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July 28, 2009

Comments

Thanks Murali, interesting stuff.

If your concern is that insurance companies have sustantial intrastate monopoly power -- that is, many states have one insurance company as a primary insurer -- wouldn't you solve that problem by allowing interstate competition among insurers .... just as we do with car insurance?

That's fine, as long as we have good, solid national regulation. Otherwise it's a race to the laxest state -- and we're at the mercy of their legislature and governor, a la credit cards and SD, DE.

So, if you can actually read what von said insetad of going on and on with your self righteous bullshit just because von happens to be centre-right on some issues(actually, mostly on abortion only), you would actually see that von makes very good points, even if I think he concedes too much to the left.

Get over yourself. If this is von's attitude toward his commenters, he'll show it.

I think Sebastian's point, and he really does have a good one, is something like: Our government has crash landed the Cessna, and you think the solution is to hand them the keys to a 747. Why should we believe they won't crash it? Because it's bigger?

Putting all your eggs in one basket, bad. Handing that basket to somebody covered in yolk and shells, insane.

All these points people are making, as well as all the other points on the virtues or lack of them, in the various plans everyone is discussing, are irrelevant in light of the issues brought to our attention by Atul Gawande. Go read that piece before commenting further with your ideas on health care reform, everyone, please.

Thanks again, Dr. Science!

"Without changes to the Supreme Court's established framework of considering corporations as persons and money as speech, the terms of debate on health care and most other issues are never, ever going to be set by individual citizens."

IMO this gets to the heart of the issue.

Thanks Nell.

"IMO this gets to the heart of the issue."

So is there any way to write a law about this that the Supreme Court won't find unconstitutional, given their precedent, or do we have to lobby for a constitutional amendment?

Serious question. Either way, we're talking very long-term work, and building a totally convincing case, and building organizations to work on lobbying and publicizing it for years and years to come.

If we take this seriously.

If not us, who?

"All these points people are making, as well as all the other points on the virtues or lack of them, in the various plans everyone is discussing, are irrelevant in light of the issues brought to our attention by Atul Gawande. Go read that piece before commenting further with your ideas on health care reform, everyone, please."

Great article. Clearly the reform of healthcare policy and delivery is essential to affording any of the options. One of the things I am told, more often than I feel comfortable with, by healthcare professionals is that I need to remember healthcare is a business.

I might add that it is one of the reasons I am uneasy with a focus on healthcare as economic stimulus or reinvestment for economic growth.

"One of the things I am told, more often than I feel comfortable with, by healthcare professionals is that I need to remember healthcare is a business."

This is why the profit-making aspect, as related to what's done to/for patients, should be taken out of health-care as much as possible.

In other words, this is why a National Health Service such as Britain's, the most "radical," "socialist," system is likely to be the best solution of all.

But the bottom line is that, at the least, all the medical professionals should be on salary, rather than, as is currently the system, mostly what's essentially on a commission basis. Which is just nuts. Even long before you get to the outright crookedness of kickbacks.

Sebastian: " My suggestion on 3 out of the last 4 health care threads that we should just straight up extend Medicare to the uninsured and put an EITC-like sliding scale on the rates doesn't count? Just because I keep raising it and no one cares to talk about it doesn't make it non-viable. It might make it boring I suppose..."

No, not boring, just not very relevant to the discussion of whether or not to pass the current bill. In the context of this post, it'd break von's point 3, and in the context of reality, the Republican Party has publicly stated they're only interested in trying to prevent Obama from passing any kind of health care reform. If they kill it, the only option will be the status quo for at least ten years. So the only question is "Will something the grandstanding "moderates" will vote for be able to be good enough to make a difference, or are they going to kill it?"

Also, I believe myself and others have pointed out problems with your proposal, such as it being easily demagouged or dying the death of a thousand cuts the next time Republicans are in office,

Steve Benen had a good short post yesterday, by the way, on how many people just don't understand that they are already getting "government-run health care" when on Medicare or Medicaid.

Obama:

"And I got a letter the other day from a woman; she said, 'I don't want government-run health care, I don't want socialized medicine, and don't touch my Medicare.' And I wanted to say, well, I mean, that's what Medicare is, is it's a government-run health care plan that people are very happy with. But I think that we've been so accustomed to hearing those phrases that sometimes we can't sort out the myth from the reality."

This, apparently, is fairly common. Rep. Robert Inglis (R-S.C.) recently hosted a town-hall meeting, at which a man insisted, in all seriousness, "Keep your government hands off my Medicare." The constituent, apparently, didn't appreciate the irony.

"So is there any way to write a law about this that the Supreme Court won't find unconstitutional, given their precedent, or do we have to lobby for a constitutional amendment? "

I don't know the answer to this.

There are a small number of organizations working specifically to change the law on corporate personhood. Most likely any progress that might be made will be made incrementally, like pretty much everything else.

The most notable recent precedent I'm aware of is Nike v Kasky, where the CA Supreme Court decided that factually misleading advertisements and letters to the editor published or written by Nike were not entitled to 1st Amendment protection. The SCOTUS considered this but sent it back to trial court, allowing the CA decision to stand.

I agree that making any kind of change like this represents more or less a sea change in the law, and therefore is likely to take many years. If it occurs, it's a change that will be measured in generations.

My goal in commenting about it is mostly to move the Overton window on the issue, i.e., to put the idea out there that there is no particular legal or constitutional necessity for corporate personhood to exist in the first place.

It's not an idea that, IMHO, would have ever crossed the minds of the founders (for the originalists among us). It evolved, over decades, in response to strong and determined advocacy from interested parties. Turning it around will take a similar level of diligent effort.

Thanks -

"It is not clear to me what your point *is*. No government can ‘cover’ any amount of people (greater than 1 person) with a per capita amount of dollars.

Per capita ($/person) is a rough statistic to measure relative cost efficiency.

Because Canada’s public spending is used to cover 100% of its population with some basic level of health insurance, by definition, they have a risk pool inclusive of non poor, non elderly people. Such a risk pool will be less expensive to cover per capita, than an exclusively poor and/or elderly pool, which is what public dollars cover in the U.S."

Canada has a smaller population than the US. So directly comparing spending would make the US expenditures look ridiculously high and be useless for analysis. Therefore we look at the spending per person so that the total population difference doesn't matter. That is why we use per capita numbers.

The risk pool issue you raise has nothing to do with it because Canada's 100% risk pool INCLUDES the analogous 27% of people that represents all of what the US government covers.

Take pools A, B, C, and D which each represent about 25% of the population. Posit that A is the most expensive (mostly old people). The US government covers only A. Canada covers A and it covers B, C, and D as well. It does so for less money per capita than the US government spends.

The per capita figure is per capita spending over A, B, C, and D in both cases. The risk pool for per capita spending covers A,B,C, and D for both cases. It just turns out that the US government spends all of that money and can somehow only cover A while Canada spends less and covers A,B,C, and D.

"No, not boring, just not very relevant to the discussion of whether or not to pass the current bill."

Argh. I raised it only in context because I was essentially told to STFU if I didn't have any good ideas myself:

"But I'd be a lot more receptive to your criticisms if you were actually in the business of suggesting viable alternatives. "

I raised it only because I apparently am not allowed to point out flaws in the current bill otherwise.

Sebastian: Per-capita is an average. The total cost, divided by the total number of people covered.

Therefore, if you cover person A, who costs $100, B, who costs $50, and C and D, who both cost $25, your per capita costs come out to $50 ($200/4).

If you alternatively, only cover person A, who costs $100, your per capita cost is $100 ($100/1).

If you cover A and B, your costs per-capita will then be $75 ($150/2).

That's the point of risk pool spreading, the people who don't need as much health care (right now) are helping subsidize the people who do, yes. But the same subsidies are there for them if they get old, sick, or lose their jobs.

