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November 26, 2010

Comments

One word: DENIED.

Insurance companies have a small habit of doing everything they can to get out of paying for medical care, and every time they refuse, it falls to the patient to pay for it.

And every time they don't (or, more accurately, CAN'T), the hospital has to raise prices up to cover their loss.

Unfortunately, it also hurts non-profit and state-funded places, as they get inundated with everybody who couldn't get care at private hospitals due to, naturally, lack of funds.

But hey, this is America, so that's a good thing, right?

Can someone please explain what the hell is going on in medical care provision in this country?

Sure: in the good old American tradition, the responsibility for the costs of insuring health care for the population has basically been delegated to a huge for-profit industry; whose business model (and the necessity of turning a profit) allows for - indeed fosters - a significant lack of control on the rise of the basic price of said care: since the insurers' practice of "discounting" charges (where they can't deny them altogether) makes the actual "cost" of medicine in this country artificially high.

Simple.

Can someone please explain what the hell is going on in medical care provision in this country?


Atul Gawande has explained some of it.

or none of the above....

The range of costs is driven by the power of Medicare to set rates, added to the state level focus of delivery of healthcare. Average health insurance costs track quite nicely with the disparity of health delivery costs, by state.

The cost of almost everything health related is quite low in many of the Midwestern states, and, for example, in the small towns along the Rio Grande. If you want the same tets or treatment in Boston or New York it costs a lot more. Oh yeah, just like everything else in Boston and New York(and San Francisco).

With no more information than the graphs, I will take the risk of assuming that the numbers for the other countries are averages or National Healthcare negotiated rates. There should be no surprise at those numbers as they map pretty closely to the US averages. We are a big country, lots of disparity in average incomes and cost of living in different places.

Short me, none of this is surprising.

This conversation will go in circles unless it distinguishes between the cost to provide a service and the charge for that service. These are two different - and largely unrelated - numbers.

"This conversation will go in circles unless it distinguishes between the cost to provide a service and the charge for that service. These are two different - and largely unrelated - numbers."

I would disagree that they are largely unrelated. The cost of doing an MRI or CTScan includes the cost of the labor and the physical location to do it. The machines may cost the same in Boise and Boston, but the other costs aren't in the same ballpark.

You can see how insurance companies compensate for those differences in this report.

The reason for the range of charges for procedures? There is no incentive for most of those consuming the services to shop around -- after all, their co-pay (if any) is fixed. So there is no competitive pressure on providers to hold down prices.

P.S. On a marginally related topic, I have a question about the graph: Why, if we are talking about "why we're broke" do you use Federal non-interest spending? At least on my budget, if I want to know why (or just if) I'm overspending my income (revenue), the amount that I'm paying in interest is very relevant.

We are a big country, lots of disparity in average incomes and cost of living in different places.

Here is a New England Journal of Medicine piece that shows Medicare reimbursement (and the growth thereof) by region.

As Marty predicts, there's a lot of regional variation, although it doesn't really follow the pattern he suggests.

NYC, LA, San Fran, Boston, all have high rates. So, high cost of living, high cost of reimbursement, maybe.

But what the heck is up with Lubbock, TX? Or Boulder, CO? Or, like, the entire Gulf Coast?

Conversely, why are costs so low in Minneapolis/St Paul, or Seattle?

pheski's point is interesting, as is the Gawande article Bernie links to.

Is the dynamic here that doctors charge whatever they can get away with, and they are just better at it in some places than others?

if I want to know why (or just if) I'm overspending my income (revenue), the amount that I'm paying in interest is very relevant.

That's a great point, there is/was no agenda on my part in omitting it. I imagine the reason it's not in the graph is to demonstrate the difference between health care costs (changing quickly) vs other kinds of costs (not changing much at all).

There is no incentive for most of those consuming the services to shop around -- after all, their co-pay (if any) is fixed. So there is no competitive pressure on providers to hold down prices.

That's an interesting point, but if lack of competition was the cause, I would expect to see costs at their lowest in places where there were lots of providers, and at their highest where there were fewer.

My guess is that there are more places to get a CAT scan in Boston MA than there are in Boise ID. For example. But the cost differences between the two cities are the opposite of what you would expect based on the availability of choices in service.

The competition issue also touches on the raw cost of making some kinds of services available. Some services - high tech imaging, for example - is, straight up, expensive to provide, because the gear involved costs a lot.

Is it practical to rely on competition to bring costs down for stuff like that in markets where there just aren't enough people to require a lot of them?

At a certain point, you run into natural monopolies.

Many years ago, the Wall Street Journal had an article about the cost of competition in health care in a mid-sized city. Apparently two hospitals are much more expensive for all involved. Competition does not save money when the people paying the bills are not the people using the services and many prices are related to high-fixed-cost items.

if lack of competition was the cause, I would expect to see costs at their lowest in places where there were lots of providers, and at their highest where there were fewer.

That would be true if the lack of competition was due to a low number of providers to compete. But in this case, the lack of competition on price is because there is no incentive for the users to look at prices at all. So the provider has an incentive to make sure that their charges cover their costs (hence high prices in high-cost areas), but beyond that there isn't much incentive for cost control.

For the users, the price is fixed at the size of their co-pay -- the rest is paid by their insurance, which insulates them from the price. Yes, their insurance costs go up as a result. But that doesn't relate closely to any individual decision on their part about were to get a medical procedure done. So they are more likely to shop, if they do, for greater expertise rather than better value for the money that isn't coming directly out of their pockets.

I think there are competing factors, for example, my guess is that Lubbock is expensive because it is hard to attract those kinds of professionals to the barren plains of the Texas panhandle. I don't have any facts on that except I have been there. :)

The cost per CAT scan performed is in some respects like the cost per fire for a town's fire department. Fewer fires mean a higher cost per fire. To reduce the "cost of firefighting" you need to cut the number of firemen, or pay them less; reducing the number of fires doesn't do it.

In other words, pheski is on to something.

Incidentally, imagine that your town decides to fight fires on a fee-for-service basis. Public or private, will your fire department have any incentive to reduce the number of fires in town?

--TP

I recently had retina reattachment surgery. When I told them I would self-pay instead of using insurance, the surgery center gave me a 65% discount on their quoted rate and the surgeon gave me a 75% discount.

OK ... a couple of observations ...

1) Recently I read an article about the top 10 paid professions in the US ... 9 were a MD specialty.

2) My wife is a foreign national so we decided to have our kids in her home country [which granted them dual citizenship]... a Southeast Asian nation. Pre-natal office visit in the US = $150 [insurance paid] ... in her home country = $15 [using a private Doctor educated in Britain .... this SEA country ranks in the mid 20s based on GDP, has universal health care which we opted not to use].

Ultra-sound in the US = $600 and $700 respectively for our 2 kids [one each when my wife was 4-ish months pregnant] ... in her home country = included in the cost of each pre-natal visit.

