion about the solar system would you demand evidence of heliocentrism before proceeding? We have thousands of years of evidence, including centuries of very strong evidence, showing that centralized control has exactly this drawback. You act as if modern healthcare is somehow the exception to how human systems function. It isn't.
Your strawman is showing.
Oops!
--Ziiiip--
There I put him away.
By definition an analogy cannot be a strawman.
TreeJoe,
Let's be fair. You can't just cite numbers without a source and expect me to find a source that says otherwise. I did look for a percentage of U.S. and Europe pharmaceutical and otherwise private research. I didn't find numbers for Europe, Australia ofr Japan. But I'm not the one making the "they depend on us" argument over and over again. So, I'm throwing it back to you - were did you find those numbers?
dsr,
Your sources are less than ideal. A chapter from an identified book and an article on the Journal of Medical Marketing. I took a look at the first and the Cowen article in NYT (great read). I plan to browsing through the article as soon as I can.
The main argument is that Medical Research is better in the U.S. than in Europe. To support this argument, the chapter and Cowen cite, among other stuff, the number of Nobels laureates in Physiology and Medicine. There's one problem with this - the large majority of them were funded by the government. The Nobel laureates we got have very little to do with our health care system. What we do have is great universities and the NIH. We also get a lot of the Nobel prizes in Economics, Physics and Chemistry. All research is better funded and organized in the U.S. than in Europe. I just don't think it's because of our health care system.
Total combined research in the U.S. in 2003 was $94.3 billion - source. It's an impressive number. But it's also less than 1% of GDP. So research doesn't come even near to account our bloated health care expenses.
Let me repost an interesting NY Review of Books article from 2004. It is written by former Editor in Chief of The New England Journal of Medicine.
Highlights:
"...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. (In 2003, for the first time, the industry lost its first-place position, coming in third, behind "mining, crude oil production," and "commercial banks.") 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."
"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.[13] Note that this is two and a half times the expenditures for R&D."
"This is an industry that in some ways is like the Wizard of Oz—still full of bluster but now being exposed as something far different from its image. Instead of being an engine of innovation, it is a vast marketing machine. Instead of being a free market success story, it lives off government-funded research and monopoly rights. Yet this industry occupies an essential role in the American health care system, and it performs a valuable function, if not in discovering important new drugs at least in developing them and bringing them to market. But big pharma is extravagantly rewarded for its relatively modest functions. We get nowhere near our money's worth. The United States can no longer afford it in its present form."
Drug industry expenditures for research and development, while large, were consistently far less than profits.
The same could be said for any other industry - wouldn't we be so much better off if Apple, Google, Exxon, Toyota, ADM, Cargill were non-profits controlled by the government. Why it would be paradise on earth.
Funny how it never worked out like that.
I don't know about Google, I'd bet bet they spend a lot on innovation. But I'd say that, in those other businesses, technological research is not as critical as in pharma. People may buy an iPod for lots of reasons not related to new technology. But you don't really care about the color and packaging and overall coolness of your antibiotics.
Besides, people get along fine without Apple products and Toyotas. Sometimes they may say something like "I'd just die without my iPod", but we really shouldn't take that literally.
It is written by former Editor in Chief of The New England Journal of Medicine.
Classic appeal to authority. Angell has a serious bone to pick with pharma and, in my reading of her book, does not appear to understand my industry.
I have no idea about Angell's relations with pharma. She's not the only one making these arguments, though.
Regarding the "classic appeal to authority", all I can say is that, unless you are planning to waste an enormous amount of time verifying every single sentence on your own, the quality of your sources matter. And the former editor in chief of arguably the most prestigious medical sciences journal in the world is a pretty good source.
Oh, and by the way - it's kind of funny how you criticize an argument of authority and do an ad hominem in the very next sentence.
I have no idea about Angell's relations with pharma. She's not the only one making these arguments, though.
I'm sure you're right -- and I disagree with those folks as well.
I recognized the mild ad hominem, although I'm guessing that she would agree with the 1st and not much care about my characterization of her knowledge of pharma.
If you're going to continue on this line of attack (pharma=greedy, NIH does all the work), I strongly recommend that you read Derek Lowe's blog. Start with this post:
http://pipeline.corante.com/archives/2004/09/07/angells_book.php
Meh.
The administrative noise of private insurers are an enormous drain on hospitals, therapists, psychologists, and doctors. The part of that which prevents quacks from getting paid for unnecessary interventions is important, as isoversight to prevent flat-out fraud. But the absurd multiplicity of forms, electronic systems, toll-free numbers, formularies, and the like are a pernicious burden essentially unique to the American "system," compared with those of other industrialized nations.
Hospitals and practicing physicians typically have dozens of different insurance contracts, each with their own byzantine and often rapidly shifting set of rules and regulations. The point of it all is to wear the providers down, so that they'll just give up and not order a necessary study or better drug for a patient or to keep fighting for reimbursement for services already rendered. Marvelously, they're not the ones who will get sued if something untoward happens as a result of care denied, since they are protected from litigation. They are practicing a medicine of attrition of sorts, with very little culpability.
All of that drains dollars away from actual patient care to feed a greedy, inefficient beast, one that hospitals and doctors in most of the rest of the industrialized world don't have stalking them. They take care of patients, rather than fighting with payors day in and day out. What a concept.
It's also disheartening to see yet again, the canard that America's outstanding biomedical research results from our broken health care "system." The US leads in medical research because basic science, where the breakthroughs happen, is well-funded by NIH and other federal agencies, in grants processes that are fiercely competitive and based in academia and to a lesser extent in industry. It's worth noting that the most successful basic science enterprises, such as Genentech, are also those that have the most academic cultures.
The process of getting drugs from the lab to market is a private-public partnership. It needs some fixing, as the Vioxx mess shows. But that is where Big Pharma tends to get involved, since the FDA approval process requires their presence. They situate themselves preferentially in the US in part to be near those federally-funded bench scientists who are discovering new, exciting things. But there is nothing about our dysfunctional health care system that makes it especially easy to run clinical trials to get the drugs the last miles to market.
Thank you. I've been trying to make this argument here for months; to no avail. Megan won't do the research to find out how most of that "innovation" she's so fond of actually happens.
I would add two more thing to this discussion: our employer-based insurance system is a drag on the business sector, particularly the small-business sector, and effectively swamps entrepreneurs before the have a chance to go from start-up to on-going. Second, her numbers fail to include the benefits of a healthier population among those either uninsured or underinsured; particularly in productivity.
and effectively swamps entrepreneurs before the have a chance to go from start-up to on-going.
Then why is our level of entrepreneurialism so much higher than in Europe?
I'm not sure that's the right question. A better question is how much more entrepreneurial might we be if our health care were portable?
People stay in jobs they don't much like and give up dreams of starting businesses because they or a family member has a condition that renders them uninsurable. It doesn't take much, either, to be completely unable to get an individual or small group policy--asthma, having survived childhood leukemia, or even bad migraines.
Megan won't do the research to find out how most of that "innovation" she's so fond of actually happens.
And the argument above didn't come with any research attached, either. Just another one of those "who will you believe, me or your lying eyes" arguments.
I will wholeheartedly agree that the employer-based insurance sucks. It's because it isn't insurance -- which would mean a financial mechanism for risk management -- and hasn't been since... oh I dunno, forever. Somehow the mandatory liability insurance for drivers manages to work without everybody ending up in the same national pool.
You fundamentally misunderstand the business of biomedical research. The NIH is a great institution. But it has not yet, as far as I know, produced a marketable drug. Marketable, meaning it has a good dosing route, can be cost-effectively produced on a mass scale, is shelf-stable, and passes a half a billion dollars worth of clinical trials. What pharmas do and what the NIH does are two very different things, and both are necessary to develop new drugs.
