There's a huge amount going on in this space at this point. Various Congressional committees had been wrestling with health care reform discussions and negotiations for several months before recently breaking for their summer recess. Just before leaving Washington, D.C. the House Committee on Energy and Commerce passed HR 3200, America's Affordable Health Choices Act of 2009 - 4-page summary, full text (1,018 page PDF) As Senators and Congressmen & women go back to their districts they are hearing from their constituents, both pro and con...
This blogger has been paying attention to the debate, and is disheartened by a lot of what is going on. The disagreements start from the reasons for why our health care costs are so high, and from there flow to disagreements re what should be done to solve the overall problem. Some partisans on each side cherry-pick their reasons and arguments.
For example, depending on one's ideological viewpoint, physicians order too many tests (thereby increasing costs) either because: a) they sometimes have a vested interest in doing this as part-owners of the institutions where the tests are performed i.e. more tests = more revenue for them (also known as the 'greedy physician' theory, for which the solution is to prohibit physician ownership of hospitals, etc., and to outlaw self-referrals), or b) they are forced to do so "defensively" to protect themselves from lawsuits brought by rapacious patients aided by unscrupulous lawyers (the 'suit-happy population' theory, for which the solution is tort reform which puts caps on damage claims). For this example, this blogger sums the extremes of the argument, there are many with positions intermediate between these two extremes...
OK, it seems like it should be possible to figure out what are the causes of the higher health care costs in the U.S. It is true, as some have argued, that it is natural that a wealthier society would spend more on goods and services that it prizes. So, as countries get richer they generally do spend more on health care. However, if you graph health care spending per capita against per capita GDP you see that although this is true, the U.S. is decidedly an outlier, with a level of spend greater than "expected." The entire discussion is re the reasons for this "excess," as well as what can be done to rein in the growth of health care costs.
This blogger has been paying attention to the debate, and is disheartened by a lot of what is going on. The disagreements start from the reasons for why our health care costs are so high, and from there flow to disagreements re what should be done to solve the overall problem. Some partisans on each side cherry-pick their reasons and arguments.
For example, depending on one's ideological viewpoint, physicians order too many tests (thereby increasing costs) either because: a) they sometimes have a vested interest in doing this as part-owners of the institutions where the tests are performed i.e. more tests = more revenue for them (also known as the 'greedy physician' theory, for which the solution is to prohibit physician ownership of hospitals, etc., and to outlaw self-referrals), or b) they are forced to do so "defensively" to protect themselves from lawsuits brought by rapacious patients aided by unscrupulous lawyers (the 'suit-happy population' theory, for which the solution is tort reform which puts caps on damage claims). For this example, this blogger sums the extremes of the argument, there are many with positions intermediate between these two extremes...
OK, it seems like it should be possible to figure out what are the causes of the higher health care costs in the U.S. It is true, as some have argued, that it is natural that a wealthier society would spend more on goods and services that it prizes. So, as countries get richer they generally do spend more on health care. However, if you graph health care spending per capita against per capita GDP you see that although this is true, the U.S. is decidedly an outlier, with a level of spend greater than "expected." The entire discussion is re the reasons for this "excess," as well as what can be done to rein in the growth of health care costs.
This blogger has yet to see a definitive listing of the factors that contribute to the high (and growing) costs of health care. It seem like this would be very useful, especially if it included estimations of the relative contributions of each factor! So, finding none, here are some possibilities. Note: this is just a compilation of some factors that this blogger has seen referenced in the news and on the 'net, there are no claims being made, either that this list is definitive, or that these factors are truly responsible for higher costs. And, unfortunately, this blogger is in no position to know the relative importance of these factors. So, in no particular order:- Shortages: There are manpower shortages in many health care job sectors including: primary care physicians, certain physician specialties (e.g. geriatrics), surgeons, nurses, pharmacists, laboratory technologists, physical and occupational therapists, radiology technologists, and others. Presumably this results in higher salaries, thus contributing to the costs of care.