All in cost of private hospital birth ... the 1st = $1,500 ... the 2nd [better hospital], about 2 yrs later = $2,000 [both with spinals and 2 nights in the hospital for both mother and child] ... and we had problems getting our US insurance company [which was premium] to reimburse all the costs [which in the US would probably have cost $10K+].

Doing the math ... the US health care system appears to be rather broken.

Just as an aside, might I just mention that the caption of the bottom spending category, "Other federal non-interest spending", ought to be taken as a huge warning that you're dealing with incomplete data, and deliberately so?

In fact, leaving out what is well on it's way to being the largest category of federal spending... Interest payments are relatively low right now, due to ahistorically low interest rates, but they'll dominate the federal budget quite easily when, (not if!) interest rates return to more typical levels.

IOW, please, no more graphs of government spending that omit interest on the national debt, please?

I will take the risk of assuming that the numbers for the other countries are averages or National Healthcare negotiated rates. There should be no surprise at those numbers as they map pretty closely to the US averages.

Sorry, went to back to look at this again, and I'm not sure what you're referring to.

The document shows comparisons between the US and anywhere from 6 to 11 other countries, for not quite two dozen procedures, fees, and drugs.

So, a little over three hundred US-to-some-other-country comparisons.

In 300 cases, the number for the other country is below the US average. Often dramatically, like 20 or 30 or 40 times less. In all but 47 cases, by at least double.

There were exactly 11 cases where the cost given for another country was higher than the US average cost.

So, like 3%.

And ten of those eleven were for surgeons' fees, for procedures where the overall cost (including hospital stay etc) was lower in every other country when compared to the US.

Maybe the numbers were cherry-picked, and only those procedures and fees where the US was higher were included. I don't know.

But there is no way that the numbers presented show foreign costs "mapping pretty closely to the US average".

I'm curious how folks who find the "no competition" argument persuasive for explaining differences in costs within the US explain the difference in costs between the US and other nations.

IOW, please, no more graphs of government spending that omit interest on the national debt, please?

I'll see what I can do.

Long story short, the only point I'm trying to make with the graph is that the cost of health care is going up very fast, to the degree that it's a significant problem for the fiscal health of the US.

I don't think anyone will argue against that claim.

Russell, I will once again argue mildly against "that claim".

Health care costs are also health care income. That income is one slice of the pie we call GDP. Make that slice smaller, and one of two things happens:
1) Some other slice (entertainment? financial services?) gets bigger; or
2) The total pie gets smaller.
I don't know how people make projections about GDP in 10 or 20 or 50 years, but I suspect that those projections look at both sides of the ledger -- i.e. both the production side and the consumption side. If they project a 50% increase in overall "production" over 10 years, say, they can't simultaneously predict a mere 25% increase in overall "consumption". If we "consume" less "health care" than currently projected, we must "consume" more of something ELSE than currently projected -- or "produce" less than currently projected.

I am not defending our current health care "system" by any means. I think it's a big factor in the skewed distribution of income and wealth we've got going. I think we will not have much trouble finding other things to consume (and therefore produce) in coming decades. All I'm saying is that actual health care is not necessarily a bad thing for us (individually or through our government) to be spending any particular fraction of our money on.

--TP

Tony,

Insofar as Medicare/Medicade pay for approximately 50% of the medical services provided in this country, and costs (determined privately) of those services are projected (rightly or wrongly) to keep increasing dramatically...then government spending shall be impacted similarly....possibly having a harmful impact on the nation's "fiscal health". (something Russell needs to clarify). I assume that means either too much debt or taxes, or something.

If we project a worst case, then health care spending keeps climbing and would "crowd out" nearly all other spending...resulting in what can reasonably be assumed to be an unsustainable economic model.

If we controlled costs in the same way(s) as does every other industrialized nation, this scary scenario goes away.....

Non Interest Spending: This "spending" is either going to private parties (contributing to their income) or is being rebated to the Treasury by the Fed (when the Fed holds US Treasuries--which, if you haven't been paying attention, they have a lot of). So it makes sense analytically and graphically to show the federal spending as a % of GNP net of interest paid.

Clarification: The "spending" I was referring to was the interest component of the federal budget, something that Republicans (cf Brett above) worry about incessantly to the point of spittle flecked hysteria whenever they are not in office.

Apologies for the confusion.

"This "spending" is either going to private parties (contributing to their income)"

And this is somehow not the case when the money is spent on medical treatment? What, is the money being burnt, and used as an ointment?

"spittle flecked hysteria"

You'd be a bit less annoying if you'd simply admit that people can disagree with you without being madmen.

"There is no incentive for most of those consuming the services to shop around -- after all, their co-pay (if any) is fixed. So there is no competitive pressure on providers to hold down prices."

This is ridicuous. People shop around for primary care physicians, pediatricians and ob/gyns they can trust when they are well. Once they are sick, scared and in pain (or fearing for their children) they aren't interested in going shopping. Even if they are, finding the lowest bidder to perform procedures on their bodies and their children's bodies is generally not high on their lists of priorities. Most people want the best care, and ask about price later. They go with the people who their doctors advise, no questions asked, because they have a relationship with them and trust them.

You'd be a bit less annoying if you'd simply admit that people can disagree with you without being madmen.

I'm sure he's just saying that he just enjoys watching when Republicans blow a gasket. Surely that's a sentiment you'd agree with?

The biggest difference is that we pay doctors dramatically more here than they do in other countries. That is a very big part of the answer, and is almost never talked about.

Yes. When we say that 30% of the economy might wind up devoted to healthcare, we're really saying that a very powerful cartel will continue to restrict supply of an essential service to extract an increasing share of everything that everyone else produces.

Which is exactly what the finance sector has done for itself, albeit through mass counterfeiting and fraud.

We need to expand medical school slots by like 50% (which also ought to reduce the cost of med school substantially) and also start churning out nurse practitioners and other alternatives to doctors.

I’m in the healthcare biz myself, a pediatric critical care doc. I agree with many of the points made upthread, and particularly recommend reading Gawande. A couple of points about this:

1.) Healthcare is a business in this country. This leads to assumptions about its economics that don’t work well. On a macro level it’s been pretty well shown that, unlike other economic activities, increased capacity – the number of docs and hospitals offering a service – doesn’t lead to decreased costs through competition. Just the opposite happens. The more capacity there is, the more stuff that gets done. Those hospital beds need to be filled, after all.

2.) Because it’s a business, physicians and hospitals are driven to move more product. I get paid more (well, not me in individually because I work on a salary) when I do more stuff. The incentive is thus to do more because that’s how one increases revenue. This is perverse. Fee-for-service medicine is hard-wired to increase costs. Until we fix this built-in elevator costs will never come down.

3.) Most physicians have little to no control over what their patients get charged – certainly I don’t. Prices are negotiated by business office types who have nothing to do with us.

My solution is to stop regarding healthcare as a business and rather treat it as a public good. Single-payer is best. Reign in fee-for-service. I'd prefer that docs be salaried, to lessen the temptation to do too much, but I could accept some sort of indirect financial incentive system. And yeah, docs get paid too much; but it is far from a normal distribution. The cluster of absurdly high-paying specialties skews the curve waaay to the right.