It's certainly possible, if not probable, that there's still inefficiencies in what we spend, especially since Medicare and Medicaid costs are related to the overall rising costs of health care. But right now the government's covering A, under your proposal they'd mostly be covering A and B, and the insurance companies would keep charging C and D $50-200 each for their coverage.

Sebastian,
Ok, I didn't realize you were estimating, based on the chart, a public share of per capita spending over the entire U.S.

The U.S. appears to be awful – from a ‘cost efficiency’ perspective - in terms of public per capita ($2800), private per capita ($3300) and total ($6100) health care spending. That tells me that we’ve got a problem, independent of funding source, that is helping to drive our poor performance.

What that doesn’t give me, is a basis on which to judge whether or not the U.S. Government, in isolation, is somehow less able than Canada to run a cost effective, quality health insurance system. Tons of second order problems with this as well in terms of data definitions that I simply don’t have time to research on the OECD site.

One could in fact argue, with this same logic, that our private sector is the worst performer in terms of cost efficiency – more bloated than either public or private spending across all countries in the dataset. And all this without having to cover the highest risk pools! That is crazy!

If your argument is that the mere shifting of payment from private to public will not be 100% sufficient to solve the cost efficiency problem, I agree (especially after reading the New Yorker article, thanks all for the link).

However, I find the data unconvincing as proof that the U.S. Government could not run an effective, efficient, health insurance system.

Am I still misunderstanding your argument (publius or others, please let me know if earlier discussions have already dispensed with this – I’m relatively new to the site)?

The total cost, divided by the total number of people covered.

I think Sebastian is saying that per capita, in his example, is total cost divided by the total population, covered or not. If you think his claim is wrong, then you could ask him for chapter and verse supporting. But his claim is itself pretty clear.

The per capita cost of B, C and D in the US system is ZERO to the US government because the US government ONLY pays for A.

The per capita government payout for health care is calculated across ALL of the pools in both Canada and the US.

Your objection would be valid only if I was comparing the per capita (A+B+C+Dexpenditures/#of people)government expenditures of A in the US to A, B, C, and D in Canada.

I'm not doing that.

I'm comparing the per capita (A+B+C+D costs/A+B+C+D # of people)government expenditures in the US to the per capita (A+B+C+D costs/A+B+C+D # of people) in Canada.

These are equivalent costs with equivalent pools. It is A+B+C+D in both cases. In both cases I am counting rich, poor, old, sick, healthy and young. The risk pooling objection is not vaild. In both cases I'm taking in the entire pool of the whole population of each country.

In these equivalent pools, the US total is about $2,684 per capita. Canada spends about $2,209. This calculation counts rich people, poor people, sick people, healthy people and old people.

In Canada, this government spending COVERS everyone.

In the US, this government spending COVERS only 27% of the population.

Now if I were using this figure to say that the US government was about 1/4 as effective as the Canadian government THEN you could raise the risk pooling argument (because the US government covers mostly old people through Medicare). But I'm not saying that. (Equivalent risk pooling from Canada suggests that the Medicare pool would represent about 40% or so of total expenditures, but of course the total expenditures are already higher in the US so I'd estimate the US government at operating a bit better than a 1/3 the efficiency of Canada). Which in my opinion still looks really crappy.

But in any case my point had no risk pooling problem at all. It was that the US spends more per capita than Canada. For that expenditure, instead of covering 100% of the population, it covers only 27% of the population.

One would think that it could cover the Medicare population plus the current uninsured on that. (Note I'm not even asking for 100% coverage. More like 40% coverage).

I think I understand what Sebastian is saying, but I'm not sure what message he intends to draw from it.

IMHO Audrey is right: the US private sector is *outstandingly* cost-inefficient, truly in a class of its own. Because this sector is huge, this raises prices (and lowers efficiencies) for the whole system, including the government sector. The sectors aren't independent; we can't expect the US government sector to be able to have Canadaian levels of efficiency when it's embedded in a system in which none of von's 3 principles are operating.

Seb,

On your proposal:
Medicare charges premiums, and it covers a very precisely defined population. If we extend Medicare to the uninsured, what premiums would we charge, and how would we define "uninsured"? In particular, would you be dropped from Medicare once you found a job with great health insurance? How about once you found a job with crappy health insurance?

In the abstract, I like your proposal to include more people in the fairly efficient government-run single-payer insurance plan we already have and which current participants seem happy with. In practice, by the time we nail down the details, I might grow to like it more -- and you might start having second thoughts.

On your favorite statistic:
Remember hilzoy's post titled Iceland: Special Elven Edition? The gist of it was that in Iceland, certifying construction sites to be free of elves is an actual paying job.

Now, when somebody gets paid to do something, that payment is an increment of GDP. When a construction firm pays somebody to do something, that is an increment of "construction spending". All else being equal, Iceland's GDP increases by $1000, and Iceland's "construction spending" goes up by $1000, when some "service provider" collects a $1000 fee for certifying a site elf-free. Note that the "fraction of GDP spent on construction" increases just a tad, when that happens.

If over some decades it became the custom in Iceland to pay separate $1000 fees for certifying sites gnome-free, and free of pixies, and clear of fairies, and devoid of trolls, and so on, then pretty soon Icelanders would be asking why they spend a larger fraction of their GDP on "construction" than other, comparable nations do.

"We don't have more buildings per capita," they'd say to themselves, "our buildings are not bigger or better than other people's. Yet we spend about twice what other nations spend, per capita, on construction. Our government's construction spending, per capita, is already more than Canada's total per-capita construction spending, and even so it only pays for 27% of the buildings in our country." And they would shake their heads in sorrow and bewilderment.

The US employs 2.3 physicians per 1000 population; Canada 2.1 per thousand. The US pays not 10% more per capita, but roughly DOUBLE what Canada does, in "health care spending". Health CARE is produced by physicians, just like buildings are produced by construction workers. For double the money, Americans buy only 10% more health CARE than Canadians do. I say that's because we Americans include an awful lot of Magical Folk Absence Certification expenses in the category we call "health care spending". But we are attached to our superstitious customs, and anyway the people who work in the MFAC industry have to make a living, too. So we tenaciously pretend that we can "cut costs" by some method OTHER THAN a straightforward rejection of mythical beliefs -- like the one about "free markets" being the answer to everything.

--TP

The Atul Gawande New Yorker article is the same one Hilzoy linked to about a month ago on another thread. It is a great article, but not a new one for me and I would assume others here. I'm pretty sure I saved the text on my computer at home so I could refer to it indefinitely. But anyone who hasn't read it should, as Gary has pointed out.

"Because this sector is huge, this raises prices (and lowers efficiencies) for the whole system, including the government sector."

Except for doctor's wages (which I suspect may indeed be a large part of the problem), this isn't likely to be a very big factor for the inefficiencies in Medicare itself. It only looks good if you don't analyze how you think the private sector inefficiencies operate. Is it profit? The government doesn't have that. Is it administrative costs? Medicare's are alleged to be lower (I think they really just free ride, but they are alleged to be lower). Is it pay per service rather than outcome? That is a feature of Medicare design, not a problem with the interaction of the private sector. Overtreatment to avoid malpractice? We can talk about that, but I'm already fairly sure you don't want to.

I'm kind of just throwing stuff out there, because your objection is vague. But I'm fairly confident that if we drill down on it, most of the areas you're thinking about don't actually function the way you're thinking.

"I say that's because we Americans include an awful lot of Magical Folk Absence"

Great. But look at the logical extension of that to Medicare. My statistic shows that the government is apparently not exempt from looking for an awful lot of magical folk absence. So assuming that having the government take over will not lower costs unless we identify the Magical Folk Absence problem areas and get rid of them.

It already has Medicare, and is clearly not getting rid of the Magical Folk Absence problem areas.

Many (and possibly most) of the things that people around here want to call Magical Fold Absence problem areas are ALREADY not factors in government spending. Yet still the spending appears to include Magical Folk Absence problem areas because the government spends more than Canada and covers only 27% of the people.