Much of the time, what pharma does -- and does relatively well -- is based on work funded by NIH through a competitive grant process.
Once those drugs are brought to market, NIH again plays an important role in funding the research that compares one drug to another.
And this whole discussion is shamefully mired in the concept of bringing drugs to market, a very good indication of the bias in our medical system that is much of the problem, and not focused on treatments and outcomes, which should, for the most part, have nothing to do with a drug or a prescription or a visit to the pharmacy.
The fact you think the focus on bringing life-saving drugs to market is "shameful" shows your own bias. Medicine wouldn't save very many people at all without capitalism.
this whole discussion is shamefully mired in the concept of bringing drugs to market, a very good indication of the bias in our medical system
Do you mean bias in favour of medical treatments that actually reach the patients? Rather than ones that look great in a computer simulation but never treat a human because of pesky things like gut absorption, side effects and the FDA?
There is increasing recognition that the role Big Pharma plays in clinical trials has run counter to proper conduct of science, sometimes in ways that have harmed patients. It is also worth noting that they play the role they do because that is how the drug approval process is designed. The conflicts of interest are legion and there has been slow but steady recognition that these need to be addressed. Journals now require that authors declare potential conflicts and are much less tolerant of industry-paid ghost writers penning articles for scientists. Industry-sponsored trials are now looked at much more skeptically than they used to be and compared to federally-sponsored studies.
The drug approval process needs revamping. The most radical proposal I have seen has the drug companies contributing to a fund from which trials are run, taking them away from the advocacy role each has for their particular stable of compounds. Interesting idea, but for now, I would settle for the getting rid of some of the more obvious conflicts of interest and FDA making sure proper post-marketing surveillance is conducted so that we don't find out years later that a commonly-prescribed drug was far more dangerous than we realized.
Second, her numbers fail to include the benefits of a healthier population among those either uninsured or underinsured; particularly in productivity.
I wonder how much of our lack of healthiness is due to unavailable medical care, and how much is due to lifestyle choices.
Those are related issues. Brief primary care intervention can decrease alcohol consumption. We could use better data on whether obesity would be amenable to similar interventions.
Zic, one of those academic institutions you spoke of a minute ago has a bone to pick with your emphasis on the economic significance of the basic science:
http://www.rpi.edu/research/magazine/summer04/pdf/rrq_drug_discovery.pdf
So...a $2.7 million grant from the NIH may be a very nice thing, and as claimed it does fund "basic science", but for that basic science to go far enough to produce new drug out of the countless dead-ends and circular rabbit trails that can be discovered along the way, about $1.7 billion will be required. Where does THAT money -- a full three orders of magnitude greater than the basic science grant -- come from? Tooth fairy?
I should note premptively that if you read the complete article, the NIH also provided a $1.2M grant to develop a computer system that is partially involved in this study. However, the basic point about scale, stands.
The US leads in medical research because basic science, where the breakthroughs happen, is well-funded by NIH and other federal agencies, in grants processes that are fiercely competitive and based in academia and to a lesser extent in industry
O rly?
http://www.nytimes.com/2009/06/28/health/research/28cancer.html?_r=1&ref=instapundit
“There is no conversation that I have ever had about the grant system that doesn’t have an incredible sense of consensus that it is not working. That is a terrible wasted opportunity for the scientists, patients, the nation and the world.”
Grants are not competitive. They are not a market, they are a controlled distribution of resources.
Grants aren't competitive? Have you ever looked at the number of NIH grant applications that don't even make it to study section, much less get funded? Scientists who don't get their grants funded, ironically, often wind up in industry (or sometimes as grants administrators, which is a different kind of ironic).
That article focuses on cancer research, which has a specific history and establishment that indeed does need some shaking up. Oncology is very protocol-driven. Chemo, radiation, and cancer surgery all have very narrow therapeutic indices, so this is no surprise. That caution also influences research agendas. It is encouraging that the cancer research community recognizes this, as a necessary first step in keeping the field moving forward.
Some of the caution is a function of tight research dollars, a situation that got much worse the past eight years. We should all hope that the additional money going to NIH this year will be put to good use. Even outside of cancer research, the Gates Foundation, as an example, is funding the kinds of out-there projects that might not pass federal muster. It remains to be seen how successful this will be, but it certainly seems like a good idea, one whose success should certainly be tracked over time.
All of this may be true (and I suspect it is), but the point remains that these expenditures are included in our national costs while the benefits are spread worldwide. Nothing you've written disputes that - in fact, you've reinforced it by noting that biomedical and pharmaceutical research does tend to happen here. The origin (public or private) of the funding is irrelevant, as is the cozy nature between the FDA and the big pharmaceuticals. The point is that the money is spent here.
No, my point is that US biomedical research functions relatively independently from health care delivery. Insurers don't pay for clinical research and indeed deny payment for treatments they deem experimental.
Public funding is relevant, because it attracts big pharma and biotech to the US over other countries. It's not our low corporate tax rates, right?
Drugs developed in the US do indeed benefit the world, particularly our peer industrialized nations (more on that in a moment). Partly this is for our aforementioned federal support of the research, basic and clinical, that leads to new treatments. And partly because we pay a fortune for drugs, since outside of the VA, essentially no American payors have the clout to bargain down the price of drugs. Congress made sure that didn't get written in to Medicare Part D. So instead, we're trying to poach drugs from Canada, because HealthCanada is a big enough player to drive a hard bargain.
The degree to which FDA is in bed with the industry it is supposed to regulate is not irrelevant. It is anathema to scientific inquiry to suppress results, yet drug companies have done just that with negative studies or with data that have shown a blockbuster drug is more dangerous than was appreciated in the Phase 3 trials that led to FDA approval.
There are unintended consequences galore of the current system. It encourages "me-too" drugs, which add dramatically to the cost of health care, without always (or even often) improving outcomes. It also means that major global killers that affect poor nations, such as malaria and TB, get short shrift in favor of yet another drug for erectile dysfunction.
It also means that major global killers that affect poor nations, such as malaria and TB, get short shrift in favor of yet another drug for erectile dysfunction.
Ah, Klug's corollary to Godwin's Law proved again: as a blog discussion grows longer, the mention of Viagra approaches 1.
Let us review the facts: Viagra was a discovered effect of an anti-angina and anti-hypertension experimental drug, not something they were looking for in the first place. Since its discovery, there hasn't exactly been a huge revolution towards "sexual health" drugs; matter of fact, Pfizer itself has seriously de-emphasized their sexual health division and has refocused on areas like oh, oncology and antivirals.
Your false choice between malaria and TB versus ED is cartoonish. It's more like ED versus some other pressing 1st world concern, like heart disease or diabetes. It's not big pharma's fault that folks in Brookline, MA don't get malaria.
Two "me-too" PDE5 inhibitors have been approved by FDA since Viagra.
Big Pharma is indeed targeting potential Viagra customers in Brookline and similar markets. Thanks for making my point.
Bzzzzt! Wrong.
Lev/i/tra (FDA approval 2003) was a oops by Pfizer (look at the structure) that Bayer knocked off. Classic me-too, right? Well, L/evit/ra's sales have been cruddy and Bayer (so far as I know) has long since stopped doing ED drug research.
And Ci/ali/s (FDA approval 2003)? It's actually a better drug; it's not a me-too, it's probably a best-in-class! ICOS, the company that made it for Lilly? Yeah, they don't exist anymore. They were bought and subsumed about five (?) years ago and the company *they* bought Ci/ali/s from is but a memory.
Palatin, the tiny, tiny company that took investor money for the ladies' version of the blue pill? Yeah, they're just about toast, too.