Sebastian:

Yes, you're right: doctors are paid more in the US. Going to medical school is also enormously costly in the US, and doctors often have $100K or more of debt when they get their degree. AFAIK in "socialized medicine" countries med school is essentially free if you qualify, so while doctors make less they *need* to make less, too.

There's also the fact that medical and hospital administrators in the US are paid much, *much* more than their counterparts in other countries. And of course there's the whole superstructure of for-profit medical corporations, hospitals, medical insurance companies, etc.

Meanwhile, the US has a never-ending shortage of nurses, aides, and other workers on the low end of the health care pay scale -- and that shortage *should* be a signal, in our "free market" system, that those people are being *under*paid. Yet, strangely, that problem is never addressed ...

And this is somehow not the case when the money is spent on medical treatment? What, is the money being burnt, and used as an ointment?

You might actually look up the definition of Gross National Product. Tell me what percentage of it is payment on the national debt.

You'd be a bit less annoying if you'd simply admit that people can disagree with you without being madmen.

I've been cognizant of current politics since the late 50's Brett, and conservatives have consistently railed at their red faced best against the "huge" national debt that was going to "be an unsustainable burden on our children". Somehow that day never came. Then all the GOP presidents beginning with Reagan have exploded the debt. So what do we here from the conservative ranks? Crickets....until the black guy won the office.

We're all Keynesians now.

I don't understand the reason for the inflation in medical school tuition over the past decades. I paid $3,000/year for med school in 1974, a number an inflation calculator tells me would be about $13,000 today. Yet med students now pay 40-50,000/year. On the other hand, it does seem to track with the explosion in tuition costs for higher education generally. But I don't understand the reasons for that, either.

"Yes, you're right: doctors are paid more in the US. Going to medical school is also enormously costly in the US, and doctors often have $100K or more of debt when they get their degree. AFAIK in "socialized medicine" countries med school is essentially free if you qualify, so while doctors make less they *need* to make less, too."

I'm not saying it happens for no reason, I'm saying that it explains the largest portion of the difference. And it does.

"I don't understand the reason for the inflation in medical school tuition over the past decades. I paid $3,000/year for med school in 1974, a number an inflation calculator tells me would be about $13,000 today. Yet med students now pay 40-50,000/year."

This I think is explained largely by federally subsidized school loans. Over the long term the subsidy is being captured by the school rather than the student. The first year you offer the loans, they help out the student. After that, the schools raise tuition with the subsidies built in--capturing it rather than it being beneficial to future students. Then the size of the federal loans have to be bigger to catch up, which the schools capture again the next year. And so on. I'm not sure you can easily subsidize something that is largely a positional good without it having a much larger than normal risk of capture.

Also, Doctor Science, (and this is disagreeing only to make your argument stronger), but the average medical school debt for 2009 was $156,000. So it is tending toward much worse than you were saying.

You'd be a bit less annoying if you'd simply admit that people can disagree with you without being madmen.

Is it OK if he calls them sociopaths instead?

"Can someone please explain what the hell is going on in medical care provision in this country?"

I only have clues, so make of this and this what you will.

Second Bernard Yomtov on Gawande, as see previous link.

Having now at least run my eyes over all the comments, I'd like to ask more emphatically that everyone who can work in the time and wishes to discuss the question Russell asked make an attempt to consider this article by Atul Gawande, Annals of Medicine: The Cost Conundrum: What a Texas town can teach us about health care mandatory reading, not that, of course, it actually is.

I'll just repeat the link back at you, of course, if it's relevant to anything you say until you do. Neener neener.

At least, I reserve the right: consider yourself warned.

Begin:

It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but it’s a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. “Lonesome Dove” was set around here.

McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns. [...]

Continue as desired.

Gawande continues:


The explosive trend in American medical costs seems to have occurred here in an especially intense form. Our country’s health care is by far the most expensive in the world. In Washington, the aim of health-care reform is not just to extend medical coverage to everybody but also to bring costs under control. Spending on doctors, hospitals, drugs, and the like now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. It’s also devouring our government. “The greatest threat to America’s fiscal health is not Social Security,” President Barack Obama said in a March speech at the White House. “It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.”

The question we’re now frantically grappling with is how this came to be, and what can be done about it. McAllen, Texas, the most expensive town in the most expensive country for health care in the world, seemed a good place to look for some answers.

Continue as desired.

Listen to Dr. Science. She knows stuff.

"Is it OK if he calls them sociopaths instead?"

I don't call everyone I disagree with a sociopath, and I think the politicians on my side are sociopaths, too. American politics just happens to be a very efficient mechanism for selecting for a particular sort of mental illness...

I'm with Gary. Gawande's article is must reading for all who are serious about getting to the bottom of what drives our outlandish medical costs.

See also Dean Baker for his analysis of the problem and for some creative solutions.

For those of you breaking out in sweats about the national debt, you might try reading "A Primer on Government Spending" by Robert Heilbroner. It's a bit dated, but still a classic. It's also mercifully short and a great way to introduce yourself to a real expository talent.

bobbyp:

'until the black guy won the office.'

Since I am called a fiscal conservative, please tell me what you are trying to convey here.

Chris J:

'2.) Because it’s a business, physicians and hospitals are driven to move more product. I get paid more (well, not me in individually because I work on a salary) when I do more stuff. The incentive is thus to do more because that’s how one increases revenue. This is perverse. Fee-for-service medicine is hard-wired to increase costs. Until we fix this built-in elevator costs will never come down.'

When I was much younger with responsibility for the health care of my children, I had fee for service insurance with what I considered significant deductibles and co-payments, so I evaluated the cost issue for each use of medical care. My children now, with families of their own and self-employed, have coverage with very high deductibles (in order to manage premium costs) so they too consider the cost issue. OTOH, since I am on Medicare and have a supplemental policy that has no deductibles or co-payments, costs for any particular medical need is not much of an issue for me, except where a provider does not accept Medicare as full payment for service.

It seems we have created much of the problem of over use of medical services by this approach coupled with the malpractice insurance situation.

coupled with the malpractice insurance situation

prove it. show your work.

'prove it. show your work.'

Well, look at it this way. Before the law capping medical malpractice awards in Texas, lawsuits in McAllen were frequent. So physicians there ordered numerous tests and procedures to make certain they could prevail in a lawsuit. Lo and behold, many made a greater profit since government agencies and insurance companies paid everything. The insurance companies raise premiums and the governments do whatever is necessary to cover their outlays. Lawsuits went practically to zero, as one doctor said in the article. Gawande seems to attribute this to the malpractice cap, but it seems to me a better explanation is that the physicians are doing so many tests and procedures at great cost.

Later in the article, Gawande discusses the extreme variance to be found in different sections of the country. In several areas, costs are not out of control. What does Cleek have to say about this?

Sebastian:

Yeah, I was pretty sure $100K was low-balling the estimate.

I'm not sure you can easily subsidize something that is largely a positional good without it having a much larger than normal risk of capture.