- Pharma: Drugs are expensive, some say too expensive. One explanation, "greedy" companies that do their best to fleece the country. This argument is supported by citing large profit margins; the companies spending more on marketing than on research; DTC marketing; a disinclination to support comparative effectiveness (head-to-head) drug trials; too generous an exclusivity for patents on drugs and on biologicals; an emphasis on "me too" drugs over breakthrough drugs; US pricing being significantly higher than for the same drugs in other parts of the world; high executive salaries; pharma companies encouraging physician off-label use; etc., etc. Another (counter) explanation, market forces - it takes hundreds of millions of dollars to develop a new drug; only a very small number of the multiple molecules developed and tested make it through the process, and end up being medically and commercially viable; a need to support and amortize these stupendous costs; other countries essentially acting as 'free riders" leeching off the. investment; etc. Then there are some factors that effect this that are not controllable by the companies, for example there is a shortage of people willing to sign up as subjects for the numerous clinical trials that a drug has to go through prior to approval (e.g. only approximately fifty percent of NCI-approved oncology trials get the required number of test subjects).
- Consumption: Health care service use is too high and consumption is in excess. Here you can plug in the "physicians ordering too many tests" example noted above; or the public requiring either too much or too fancy services; "too much" care provided in the last few months of a patient's life (versus hospice care); the disconnect between consumption and payment responsibility (responsible only for co-pays the consumer has no motivation to look for lower costs or to lower usage); the aging of America is resulting in an increasingly large cohort that requires increased health care services; etc.
- Lifestyle choices: The consumer is overweight, smokes, etc., and indulges in behaviors that are unhealthy and that result in higher health care needs, consumption, and thus costs (e.g. higher incidences of diabetes, heart problems, overweight, etc, that last being responsible for a whopping 10% of all health care expenditures according to a recent study!); increasingly patients have multiple co-morbidities that result in greater health care consumption and costs; etc.
- New technology: The rate of technological change is accelerating, and most new technology tends to be more expensive, be it drugs and biologicals, supplies, equipment, etc.
- Insurance companies: Here we have the "greedy insurance company" argument, for example they are for profit entities with a built-in incentive to increase premiums while cutting back provider reimbursements and reducing the number of services covered; need to pay a return to stockholders; have high executive salaries; result in too high administrative costs that "waste' health care dollars, etc. A significant number of uninsured (est. 45 million) cause costs for various reasons e.g. they put off care until it becomes critical (and more expensive), the use of hospital emergency departments (higher costs) for care that should be more routine, etc.
- Government: The government imposes multiple burdens e.g. regulatory burdens, mandate burdens, etc.; government spending on health care (just under half of all health care spending) is wasteful and rife with fraud ("greedy" physicians, hospitals, other providers, etc.); government reimbursement is below provider cost (resulting in significant cost-shifting as providers get "excess" profits from customers with commercial insurance to cover this gap); etc.
- Providers: Hospitals have lost sight of their mission; provide levels of charitable care less than the value that they derive from their non-profit status; pay too high executive salaries; engage in technology and services "arms races' with each other; have too much capacity; hospital errors kill and cause higher costs; patients get sick in hospitals; there is no strong correlation between costs and outcomes; patients are often readmitted after being discharged for follow-up complications; etc.
- "Model": Much of the care provided is ineffective, and not evidence based; there is no real outcomes-focused way to compare different providers (beyond broad categories and/or measures); preventative care and other types of care (e.g. post-discharge contacting of patients to ensure that they have purchased and are correctly taking their prescription medications) that would result in lower costs and better health are not reimbursed and thus not done, resulting in the need for 'extra' care; there is an insufficient emphasis on disease management; access to health care is very uneven (some areas with smaller populations have insufficient access, while in some large, urban areas there is a surfeit of hospitals); there has been shown that there can be a strong correlation between outcomes and the number/volumes of procedures that a given hospital carries out (the expert effect), yet smaller providers may provide a service for which they may have an insufficient volume to gain real expertise, in order to protect their market or their bottom line; there are discontinuities and poor hand offs between various providers along the continuum of care; health care records are not standardized and "portable"; etc.