Look, you can believe that oh, Big Pharma is dumping billions into ED/sex health research right now instead of focusing on 3rd world urchins with malaria, but it's just not true.
Clearly ED as a drug target was an accident. After all, if you want to make money, you'd realize that getting the FEMALE ready was a much, much larger market than getting the male ready.
I'm not really impressed with the external costs argument here. Lobbyists are expensive, but congressional staffers are not especially high earners, and the marginal cost of expanding medicare would not be so high, since doubling the quantity being negotiated would not double the number of negotiators.
Same thing with the IRS, which probably does not have to spend that much more to collect high taxes than it does to collect low taxes.
As to the three reasons why europe does it cheaper, each has critical flaws.
1- this seems to contradict you primary thesis, as Downpuppy points out above. This isn't an argument about why we shouldn't have single-payer healthcare, it's an argument about why we don't.
2- It might well be true that this would be difficult to change in the US, but you yourself point out that it's not a big factor.
3- This is the weirdest of all. Our healthcare system needs to continue to suck so that Europeans can continue to have good cheap healthcare. Next time I pay $180 (out of pocket, since its a preexisting condition) for a bottle of eyedrops I'll take a moment to remember that I'm helping the Europeans keep their costs down.
3- This is the weirdest of all. Our healthcare system needs to continue to suck so that Europeans can continue to have good cheap healthcare.
It's unfortunate we have to pay for innovations while Europeans free-ride. I don't think the answer is to throw a wrench in the machinery of our innovation to spite them.
Ideally, they would stop stealing our intellectual property and start paying us for it.
We should consider a regulation that US buyers are entitled to the same price any EU government Agency receives.
You're playing with fire. That might result in companies bargaining harder in Europe because they can't let them free-ride any more, or it might result in less innovation, and I'd wager it'd be more of the latter than the former.
How about a regulation that all the other countries have to pay what we do?
Not as weird as the complete absence of advertising here.
Somebody is paying for this place. After reading the publishers letter,
http://www.theatlantic.com/doc/200907u/note-from-david-bradley
I still have no idea who, other than the fine folks at AstraZeneca. AstraZeneca - building innovation in goodness!
I'm pretty sure I remember Megan making these arguments long before she worked at The Atlantic.
Megan,
There is one place that a single payer plan can cut that the market can't. It can cut back on service to the patient without without fear of losing market share or fear of lawsuits.
A single payer plan is a monopoly, just like Ma Bell (kids, when there was only one phone company, it used to pay refunds in postage stamps). In a single payer plan, the doctors get paid every week. So do the janitors and the suppliers. The only variable in the system is how much service we will provide to the patients and how quickly will we provide it.
I don't like the notion of unaccountability when it comes to government-rationed care. But if it prevents a new generations of John Edwardses getting filthy rich while driving up costs, then I can see at least one really great silver lining.
And those are the only two choices? Destroy a really good health care system (in some ways an ideal one) because it isn't perfect OR John Edwards gets rich suing obstetricians?
Of course those are not the only two choices. It is like Hitler and the Autobahn (or the improvement in chess playing ability in Stalin's Russia for those obsessed with Godwin's Law). Any cost / benefit analysis is going to conclude that the benefits are not worth the cost but the benefit is real.
Physicians, researchers, drug companies do plenty to innovate. Insurance companies? Not so much. Unless you count the universal elevation of the nurse practitioner.
Allrighty then, it may be time to send out the science police to get mavericky wid it.
Given the title of your article, I was surprised that you did not mention biggest reason why the "Medicare-Is-An-Administrative-Cost-Saver" meme is a myth.
Medicare has increased hospitals' administrative costs exponentially over the lifetime of that program, which means that although Medicare's administrative costs are relatively low compared to insurance companies, the Medicare system's systemic costs are enormous. Medicare has simply pushed the costs caused by its system onto hospitals' backs, while keeping its own administrative costs low.
Want proof? Compare the ratio of billing clerks in a hospital to overall number of hospital employees back in 1964 and compare that ratio to today. Whereas a hospital billing office in 1964 may have been two or three people, today that same hospital must employ a veritable army of billers, transcribers, and coders to keep up with Medicare's withering and ever-expanding paperwork dictates.
Why is this so? Because the Medicare prospective payment system requires an inordinate amount of paperwork for hospitals to complete, detailing down to the nth degree each and every hypodermic needle, bottle of oxygen, etc. that goes into each and every medical procedure, cross-referenced by diagnosis code. At the end of the year, Medicare adds all that up, divides the costs of each procedure by the number of procedures, and -- presto -- next year's payment for a particular procedure shall be last year's average cost for that procedure. No wonder Medicare only spends 3% on its administrative costs, all Medicare does is press a button on its computer.
Sorry, if I'm not making myself clear.
That the US provides the bulk of the world's biomedical innovation is not in dispute (or at least, it's not disputed by me).
But that's not what Megan is saying. She is saying that innovation is one of the main reasons that the US healthcare system is so much more expensive than everyone else's.
However, the evidence indicates that, as far as we can quantify innovation (research spending), it amounts to a fairly trivial percentage of our healthcare costs, and certainly nowhere near explains the cost differences between the US and Europe.
Shorter version: Yes, we do most of the research, but we don't spend that much money on it.
Well, we also spend far more on diagnostics, and we don't do nearly as much rationing. We spend more, period.
But try to imagine if Europe were barred from using any of the innovations we paid for. It wouldn't change the costs much, but it would have a huge impact on the efficacy of care.
I don't think Megan's argument is that health care research spending in the US drives our higher overall costs. She wrote:
"Third, we're still driving quite a bit of product innovation. Our messy, organic, wasteful, unfair, irrational system allows experimentation, and they cherry pick the best results. If we stopped doing this, their system would stop looking so good."
This is an argument about innovation that happens here and then gets used in Europe. But if health care reform results in less innovation here? Then everyone suffers. We need to be very careful that our health care reform doesn't undercut existing incentives to innovate.
their system would stop looking so good.
Which is pretty scary, considering:
Man pulls out 13 of his own teeth with pliers 'because he couldn't find an NHS dentist'
http://www.sundaygazettemail.com/News/StateofDecay/200704290012
just one of several stories in my local paper about people in THIS country pulling their own teeth because they can't afford a dentist.
If only we had socialized health care, then people could pull their teeth out waiting for a dentist instead of because they couldn't afford one.
I think it's worth noting that this guy could have gone to a private dentist if he'd had the money, just like in this country. It's not clear to me that he would have been any better off in this country.
buskertype,
What a load of bull your post is. I read the story. From the story:
State health officials have acknowledged they have done little to improve oral health among older West Virginians. They’ve launched no initiatives. No money has been distributed to address the problem in recent years.
So, you like to a post offering it up as "one of several stories in my local paper about people in THIS country pulling their own teeth because they can't afford a dentist" as a counter to a story about the NHS not funding dentists. And, what did your linked story say, well that WV is not funding dentistry for people in need.
It seems to me that your story is making TallDave's point.
ummm... what?
Of course West Virginia isn't funding dentistry for people in need. That would be socialism. That makes Talldave's point how?
"I'm not trying to justify the bullshit automatic claims denial, but that's not actually a very costly process: a hospital submits a bill, they deny it, you yell at them."
Megan, this is flat-out untrue. Yelling at them is often a VERY costly process, we just don't account for it because it's one the consumer pays in time. Care for a chronically ill relative who is getting auto-denied and you will see. This may have improved in the last few years, but my sister and I lost countless hours on the phone with useless HMO reps when my mother was ill. I could have been FAR more productive at work, and earned a lot more money, had I not lost this time. I work in the insurance industry, I know the jargon, I know what to do, I followed every last damned rule, and I STILL nearly went postal. I came to the conclusion that their process was to deny everything and hope the consumer was too stupid to call the insurer and would simply pay it themselves, or would give up after an hour on hold.