I don't understand what you mean by "positional good". International comparisons would be helpful.

GoodOleBoy:

As I understand you, you attribute much of the high cost of American health care to patients being insulated from costs. This must be incorrect, because in other countries patients are *more* insulated yet overall costs are *lower*.

As for malpractice as a cost-driver, Gawande's article points out enormous cost differences between towns in the same low-malpractice environment. It looks to me as though malpractice insurance is an excuse, not a reason.

Furthermore, I think that spotty and inadequate health care coverage is one of the drivers behind malpractice and tort costs. Americans who have adverse medical consequences often *have* to sue for large sums, because they have no other way to cover their medical expenses.

possibly having a harmful impact on the nation's "fiscal health". (something Russell needs to clarify). I assume that means either too much debt or taxes, or something.

If we project a worst case, then health care spending keeps climbing and would "crowd out" nearly all other spending...resulting in what can reasonably be assumed to be an unsustainable economic model.

Something along the lines of your worst case is what I had in mind. Not necessarily crowding out nearly all other spending, but certainly some other important spending. That, or not crowding it out, but causing us to go deeper into debt to fund it.

This I think is explained largely by federally subsidized school loans.

Seb, by 1974 federal subsidies for student loans had been in place for about 10 years. In other forms, federal support for college expenses had been around a lot longer than that.

If your theory is true, why the explosion of costs more recently, rather than when ChrisJ was a med student?

It seems we have created much of the problem of over use of medical services by this approach

Then why are costs so much less in countries that are otherwise similar to ours, but where medical insurance is a public entitlement?

It seems like if the lack of a market pricing discipline was what was driving up costs, they would be higher everywhere else but here. Exactly the opposite is the case.

It seems we have created much of the problem of over use of medical services by this approach

That does not explain the discrepancy between McAllen and, for example, El Paso, which has very similar demographics, but much lower costs.

'That does not explain the discrepancy between McAllen and, for example, El Paso, which has very similar demographics, but much lower costs'

'Later in the article, Gawande discusses the extreme variance to be found in different sections of the country. In several areas, costs are not out of control.'

Russell:

Agree. But in some places in the US, medical practitioners do their job effectively at reasonable costs. I'm glad we have these different examples so, at least, we have some chance to find the answer.

Gary, thanks for the reference. It's beginning to change my views on the subject. What higher praise is there?

"Something along the lines of your worst case is what I had in mind..."

Yes. But that would be a allocation problem, not a "fiscal health" issue. For example, in WWII the government ordered the economy to produce war goods in lieu of other outputs. This was an allocation decision based on politics (defeating the Axis Powers). The "fiscal health" of the nation was not at risk as a result.

IMHO conflating these terms is a mistake.

Thanks.

So, what we're getting here is:

1) The Market isn't free enough. This argument ignores the fact that in the rest of the first world, the market is LESS free with lower costs and higher results.

2) TOO MANY LAWYERS. This ignores the fact that tort-reform has varied by state, and hasn't done a frickin' thing to change prices.

3) "People don't shop around/People don't get what it really costs". Once again, ignores the fact that everywhere else in the first world people shop around less, and have LESS of an idea what it really costs -- and get better results for less money.

I think it's pretty simple. Health care is run for profit in the US. And it is, in fact, VERY profitable to be providing a service people have no choice but to pay whatever you charge them.

It's made worse by the fact that, in the end, even those who can't pay get their services for free and the rest of us pay for it. We just do so in the most expensive, most annoying way possible.

Your choices on a functioning health-care system are fairly binary. Either you have a system in which you treat everyone, regardless of ability to pay --- or you have a system in which if you can't pay, you don't get care.

The former needs to be run as a public good. The latter should be run through a free market approach.

We have the former, but are trying to pay for it like it's the latter. Which just leads to crappy care and high costs.

Anyone arguing lawyers or "people don't shop around" is ignoring the fact that if you don't let poor people die because they can't pay for the doctor, you can't use a free market solution to pay for it.

The free market WORKS by the notion of "If you don't have the money for it, you can't have it".

This conversation should have started and ended with "Do we let poor people die of treatable illnesses because they can't afford care?".

The answer to that question tells you which system will be most affordable.

"But in some places in the US, medical practitioners do their job effectively at reasonable costs..."

The question would then become how and why they can do so, and as the article seems to imply, a cooperative outcomes based approach seems to work well in this regard....exactly the same types of incentives found in various single payer/national health systems that deliver health care for much less cost without sacrificing quality.

As for your question to me: I'll give you an answer, but first you have to tell me what a "fiscal conservative" is.

IMHO conflating these terms is a mistake.

That's a good point, noted. Thanks!

'As I understand you, you attribute much of the high cost of American health care to patients being insulated from costs. This must be incorrect, because in other countries patients are *more* insulated yet overall costs are *lower*.'

Doctor Science:

In these other countries, are there any other factors that help keep costs down such as who makes the decision on medical treatment and when and where and by whom that treatment will be delivered?

"Seb, by 1974 federal subsidies for student loans had been in place for about 10 years. In other forms, federal support for college expenses had been around a lot longer than that."

College prices have been rising well above inflation for almost 60 years, often 2% above inflation, and almost never below 1.5% above inflation. That may not sound like very much, but as it compounds on itself, it tends to make a smallish difference in the first few years, but an enormous difference by 20 or 30 years out.

Now I don't know where Chris went to medical school in 1974, so I'm not sure what a direct comparison would look like and 1964 medical school tuitions were hard for me to google. The only specific reference to tuition that old that I could find was this which put in-state tuition at $535 and out of state at $1,100. The inflation calculator between 1964 and 1974 suggests that $1,100 from 1964 should be about $1750 in 1974 dollars. Of course we don't even know if Chris was paying the average tuition, he may have been paying more at Harvard, or less at UCLA.

But in any case, I would say that assuming a $3,000 price point proves that tuition increases were NOT above inflation already by 1974, is taking the value of his anecdote too far. The anecdote is valuable to show that there really was a very different world in 1974, where you could go to medical school and not cripple yourself with debt. But using it to suggest that there couldn't have already been a runaway problem with tuition inflation (which may or may not be linked to the form of loan subsidy) seems like taking the anecdotal evidence about three steps too far. This isn't the very best presentation of the data that I could imagine (I'm skeptical of the choice of 17 year period) but it was the only link I could find that goes back as far as you seem to want, and it shows that tuition costs have been well above inflation since at least the late 1950s.

Compounded, that could easily show smallish differences in the 1970s, bigger in the 1980s, and enormous shifts by 2009. Which is exactly what we see.

GOB:
In these other countries, are there any other factors that help keep costs down such as who makes the decision on medical treatment and when and where and by whom that treatment will be delivered?

Of course -- in other countries such decisions are made by people who have other motives than immediate profit.

Morat:

"Do we let poor people die of treatable illnesses because they can't afford care?".

My experience arguing with a strong libertarian on this point is that the answer is "Yes. We need to accept the fact that we can't afford to save everybody; some people are going to have to suck up and die."