My whole point all along is to get people to focus on what those areas are likely to be.

I know it isn't the most common bugaboos though.

It can't be insurance company profit. Medicare doesn't run a profit.

It can't be drug costs, they are to small a component.

It probably isn't administrative costs--they are alleged to be lower. And if that was the big issue you'd see lots of doctor's going to Medicare only practices (low administrative costs) instead of we-don't-take-Medicare practices.

So I'd love to talk about what is causing the Magical Folk Absence increases in health care.

That has been my point all along.

The problem is that once we start talking about it, we tend to get bogged down in things that obviously aren't the issue: like insurance company profits.

Sebastian,

I agree that that you are just throwing stuff out there, but I’m not sure why:

Pay per service is not unique to Medicare (you think they really just free ride on what? Again, what is your specific argument?).

Why is the private sector not equally accountable for the existence of a pay per service paradigm? Couldn’t the private sector have ‘innovated’ away from this to create more value for customers?

Even as a newcomer to the site, I’ve seen the discussions verifying that malpractice costs are in the low single digits as a percentage of total costs. Why wouldn’t anyone be willing to talk about that?

Why do you think the profit incentive in the private *insurance* sector is a non issue for diagnosing structural problems with the health care value chain (apologies for the MBA speak).

I continue to not understand what your "point" is. How do you think the United States should address our poor performance in providing health care?

Sebastian: Well, yes, it CAN be insurance company profits. Medicare's prices are set in an environment that is mostly set by the insurance companies and their profits. Therefore even if Medicare keeps costs lower than the private sector does, it can still be higher than the rest of the world, especially given how astoundingly inefficient our private sector is by your own metric.

Which may not be the only problem, but things like malpractice or "defensive medicine" are not the major drivers of costs either.

Sebastian, could you please respond to this article by Atul Gawande, which Dr. Science brought up here yesterday, and which I've since blogged about here. Would be much interested in your views, as it seems to me an absolutely essential part of the discussion.

Thanks muchly.

"The Atul Gawande New Yorker article is the same one Hilzoy linked to about a month ago on another thread."

Oh, I missed that somehow. Thanks for pointing that out.

Audrey, I'm throwing stuff out there because the comment I was responding to was so vague. I obviously don't think those things explain it, because I don't think his argument is valid. And there seems to be some vague agreement with it based on your comments and Nate's, but a noticeable lack of specifics. But ok, I'll wait until he (or one of you) comes up with something concrete.

Nate: "Well, yes, it CAN be insurance company profits. Medicare's prices are set in an environment that is mostly set by the insurance companies and their profits. Therefore even if Medicare keeps costs lower than the private sector does, it can still be higher than the rest of the world, especially given how astoundingly inefficient our private sector is by your own metric."

Again, please specify how you think this works. Prices for WHAT are set in an environment that is mostly set by the insurance companies and their profits?

Doctors salaries? Insurance companies would prefer to pay less.

Drugs? Insurance companies would prefer to pay less.

Tests? Insurance companies would prefer to pay less and less often.

Insurance Premiums? Medicare doesn't pay those.

Other than insurance company premiums (which Medicare doesn't pay) which prices that can impact Medicare do you believe are kept artificially high by the existance of insurance companies profits?

"Which may not be the only problem, but things like malpractice or "defensive medicine" are not the major drivers of costs either."

Fine, so lets talk about what are...

Seb,

I don't know how you define insurance company "profits", but here's how I think of them: company collects $100 in premiums, pays $80 to health CARE providers, pays $19 to clerks and actuaries and corporate officers, and books $1 of "profit". It's not the $1 that's analogous to Magical Folk Absence spending. It's (most of) the $19.

Unless I am incredibly mistaken, it's the whole $100 that we count as "health care spending" when we calculate national statistics like "one-sixth of GDP". If we're buying only $80 worth of medical services with it, there's part of the problem.

You keep not addressing MY favorite statistic: 2.3/1000 versus 2.1/1000 physicians to population, US versus Canada. To me, health CARE is dispensed by physicians. To get more total health CARE you need more physicians. We have that. But "total" health care doesn't do any good to whatever fraction of the population can't afford to see a doctor. We have more physician-hours available per capita than Canada does, but we manage to distribute them badly.

One reason I can think of for the maldistribution of physician-hours among our population is the highly skewed income distribution among our population. Rich people are afraid of illness and death just like poor people. They are able to pay more for "health care" in "the market" than poor people can. And really, is there anything better to spend money on than "health care" once you have enough money that you can't spend it all on food, shelter, and consumer gee-gaws? So the price of "health care" gets bid up the way the price of Rembrandts gets bid up: rich people bid against each other, driving prices higher for everyone else.

Oh, and I did ask you for clarification on your Medicare for the uninsured proposal.

--TP

"I don't know how you define insurance company "profits", but here's how I think of them: company collects $100 in premiums, pays $80 to health CARE providers, pays $19 to clerks and actuaries and corporate officers, and books $1 of "profit". It's not the $1 that's analogous to Magical Folk Absence spending. It's (most of) the $19.

Unless I am incredibly mistaken, it's the whole $100 that we count as "health care spending" when we calculate national statistics like "one-sixth of GDP". If we're buying only $80 worth of medical services with it, there's part of the problem."

And that is the point of my Medicare fact.

Medicare doesn't have those costs.

That is the whole reason I separate it out from the general "health care" "one-sixth of GDP" statistic.

Those factors are not present in Medicare THEREFORE they very likely CANNOT be the reason why the US government spends more than Canada yet can only cover 27% of the population.

"You keep not addressing MY favorite statistic: 2.3/1000 versus 2.1/1000 physicians to population, US versus Canada. To me, health CARE is dispensed by physicians. To get more total health CARE you need more physicians. We have that. But "total" health care doesn't do any good to whatever fraction of the population can't afford to see a doctor. We have more physician-hours available per capita than Canada does, but we manage to distribute them badly."

This seems quite likely. My tentative suggestion has always been that we spend much more time and money on the last 6 months of life than other countries do. But that is strangely difficult to get good statistics on (I'd be thrilled to see good stats on it so we could investigate the hypothesis further or discard it). Or maybe it isn't surprising, because often you don't know the last 6 months until the person actually dies.

"Oh, and I did ask you for clarification on your Medicare for the uninsured proposal."

Sorry I thought I answered on this thread, but it was a few threads ago.

I would propose an EITC-style phasing in of premiums. I would set the Medicare level of care as the floor level of care. Any general health insurance would have to provide at least Medicare level of care. So if you got hired at a place with care, you'd have that level of care or better available.

The premiums should be set at a high enough level that the US government's only subsidy is through whatever we decide the EITC-level ramping up should be. That way it functions in the market and doesn't cost the US government a ridiculous amount. If it turns out that everybody decides to just get Medicare--that is great I guess. So long as the government isn't cheating on the premium setting.

Since people are talking up Gawande's article, I'd like to offer a plug for his book Better: A Surgeon's Notes on Performance. It doesn't spend too much time dealing with healthcare economics, but it is fascinating and very well done. I particularly enjoyed the bits about how 4 WHO doctors coordinate ring immunization programs in the third world that immunize 3 million people over 3 days. I also liked his theories on why Americans do so many C-sections.

Sebastian,

From your latest Q&A:

Tony P: "You keep not addressing MY favorite statistic: 2.3/1000 versus 2.1/1000 physicians to population, US versus Canada. To me, health CARE is dispensed by physicians. To get more total health CARE you need more physicians. We have that. But "total" health care doesn't do any good to whatever fraction of the population can't afford to see a doctor. We have more physician-hours available per capita than Canada does, but we manage to distribute them badly."