The insurance industry loves to talk about fraud as if it's always on the part of the consumer, but how many people are paying $60 bills for lab tests to save the insurer the $10 negotiated rate? I used to think I worked for an amoral industry, which I could deal with, but now I think it's actually IMmoral.
Just because you can't measure a cost directly doesn't mean it doesn't exist.
Picking up the phone to answer a customer complaint/request costs the insurance company at least $4. Spending time looking up account info, etc. etc. costs more. Paper work mailing, remailing denials costs more. Passing the call up stream to someone else costs more.
There is definitely a cost to the insurance company as well. Maybe it's in the range of 10-25 per case. Those are just guesses. But it certainly adds up if they deny everything out of hand, which I can't imagine most do. I paid for my own private insurance in the US and everything they denied they had a valid reason for it, and when presented with a valid reason why they should pay they paid up within 1-2 months 80% of the time. The other 20% of the time they had a valid response why my response wasn't good enough and would either require more documentation or another response or I'd have to pay the claim myself.
It certainly wasn't fun. And it was costly for both of us. But I think 95% of the time it was pretty reasonable. It's just that 5% that leaves a pretty sour taste in your mouth. I don't think this would improve with the government running things, it would probably tend to get worse as 100% of my interaction with the DMV, airport security, state government, and IRS, 75% of my interaction with the post office have left a sour taste in my mouth.
I had a problem with an insurance company that refused to pay and put me through many time-consuming and frustrating calls for no reason. Finally, I turned to the Human Resources people at my employer, who intervened with the insurance company. The company was just as bad the next year, and so my employer got rid of them and went with a new insurance company that was much better.
With the government running everything, there will be no pressure for the bureaucrats to maintain good service, because no one will have a choice. In fact the bureaucrats' only incentive will be to turn down coverage to save money, safe in the knowledge that customers are powerless. How is that better?
How do countries pay less for medical care? In order of savings:
1) They stick it to the doctors. Universal payer rates are set by the government. Doctors end up making 50% less than in the US.
2) They stick it to the pharma companies. Universal payer rates for drugs are set by the government. They can cost-shift to the US of course.
3) With the notable exception of France, most countries have HIGHER percentages of out-of-pocket expenditures than the US (France only covers 70% of most medical care, but evidently people there have more private coverage on the remaining 30% co-pay than say Japan).
My secret suspicion: in a country with high ongoing unemployment, such as France, becoming a doctor and setting up a practice on your own may seem more attractive than getting a degree in engineering, but having to wait until you are 30 to actually get a real engineering job.
I think that you left out a couple of fairly significant methods by which European countries save on their medical costs.
4)They deny treatment to people deemed too old and too sick.
5)They kill off the sickest people whenever their hospitals get too crowded.
As the Baby Boomers move into the "too old for medical treatment" category, this will be a low hanging fruit that will be too attractive for a government medical system to resist. If that doesn't save enough money, there is always Cuba's innovative system for dealing with AIDS that offers a cost effective alternative to an infection that is currently very expensive to treat in the US health care system.
I'll stay out of the political argument here, but having spent some significant time in the insurance industry (not anymore, so put down your conflict-of-interest darts), I can tell you that insurance companies do not spend money on denying claims. In fact, most of their focus is on finding ways to spend less money processing claims.
There are four basic departments in any insurance company:
Underwriters write policies (which are basically legal contracts) that strike a balance between a) attracting customers and b) limiting the company's liability for catastrophic loss (hence the per risk, per occurrence and lifetime limits). Their goal is to set the right premium rate.
Actuaries try to determine the probability of claims occurring, whether it's health issues, car crashes or house fires. They take in as much data as the law allows them to, and attempt to tell the underwriter how much to discount the claims when setting the premiums. Their goal is to accurately predict the future.
Claims examiners try to pay claims as efficiently as possible. Claims are expected, so they are not out to deny claims per se, they are out to resolve them as quickly as they can, so they can minimize the Loss Adjustment Expense (LAE) the company has to pay for each claim. Their goal is resolve claims quickly.
Accoutants make sure the money is paid & received correctly.
Insurance companies measure their underwriting profitability using something called a Combined Ratio (basically, Losses & Expenses / Premiums). The average over time is between 100% and 110%. In other words, they typically lose money on each and every policy. Actual profit comes from the float - investing the premium money in approved, low-risk investments while waiting for the claims to come.
Any company that can get their Combined Ratio under 100 makes money twice (on the underwriting & on the investments), regardless of how many claims they pay. Put another way, paying a claim quickly is usually cheaper than spending a lot of money to prove you don't have to.
I've written a lot more on this topic here, for those who are interested.
Very interesting -- but I do wonder how much of this applies to health insurance companies. For one thing, the number of claims per dollar of the premium ought to be orders of magnitude above any other kinds of insurance I can think of. Also, what is the ratio between the dollars paid out to entirely predictable claims such as regular office visits, care for chronic conditions et.al. vs. the "catastrophic" things? If it is greater than 1:1 than it's really an administrative business with a small sideline in insurance...
Brian, based on a quick Google search, I strongly suspect the combined ratio you are quoting is the P&C industry ratio, which is irrelevant here. I don't think there's an equivalent of ISO for the life/health side to gather such data.
Aside from that, I'm saying the denials cost the PATIENTS money and time, and that that loss is not accounted for. I'm not saying the insurer would save money with less denials, I'm saying total health expenditures would be lower(even if premiums went up) due to the negotiating power that the insured has and the individual does not.
@...Max...: I don't have the data you're asking for (I've been out of the insurance industry for quite a while now), but I'd suggest that the numbers themselves are only of interest to the actuaries. If claims per dollar of premium is high, it just means the recommended cost of a policy would be higher than, say, home insurance, where claims happen relatively infrequently. From an actuarial perspective, it's all about probability and risk-adjusted cost. The number of claims only matters to the claims examiner (and the CFO, of course...)
@BGKev: Combined Ratio is indeed a P&C term, but I fail to see how it's irrelevant here. Health Insurance is very much like Casualty insurance at the underwriting & claims level. Reserves are established, claims reviewed, payments made, reserves adjusted, etc.. The only insurance that is completely different is life insurance (where each policy has one and only one claim, after which the premium flow always stops). Just because a regulatory body might not collect the data, it doesn't mean that the companies don't use it to measure profitability. Taking one company at random (Aetna), I find that they have a similar measure called Medical Benefit Ratio (MBR), which roughly equates to Loss Ratio on the P&C side.
It's irrelevant because you are citing the value of the P/C insurance industry's ratio as evidence that the Health insurance industry only makes money on its investments. That's like saying because car manufacturers are losing money, boat manufacturers are.
The fact that I can't readily find the value of the health industry's ratio leads me to suspect that it's not the case, since it would seem to be a point in the insurers' favor.
Also, a lot of P/C products are used as "loss leaders" for other more profitable products - like life insurance. And maybe health, I don't know. But the common knowledge that the P/C Industry's combined ratio is above 100 does not necessarily apply to the other branches.
Fair enough - without the need to report it, we'll probably never get a true sense of the number (anecdotally, Aetna's was in the high 80's without the expense ratio, which is in line with the P&C numbers).
In either case, though, the idea of investing the float still fits the model, so we're either talking about making money one way (investments) or two (investments & premiums). So the claim (no pun intended) that insurance companies spend lots of money looking for ways to deny claims still doesn't hold water in my book...