I reply, "but other countries *can* afford to save everybody. So how can you also say we have The Greatest Medical System in the World?"

Then they get all mumbly and uncomfortable, and basically forget what I said until the issue comes up again.

In these other countries, are there any other factors that help keep costs down such as who makes the decision on medical treatment and when and where and by whom that treatment will be delivered?
In our country, those people are called "the guys at my insurance company" whose motivation is to deny as much care as possible because their bosses want to make a profit.

So really, Good Old Boy, you have a choice: Do you want faceless government bureacrats who DON'T have a profit motive making choices as to what's covered -- or faceless private industry bureacrats, who DO have a profit motive, making the choice?

Either way, faceless bureacrats are telling you what gets covered. Who do you trust more? The private guys, whose every incentive is to deny you care because caring for you cuts into their bottom line? Or the government guys who DO want to contain costs, but don't get bonuses for doing so?

You seem to be laboring under the weird delusion that out current system of private care isn't absolutely full to the gills with 'faceless bureacrats who like to deny care'.

What America are you living in?

The Gawande article is based upon the justly renowned and ongoing Dartmouth Atlas of Health Care, which first pointed out these regional differences in costs. Anybody interested in this issue should have a look at it.

Physicians drive health care costs – not by what we are paid, but why what we do. Nobody is in a position to evaluate the cost/benefits of a particular treatment; people are more or less held hostage to what the doctor says needs doing. This principle varies a little in some things, leaving room for patients’ choices. But generally not. I do pediatric intensive care. No parent is going to “shop around” when I say we need to do this or that expensive thing for their child. They want the best for their child and they don’t consider cost. Nor should they have to – it would be obscene if they were forced to. And they typically had no choice about choosing me as their child’s doctor, either, because the ambulance or helicopter brought their child to me. So if my practice style is to do more stuff than the average PICU doc, the bill will be higher.

This brings us to a key aspect of Gawande’s article – physician culture. We drive the costs. The geographical variability across the country of these costs is, to a large but difficult to quantify degree, a result of differing physician cultures. The costs per patient at the Mayo Clinic, for example, are substantially less than they are elsewhere for the same thing, and the outcomes are better. I spent twenty years of my career at Mayo, and I think the reasons for this are not hard to find.

The first reason is the system. Mayo is the McDonald’s of medical care. They produce consistent, reproducible results because the doctor is only part of the system, and probably not the most important part. In a sense, the doctors are interchangeable. I saw more than a few examples of how an above average physician, plugged into that system, becomes an outstanding physician.

Another reason is that Mayo physicians are salaried. A surgeon gets paid the same if she operates her head off all day or if she doesn’t. There is no financial incentive to the individual doc to do more. (For the institution, of course, this matters in our fee-for-service “system”: if nobody operated, revenues would fall. But they’ve got that all figured out on average.)

The last reason is physician culture at Mayo. It’s an enormous factor, and one difficult to describe. Some don’t like it because it discourages tall poppies – if you want to be a big star, it’s not the place for you.

What we have now in America is more or less medicine as a cottage industry. Physicians scramble for market share, jostling one another for position. Inefficiency is everywhere, even encouraged, all because we refuse to regard healthcare as what it is – not some widget or new electronic gadget that you can choose to buy or not, but a public good. None of us can make the choice to forgo healthcare, just as we cannot forgo other public goods, like clean air and water.

Single payer. Someday we’ll get there. After we’ve tried everything else and the system smashes into a wall.

I recall looking at med school tuition costs in 1974 pretty closely. The $3,000 I paid was for a private medical school (Mayo Medical School). I also was admitted to 6 or 7 other medical schools. They ranged in cost from about $4,000/year (maybe a bit less) for an Ivy League school, to around $600/year for my state university. State schools, of course, have their tuition subsidized by the states to varying degrees, making that comparison difficult.

Doctor Science, re: positional goods.

A pure positional good has almost entirely status value. Its price goes up because the demand is high for someone who values the positional good to have the good, and for other people to NOT have the good.

I would never claim that college is all positional good, but I do think it has a strong positional component. At this point there are a large number of jobs which require "college education" but don't have requirements which match anything you would learn past high school. For various reasons the college diploma is functioning as a positional marker. This has led to a sort of arms race of degrees, where what used to require a college diploma, now requires a Masters or PhD to sort from the mere college graduates. Furthermore within universities there is a positional arms race. The difference IN EDUCATION between UC Berkely and Harvard, is if anything at all, definitely not worth the difference in price. But the positional difference is still large as a status marker, and can still get students a large difference in pay, especially students who graduate in the middle of the pack at each institution.

So I would argue that college tuition has a pretty noticeable positional component (both against non college goers, and between colleges). Medical school has all that and more. It is the entrance to a highly regulated cartel, with many more people who want in, than get in--making the price point inflexible (those who get in don't get the benefit of downward pricing pressure from all those who want in). The positional component of medical schools against each other is very high as well.

(I don't mean this directly as a criticism. Medicine clearly needs to be licensed. I'm just being descriptive here).

My argument is that it is very difficult for goods with a large positional component to be effectively subsidized on the consumer side without the subsidy being largely or entirely captured by the producer. If the government offers $100 to every college applicant, the positional portion means that everyone just bids against each other and the university can raise tuition by $100. When the government is only giving to a portion of the population, the costs go up more slowly (about the amount of the limited population subsidy if divided by the whole student population). But if the subsidy is in the form of a loan it hurts in two ways. First the subsidy gets captured by the university (driving everyone's price up) and THEN the person subsidized ends up having to pay the new higher price all back with interest. In short, if college has a largely positional portion, government loans can help out the first few years, but after that they are just letting the colleges demand more money.

Thank you, Sebastian, that is very clear.

It's not clear, alas, how one can alter the education (and esp. medical education) system to have a lower price ratchet, and to reflect our desire to balance the public and private goods.

From one POV, it might be ideal if medical school in the US was essentially free, once you qualify (which would continue to be very difficult). Federal and State governments would be the payers, negotiating with the med schools.

But this would *have* to involve higher taxes on someone, because med school is intrinsically expensive: it uses a lot of unavoidably-expensive equipment, and even more expensive, highly-trained people. Even though the total med-school-tax burden would be lower than the current cost of med school, especially when you add in the costs of everyone's future medical care, I can't really imagine anyone in the US having that kind of political will.

Basically, I think even though an ounce of prevention now would offset a pound of cure later, everyone will scream blue murder at the cost of an ounce of prevention.

Can you think of any way around this?

Debt forgiveness has been used from time to time to encourage docs to choose one career over another. This can be targeted for choosing to practice in a particular place or for choosing a particular specialty.

We also have too many subspecialists, another thing that drives up costs. The number of training slots should be capped, with a goal of around 50% of physicians being in primary care. There are a variety of reasons medical students aren't choosing primary care, not all of them financial. But med students are used to competing with each other -- just cap the positions and you'd have more primary care docs immediately.