Sebastian (you): "This seems quite likely. My tentative suggestion has always been that we spend much more time and money on the last 6 months of life than other countries do. But that is strangely difficult to get good statistics on (I'd be thrilled to see good stats on it so we could investigate the hypothesis further or discard it). Or maybe it isn't surprising, because often you don't know the last 6 months until the person actually dies."

What? In what way do you feel you've answered the question posed to you in the above exchange? I'm trying to figure out whether it is possible to have a productive conversation with you. I'm not sure I would bother with Tony's question, but if you agree his question is not central to the debate, why have you chosen to respond in this manner?


Best Regards...

Without bothering to attempt a link, I think russell may have been the first to bring up the Gwande article (if that matters to anyone):

Finally, I recommend the article by Dr. Atul Gawande in the June 1 issue of the New Yorker on health care costs in McAllen county, Texas. They have the highest per-patient medicare costs in the nation, Gawande wanted to know why.

Cut and paste will get you there.

http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande


Posted by: russell | June 05, 2009 at 03:23 PM

or Gawande...

Audrey, I don't think Tony P will have as much trouble understanding my response. (He may not agree with it, but we can go from there).

You still haven't dealt with my response to you. Let's go back to that before we deal with your thoughts on my response to third parties. Thanks.

Audrey,

When you say "I'm not sure I would bother with Tony's question" you leave me a bit puzzled, since the paragraph you quoted from me doesn't contain an explicit question. My best guess is that you see an implicit question there: "How do you, Seb, explain the fact that we have 10% more physicians per capita than Canada does, and still manage to (something)?"

The "something" could be two different things: 1)"spend twice as much per capita"; or 2)"not provide medical care to some people".

I'm sincerely curious which of those forms of my implicit question is possibly not worth bothering with.

I acknowledge that in nitty-gritty discussion of the political mechanics -- which Senator or Congressman is supporting which particular item in this or that draft bill -- big-picture questions may have no immediate relevance. Is that what you meant?

--TP

The U.S. appears to be awful – from a ‘cost efficiency’ perspective - in terms of public per capita ($2800), private per capita ($3300) and total ($6100) health care spending. That tells me that we’ve got a problem, independent of funding source, that is helping to drive our poor performance.

What that doesn’t give me, is a basis on which to judge whether or not the U.S. Government, in isolation, is somehow less able than Canada to run a cost effective, quality health insurance system. Tons of second order problems with this as well in terms of data definitions that I simply don’t have time to research on the OECD site.

One could in fact argue, with this same logic, that our private sector is the worst performer in terms of cost efficiency – more bloated than either public or private spending across all countries in the dataset. And all this without having to cover the highest risk pools! That is crazy!

I apologize for being so testy. I've gone over these exact same objections repeatedly, including in my post and its comments here.

You say "That tells me that we’ve got a problem, independent of funding source, that is helping to drive our poor performance."

That is indeed my whole point. That is exactly what I'm trying to say.

And I'm additionaly suggesting that whatever the problem IS, it IS NOT many of the shorthand liberal responses. It is NOT insurance profits. It is NOT high drug prices. It is NOT a risk pool problem.

I'm not sure what it IS. I've made a few tentative attempts at it, but gotten repeatedly bogged down in the things that it clearly IS NOT. I have to clear away the brush about insurance profits/drug prices/risk pool about once a week in each new health care thread.

Again, I apologize for being testy. I realize that you weren't present the last 3 times I tried to talk about this.

Sebastian,

"You still haven't dealt with my response to you. Let's go back to that before we deal with your thoughts on my response to third parties. Thanks."

You've not responded to my questions - reposting for your convenience:

Pay per service is not unique to Medicare (you think they really just free ride on what? Again, what is your specific argument?).

Why is the private sector not equally accountable for the existence of a pay per service paradigm? Couldn’t the private sector have ‘innovated’ away from this to create more value for customers?

Even as a newcomer to the site, I’ve seen the discussions verifying that malpractice costs are in the low single digits as a percentage of total costs. Why wouldn’t anyone be willing to talk about that?

Why do you think the profit incentive in the private *insurance* sector is a non issue for diagnosing structural problems with the health care value chain (apologies for the MBA speak)...
-------------------------------------------

...so I can't 'go back' there (to a nonexistent response). Feel free to answer my questions at any time.

Sebastian:

For the record, I wasn't telling you to STFU. I was telling you why I didn't give what you said much weight, not that you shouldn't have said it. :)

Audrey, please refer to the posting rules to understand the purpose of this site and the tone we try to keep in it.

"Pay per service is not unique to Medicare (you think they really just free ride on what? Again, what is your specific argument?)."

I don't understand this question.

"Why is the private sector not equally accountable for the existence of a pay per service paradigm? Couldn’t the private sector have ‘innovated’ away from this to create more value for customers?"

I'm sure they could have. And sometimes they have. I don't understand why that it is important to the issue. My point remains that Medicare already has a chance to be amazingly more cost-effective than the private sphere. It doesn't seem to have actually done so--in fact it has done dramatically worse than any other country's government health care program in that it spends as much or more as anyone else and covers only 27% of the population. I then attempt to identify possible reasons why it is so dramatically ineffective. I wonder whether or not it could be because of something inherent to US expectations of health care. At best your question appears orthogonal to all of that.

"Even as a newcomer to the site, I’ve seen the discussions verifying that malpractice costs are in the low single digits as a percentage of total costs. Why wouldn’t anyone be willing to talk about that?"

Because discussions of tort reform end in tears around here.

"Why do you think the profit incentive in the private *insurance* sector is a non issue for diagnosing structural problems with the health care value chain (apologies for the MBA speak)..."

In Medicare's health care chain? See my response at 2:45.

Myth One: Government Health Care Is More Efficient
Myth Two: We're Spending Too Much on Health Care
Myth Three: Forty-Six Million Americans Can't Get Health Care
Myth Four: High Drug Prices Drive Up Health Care Costs
Myth Five: Importing Drugs Would Reduce Health Care Costs
Myth Six: Universal Coverage Can Be Achieved by Forcing Everyone to Buy Insurance
Myth Seven: Government Prevention Programs Reduce Health Care Costs
Myth Eight: We Need More Government to Insure Poor Americans
Myth Nine: Health Information Technology Is a Silver Bullet for Reducing Costs
Myth Ten: Government-Run Health Care Systems in Other Countries are Better and Cheaper than America's

The Top Ten Myths of American Health Care: A Citizen’s Guide (.pdf)

"I was telling you why I didn't give what you said much weight, not that you shouldn't have said it."

And now that you can see that I actually have given proposals both in past threads and this one, I'm sure that weighting has changed? ;)

Audrey, for the record, are you ok with the per capita figure? Are you withdrawing the risk pooling objection to it? I just want help understanding where we are in the discussion before we go off on to other topics which require that we agree on the basics.

Sebastian:
And now that you can see that I actually have given proposals both in past threads and this one, I'm sure that weighting has changed?

A little bit. :) Although if you answered my question about your suggestion, I missed it (entirely possible). So again, if what we're already doing is too expensive, which you claim it is, then how is doing MORE of it, which you suggest doing, going to help?

It is for at most 40 million people--that stat is based on anyone who has any gap in coverage at any time. It isn't the total number of additional people who need government health care on an ongoing basis.

So it isn't as expensive as you imagine. Furthermore since it is on an EITC-like scale, some people will be paying for it at full or near full price. That is revenue-neutral.

Third, my major objection to current proposals is not price. I object to the notion that they will SAVE money and I object to that a selling point (especially when the rest of the selling points suck).

My proposal is probably not more expensive than current ones and if it is it isn't much more expensive, it actually covers everyone (unlike current plans), and it doesn't dramatically screw with everyone else's medical coverage by throwing a giant monkey wrench into everything.

And if it turns out that the government really is better at providing all this, everyone will join. Which is fine so long as most of the population is paying the real price.

Sebastian,

I’m not seeing anything in my comments that would lead you to point me towards the posting rules.