The whole "government monopolistic health insurance is cheaper" is only true for anyone except the consumer.
Canadian income tax rates
Ontario income tax rates
$60,000 income in Ontario, Canada
31.15% Ontario
22% Canada
53.15% total
$60,000 income in Illinois, U.S.
25% U.S.
3% Illinois
28% Total
25.15% difference
That's $15,090 to shop around for a variety of quality health insurance plans vs. Canada's one and only.
Except of course that 31.15% rate is the combined provincial and federal rate. The chart you linked to indicates that clearly - meaning the Canadian tax burden is only 3.15% greater with universal healthcare.
D'oh! Good catch. Tax rates have greatly improved since I lived there. Here is a doc listing provincial rates for when I did reside in Ontario.
1999 Provincial Tax Rates
I knew my take home pay was much smaller there than in the U.S. then. Harper must have really improved things.
Thanks.
Smaller? It must have been a lot smaller those rates range from 50-60%!
Wasn't Harper - his biggest tax cut was 2% to sales taxes. Was Chretien and Harris that knocked that much off the income tax rates.
You made a slight mistake in your numbers(and by "slight" I mean "gaping and foolish") - that 31.15% Ontario income tax is the combined marginal rate at $60,000 and is in no way in the same ballpark as the provincial absolute rate. On $60,000 taxable income in Ontario, you will pay, according to those numbers, $14,696.89 in combined federal and provincial taxes, for an absolute rate of 24.49% combined federal and provincial. On $60,000 of gross income it'll be lower, since there is a basic personal deduction I'm not factoring in.
I assume you're also using marginal rates for the US, so the 28% you cited is misleadingly high. But even if we assume the overall structure is the same and marginal rates are a good proxy, then an Ontarian will pay 3.15% more income tax than an Illinoisian.
Now, Ontario's sales tax rates are 5% for services and 13% for goods, compared to 6.25% in Illinois, so you gain another couple percent on us there. And while I can't speak to the rest of Illinois tax rates, I wouldn't be all that surprised if they were a couple percent lower than Ontario's overall(though it might just as easily go the other way). It's entirely believable that the difference is several thousand a year, all-in. But it's not $15k on income taxes alone.
It doesn't really matter, since in the U.S. people making over $60K pay some 90% of all income taxes anyway.
You can either have rationing where healthcare is free, but it takes three months for anyone to get an MRI and they pass out doctors by lottery, or rationing where only people who can't afford medical care are forced into the substandard government system.
Yes, I have admitted my error in a previous reply. It was colored by my experience living there around the millennium. As you could see in my link in that reply, my experience was quite different. I'm not sure why the tax structure is lower now.
Canadian governments have been aggressively cutting taxes since the mid-90s. Capital gains, corporate taxes, sales taxes, income taxes, the works. "Tax Freedom Day" has moved back a month or so in the last decade, from early July to early June. Canadian fiscal policy has been absolutely beautiful for a long time, until this whole stimulus nonsense got started.
Just out of curiosity, since we pay more than any other nation, what percentage of overall GDP is medicare? And what is the projection if medicare was expanded to all ages, insofar as how much that would grow it's percentage of GDP?
Joe
The problem with health care "reform" is that ALL of the cost savings are likely to be mythical, no matter where they come from.
Here's how it'll play out. In order to get the numbers in the bill to balance, Congress and the White House will wring a bunch of expenditure reduction promises from the private sector (hospitals, insurers, pharma), and promise a bunch of expenditure reductions in Medicare and Medicaid. Whatever 'public option' the legislation establishes will be a milk toast program that doesn't cost too much because it won't do too much--the price of getting the private sector to play ball. The difference will be made up by some basket of new taxes and tax increases.
The taxes will take effect immediately, but the reductions will take effect at least two or three years down the road. Almost as soon as the ink dries on Obama's signature, lobbyists from the private sector will rush up the Hill seeking to "modify" (i.e., weaken) the cost reductions their industries promised to make. At the same time, the lobbyists from the AARP, hospitals, nurses, etc., will also be on the Hill seeking to reduce the cuts to Medicare and Medicaid.
So little in the way of cost reduction will occur. Americans will pay higher taxes for an ostensible reduction in the number of uninsured, but they'll still get too little health care, and still pay too much for it. That isn't real reform. And that's because there is no political will for real reform. Just more of the never-ending kabuki theater that is Congress.
"White House will wring a bunch of expenditure reduction promises from the private sector (hospitals, insurers, pharma)"
http://news.yahoo.com/s/ap/20090621/ap_on_go_co/us_health_overhaul - Here's where they got pharma companies to agree to slash prices by 50% on certain classes of prescriptions
http://www.nytimes.com/2009/07/07/health/policy/07hospitalsweb.html?ref=us - Here is where they are working on hospitals...
What I love is how all the news outlets are treating this as if you can take a private enterprise and suddenly reduce their revenue substantially and the only thing that happens is healthcare gets cheaper.
Joe
Since when does anybody in the media--the financial media included--understand anything about economics or business? I'm convinced they're all a bunch of innumerates. Case in point--the economics reporter for the NYT (whom Megan wrote about) and his absurd mortgage situation.
There is nothing like a government program for stupid paperwork rules, conundrums. As Brian says, private business is about the flow of money and purchase; government, in this arena, is about CYA. My most recent government example. I have a 'Katrina' patient; she had gotten a brand name drug a day for years in NO. I continued it (it wouldn't have been available to local Medicaid patient), have for 2-3 years. This drug is going generic. Recently,I got a call from the pharmacy where the Rx was sent. They needed a 'Brand name necessary' Rx; otherwise the patient couldn't get the drug. Her Rx would have to go generic by default w/o such a statement but the generic hadn't yet been reviewed by the appropriate Medicaid committee; so otherwise she couldn't get it (that's the pharmacy's story anyway). We might call Medicaid about it but getting them to answer the phone is chancy.
Disputes with insurance companies more have to do with what, on my side, I view as failure of contract. I had a patient we kept in the hospital for a couple of weeks. The insurance company said it was not authorized by their immediate reviewers but, on a next level review before it would go to the State Insurance Board for review,, after the patient was discharged, payment was made. In this case the state's rule was as potential adjudicator and a constructive one.
Private business is indeed about the flow of money and insurance companies make more money by denying care. This is particularly true when patients have little recourse if their doctors are unsuccessful in getting authorization.
The insurance industry could work together to streamline the authorization and billing process, in particular harmonizing them across companies in order to decrease provider overhead and thus cut health care costs. But they don't, because they the chaos of the current system benefits their bottom line. It needs to change, the same way doctors needed to be forced to stop self-referring.
http://www.cbo.gov/ftpdocs/88xx/doc8807/11-13-2007-LT-Health-Presentation.pdf
2005 CBO review of medical costs including as a percentage of GDP. Looks like Medicaid/Medicare made up about 4-4.5% as of that time. Or roughly 1/3rd of all "health care" costs. Now I wonder what happens when you expand that to the entire population?
Based on the presentation in that link, which does describe some things unclearly to me, it appears medicare/medicaid excess cost growth was growing at a higher rate than the excess cost of all "other health care". (Slide 3)
One of the most interesting slides was slide 15. It describes out of pocket expenses of healthcare over the past 30 years.
Notice how the decline in out of pocket expenditures prefaces the increase in excess cost growth of healthcare? It's almost as if when you take personal responsibility out of people's hands, they can no longer control the cost....
Joe
It's also almost as if medical treatments got more expensive in the last 30 years. Costs of health care grew for everyone irregardless of the provider.
Medicare is unsustainable without reform, and that's part of the problem. And while I don't advocate extending Medicare to all population, there are reasons to believe it wouldn't not be that much more expensive. Medicare is now covering the elderly, which are by far the most expensive patients.