However, the medical centers that train subspecialists would not like this. Right now medical centers receive federal dollars for trainee slots. They also use those subspecialty trainees as cheap labor -- if the slots went away, the faculty physicians would have to do more direct patient care. This would not make them happy.

wj: There is no incentive for most of those consuming the services to shop around -- after all, their co-pay (if any) is fixed. So there is no competitive pressure on providers to hold down prices.

The problem with this argumeny is that it regards insurers as bottomless indiscriminate fountains of money, rather than businesses who are, from the point of view of health-care providers, major customers

Insurers use their market share to negotiate significantly discounted rates from hospitals, and can choose not to cover certain procedures at all or to reimburse them at a rate lower than what the provider would like to get. They are the ones doing the "shopping around" that you think is not happening... and in the case of employer-funded coverage, the employer also has an incentive to pick an insurer who's not just lighting big piles of money on fire.

Obviously this all doesn't work well enough to keep costs down across the board, but it's one thing to say that the market functions poorly, and another thing to imagine that there's no market at all just because the individual consumer has a fixed co-pay.

"At this point there are a large number of jobs which require "college education" but don't have requirements which match anything you would learn past high school. For various reasons the college diploma is functioning as a positional marker."

It's also functioning as a marker of somebody who actually did learn what they were supposed to learn in high school. Granted, I seldom need in my engineering job any math I didn't learn in high school, but during our recent job interviews for a second designer, I was repeatedly shocked at candidates who couldn't calculate the volume of a cylinder, for instance, without looking up the formula.

Brett:

[...] I don't call everyone I disagree with a sociopath, and I think the politicians on my side are sociopaths, too.
This generalization will, in my opinion, steer you wrong far more often then it will steer you right, and this is a major difference in our outlook.

Unsurprisingly, I speak as someone elected to trivial positions in the Democratic Party, and think of myself therefore as a politician, too, in my own small way.

I also know various politicians to various degrees of personal experience, plus, of course, my lifetime of experience and study, plus all the objective measures I can muster, suggest overwhelmingly that your generalization isn't helpful, and as a default assumption, steers you further from reality than closer to it, though I do agree it's a reasonable statement applied to many individual politicians, sufficiently that if you made a much narrower generalization, we might reach language both you and I agree on, for whatever little that's worth.

American politics just happens to be a very efficient mechanism for selecting for a particular sort of mental illness...
That part I find close enough to reality as I know it, for instance, to be within the realm of agreement.

That's very different from defaulting to the notion that most politicans are at the point it's reasonable to consider them any more sociopathic than you or I, Brett. I hope. Repeat: different from defaulting to that assumpton.

"I don't call everyone I disagree with a sociopath"

That's good, but perhaps also not the best default, or even used very often.

GOB:

But in some places in the US, medical practitioners do their job effectively at reasonable costs. I'm glad we have these different examples so, at least, we have some chance to find the answer.
Who is "we"? Do you mean "I," or are you suggesting no one else knows the answers, and if so, have you asked everyone or otherwise what is your basis for implying that others don't know "the answer," in short?

wj:

[...] What higher praise is there?
Little. Thank you.

"It's not clear, alas, how one can alter the education (and esp. medical education) system to have a lower price ratchet, and to reflect our desire to balance the public and private goods."

Probably it would be better to subsidize on the supplier side, with an explicit refusal to give the subsidy if the price is beyond a certain point.

Dr Science,

Its not quite correct to say that universal healthcare countries succeed in treating everyone. The difference is who doesn't get treated. In universal systems its the most expensive treatments that don't get provided. Since all treatment has to be provided using the same resources and all patients are equal, the entity doing the rationing ultimately comes down on the side of making sure everyone gets the same treatment, even though that treatment may not be sufficient to cure some treatable conditions. There are conditions with much higher survival rates for those receiving treatment in the US than in the UK.

On the other hand, in an insurance based system like the US, those who don't get treated are those who can't afford to pay. Which results in various people not being able to survive various conditions that are not in fact that expensive to treat.

Its important that what differs between universal healthcare and pay-for-service systems isn't that universal systems can treat everyone for everything. Its that different people don't get treated for different things. Under a universal system, the most expensive treatments don't get given because they're an inefficient use of the payers funds, and the payer has to pay for everyone in the pool they're insuring come-what-may. In a pay-for-service system like the US, its those who can't afford it who don't get treated.

You know, I'm here for just a minute, and I should know better, but the next time I hear someone refer to seeking medical care as "shopping around" (are you seeking price points as your kid's ulcer perforates or your aorta develops a rip? Are you in the mood for holding a bidding auction for ambulance service as the elephant stands on your chest? Are you going to let your tumor do the walking?))or I read McKinneyTexas (a fine, reasonable, charitable, productive individual, I'm sure, probably one hell of a drinking partner once the fistfight is out of the way) tell us one more time that his file clerk is going to get it in the neck if one effing small change is made in the marginal tax rate, or I hear Alan Simpson (this terrorist and his ilk and their policies will murder more Americans in the next five years than Osama Bin Laden could ever dream, and yet he won't have his old codger Mr McGoo junk patted down at the airport, the vermin cackling serial killer) express fondness for the coming bloodbath in which Republicans murder the poor and the uninsured, this is what America is going to look like, times millions, just so you know:

http://andrewsullivan.theatlantic.com/the_daily_dish/2010/11/nick-cage-losing-his-shit.html

I'd have used footage from "Inglorious Basterds" instead, but I've gone to that well already.

A belated Happy Thanksgiving to one and all.

"On the other hand, in an insurance based system like the US, those who don't get treated are those who can't afford to pay. Which results in various people not being able to survive various conditions that are not in fact that expensive to treat."

Inclusive and a point that can't be over-emphasized, are the damages done by lack of ease of access to simple preventive measures that would be infinitely cheaper to provide than to try to catch on an emergency room basis on sporadic occasion, often after severe medical conditions have already done irreparable damage, if caught and treated correctly at all.

Solely from a perspective of fiscal conservative principles, universal free care for the poor is vastly cheaper than most alternatives, though it also can't be taken out of isolation from the systematic problems of poverty that are synergistic with lack of education, family role models and support systems.

Richard Nixon and Daniel Moynihan were not hippies, nor leftists.

Really. Truly.

Neither was Milton Friedman.

Doctor Science: "Thank you, Sebastian, that is very clear."

Agree; Sebastian's 01:22 PM makes excellent points.

Countme--In:

A belated Happy Thanksgiving to one and all.
And to you, too.

If you read this, and have time, energy, or interest in sampling only a bit of any recent Obsidian Wings that might aid in any possible better cheer, I highly recommend perusal of this one, for dipping in as you might, or might not.

Any thoughts of yours would be welcome and encouraged, though preferably staying within the posting rules, please.

Hope you'll be around here as much as you feel inclined and able and interested, whenever such impulses should occur.

Just a small point, at least for Japan, Japanese doctors actually seem to make a comparable income to US doctors. International comparisons on this are problematic because most doctors set up their own clinics and enterprising doctors set up their own pharmacies, so their 'salary' may look like half of what US doctors make, but their income is probably comparable, though it is difficult to tell with exchange rates and such.