Anyway, I've scanned the linked post (thanks). I think our inability to connect is both one of substance and one of tone.

Substance: Because the majority of our spending per capita is private sector spending, and because even that spending is underperforming across low risk pools, I lean toward assuming that our private sector policies in this area need adjustment; that indeed, having 50% of our spending captive by the private market (look at the chart again, this is an outlier across the other countries in the dataset) might not be the right answer.

In addition, if the goal of this reform effort is universal coverage, I have the additional problem of incentives – I admit to being quite moved by Ezra Klein’s observation that private health insurance is much like having a fire department that makes money by letting your house burn down. I don’t see how one fixes this without controlling prices – and if you’re going to control price, why not just go public sector?

Tone: I'm not worried that considering a public role in reforming our system is a 'liberal' solution that must be avoided. Your earlier post actually makes my point (both public and private per capita spending underperform compared to OECD, hooray, we agree!), but then chooses, inexplicably, to rhetorically focus mainly on the public sector as a failure. That’s going to make debate on a centrist/center left site very frustrating for you.

I’m fine with the per capita public spending number – I have serious problems with assuming this to be a meaningful indicator of U.S. public sector cost efficiency across all risk pools. There are way too many interdependencies in our private industry dominated system to make such an assumption.

I’m willing to keep talking anyway. You?

Sebastian,

"Because discussions of tort reform end in tears around here."

Why? If they are political tears, who cares? I've not seen any data suggesting that tort reform would have a meaningful impact on costs. If there's some empirical data out there that could help, I'd be willing to be convinced.

Tony P,

"When you say "I'm not sure I would bother with Tony's question" you leave me a bit puzzled"

Apologies, that was a disrespectful way to address your comment. I've not seen any rigorous analysis of geographic allocation of doctors and its relation to cost, so I would have asked for some basis (which you and Seb may have already established in earlier conversations) in order to respond. But my wording was not respectful and I apologize.


Sebastian:

But why stop at just the currently-uninsured? And how do you prevent the Hawaii problem (where people were purposely dropping health care so they could get on the taxpayer-funded state plan)?

"Substance: Because the majority of our spending per capita is private sector spending, and because even that spending is underperforming across low risk pools, I lean toward assuming that our private sector policies in this area need adjustment"

It isn't much of a majority. It is like a 55%-45% split.

As such I suggest that there are primary factors about US health care system which end up driving up cost independent from the question of who pays for it.

"I don’t see how one fixes this without controlling prices – and if you’re going to control price, why not just go public sector?"

This isn't inevitable. Japan, Germany and France all do better without going full blown public sector. Again this suggests that there are very important other factors.

"Your earlier post actually makes my point (both public and private per capita spending underperform compared to OECD, hooray, we agree!), but then chooses, inexplicably, to rhetorically focus mainly on the public sector as a failure. That’s going to make debate on a centrist/center left site very frustrating for you."

Both are failures. Either one alone should be able to cover everyone. The fact that both together don't is a disgrace.

The reason I focus on Medicare on a center left site is because the government is touted as a solution to all of these problems *despite the fact that the evidence suggests that it in fact has many of the exact same problems*. I'm perfectly happy to attack the private sector on these primary factors. It clearly sucks with them too. But I can't even get to that until we stop the silly "it must be insurance company profits" thing which is clearly not the case. And one of the ways I can illustrate that is by noting how relatively awful Medicare is compared to other countries. *Then* we can start on the factors which are causing the problems in BOTH the private and public sphere.

If the basic problem is "we spend too much on health care" then the answer "so we need to have government take over" is a bad answer because the US government already spends as much as Canada to cover 27% of the population. This demonstrates that the government does not currently have the solution to "we spend too much on health care" because if it did, it would be covering everyone with the amount of money it ALREADY spends.

I'm perfectly willing to get to the step where we talk about the factors which appear to be causing problems in both the public and private sphere. I've made a number of suggestions about what they might be.

But I can't do that until we get past the wrong ideas about what is causing the problem. Since many of the members and commenters on this site seem to believe that it is private sector inefficiencies which are causing the problem, I have to spend time illustrating that the same problems exist even in systems where the alleged inefficiencies do not exist which suggests that those are not the inefficiencies which are causing the problem.

I haven't even gotten to that point yet. So I don't get to talk about the important issue of figuring out what is actually causing the problem.

"And how do you prevent the Hawaii problem (where people were purposely dropping health care so they could get on the taxpayer-funded state plan)?"

Because the EITC-like sliding scale means that most of them are paying full price for it and thus have no incentive to drop it.

Sebastian:

Do you think you could sell the EITC-like sliding scale to the voting public? Sounds too complicated to me. If I had _my_ way, we'd just go single-payer and be done with it, but I recognize that's not realistic. I don't see how what you're suggesting is realistic, either. I'm concerned about what can be done in a reasonable time frame. Some modified version of Wyden? Maybe. A complete change of approach? Seems to me that this would result in doing nothing at all.

"Do you think you could sell the EITC-like sliding scale to the voting public?" Why not? We have a sliding scale for the Earned Income Tax Credit. It is one of the least disliked anti-poverty programs.

I don't understand what's "not realistic" about it. I mean it isn't under consideration right at this very moment, but I don't see any larger institutional barriers against my idea that aren't present in almost all alternative (and many worse) ideas.

Sebastian,

"I don’t see how one fixes this without controlling prices – and if you’re going to control price, why not just go public sector?"

This isn't inevitable. Japan, Germany and France all do better without going full blown public sector. Again this suggests that there are very important other factors."

Again, respectfully, *what* isn't inevitable? All these countries have an overwhelmingly public solution (again, check your chart for public vs. private spending). I know from the Frontline piece (a google should suffice if you haven't seen it) that Japan closely controls price, and suspect that the other countries do as well.

How does the experience of Japan, Germany, and France (in fact, the experience of all OECD countries) argue against a robust public option?

I don't understand what's "not realistic" about it.

For starters, you're talking about expanding one of the entitlement programs that's already being demagogued as "too expensive" and something that "threatens to bankrupt the country." If you can't get Republicans and Blue Dogs behind modest subsidies to help the uninsured buy private insurance, why on earth would you believe you could get them to support expanding entitlements?

And frankly, the fact that it's not under consideration is a key part of WHY it's not realistic, even if it weren't for the other factors. The CW says that if something doesn't get done by the end of October, nothing gets done at all; history seems to strongly support that CW. Why should this time be any different?

What comment of mine suggested to you that I'm against a strong public option?

Have you read my suggested solution?

I don't understand your analytic style. You ask "what isn't inevitable" and I'm tempted to just quote myself.

You said "I don’t see how one fixes this without controlling prices – and if you’re going to control price, why not just go public sector?"

I then gave 3 examples which are doing fine, have lower costs, and did not go into the full blown public sector (as opposed to say Canada or the UK).

I presumed you were arguing for a full-blown solution because you are arguing with me about it, and I clearly am for a robust public option.

If you are arguing for merely a robust public option, why do you believe you're in disagreement with me?

"The CW says that if something doesn't get done by the end of October, nothing gets done at all; history seems to strongly support that CW. Why should this time be any different?"

Well with that attitude I guess it can't be.

Though if we are looking at historical inevitability I suppose health care reform is doomed anyway.

And why couldn't it be done by October anyway? The kernel of the proposal is astonishingly simple. It also has the virtue of being a good proposal as opposed to a bad one.

"If you are arguing for merely a robust public option, why do you believe you're in disagreement with me?"

From a %of spending view, France, Germany, and Japan are indeed as 'full blown' public option as Canada, and arguably closer to the U.K. than we are.

Never said I was in a robust disagreement with you. Started out by asking your source for a statistic (which you never provided, I had to infer it). You never directly answered that question, so I then picked up on a perceived -by me - anti public solution bias. Your written style suggests it. I'm quite open to be wrong, whatever...

