Good article on health care costs in Washington Post

[Koolau]

The whole healthcare cost issue is indeed thorny. I hope folks can resist one-size-fits-all approaches to fixing it. This isn't a "two-sides" issue (like labor and management). There are doctors, lawyers, drug companies, pharmacy benefit managers, insurance companies, politicians, activists, consumers, young people, old people, sick people, well people, US manufacturers, OUS manufacturers, NON PROFITS, etc. etc. etc which all have a stake in this. And YES, profit is a motive. I highlighted NON PROFITS because in my old town, there were ONLY non profit (or maybe you call them not-for-profit) hospitals. In any case, a study was done in which the services offered by these non profits were shown to be 60% HIGHER COST than at FOR PROFIT hospitals less than 100 miles away (same state). No, there was no "profit", but that was because the non profits found ways to disperse the extra funds. I thought this would turn into a huge scandal, but it never did because most folks have health insurance and don't really care what HC costs.

One thing I'm surprised no one has really picked up on is the statement in the article (which is even TRUER than one might expect) that the US is bearing the brunt of HC research. Virtually ALL other countries benefit more form US research than the US benefits from the limited HC research of outside countries. In the article, this disparity was couched as a reason that US costs are so high - profits are MADE and THEN poured back into research. True enough, but if the US didn't do it, it probably would not get done. We could solve the HC "problem" tomorrow with this simple solution: "We the Congress of the US have decided that the state of HC in the US (and the world) is now sufficient. It is hereby illegal to do any more HC research in the US." Problem solved (unless you are a HC consumer, of course). Perhaps a bit tongue-in-cheek, but, realistically, think of the HC benefits those of us on this forum (okay, us geezers over 60) have seen. When I was a kid, transplants, bypasses, most current drug therapies, DID NOT EXIST. Now, they are all but routine. Expensive - but routine. Should we go back? Should we stop research? I think not. This is ONE situation in which cost "inflation" needs to take into account the "quality" and "alternative". Quick example: Does anyone know a single person who, in the past 20 years has had surgery for a stomach ulcer? Probably not, because the 3 generations of ulcer drug therapies have all but eliminated ulcers. Don't know the cost savings, but the pain relief alone has probably been worth the drug costs. If you knew anyone with an ulcer (25 years ago) I think you will know what I'm talking about.

I realize there are a lot more issues here than I've pointed out and I really am not taking a "side" (too many sides to figure out which one to be "on"). My contention is that if we let our Federal gummint "solve" it for us we may not like the lack of control we have over the services available to us AND, I submit, we STILL won't like the cost. Naturally, as a non-expert, I caution that YMMV.

 

[Texas Proud]

The whole healthcare cost issue is indeed thorny. I hope folks can resist one-size-fits-all approaches to fixing it. This isn't a "two-sides" issue (like labor and management). There are doctors, lawyers, drug companies, pharmacy benefit managers, insurance companies, politicians, activists, consumers, young people, old people, sick people, well people, US manufacturers, OUS manufacturers, NON PROFITS, etc. etc. etc which all have a stake in this. And YES, profit is a motive. I highlighted NON PROFITS because in my old town, there were ONLY non profit (or maybe you call them not-for-profit) hospitals. In any case, a study was done in which the services offered by these non profits were shown to be 60% HIGHER COST than at FOR PROFIT hospitals less than 100 miles away (same state). No, there was no "profit", but that was because the non profits found ways to disperse the extra funds. I thought this would turn into a huge scandal, but it never did because most folks have health insurance and don't really care what HC costs.

I think you got taken in by the name... ie, NON PROFIT... ... they are TAX EXEMPT entities... (sure, most of the time they are referred to as non profits, but that is only to have them not pay taxes ON their profits) There is nothing that prevents any tax exempt entity from making a profit.. and the amount of money they need to spend to meet the rules is very little... so their capital can grow and grow and grow...

 

[kevink]

However, it would cost you $700 in airfare to fly to France to get said MRI!

True, but OTOH I had 2 CT scans, an MRI and just about every blood test imaginable done at a top lab in Guadalajara, Mexico for about $450 U.S. There are lots of self-described "health care/insurance" refugees from the U.S. living at Lake Chapala and elsewhere in Mexico who often now pay for their rent and food with what they save by not paying U.S. prices for health care. Sad but true.

 

[Gone4Good]

One thing I'm surprised no one has really picked up on is the statement in the article (which is even TRUER than one might expect) that the US is bearing the brunt of HC research.