It's also almost as if medical treatments got more expensive in the last 30 years. Costs of health care grew for everyone irregardless of the provider.
Actually, the problem is more that new treatments are available than that existing treatments are getting more expensive. Medical care is much better than 30 years ago, and many treatments that didn't exist then are common now.
There's no reason why health care shouldn't continue to get more expensive, as long as we keep coming up with new treatments.
Nimed -
[quote]It's also almost as if medical treatments got more expensive in the last 30 years. Costs of health care grew for everyone irregardless of the provider.[/quote]
They got more expensive (beyond inflationary pressure), but my point is that I had never before seen a chart showing the very substantial decrease in out-of-pocket expenses for medical procedures. We talk about over-prescription of meds/diagnostics, and I personally think that could be massively cured if people were immediately responsible for a much greater portion of the cost up-front.
Health Insurance has been the equivalent of buying on credit. Get the service today, but pay over an amortized period of years.
It needs to be much more immediately costly for all services other than something catastrophic or financially prohibitive.
Joe
"Europeans are far less likely to demand heroic intervention for people of advanced age": odd, isn't it, that the atheistic Europeans are less frightened of death than the allegedly Christian Americans?
How do you interpret that?
And what's up with the "allegedly"? Are you saying people are lying?
Either that or they've learned to expect less from their healthcare industry.
On the innovation business - I have the impression that a Golden Age of new pharmaceuticals did happen but is now well behind us. Am I wrong?
You never know. A lot of research is a crapshoot. Sometimes they get lucky and most times they don't. Sometimes they find a drug has a different effect than what they were shooting for, good or bad.
Here's just one silly example: Carprofen. It was developed for arthritis but never became very successful as it wasn't really any better than other NSAIDS. It got sold around among rug companies. Then Pfizer realized that it worked well on dogs, marketing it as Rimadyl. They sell a lot of that now. I had a dog who was on it from age 9 through 15, when he died. Without it, I'm guessing that i would have had to put him down at about 11 due to pain. Now, Carprofen wasn't invented or researched for dogs, but it worked out. In this case my dog won, I won and Pfizer won.
Here's another: Valtrex. You've probably seen ads for treating genital herpes with Valtrex. Well, doctors also prescribe it for Shingles. The idea is to suppress the virus so that it does less damage than it might without Valtrex. I have no idea what Valtrex was researched for, but I have first hand experience with it treating Shingles.
It comes in waves. Statins were a big thing for a while.
Personally, I think drugs are overprescribed and over-researched as opposed to other approaches, because it's always more profitable to treat someone with a drug forever than to cure them once. One useful thing the government could do is establish various medical X-prizes and let entrepeneurs and capital markets figure out what approaches to try in order to claim the prize.
There's some very exciting non-drug things going on right now. They've developed a viral technique that was very promising against all solid tumors, and just today there was a story about 1mm vein-crawling robots.
I completely agree. There should be (and I do not exaggerate) a $1 billion x-prize for a cure for HIV, a $5 billion x-prize for a cure for diabetes, etc.
The cost savings would be saved a dozen times over in the first year post-cure.
A cure for HIV and/or diabetes? Like a drug that you could take once and be done with it?
Screw your billion dollars -- if I were a drug company, I'd want hmmm, like 200 billion. At least. No, probably more.
People tend to forget about how much drugs really benefit us and actually do CURE stuff. Antibiotics are the most prominent. They save billions every year by preventing hospitalization for infections - and save countless lives. Even stuff like over the counter Neosporin keeps people out of the hospital.
Other drugs prevent a lot of suffering. My wife has bad allergies in the fall, with asthma symptoms. Most antihistamines put her to sleep. Claritin is her wonder drug. We still buy the mane brand as a way of saying "thank you" to the outfit that invented the stuff. Then again, she's allergic to mosquito bites - huge welts and itching. For that Benadryl salve is her savior.
There are also countless other drugs - that were researched at great expense - that we take for granted because they're over the counter and not in pill form. Ever get athlete's foot or jock rot? I'm old enough to remember when cures were few and far between. Then came Desenex, followed by many others. A lot of those same formulations are used to treat women's yeast infections.
Most drugs are not prescribed for a lifetime - but to treat a problem til it's cured.
I wouldn't say it's behind us. Combination antiretroviral therapy for HIV infection, despite the side effects, is still pretty darn amazing. Microbes being what they are, staying ahead of HIV until a vaccine (or at least a microbicide) comes along will mean having to develop new antiretrovirals for the foreseeable future. Such is also the case with other antimicrobials. We make new drugs; the beasties develop resistance, and round and round it goes. It's evolution on a scale to which we can all relate.
Statins have been helpful and it may well be that even if we were all a bunch of skinny, celery-crunching runners that they might still be useful drugs because they have effects beyond their ability to lower cholesterol.
We clearly need to focus more on prevention, but drugs have their role now and for the foreseeable future.
An interesting question is whether cost containment should be a higher priority for drug research and indeed all biomedical research. Your computer is much, much faster and probably somewhat less expensive than the one you had a decade ago. Your health care is somewhat better and a hell of a lot more expensive than it was a few years back. Technological advances drive down computing costs, but drive up health are costs. We just make it even worse with our fragmented system.
I think this posting completely missed the point. From an economic theory perspective, it did an excellent job of deflating many of the points made by those who favor a governmental run health care system. But the choice we face is not between having a free market economic system which would theoretically maximize economic growth and innovation and a government run system, but between having the current system and having a well-thought out government run system.
We already have socialized medicine in the United States, and there is zero possibility of that coming to an end. To begin with, the government runs Medicare and Medicaid, and being part of an HMO or a PPO is exactly like being part of a socialized system. But what makes our system already completely socialized is that we already provide services to everybody: anybody who walks into an emergency room will be treated. In one fundamental sense, everybody in the U.S. has health insurance, and those who are part of a more formalized system subsidize those who are too poor to sign up for a plan and those who just figure they are better off not signing up for one.
I think we can all agree that the chances of the government not mandating that all comers be treated at emergency rooms is zero. Thus, we can choose between the current system or another socialized system that is more rationally designed. In an earlier posting, McArdle indicated that she is not in favor of universal coverage despite the fact that she had to live without health insurance during an earlier time. It is more accurate to say that she lived without formalized health insurance because she knew that the EMS crew is not going to throw her into the ditch after an accident despite the fact that she did not purchase coverage. And she figured that she doesn't have much money, the downside risk of getting stuck with a big bill is worth the risk.
Let's not forget Medicaid! Medicaid is a single-payer government health plan with "low adminstrative cost" too ...
With the reported result that fully 40% of claims cost goes to fraud, graft, and "legal graft" in both California and New York . (Who knows about in between?) Yes, 40%!
("Legal graft" being Tammany's famous term for graft that's not illegal because we write the law that way.)
Before we put our belief in the superior efficiency of politician-managed health care, wouldn't we want to see them knock this graft level down to below, say 30%?
More on national Medicaid fraud.
There's fraud in Medicare, too. What I want to know is whether there is less fraud in single payer systems and if so, why.
You're imagining that a 40% fraud rate is less than something??
To answer your question, we know there's massive fraud in the single-payer Medicaid system and why: Because politicians get no votes by denying health benefits to anybody, they only lose votes. Now add to that the lobbying power of all those who want goverment money spent without checks: doctors, medical suppliers, unions of hospital workers, everybody. Who's on the other side? Nobody.
Certainly not liberals, who actually brag that single-payer doesn't "waste money" by verifying claims "to deny coverage".
How much money do you save by not wasting money to verify claims? Follow the links I provided and see!