So what's your proposed solution in a nutshell? Refundable EITC for the very poor, what else?

"Since many of the members and commenters on this site seem to believe that it is private sector inefficiencies which are causing the problem, I have to spend time illustrating that the same problems exist even in systems where the alleged inefficiencies do not exist which suggests that those are not the inefficiencies which are causing the problem."

I'm still looking forward to your getting to to the Atul Gawande points, and what you think; or did you already previously respond to that?

Fwiw, it's obvious now that there won't be a vote on any bill until the fall, anyway, at best.

"From a %of spending view, France, Germany, and Japan are indeed as 'full blown' public option as Canada, and arguably closer to the U.K. than we are."

I don't know what you mean by this. France, Germany and Japan simply aren't full blown public plans. I don't know what to say more than that. If you look at their plans, that isn't what they are.

"Started out by asking your source for a statistic (which you never provided, I had to infer it)."

The statistic you ask for is provided on my front page post, which I linked for you.

"You never directly answered that question, so I then picked up on a perceived -by me - anti public solution bias."

The problem with that is that contrary to your perceived bias I have written explictly in this thread that I support a public option. See for example yesterday at 4:18, today at 3:06, 4:48, 5:43, and frankly pretty much the entire last half of this thread.

I honestly don't know what more I can do for you.

Sebastian,

I'm not asking you to 'do' anything for me. Thank you for directing me to your 3:06 post, which does indeed spell out your position (your proposed solution to our health care problem is to implement an EITC, and enforce a Medicare standard of care across public and private sectors).

I do have questions about this, but you seem irritated at having someone new ask you, a 'tenured' contributor, about your assumptions, so I will do my best to research prior posts before daring to speak to you again.

Enjoy your evening

"I do have questions about this, but you seem irritated at having someone new ask you, a 'tenured' contributor, about your assumptions"

In fairness to Sebastian, and it does wind up being unfair to newcomers, it does end up being very frustrating to write hundreds of posts and/or comments on a blog over several years on a given topic, but every time someone new comes along to make points previously discussed, the discussion has to start all over again.

It's not fair to the new commenter/reader to expect them to go read a near-endless number of prior posts and discussions, but at the same time there's a limit to how many time someone, anyone, can repeat the same points and arguments, too.

Eventually it's unfair to both people involved. This is also another contributor to blogger burn-out, incidentally.

More use of specified tags on posts would help a bit, but wouldn't help on finding discussion in comments without either reading whole threads, or having a system for tagging comments, as well. And making it retroactive would be nigh impossible. (I regret that I never got seriously started on tagging entries on my own blog, among many other things I should have done differently long time ago. As a result, I sometimes, after nearly eight years of blogging, can't find posts I know I wrote, despite having excellent google fu. Let alone find old comments on Usenet from over five years of writing hundreds of thousands of similar words, arguments, and links, there.)

Gary,
Yeah, I can actually relate to this, and cut my response short for that reason (his original comment on this thread cited a figure referenced in a prior front page post, but he claimed it as validated by the CRS report cited in the current post. It was an honest confusion, I had to go find it, but whatever, we're human)

I'm learning. Practice makes perfect.

By the way, welcome, Audrey! :-)

Now I feel all special... :-)

Good night Gary...

Well with that attitude I guess it can't be.

What can I say? I'm a pragmatic realist. My Brewers could go on a huge tear, win the NL pennant, and ultimately the World Series, and I'd be thrilled if they did so, but it would be foolish of me to expect anything of the sort to have a decent chance of actually happening, still less to plan accordingly.

And why couldn't it be done by October anyway?

Umm, because absolutely no one in any position of power has proposed anything of the sort?

Americans who have health insurance, either private or public, are more likely to gain weight or become obese, wrote authors Jay Bhattacharya and Kate Bundorf from Stanford University, Noemi Pace from University College London and Neeraj Sood from the RAND Corporation. According to the paper, which estimates weight gain in terms of body mass index, a measure of weight related to height, “private insurance increases BMI by 1.3 points and public insurance increases BMI by 2.1 points.”
[...]
Though the study found weak evidence that more generous insurance encourages greater weight gain, or that risk-adjusted premiums discourage it, there was “strong” statistical evidence that being insured increases body mass index and obesity. So, will expanding health-care coverage to drive up U.S. obesity rates to new record-setting heights?
[...]

Does Health Insurance Make You Fat?

Jesse Taylor at Pandagon, along with several commenters, have already taken care of whatever point CharlesWT -- who seems to have no arguments of his own, but rather simply throws around links -- thinks he's making.

But I'll ask the obvious: I assume you've cancelled your health insurance based on this study, right, CharlesWT?

It's also worth pointing out that the much more robust "socialized medicine" in Canada and in European countries doesn't seem to have done a very good job in making them fatter. Why, it's almost as if there's something completely different going on in the United States! If only we had ways of figuring out what that might be . . .

Phil, thanks for the link. The article and comments make some good counter-arguments to the WSJ article. However, it shouldn't be surprising if there is, in fact, some moral hazard to having health insurance.

I haven't had any health insurance for years. That's why I make more effort, like loosing weight recently, than I might otherwise make to avoid health problems. :)

"However, it shouldn't be surprising if there is, in fact, some moral hazard to having health insurance."

I think that blogs present a moral hazard.

You can be anonymous, you bear exactly zero responsibility for anything you say, you can just blurt out any damned thing that pops into your head and noone can really hold you to account for it.

"I haven't had any health insurance for years. That's why I make more effort, like loosing weight recently, than I might otherwise make to avoid health problems."

Well dude, I highly recommend you keep that up. Cause unless you're quite wealthy, if you get seriously ill, you're gonna either go broke or die.

Maybe both.

"Well dude, I highly recommend you keep that up. Cause unless you're quite wealthy, if you get seriously ill, you're gonna either go broke or die.

Maybe both."


Agreed, I've been playing the odds and my luck will eventually run out. In the pass 20 years, I've needed medical attention about three times: twice for relative minor workplace injuries and a $50 out patient procedure. However, I'm eligible for Medicare in about three years. Whoopee!

"But I can't do that until we get past the wrong ideas about what is causing the problem. Since many of the members and commenters on this site seem to believe that it is private sector inefficiencies which are causing the problem, I have to spend time illustrating that the same problems exist even in systems where the alleged inefficiencies do not exist which suggests that those are not the inefficiencies which are causing the problem."

This quote picked randomly out of all quotes on inefficiency and cost so I can say:

The reason our healthcare is more expensive is because healthcare itself is a huge business, whose primary purpose is to make money. No payment system can impose on an industry the requirement to charge less at the expense of being profitable.

The desire and ability to effectively increase (or maintain) profit levels is the reason for Independent Delivery Networks, HMO's etc. These are businesses.

The only control on the costs free market delivery of healthcare is to provide market incentivess to control prices.

Otherwise you implement government regulated delivery or simply government delivery of healthcare.

All of these options seem to miss the essential point, whatever option you provide will control costs only to the extent it can impact the profit of the providers.

For free market healthcare delivery we should have a free market payment structure perhaps enhanced to create more competitive markets(with government as one potential payer).

If we want a government as a single payer method then we will need government delivery.

Simply arguing about healthcare payment won't solve the problem.

"The reason our healthcare is more expensive is because healthcare itself is a huge business, whose primary purpose is to make money. No payment system can impose on an industry the requirement to charge less at the expense of being profitable."

IMO this is a pretty relevant insight.

It leads me to ask the question:

Is health care more like a consumer good, or a public good?

Is it more like TVs, tube socks, and Caribbean vacations?

Or is it more like highways, running water, and fire departments?

If we want a government as a single payer method then we will need government delivery.

I don't see how this follows from anything you wrote before this, Marty.

Simply arguing about healthcare payment won't solve the problem.

I agree. I also don't see many people doing that here.