All of these multiple factors play some part (large or small) in contributing to our health care costs, and many of these need to be addressed in any legislation if it is expected to have a positive effect. Taking care of some while ignoring others would be analogous to pushing down on one part of a balloon, and about as effective.
While listening to the back and forth arguments on various health care reform issues, unfortunately, this blogger hasn't been getting very good vibes that a sufficiently holistic view is being taken, and that all the necessary factors are being considered.
For example, it is extremely disheartening to hear Congress-men and -women exiting their conferences or caucuses and proudly proclaiming that they have cut costs by X billions by agreeing to reduce Medicare or Medicaid payments. Hmm, what they have cut is reimbursement... they may or may not have effected costs by one iota. While the cost of providing care may not have changed a jot, they are paying the provider less, so the provider loses money on the transaction, money that they will have to make up elsewhere (i.e. this is more along the lines of cost-shifting). Note: I supposed that one could argue that reducing reimbursement will put pressure on providers to cut costs in the long run (to prevent themselves going out of business) and in the long run this would result in lower costs... Of course we all know what a famous economist said about that.. "In the long run we are all dead."
While listening to the back and forth arguments on various health care reform issues, unfortunately, this blogger hasn't been getting very good vibes that a sufficiently holistic view is being taken, and that all the necessary factors are being considered.
For example, it is extremely disheartening to hear Congress-men and -women exiting their conferences or caucuses and proudly proclaiming that they have cut costs by X billions by agreeing to reduce Medicare or Medicaid payments. Hmm, what they have cut is reimbursement... they may or may not have effected costs by one iota. While the cost of providing care may not have changed a jot, they are paying the provider less, so the provider loses money on the transaction, money that they will have to make up elsewhere (i.e. this is more along the lines of cost-shifting). Note: I supposed that one could argue that reducing reimbursement will put pressure on providers to cut costs in the long run (to prevent themselves going out of business) and in the long run this would result in lower costs... Of course we all know what a famous economist said about that.. "In the long run we are all dead."
Another example is when one hears a politician give a long discourse on "health care reform", the whole while talking about insurance reform and insurance costs, and acting as if 'health care' and 'health insurance', and 'health care costs' and 'health insurance premiums' are one and the same. They are not!
This blogger may be obliged to read the entire 1,018 page bill to try to understand what is being proposed. He certainly hasn't yet run across any good, unbiased assessment. There are many synopses and/or recaps of the bill out there, but many are so divergent it is hard to believe that they are about the same piece of legislation! And the "sales" points of the proponents of the legislation are feel good sales pitches to the public of all the goodies they will get if the legislation passes.
For example, the Congressional committee has provided its members a district-by-district list of the positives that the legislation would do for that district if signed into law. A quick perusal shows: 1. the number of small businesses in the district that will be helped, 2. the number of seniors in the district that will receive "donut hole" assistance, 3. the number of health care related bankruptcies in that district that might be avoided, 4. the amount of uncompensated care in the district that might be eliminated, 5. the number of uninsured individuals in the district that would get coverage, and 6. that all this "is fully paid for." So, everyone wins, everyone gets more help, everyone gets more coverage, out-of-pockets are capped, care can not be denied, and it is all paid for!! Let us now all join in singing Kumbaya! Hmm, surely not!
A series on health care costs by economist Uwe Reinhardt:
Why Does U.S. Health Care Cost So Much? (Part I)
Why Does U.S. Health Care Cost So Much? (Part II: Indefensible Administrative Costs)
Why Does U.S. Health Care Cost So Much? (Part III: An Aging Population Isn’t the Reason)
Why Does U.S. Health Care Cost So Much? (Part IV: A Primer on Medicare)
U.S. Health Care Costs, Part V: Can Americans Afford Medicare?
U.S. Health Care Costs Part VI: At What Price Physician Autonomy?
U.S. Health Care Costs Part VII: Reining In Doctors Who Cost Too Much
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