The investigators quoted in the NY Times story are quoted as saying "40% fraud and abuse" in NYS -- 40%!!
When Eliot Spitzer was attorney general of NYS his constititional duty was to fight Medicaid fraud, and he did nothing. He went after Wall Street instead, which was the jurisdiction of the Feds.
Why did he do nothing to fight NYS's infamous Medicaid fraud? When called on it he said it was because the state legislature gave him no budget to do it -- which his half true, the politicians in the state legislature didn't want to do anyting about it either, but he did absolutely nothing on his own.
Why? Because he wanted to get elected governor! And how would he do that with the hosptial workers union spending a fortune on TV ads slamming him for denying medical care to the poor???
Now, there's a big amount of fraud in single payer Medicare too -- and Orszag has highlighted how medical costs in some regions are 30% higher than others, with the lower-cost regions getting the best results.
Hmmm ... since they know what the problem is in the high cost areas, why don't the politicians just contain those out of whack costs now? Hmmmm ... I wonder why....??
No, I'm not. I'm asking whether France, Canada, and other countries with single payer have significant health care fraud and if not, why?
As for widely varying Medicare costs, there are solutions implicit in that variability, specifically sorting out what it is that provides better care for less money in parts of the country, such as Minnesota, that do so. And, conversely, figuring out what Florida, for example, is doing wrong.
How about some of the hidden costs of our system:
1. People who cannot get new jobs or move because they will lose health benefits, thereby keeping people from pursuing their full potential.
2. The time and effort spent arguing with insurance companies and dealing with our system.
3. The cost of bankruptcy caused by medical expenses. Regardless of your view on bankruptcies going up or down or whether the medical factor has increased or not, even then low estimates creates a big drag.
"People who cannot get new jobs or move because they will lose health benefits"
Nothing "hidden" about that! It's maybe the single worst distortion in the whole system, increasing the cost of benefits while also creating the problems you mention and inequitably tying the quality of benefits one receives to the size and economic health of one's employer.
Of course, it is a condition created by the government, not the market.
So it's hardly evidence that further intervention by politicians in health care would improve the system -- rather the opposite!
BTW, as it happens the Obama reform is based on retaining the current tie between employers and health benefits -- the alternative Republican plan would break it.
Employer-based health care distorts the system, no doubt about it. Unfortunately, it is currently pretty much the only way, besides being 65 and thus eligible for Medicare, individuals can be sure they have coverage. Rescission is a constant threat to people with individual policies or even those working for small businesses where a coworker's liver transplant can threaten your coverage.
Or, you know, buying your own. The only difference between self purchased insurance and employer provided is the rate you can negotiate as a group. If the mobility is that important, then bear the extra cost and buy your own. And it's really not that difficult to form a group and negotiate better rates; I know of a few artist co-ops that have set up plans that their members can join.
Individual or small group plans are often not available at all, much less at affordable cost, for people with chronic conditions or folks who have survived a major illness, such as cancer. And, as the link I posted indicates, insurance companies reserve the right to cancel your coverage if you get sick and indeed reward their employees for doing just that.
As far as Medicare's claimed superiority in "administrative costs," in addition to the comments already made, I would point out two more items:
1. A significant portion of "administrative costs" for private health insurance goes toward compliance with the insurance laws and regulations of 50 different states. Medicare does not, of course, have any obligation to comply with state laws.
2. My understanding is that Medicare's administrative percentage is calculated based on total dollars spent, not on a per-patient basis. Given that Medicare pays the very large bills associated with the last six months of life, you would expect that it would be paying a much higher percentage of large claims than private insurers that are dealing with flu shots, normal births, etc. I remember reading (but don't remember where) that Medicare's administrative costs are far higher on a per-patient basis than the private insurer average.
I found the link for the data on Medicare administrative costs.
2005 per patent admin costs:
Medicare - $509
Private Insurers - $453
http://gregmankiw.blogspot.com/2009/07/does-medicare-have-lower-administrative.html
Do the math on your insurance coverage. You might think you are making out like a bandit when you get that $5 prescription, but see what you pay in, year in and year out. Then see what happens to your premiums whenever you call in a big ticket item. Nope, the insurance companies and hospitals are in bed together and they are screwing the consumer.
Nimed,
But I'd say that, in those other businesses, technological research is not as critical as in pharma. People may buy an iPod for lots of reasons not related to new technology. But you don't really care about the color and packaging and overall coolness of your antibiotics.
All the drugs that were available in 1989 are now generic. Were people dying in the streets back in 1989? No. If people what the best drugs available in 1989 they can get them for $5 at wal-mart. Much like flat screen TVs or iPods if you wait the price goes down, what was once available to only the wealthy becomes available to all.
People don't have any right to the latest and greatest. I could be convinced that if they can't afford the $5 for the generic, a subsidy may be provided.
Megan,
While I am inclined to agree with you that Europe benefits from the fruits of American research and development/cutthroat competition/what have you in the pharmaceutical and medical technology markets, I have yet to see definitive data in support of this hypothesis. Certainly there are some major European drug companies (Sanofi-Aventis, GlaxoSmithKline, Bayer, Roche, AstraZeneca...) that do world-class development. Is it too much to ask for you to dig the data up and synthesize it for your (loyal) readers?
Grotopotamus
All I can tell you is that if you look at the 10Ks of pharma, they make more than 80% of their money in a single market: the US.
TallDave (Replying to: mj) July 7, 2009 7:54 PM
How about a regulation that all the other countries have to pay what we do?
Unenforceable. We have no jurisdiction to directly determine what they pay.
OK a few things. First, I'm glad you point out that Europe's healthcare system free-rides on the innovations generated by profits from the US market. This isn't widely known, and it's a terrible shame because as the only major research-friendly market, if we stop then the whole engine screeches to a halt. It's terrible that they free ride on us, but the stream of advances are still well worth it.
Second, Europe's system costs less because they offer less. Long lines, mediocre doctors, inferior treatment. Could you imagine losing twenty thousand Americans in a heat wave? France didn't even blink. As Mickey Kaus points out (correctly), much of the savings out of the Obama plan comes from a denial of treatment at the federal level-- something he considers a criminal scandal when the private sector does it. It's very telling that he wouldn't commit to putting his own wife and daughters on his own healthcare plan.
Third, the American system is just the kind of public/private hybrid that proved so disasterous in the housing sector. Our current system is that costs and risk are assumed by one actor (the employer and insurer), treatment decisions are made by another (the provider), to provide services to a third actor (the patient), who might grab a lawyer at any time, swoop in and sue.
In a pure public model, the patient has no choices at all, and is explicitly denied treatment by the government. The consumer receives healthcare at the mandated level, whether he wants it or not (especially important in preventative care where the patient might not want treatment). In a pure private model (even with an insurer to assume the risk) you have the patient consuming healthcare until the net marginal utility = 0; supply and demand reach some kind of equilibrium. The distorting effect on market forces of our system is profound; in fact, that's one of its only selling points: it keeps the patient from facing the fact that his healthcare is rationed by cost. Instead he's allowed to pretend that he's at an all-you-can-eat-buffet. So of course our costs are spiraling out of control. This isn't a laissez faire system any more than the mortgage market was.
Finally, we seem to have abandoned the argument that national healthcare opens a door to massive infringements of civil liberties. After all, if I (the taxpayer) am paying for your lung cancer, I should be allowed a say in your smoking behavior. If I pay for your abortion, or your prenatal treatments, I should have a say in your sex life. If I pay for your cancer or heart disease treatment, I should get a say in your eating and exercise habits.