I don't know if you read the New Yorker article Gary provided the most recent links to, but you might want to. I'm referring to the original, not the follow up, which I haven't read yet. I'm guessing the follow up is also worth a read, but I wouldn't say without reading it myself.

At any rate, it supports this general point:

The reason our healthcare is more expensive is because healthcare itself is a huge business, whose primary purpose is to make money.

I'm not completely sure what you mean by this:

No payment system can impose on an industry the requirement to charge less at the expense of being profitable.

Do you mean being profitable at all or do you mean being as profitable? Do you mean charge less for the very same services, or might services be adjusted to get reasonably close outcomes at lower costs?

All of these options seem to miss the essential point, whatever option you provide will control costs only to the extent it can impact the profit of the providers.

I don't know about this or what "all of these options" are. But I think there are ways to control costs that go beyond simply reducing profits. I'd be wary of trying to implement a wholly not-for-profit health system because I think that would have negative long-term consequences for the quality of health care. But I think there can be healthy competition with reasonable profits involved so long as there's a greater emphasis on the cost-to-benefit ratios of various health services and less on simple per-service payments.

I also think there's a distinction missing in your discussion between individuals receiving incomes as health-care providers and businesses or corporations making profits. Both are motivations for action, but they are not the same thing. People can make handsome incomes in not-for-profit settings. (I work in one of those settings myself, though my income is not as handsome as those of others, and no one is making a killing here, but we're not doing brain surgery or curing cancer, either. On the other hand, I'm pretty sure Gary Farber, for example, would have a hard time spending my annual income, given his previous statements on the nature of wealth.)

"I'm not completely sure what you mean by this:

No payment system can impose on an industry the requirement to charge less at the expense of being profitable."

Changing who pays doesn't impact prices. The two primary ways to do that are:

1) Create a more competitive environment where profit goes down due to loss of market share etc. creating both competitive pricing and business innovation

2) Set prices through a regulatory system that often creates some business innovation but tends to reduce quality of output of the commodity.

Maybe arguable, but that is what it meant.

"I also think there's a distinction missing in your discussion between individuals receiving incomes as health-care providers and businesses or corporations making profits."

I agree with this.

You local GP practice is not the same order of entity as (frex) Hospital Corporation of America.

"Changing who pays doesn't impact prices. The two primary ways to do that are:

1) Create a more competitive environment where profit goes down due to loss of market share etc. creating both competitive pricing and business innovation

2) Set prices through a regulatory system that often creates some business innovation but tends to reduce quality of output of the commodity."

I'd just like to point out that a more competitive environment quite often yields a reduced quality of output.

Buy stick lumber at a Home Depot, or tube socks at a WalMart, and you'll see what I'm talking about.

A more competitive environment forces efficiency. *Quite often* that comes at the cost of quality.

" I'm guessing the follow up is also worth a read, but I wouldn't say without reading it myself."

Shorter followup (which I quoted to in my addendum here, but best to read the whole orginal): the investors in the vast profit-making hospital/corrupt physician complex in McAllen, Texas, that Atul Gawande wrote about in The New Yorker are now busily contributing more than a million dollars to the relevant Congressional folk to make sure any health care reforms either don't change anything they do, or at worst, grandfather themselves in.

Original must-reading Gawande article, again, here.

"I'd just like to point out that a more competitive environment quite often yields a reduced quality of output.

Buy stick lumber at a Home Depot, or tube socks at a WalMart, and you'll see what I'm talking about."

I would suggest that in both of these cases the low cost provider managed to meet the baseline requirements of the market in terms of quality. This reduced competition for the consumer goods they sold. It didn't provide for increased competition.

"I also think there's a distinction missing in your discussion between individuals receiving incomes as health-care providers and businesses or corporations making profits."

I agree with this.

You local GP practice is not the same order of entity as (frex) Hospital Corporation of America.

I would say that Gawande successfully largely refutes this otherwise intuitive claim. That is, maybe not as regards your own specific physician, but as regards the phenomenon of individual physicians and the culture they were trained in, and the financial position they have arranged themselves to put themselves into, and their goals in income, are amongst the largest factors in our health care costs problems, rather than it being, as one would intuitively tend to assume, overwhelmingly the fault of mega-hospital corporations (though they bear some blame as well, to be sure).

Separately, Gawande briefly looks at the way the Mayo Clinic has organized itself as a mega-medical-complex that functions in a completely different, and far more efficient, and giving far better care to patients, way, than other major medical complexes, as well.

I think we need to separate a couple of things out. I think Marty is taking a different turn from the previous discussion, but I'm not sure.

In very brief synopsis, much of the discussion on this thread has been under the assumption that insurance company profits have been driving up health care costs throughout the system. This makes some sense to me, but in almost exactly the opposite way from how it is being discussed. Insurance companies are indeed about profits. But they are about insurance company profits, not hospital profits or doctor profits or clinic profits. As such, insurance companies are driving profits in the other areas down as much as they can (which appears to be not very much). So the profit motive of insurance companies can't really be the driver of costs in the rest of the system.

Now I've argued that divorcing awareness of how much things cost from the patient could be a systemic problem which leads to increased costs, and insurance certainly does that. So maybe insurance works both directions--increasing systemic costs by encouraging use, decreasing costs by seeking profits.

Marty seems to be saying something different though. That profit seeking at a provider level (hospital/doctor group/doctor) is driving health care costs. This is more possible for at least two reasons I can think of. First, it identifies an area which is actually an enormous percentage of the total, so it could add up quickly. Second, at the hospital level, there is an identifiable change that could apply--the shift from not-for-profit charity hospitals (often historically run in large part by donations from church organizations) to for-profit hospital models.

Also I've seen salary comparisons between doctors in the US and doctors in other countries. The difference is striking see this NYT blog entry for example.

I actually wonder if this understates the difference. A very large number of doctors (especially specialists) operate in partnership groups where in addition to their salary or fee they also have an equity ownership piece which can be very profitable. I don't know if that arrangement is as common in other countries. I also can't tell if that is reflected in the stats--there is talk of 'compensation' but when I drilled down I only saw wages, salaries, and benefits.

I don't raise this because I'm against small corporations or partnerships. I raise it because I don't feel like I have a good grasp of the stats in that area.

"I'd just like to point out that a more competitive environment quite often yields a reduced quality of output.

Buy stick lumber at a Home Depot, or tube socks at a WalMart, and you'll see what I'm talking about."

Don't know a darn thing about stick lumber, but tube socks I know! The only reason I'm commenting about it is because of the mild irony that I usually buy Russell brand socks at Wal-Mart. (Hmmm that seemed funnier in my head).

I typically buy Russell or Hanes brand tube socks at Wal-Mart. They hold up pretty well, and I'm hard on them--typically 8 hours of indoor volleyball a week. They last about a year and a half of that, and since they were less than 10 bucks for 12 pair (though I once got excited about a sale of 12 pair for $4) I normally convert them to dust rags and boot polishers after 1.5 years and buy another 12 pair.

I wonder though if we are selecting for different things? I select for durable on hard use and cheap. But I live in California so for example thick and warm isn't a big concern.

Audrey, again I want to apologize for being so testy. I feel like I've been through the exact same conversation about four times in the past two months, but that isn't your fault.

It caused me to use short-hand references to my previous arguments which clearly didn't help you as you weren't present for those.

In explanation, though not excuse, it is sad because I end up rehashing the basics so I never get to deeply discuss the things I think might actually be important.

For example: does anyone have access to some good stats about spending on "last 6 months of life" or "last weeks of life"? I often hear that the European and American approaches are fairly different at end of life, but I've never seen anything beyond anecdote on it. Is there a good study? Or even a couple of questionable studies? Heck is there even a straight up "end of life care" statistic that is commonly accepted?

Marty:
If we want a government as a single payer method then we will need government delivery.

Umm, several Western European nations (and to a lesser extent, Canada) stand in direct contrast to this assertion.