This is not to claim that everything is great. Lucrative specialities attract more students, and so there is a shortage of GP practitioners. Doctors who simply want to work at one place and draw a salary don't get very much. The pharmacy linkup is one of the reasons for the over prescription of antibiotics, and Japanese doctors see, on average, 3 times as many patients as a doctor in the US. On the other hand, most doctors will have their practice, a tie up or two into some local group where they will get paid for doing the annual health checkup there (part of national health, which helps catch conditions before they get enormously expensive) Japanese university education is probably more expensive than US education and is even more a positional good than the states.

Japanese university education is probably more expensive than US education and is even more a positional good than [in] the states.

I knew about the positional good part (i.e. Tokyo Univ=future ruler), but I didn't realize it was (or *could* be) more expensive. How do the Japanese pay for it? Real money? Loans to parents? Loans to students?

Loans to parents primarily. Obviously, prices are all over the place, but there are no (I think) low cost options, it is just expensive, outrageously expensive and you have got to be kidding. And Japanese think nothing of taking out really really long term loans, which is one of the reasons why the property prices went so high (it is possible to get a three generation loan with 100 year terms, which tells you about attitudes towards loans) Very few of my students seem aware of the cost, which I don't think would be true at a comparable US institution.

The universal systems outside the US tend to have the option to get more than the system will provide by getting private insurance on top. Reforms to the system usually concern this boundary. Dental care is the prime example. In Switzerland it is essentially out of the system, i.e. patient pays all. In Germany more and more of the originally fully included care is moved out and into a gray zone where the 'normal' system offers an add-on at a higher price but still below what a 'free market' private insurer would charge. Also many dentists offer additional services for cash that once were part of the universal package. This includes a lot of prophylactic stuff. E.g. normal insurance pays for calculus removal once per year while the consent between the dentists I know is that it should be done twice per year. Different dental fillings also have crossed the line (in both directions). Currently polymers carry a fee while amalgam is free but this will likely change (again) when amalgam gets banned here too (as in Scandinavia).
I think what would be acceptable to most people is a system where basic care (i.e. what the average person 'consumes' plus a limited reserve for special services) is provided as a right, leaving the remaining stuff to a more 'market-based' approach. The transition point would be negotiated regularly allowing voters to have a say in it (CAT scan included or war in country XY? Free hepatitis vaccination or military subsidies to Israel? Ultrasound part of pre-natal care or more money for abstinence-only education?).

Well, Gary, let me throw in some nuance:

American politics functions as a filter selecting for a particular sort of mental illness. Basically, some combination of narcissism, and sociopathy. And, the higher you get in American politics, the more passes through the filter you've endured.

So, nuanced version, sociopathy is probably relatively common in local politics compared to the baseline population, but still not absolutely common. We might liken local politicians to low enriched uranium, they've only had a few passes through the centrifuge.

You go up to state legislatures and Governors, and they've been through some more passes, sociopathy becomes more common. Say, uranium meant for research reactors and nuclear submarine power plants.

By the time you get to federal politics you're dealing with the bomb grade material... Sociopathy has become the rule, not the exception.

Now, back to the subject of the thread: http://www.weeklystandard.com/articles/fiscal-trap_519582.html>Here's my comments on the prospects for debt servicing if interest rates return to more historically normal levels, with some numbers. The short form is, if you make realistic assumptions about how interest rates will co-vary with economic performance, (That we've got absurdly low interest rates right now precisely BECAUSE the economy is in the dumper.) any improvement in the economy is going to increase the cost of debt servicing by more than revenues go up.

That is to say, we're reaching levels of debt where an improving economy puts us DEEPER into debt, instead of rescuing us from it.

Do you mind if I ask how, as some kind of engineer or another, you're qualified to diagnose sociopathy, which is an actual medical thing?

In universal systems its the most expensive treatments that don't get provided.

I think this needs some qualification.

My impression is that, in universal systems, the most expensive treatments might not be provided through state-provided, universal health insurance.

Folks can always buy them, and/or purchase private insurance products that will fund them, outside of the universal health insurance.

And here, in the US, with our weird mixed bag of approaches, the most expensive treatments are *absolutely* not available to everyone.

So, no advantage to our approach on that count.

LJ:

it is possible to get a three generation loan with 100 year terms

@[email protected]

How can that possibly be sane? I mean, 100 years is longer than the current Japanese political/financial system has been around.

Meanwhile I looked for info on Japanese tuition costs, compared to those in the US. This chart has a comparison -- warning, all figures are in *Taiwan* dollars, which are worth about 3% of US dollars. But this seems to indicate that the absolute value and also the "bite" of Japanese tuition is nowhere near that of US tuition.

What's going on in our country? The same thing that's going on in every western country.

Instead of focusing on the differences between how first world economies provide medical care in the present, it may be more productive to look at the fact that they're all facing dramatic increases in health care costs as a fraction of GDP that extend along a similar trajectory into the future. This isn't a problem that we'll escape by going to a nationalized healthcare system, or subsidized insurance. It's more an issue of technology and demographics.

Estimates are that anywhere from a fifth to a quarter of medical tests and procedures are unnecessary. So why are they done? People point the finger at defensive medicine, but it goes deeper than that: both physician culture and patient expectations are key. Just try to dismiss somebody with a head bonk from the ER without a head CT scan and you will hear screams of protest, even though the criteria for doing a CT are pretty well worked out.

A related issue with unnecessary tests and procedures is that all those unneeded things constitute somebody's revenue stream. And they won't take kindly to having their revenue cut by 25%.

Instead of focusing on the differences between how first world economies provide medical care in the present, it may be more productive to look at the fact that they're all facing dramatic increases in health care costs as a fraction of GDP that extend along a similar trajectory into the future. This isn't a problem that we'll escape by going to a nationalized healthcare system, or subsidized insurance. It's more an issue of technology and demographics.

So what you're saying is that, when faced with this challenge, the LAST think the US should do is go "Hey, why don't we go after the low-hanging fruit, convert to a system like France, the UK's, Canada's, and cut our costs in half?"

Yes, we're all seeing price increases. But unlike Canada, we've been overpaying for a LONG time. So we can actually cut our costs in half by switching to the more efficient systems everyone else uses. It won't deal with the long-term problems, but it gives us a lot more wiggle room.

If we're on health care policy, we should also be talking about Ezra Klein's work.

"So why are they done?"

I'm guessing the ambulance chaser ads I'm seeing on TV have *something* to do with it. As a doctor, you don't get in trouble for ordering a test which is extremely unlikely to catch something important. Let your patient some time down the road die of something that test would have caught, even if unlikely, though, and the legal system will break him.

I'll note here that the only reason I had a chest X-ray during my preoperative for prostate surgery was that I'd had bronchitis a month prior. A different medical system might have have been satisfied with the fact that my lungs sounded clear.

And not discovered my lymphoma while it was still curable... Who knows, my widow might have been suing the doctor even now.