Here is what the article actually said:

This is a good deal for residents of other countries, as our high spending makes medical innovations more profitable. “We end up with the benefits of your investment,” Sackville says. “You’re subsidizing the rest of the world by doing the front-end research.”

But many researchers are skeptical that this is an effective way to fund medical innovation. “We pay twice as much for brand-name drugs as most other industrialized countries,” Anderson says. “But the drug companies spend only 12 percent of their revenues on innovation. So yes, some of that money goes to innovation, but only 12 percent of it.”

 

[Gone4Good]

True, but OTOH I had 2 CT scans, an MRI and just about every blood test imaginable done at a top lab in Guadalajara, Mexico for about $450 U.S. There are lots of self-described "health care/insurance" refugees from the U.S. living at Lake Chapala and elsewhere in Mexico who often now pay for their rent and food with what they save by not paying U.S. prices for health care. Sad but true.

Some time ago I read that U.S. insurance companies are starting to cover procedures done in other countries to take advantage of the lower cost.

 

[Gatordoc50]

You have to look at the big picture. We live in a society where each of us competes for the same resources. Compare the salaries and benefits of healthcare workers to government workers and you will find that the salaries of healthcare personnel are inferior. Can you imagine the cost of healthcare if receptionists, janitors, and all the rest of HC employees were paid as well as govt. Workers? Why do teachers make so much more than RNs? Summers off, holidays off, no weekends, no nightshifts, a DB pension. Crazy. Hell, the high school janitor does better than the RN.

 

[tjscott0]

1. Wages generally are higher. Wages are >60% of US HC costs.

I've always thought European doctors received less pay due to the fact their education was low cost or "free" versus the high debt* US doctors incur for their education. Obviously it isn't free; it is paid by their respective country's subsidies to the universities to keep tuition cost down. Their respective societies have determined that low cost higher education benefits their societies.

I always wondered if those subsidies to educate European doctors were included in the per capita cost figures. And if not; how much would that raise those figures.

And while folks complain about high health care inflation here in the states; just look at higher education costs.
http://3.bp.blogspot.com/-dqm5PIPoC58/Ti8HKy2jjrI/AAAAAAAAPgU/Wm3iJROU5KQ/s1600/college.jpg

 

[Gone4Good]

I've always thought European doctors received less pay due to the fact their education was low cost or "free" versus the high debt* US doctors incur for their education.

It seems, though, a root cause for all of the things that drive prices higher is the fact that nobody in the U.S. really negotiates the price of services. We just use what we use and the bill comes later.

Doctors get paid more because nobody shops for a lower cost doctor. As the return to being a doctor increases, the demand for medical school increases. Medical schools, seeing the value of a medical degree, increase tuition prices. Would-be doctors are willing to borrow to pay for school because the field is so lucrative. New doctors, then, demand higher wages to compensate for the higher cost of their schooling.

The simple fact that the end user is insulated from the cost of service inflates the price of everything along the way.

 

[Midpack]

It seems, though, a root cause for all of the things that drive prices higher is the fact that nobody in the U.S. really negotiates the price of services. We just use what we use and the bill comes later.

Doctors get paid more because nobody shops for a lower cost doctor. As the return to being a doctor increases, the demand for medical school increases. Medical schools, seeing the value of a medical degree, increase tuition prices. Would-be doctors are willing to borrow to pay for school because the field is so lucrative. New doctors, then, demand higher wages to compensate for the higher cost of their schooling.

The simple fact that the end user is insulated from the cost of service inflates the price of everything along the way.

+1. One of many factors...

 

[tjscott0]

It seems, though, a root cause for all of the things that drive prices higher is the fact that nobody in the U.S. really negotiates the price of services. We just use what we use and the bill comes later.

Yes. Roemer's law.
When third parties[insuers] make the payments; the insured has NO incentive to comparison shop. Thus the US health care capacity will be fully utilized. Which drives up insurance premiums. Which drive the insured to utilize more health care to git "their money worth".

I have a individual $5000 deductible health insurance policy. It pays $400 annually for preventive health care. So I can find out about any life threatening issues which my policy wil pick up the majority of the cost. The small stuff I can weight whether to urue treatment or not. If I do pursue treatment; I git the insurer negotiable rate.