Seb,

"Marty seems to be saying something different though. That profit seeking at a provider level (hospital/doctor group/doctor) is driving health care costs."

This is accurately what I am saying. After reading all of the disscussions on private and public coverage costing more, long discussions about risk pools etc. It seems to be that the payer isn't controlling the costs in any method.

I also have worked with hospitals as a service provider for about 15 years and have watched the change from underfunded, money losing operations to implementation of up to date business management turning a profit.

In addition, every doctor I go to has expanded to doing their own testing: xrays, many have scan capability and all have a lab. Most often this is in conjunction with a practice partnership, a few have made those investments for their individual practice.

It is very convenient to go to your doctor and have him walk you down the hall to the CTScan, lab and xray. What insured person would consider the extra cost?

The doctors offices are also excellent at coding service to ensure payment by both insurance companies and Medicare. An example is an out of cycle checkup, that wouldn't get paid, is coded as a followup to the last visit, that does get paid.

And I haven't started on real over use.

I believe that insurance premiums go up and Medicare costs go up because providers cost more.

"I would suggest that in both of these cases the low cost provider managed to meet the baseline requirements of the market in terms of quality. This reduced competition for the consumer goods they sold. It didn't provide for increased competition."

That's a pretty plausible analysis.

I'd say the same thing is quite possible in health care, and I'd say it would suck.

I'm in general agreement with what I take to be tgirsch and hairshirt's points about a public insurance option being completely compatible with private providers.

Gary, I take your point about the Gawande article, however I'd still say that the need for private local practices to be profitable, and very large scale for-profit hospital chains to be profitable, are different in their effects on the cost of health care. The common practice in the county Gawande discusses are, thankfully, not quite the norm (yet).

Also, I'd point out that Mayo is not a for-profit organization.

Sebastian, I will defer to you on the issue of tube socks from Wal-Mart.

Last time I bought socks I bought them at Marshall's, also a bargain-oriented retailer, and they kind of sucked.

""Marty seems to be saying something different though. That profit seeking at a provider level (hospital/doctor group/doctor) is driving health care costs."

This is accurately what I am saying."

Marty, I think your analysis here is spot on.

The question it leaves me with is this: why is this uniquely so in the US?

Are doctors in other countries somehow less interested in making money? Do they not also have access to, and possibly a financial interest in, labs and scanners and other technical medical facilities?

Why does profit-seeking by providers cause an inflation of costs here, and not other places?

Sebastian,

"Audrey, again I want to apologize for being so testy. I feel like I've been through the exact same conversation about four times in the past two months, but that isn't your fault."

Wow, you beat me to it! I was trying to word an apology for asking a question badly and jumping unintentionally to conclusions based on the written communications of someone I've never met! Sorry...

Specifically, my earlier question:

"Why do you think the profit incentive in the private *insurance* sector is a non issue for diagnosing structural problems with the health care value chain (apologies for the MBA speak)..."

Was a (poor!) attempt to raise the issue that there are structural problems across the system, and % of profit/poor incentives across all (insurers, providers) should be investigated.

When I looked at the CRS chart of HC Spending per Capita, I see that the public sector is doing most of the spending - Japan may not be a 'socialized' health care system, but the public funds seem to be paying for the vast majority of care.

This suggests - but does not prove, correlation isn't causation - to me that governments are exerting price control in these countries.

I perceived your solution of putting the uninsured on Medicare (a good short term idea), as something to be done *instead* of exploring if/how more expansive government involvement makes sense to bring down cost.

Now I will go think about this some more, because I don't know all the answers :-)

Wierd. I worked in construction for a couple of years, and I have no idea what "stick lumber" means, as distinct from any other kind of lumber.

oops, clarifying additions in brackets:

When I looked at the CRS chart of HC Spending per Capita, I see that the public sector [in other countries] is doing most of the spending [across highly variable delivery systems]

"Last time I bought socks I bought them at Marshall's, also a bargain-oriented retailer, and they kind of sucked."

Ahh but there is a reason why Marshall's isn't doing well and WalMart is a juggernaut. WalMart is inexpensive, but most of the stuff there isn't cheap. (I wouldn't go so far as to say excellent quality, but they normally pull of 'good'). Marshall's however is just cheap.

I would say that Gawande successfully largely refutes this otherwise intuitive claim. That is, maybe not as regards your own specific physician, but as regards the phenomenon of individual physicians and the culture they were trained in, and the financial position they have arranged themselves to put themselves into, and their goals in income, are amongst the largest factors in our health care costs problems, rather than it being, as one would intuitively tend to assume, overwhelmingly the fault of mega-hospital corporations (though they bear some blame as well, to be sure).

My intent in pointing out the distinction between institutional profit versus individual income was not to show that high health-care costs were overwhelmingly the fault of mega-hospital corporations. Like russell, I was thinking very much along the lines of the Mayo clinic's way of doing things versus the way the Texas doctors in the Gawande article did things. But policies that target the income motives of doctors may not be the same as policies that target the profit motives of corporations, though there might be some overlap.

I'd like doctors to be able to make money independently of how many CAT scans they did or how few answers they gave to patients over the phone. But the policies that would acheive that goal might not be the ones that change how corporations in the health-care business make their money relative to the quality of care they provide their customers.

I really don't know what to think about insurance company profits. What innovations does their profit motive spur other than finding new ways not to pay for health care or to charge higher premiums? There doesn't seem to be much connection between encouraging low-cost, highly effective treatments and the forces placed on the health-care system by profit-seeking insurance companies. Maybe I'm wrong about that.

In the business of health care, the free, private market seems to result in perverse incentives, assuming the goal is a well-cared-for population.

Googling "hospital profits", I ran across this:

I don't claim to be an economic genius, but this just doesn't make sense. Hospitals say they are struggling, but their profit margins are robust? Can someone explain it to me?

"Robust", in this context, is 5.3% I don't know if 5.3% would be considered "robust" in other contexts, though.

It's not clear from the linked article just how many hospitals are claiming to be struggling but it's completely possible that some hospitals are pulling down, for instance, 10%, while others are running at a dead loss. I'd also guess, those statistics being a few years old, that times are a little less plush for for-profit hospitals.

Oh, right. Hospitals have investments, which are currently losing them money. That kind of complicates things.

"Wierd. I worked in construction for a couple of years, and I have no idea what "stick lumber" means, as distinct from any other kind of lumber."

Stick lumber is the long, skinny kind. Like 2x4's.

I will not buy stick lumber at Home Depot, because I end up taking it back. It warps like a SOB.

Seb, maybe I should start buying my socks at Wal-Mart.

"Are doctors in other countries somehow less interested in making money? Do they not also have access to, and possibly a financial interest in, labs and scanners and other technical medical facilities?"

Interesting comparison here

of how doctor and hospital fees are set. Interesting that in most of these countries specialists work in hospitals and are salaried.

Interesting that in most of these countries specialists work in hospitals and are salaried.

I believe the same is true at the Mayo Clinic. Perhaps we agree on more things than it at first seemed, Marty.

Ah. See, I just think of lumber as lumber. Maybe if their stick lumber is cheap, so are their other kinds, the names of which are also not in my lexicon.

Try not to buy the lumber stamped as "green", is a good rule of thumb. Probably you already knew that.

"Interesting that in most of these countries specialists work in hospitals and are salaried.

I believe the same is true at the Mayo Clinic. Perhaps we agree on more things than it at first seemed, Marty."

I do not feel knowledgeable enough to present wide ranging healthcare delivery reform solutions. I would like us to be solving the problem of rising costs at the source rather than by guessing which payment method would impact the costs.

I equate systems where the government sets the rates and the countries where government delivers services as "the same". The only model really different than that is Germany and they seem to have doctors "groups" that negotiate rates with the insurance companies (and of course Switzerland, not sure it is a meaningful comparison).

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