Consider how contradictory medical evidence often is. Would you put long odds on politically unpopular behavior being ruled to be too costly to permit? Can you imagine what a political movement armed with a "scientific consensus" might use healthcare to justify? I'm not just talking liberals; a generation from now, I'm sure conservatives will have a long list of moral and social ills that impose "unsupportable costs on our healthcare" and therefore require government intervention.
Great piece! I'm saving this one.
By the way, didn't the Socialist Calculation Problem originate with Hayek's mentor, von Mises?
Anyway, responding to a query from the comments about "How about a regulation that all the other countries have to pay what we do?" The answer is obvious if you rephrase the question. "How about a regulation that we will pay no more than what other countries have to pay?"
I don't agree with government regulating prices, but it would have the benefit of eliminating the free rider problem given the socialist European systems typically cover the marginal, but not fixed, costs of production for new medical technology.
Medicare loses 60 billion dollars a year to fraud according to this Washington Post article:
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203915.html
The simple, one sentence answer is that its easy to have low administrative costs if you are ok with wasting 15% of your budget on fraud.
To put it in context, Medicare loses more to fraud than the biggest private insurance company in the nation (Wellpoint) makes in revenue.
Why should this be the least bit surprising? When has government ever done something efficiently or cost effectively? It would be borderline miraculous if what Obama is claiming about Medicare were true- but come on folks, this doesn't pass the smell test. This is a huge, wasteful, fraudulent government program. The idea that it should be the example of how to run a lean organization is ludicrous, and we all know it.
Sorry for the bad tag above.
One more thing as well- you have to be very careful when talking about the relative health of Europeans and Canadians compared to Americans. It is a myth that they are across the board healthier. American mortality with cancers are often lower than Canadians, for example (breast cancer being a big one).
You can't overstate the importance of how fat Americans are in these comparisons. Americans are something like TWICE as likely to be obese. Thats a HUGE indicator for disease. We should expect to be much less healthy. Unless part of this medical plan is mandatory calisthenics, we simply aren't going to close the health gap no matter what we spend.
Your assertion about American and Canadian cancer survival rates is simply false--Canada compares quite favorably with the US, and is far less prone to disparities in survival based on income and class:
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080716/cancer_statistics_080716?hub=MSNHome
And even for obese Americans, equal and timely access to medical treatment and counseling will surely lessen the chances of cardiac mortality. I never ceased to be amazed at the contortions of sophistry that result from efforts to distort the plain reality that the U.S. health-care system, compared to the rest of the industrialized world, yields inferior results for twice the per capita expenditure.
Medicare also shifts adminstrative costs to the private sector, which is not figured into this. My medical office spends an inordinate amount of time on Medicare claims...that's on my dime, not the government. Then, too, it's frequently the case that Medicare simply decides it won't pay providers because of computer upgrades, or whatever.
Finally, the biggest hidden Medicare cost is that it is becoming the defacto model for private insurors...burdensome regulations, constantly changing requirements to bill and collect...all costs born invisibly by the providers.
There's a perversity among the clerisy of academically trained economists that always amazes me: the proclivity--rivaled only among Lubavitchers, Hare Krishnas, and Southern Baptists--for blindly reiterating cherished dogmas no matter how starkly they are contradicted by plain facts.
I was reminded of anti-empirical bent recently when N. Gregory Mankiw, a professor of economics at Harvard and former adviser to President George W. Bush, gallumphed into print in The New York Times to declare, "A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices." (http://www.nytimes.com/2009/06/28/business/economy/28view.html) This is dogma gone delusional--this is precisely the dysfunctional, unraveling, and untenably expensive system WE ALREADY HAVE: DOUBLE the average per capita costs of any other industrialized country and the leading cause of personal bankruptcy, even for people with these lousy private insurance plans. Yet these facts do not deter Professor Maniw from declaring, in effect, that the sun revolves around the earth. As the old saying goes, why let the facts spoil a good story?
The same sovereign immunity to simple facts applies to Ms. McArdle's post above. Nothing in her theoretical divagations confutes a simple reality: the rest of the countries of the industrialized world all have variations of nonprofit, single-payer health-care systems, and they all have HALF the average per capita costs of the United States and BETTER health outcomes: better life expectancy and lower infant-mortality rates.
This is why the World Health Organization rated the U.S. health-care system 37th in the world, only two notches ahead of Cuba, behind Costa Rica, and dead last in the industrialized world.
That's a half-century of empirical evidence that predominantly nonprofit health-care systems produce far better results at far less cost than the chaotic for-profit shambles here in the United States, which fails to cover 1/6 of the population AT ALL, much less with quality care. And wait times and rationing? For the more than 18,000 people in the United States who die each year because they cannot afford to see a doctor, the waiting times are FOREVER.
But, as I said--why let some simple facts spoil a good story? Ms. McArdle, like Prof. Mankiw, is determined to believe that Americans live in the best of all possible health-care worlds. Far be it from me to disturb their dogmatic slumbers with a few bracing splashes of empirical reality.
More free-marketeer catechism from McArdle: "Economists who would be ashamed to make these sorts of arguments about Proctor and Gamble or the used car market suddenly start parroting these things as if they hadn't been thoroughly discredited by the last seventy years."
If the price of one used car is too high, you can go down the street to the next lot and find a cheaper one. Or, if you live in a large city, you can decide not to buy a car and use mass transit. If Windex is too expensive, you can switch to the store brand or put off washing your windows. If you have colon cancer and have a huge, unaffordable deductible on your lousy HMO policy, you cannot just switch to another cheaper plan; nor can you decide to forego treatment, because the penalty is not just the inconvenience of a public-transit commute or a dirty window: the penalty is suffering and death.
Chipper, frivolous free-market fundamentalists/fantasists like McArdle don't seem inclined to conjure with such existential realities--nor any other comparative global realities about health care, for that matter.
Another point:
McArdle's final paragraph on Europe is just . . . stupefyingly specious. Part of the "better governance" of European societies is their immunity to free-market-fundamentalism. They actually implement rational social policy because they do not consider Milton Friedman or Larry Summers to be demigods. The United States could do the same with a small evolution in consciousness beyond the dogmatic twaddle purveyed by McArdle and her coreligionists.
Second, living standards for Canadian and European health-care professionals are not appreciably inferior to those of Americans. McArdle just made this up.
Third, as pointed out by other commenters in this thread, much of the "innovation" in U.S. health care--especially in drugs--has originated in government-sponsored research, especially in the NIH. Drug companies spend most of their profits on advertising--far more than on research.
Europe and Canada have long ago decided that the physical protection of their citizenry is a baseline tenet of civilization. They do not hesitate to extend this principle from police and fire protection to medical care. Some services just work better as SOCIAL services. A half century of empirical reality in the rest of the industrialized world shows that health care is among them.
Just to clarify one point: physicians in Europe make less than U.S. physicians, but the U.S./Canada disparity is quite small. See the following:
http://student.pnhp.org/content/what_about_physician_salaries.php
The point is that overall standards of living among physicians here and in Europe do not vary greatly--unless you count among life's dire necessities a McMansion and Lexus for each family member, as opposed to livable, walkable, beautiful cities; first-rate mass transit; better food; etc., etc. Such judgments devolve into subjective preferences, but the idea that European or Canadian doctors are underpaid or in general live less "comfortably" than their U.S. counterparts is just silly.
There are many stakeholders in the health-care debate: if some U.S. doctors have to own one less Lexus to ensure that this country finally has a rational health-care system, then f**k 'em. Some of them thought Medicare was the end of the world as well. Fortunately, most U.S. physicians are more sensible: according to a survey done by The Annals of Internal Medicine, 59 percent of U.S. doctors favor single-payer (see http://www.reuters.com/article/latestCrisis/idUSN31432035).