The habit of over-ordering of tests begins pretty early in training. Kevin Pho, who runs a big medical topic aggregation blog (KevinMD), has an interesting post up about that here.

Let your patient some time down the road die of something that test would have caught, even if unlikely, though, and the legal system will break him.
And Brett falls into 'disproved by reality' medical fallacy number 2.

We have 50-state, legal laboratory. Tort reform, ranging from mild to draconian, has made absolutely no real chance in malpractice costs, which themselves constitute a miniscule fraction of medical costs.

Your suggestion that we remove the tiny splinter from our hand, while ignoring the two inch thick steel bar from the torso, in order to fix the 'bleeding to death' problem has been noted.

It's also been tried, and done zilch to affect costs. I'm sure tort reform just hasn't been done HARD enough yet.

Health Affairs pegs the cost of defensive medicine at 2.4% of the total. As Morat says, not the chief cost escalator.

Hi Doc Science,
I'm convinced that not only do my students have a different view of money than me, but the whole archipelago has a different view, so I can't really explain it. Japanese can be incredibly frugal, but can also spend their money in ways that I cannot fathom. So when you ask about 'bite', I'm not sure what that means.

As far as tuition goes in relation to household expenditures goes, the chart is correct (otherwise, we would be seeing a bigger drop in numbers than we do now in students attending uni, especially at places like where I work, I think), but imagine that the cost that is indexed in the Taiwan page is not simply the cost of getting your son/daughter into Todai, but getting them into the local Moo U.

lj:

So when you ask about 'bite', I'm not sure what that means.

I mean things like, a year at Harvard costs almost as much as an average income. It looks as though in Japan, every college costs approximately the same, and the cost is about that of in-state tuition at a state school.

DocSci--

As I understand you, you attribute much of the high cost of American health care to patients being insulated from costs. This must be incorrect, because in other countries patients are *more* insulated yet overall costs are *lower*.

This is only half the picture. The other half deals with how long you wait for a particular treatment/test/service/product, and whether you're allowed to have it at all. Price controls almost always cause shortages. Maybe it's just that everybody else has better managerial practices than the US, but that would seem odd, given that the converse is true for almost every other industry. If you have hard data on wait times and shortages, that would be very helpful.

Seems to me that there are two (and only two) ways to go:

1) Some external entity (aka the government) sets prices, allocates resources, and manages things as best they can. If you really think that ordinary folks aren't capable of managing their own health care, this is probably the way to go.

2) You let the market actually clear, which involves turning insurance back into insurance, rather than a payments-transfer clearinghouse, and systematically stripping away the multiple layers of stuff (first-dollar insurance, opaque Medicare costs, employer-paid insurance, 3rd-party negotiated rates, etc.) that prevent consumers from understanding what they're paying for, and how they're paying for it.

I vastly prefer the latter approach, if only because it leaves me as master of my own fate. But implementing it is more than problematic. The whole system is so friggin' complex, with so many different oxen at risk of being gored, that it makes me wanna holler, 'n' throw up both my hands.

Ultimately, this is pretty simple: Everything gets paid for, but between the hospitals transferring costs from the can't-pays to the can-pays, eight bajillion different actuarial models for sharing risk by the insurance companies, employers hiding costs inside their benefits, and Uncle Medicare holding a very heavy thumb on the scale, nobody can figure out who's paying for what.

The more transparent you make those payments, the quicker the market clears, and the quicker goods and services regress to their actual costs. Right now, things are near maximal opacity. Surely we can fix that, at least.

Russell - The US system does provide treatment for the old and wealthy that would not be provided under a universal coverage system. In many respects this is the unique problem - medicare and "gold plated" insurance schemes divert medical resources from better uses, at least on coldly utilitarian grounds, and thus push costs up. I don't consider this an advantage.

Price controls almost always cause shortages.

In this case, it is not clear what a 'shortage' is when we talk about medical care. Waiting a month for a knee or hip replacement? I know that time is money, but the inverse, that market pricing makes sure that certain people cannot access certain services seems equally to the point.

The US system does provide treatment for the old and wealthy that would not be provided under a universal coverage system.

That's cool, my only point in my reply to your comment was that the fact that a universal care plan doesn't pay for a particular procedure doesn't mean it's not available at all. Folks might have to pay for it out of pocket, or buy additional private insurance to pay for it if they need it.

In other words, for very expensive things, folks in countries with socialized medicine have basically the same deal we do, with perhaps the exceptions you note for some procedures for folks with Medicare.

LJ--

Waiting a month for a knee or hip replacement?

If demand = one hip replacement per week and supply = one hip replacement per month, then the wait time gets longer and longer until demand gets reduced to one per month. That means that 3 out of 4 people aren't getting their hips replaced who otherwise would.

That's only if there are operating rooms and hospitals that only do hip replacements and those operating rooms are completely separate and distinct from operating rooms where other procedures are done. It's like complaining that a bank doesn't have enough tellers because you have to wait in line from time to time.

I've invented a pair of shoes which, if worn properly, cure and prevent every type of cancer.

Now, when it comes around to that time of the year when we replace the kids' shoes, in our pensive time around the kitchen table, nibbling on the eraser at the end of the pencil, toting up the household budgetary restraints (you know, just like we all do .. families ... small businesspeople .... and we expect the government to do as well, though I've already cut bombing the Taliban out of my household budget .. to no effect), are these new cancer-curing shoes exactly the same quality of commodity as the old quotidian walking shoes?

Or, are the new shoes now medicine and not really shoes at all, but are now subject to different calculations, within of course the constraints of our high deductibles, which seemed so incentive-filled when the problem was the kids' ear infections and not the neuroblastoma, or whatever, swelling one eye.

I'm considering price points on the business end. I don't think we'll sell these new shoes through Walmart or Target. Tiffany and Coach and the like seem like more suitable outlets. After all, they are among the few retailers attracting the big bucks. Something tells me the hedge-fund managers' and investment bankers' kids are going to have new shoes for Christmas, despite the fact that they blew up the economy.

Let the bidding begin. It'll be difficult to advertise a price -- maybe we'll price the shoes like lobster at a great restaurant -- ask your waiter for the market price today. No insurance permitted.

I'm going to go watch Nicholas Cage lose his sh#t again.

Also, please apply Slart's high-wind sarcasm warnings to my comments as well.

It could be that America's provision of medical care is broken (with the exception of inventing new gizmos, but please, whatever you do, don't ask us to wash our hands before patient contact, because that might cost us too much and seems so top-down -- you're not the boss of me) because we Americans are incompetent at providing medical care with good outcomes to our population.

Maybe, collectively, we Americans are just stupid, unlike say, the French, in this particular respect.

Maybe we just sit around like immovable slugs awaiting proper incentives and disincentives.

Sorry, I can't do anything until I'm properly incentivized.


"That means that 3 out of 4 people aren't getting their hips replaced who otherwise would."

This is interesting, but how many get their hips replaced who otherwise wouldn't?

Read this if you like:

http://motherjones.com/kevin-drum/2010/11/healthcare-and-its-discontents

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