 

[MichaelB]

There are significant differences in total earnings among the different specializations in the US. There is much less correlation to hours worked or years needed to specialize. Family doctors earn less than any other despite studying just as long and working as many hours, and the difference is often 3x. This implies that higher earning specializations earn more because they charge more and have greater leverage with insurance companies.

No data to support this, but my feeling is family doctors earn as much, perhaps less, but not more, than their counterparts in other countries, while specialists in the US earn considerably more.

 

[explanade]

Yeah supposedly primary care is not a sexy area of specialization for med students and doctors who are choosing their specialty.

It would be interesting to see pricing trends for some elective procedures which are simple enough to comparison-shop, like Lasik.

When you have to treat a condition like diabetes or a major illness like cancer, it's not that easy to comparison-shop. For one thing, what are you going to do, put up your web research versus the recommendation of your doctors?

For another, you may not have the time to shop or consider alternatives.

So health care in general doesn't lend itself to supply-demand dynamics because it's not like comparison-shopping cars.

 

[samclem]

The simple fact that the end user is insulated from the cost of service inflates the price of everything along the way.

And it goes even farther than this. Not only is the end user insulated from the cost of the service, but most end-users are even insulated from the direct cost of the insurance which pays for the services. "Someone else" buys the insurance.

Given the whacky setup, the real wonder is that costs aren't even higher.

If we had a true efficient market for health care insurance then the much-noted difficulties of individually price shopping for medical services would be largely insignificant.

 

[eytonxav]

It seems, though, a root cause for all of the things that drive prices higher is the fact that nobody in the U.S. really negotiates the price of services. We just use what we use and the bill comes later.

Doctors get paid more because nobody shops for a lower cost doctor. As the return to being a doctor increases, the demand for medical school increases. Medical schools, seeing the value of a medical degree, increase tuition prices. Would-be doctors are willing to borrow to pay for school because the field is so lucrative. New doctors, then, demand higher wages to compensate for the higher cost of their schooling.

The simple fact that the end user is insulated from the cost of service inflates the price of everything along the way.

I agree, and also feel we have been conditioned over many years to simply accept YOY double digit increases and made to believe there is nothing we can do about it. Price is a function of what the market will bare, and the healthcare market in the US seems to know no limits.

Aside from the end consumers not having much negotiation leverage, the company sponsors of health insurance coverage themselves don't seem to do a very good job exerting what leverage they do have, as its much easier to simply pass on the cost increases to employees/retirees. We also seem to slice and dice and categorize various insured groups in such a granular fashion that leverage/standardization is also lost, while fraud is rampant. What a mess.

 

[Helen]

And it goes even farther than this. Not only is the end user insulated from the cost of the service, but most end-users are even insulated from the direct cost of the insurance which pays for the services. "Someone else" buys the insurance.

Given the whacky setup, the real wonder is that costs aren't even higher.

If we had a true efficient market for health care insurance then the much-noted difficulties of individually price shopping for medical services would be largely insignificant.

I have tried to examine my insurance bills to look for errors but the information is not clear at all. They don't list doctors names and they use codes for treatment/test descriptions.

 

[samclem]

I have tried to examine my insurance bills to look for errors but the information is not clear at all. They don't list doctors names and they use codes for treatment/test descriptions.

If health insurance were competitively sold to consumers, you can bet the statements would get better. Nobody would stand for being billed hundreds of dollars for services they can't decipher. I'm sure "clarity of statements and billing" would be among the criteria we would consider, as well as quality of medical care, waiting times, price of the policy, etc.

We'll get there, because it's better than the alternatives ("better" for customers and for most of the current (monied) vested interest groups). It will be painful in the meantime

 

[Gone4Good]

If health insurance were competitively sold to consumers, you can bet the statements would get better.

I have an individual health insurance policy and it isn't any more user friendly than what I had working for Mega Corp. Meanwhile it comes with a bunch of significant downsides that I didn't have to worry about with the Mega Corp policy.

I'm in favor of adding competitive forces where we can to our health care system, but there are so many natural market failures in providing health care that competition alone (or even mostly) can't get the job done.

 

[samclem]

I have an individual health insurance policy and it isn't any more user friendly than what I had working for Mega Corp.

Did you find that it was easy to shop for an individual policy? Were there many competitive vendors selling policies with standardized features and were there easy-to-use tools to help buyers choose (e.g. a site with examples of billing statements from all insurers for the same few procedures? The same site maybe giving consumer satisfaction ratings? Snapshots of typical wait times for various procedures, etc)? I haven't shopped for individual health insurance, maybe the market is very competitive and efficient, but my impression was that there were few vendors and that there was a lot of "friction" involved in getting information to make a buying decision.

 

[Gone4Good]

Did you find that it was easy to shop for an individual policy?

I probably had as many insurance companies to choose from as I do airlines between any two destinations.

Was it easy to shop? Some required 5 years of medical history others required 10. No, it wasn't easy. Shopping for health insurance was an excercise in prostration all the while hoping that you haven't forgotten something in your history that will later allow the insurance company to revoke your coverage when you need it most.

 

[ERhoosier]

Doctors get paid more because nobody shops for a lower cost doctor. As the return to being a doctor increases, the demand for medical school increases. Medical schools, seeing the value of a medical degree, increase tuition prices. Would-be doctors are willing to borrow to pay for school because the field is so lucrative. ......

While it can indeed be difficult for the consumer to compare doctor prices, the financial luster of a medical career is clearly in decline.
Here's a very interesting & well-referenced analysis of ROI (Return on Investment) for medical education:
The Deceptive Income of Physicians
Physician bankruptcy, previously rare, is now not unusual-
Small Business: Doctors going broke - Jan. 5, 2012
And the "cost" of being a physician is not measured just in $$, but in a toll on personal health inc. increased rates of suicide, divorce, and cardiovascular disease compared to the general population.
Physician wellness: a missing quality indicator : The Lancet
FWIW- Medical schools are increasing tuition not out of greed but in an effort to stay afloat-
AAMC Study: Recession Forced U.S. Medical Schools to Take New Tack -- AAFP News Now -- American Academy of Family Physicians
Interestingly, the number of med school applicants in US has NOT been steadily increasing over past 20yrs but has waxed and waned with economic conditions.
https://www.aamc.org/data/facts/

 

[samclem]

Was it easy to shop? Some required 5 years of medical history others required 10. No, it wasn't easy.

Thanks. That's what I'd heard from others. This is definitely "low hanging fruit" if we're looking for a way to reduce costs and improve the quality of care. Maybe when "the exchanges" get here we'll see some progress in building an efficient marketplace for individual policies.

 

[ERhoosier]

Thanks. That's what I'd heard from others. This is definitely "low hanging fruit" if we're looking for a way to reduce costs and improve the quality of care. Maybe when "the exchanges" get here we'll see some progress in building an efficient marketplace for individual policies.

+1
Never understood why sales of health insurance across state lines has been severely restricted. Limited competition means consumers can get treated like dirt. Health insurers get away with junk that would never be tolerated by car insurance companies (e.g. incomplete bills/statements, delayed benefits, unjustified denials, etc.).

 

[M Paquette]

+1
Never understood why sales of health insurance across state lines has been severely restricted. Limited competition means consumers can get treated like dirt. Health insurers get away with junk that would never be tolerated by car insurance companies (e.g. incomplete bills/statements, delayed benefits, unjustified denials, etc.).

What health insurers 'get away with' is largely determined by state insurance regulators. Allowing insurers to register under one state while selling policies in other states has interesting consequences. Insurer operating expenses drop, as there is only one state regulatory board to manage, in their 'home' state. States can compete to become the home state for insurers by suitably adjusting their regulatory regime.

I believe this is commonly called a 'race to the bottom'. I don't see any path that would have a net benefit for the consumer, as any drop in rates is likely to be matched by improvements in loss mitigation (that funny thing where your claims are denied).

 

[samclem]

I don't see any path that would have a net benefit for the consumer, as any drop in rates is likely to be matched by improvements in loss mitigation (that funny thing where your claims are denied).

There's no doubt that insurers would gravitate to states with fewer mandates (i.e. no mandatory insurance covering erectile dysfunction for 90 year olds, etc). And then people would buy the types of policies they'd like to have from those companies.

An article in Reason makes the point: is "the bottom" such a bad place if state mandates are adding 30-50% to the price of health insurance?

I do see the problem with the money/political dynamic of a huge health insurance industry being located in a tiny state and having tremendous influence on that state's economy, politics, and regulatory oversight (like Delaware and credit cards). And I also see that having 50 state markets would continue an inefficiency that bedevils us today. But right now we've got the most expensive possible combination, and it shows.

 

[explanade]

Race to the bottom is seen with credit card companies located in some small state with lax regulatory standards.

It's associated with predatory lending and usurious interest rates.

May not be the best way to improve health care availability or costs to people but it's probably great for the insurers.