health insurance and effect on increased health care costs

[Martha]

In this weeks Business Week there is a short article on health costs and the possible effect insurance has had on health care costs. http://www.businessweek.com/magazine/content/06_33/b3997089.htm?chan=search

After studying data going back to the 1960s, Amy N. Finkelstein has concluded that the real culprit for the rapidly rising cost of health care is the massive expansion of medical insurance over the past 40 years. Sure, new technologies play a role, but doctors, hospitals, and consumers adopt them so freely largely because insurance foots the bill. "Where does that technological change come from?" asks Finkelstein, 32, who lives in Cambridge, Mass., with her economist husband, Ben Olken. "I am trying to get inside that black box."

                                    *    *    *
Finkelstein's breakthrough confirms a theory first advanced almost 30 years ago by Harvard economist Martin Feldstein. At the time he didn't have detailed health-cost data to prove his case. Then in 1987 a massive Rand Corp. study concluded that technology accounted for more than half of the rise in health-care costs. Insurance, Rand figured, increased costs by just 10%.

So Feldstein's theory gathered dust until Finkelstein discovered the proof by sifting through long-forgotten paper records in MIT's library. There, she found that hospital spending soared after the federal Medicare program began in 1966



Finkelstein doesn’t draw any conclusions as to whether this is bad or good.  If quality of care has improved or more people get care than did before insurance expanded, then it is a net positive.  However, it is something to think about when trying to get our arms around health care distribution in the US.  For example, in my town there are two major hospitals.  Each has a helicopter.  Each has an MRI machine.  Etc.  Is this efficient?  If there was a single payor rather than insurers funding care, maybe some of these inefficiences could disappear. 

The article states that her theory could "spur the drive for evidence- based medicene."


The article  also states that "if individuals have to pay more for their care through high-deducible health plans, they may cut spending."  Yes, maybe so, but is that positive?  Will people go without necessary care.  Without necessary drugs?    Also, I don't think individuals are in much of a position to go shopping for the best care and the best price. 

 

[justin]

Seems like basic econ 101. I think I wrote a paper in econ 101 freshman year with the same basic conclusion re: health insurance.

Basic supply and demand are thrown off kilter by subsidies (insurance). Theory says when consumers don't have to pay (or pay very little) for what they consume, they will consume much more until the value of treatment/medicine they receive is equal to the cost they pay (in money or time).

If a simple office visit were to cost $100, that is a high threshold to seek treatment. In other words, most wouldn't pay the price for a runny nose or cough.

Only require the consumer to pay $10 copay, and all of a sudden very minor problems "need" medical attention. The value received by the office visit exceeds the consumer's cost of $10.

As to the larger question of High deductible plans curbing medical consumption, good or bad? Dunno.

 

[Martha]

Yes, it does seem like kind of a "yes, duh" conclusion.  BUT, if costs are not regulated in some form or another, then there will be many people who go without. So in the interest of social welfare we come up with ways to spread the risk.  We can have insurance.  We can have subsidies.  We can have a government run system.  Any number of options.

Theory says when consumers don't have to pay (or pay very little) for what they consume, they will consume much more until the value of treatment/medicine they receive is equal to the cost they pay (in money or time).

If a simple office visit were to cost $100, that is a high threshold to seek treatment. In other words, most wouldn't pay the price for a runny nose or cough.

Only require the consumer to pay $10 copay, and all of a sudden very minor problems "need" medical attention. The value received by the office visit exceeds the consumer's cost of $10.

The problem is that the runny nose isn't contributing much to our health care costs. It is the big expensive problems that cost a lot. And paperwork.

 

[maddythebeagle]

The problem is that the runny nose isn't contributing much to our health care costs. It is the big expensive problems that cost a lot. And paperwork.

Yep...I think they have learned to funnel the little issues to a nurse or Physician assistant, right

 

[razztazz]

The only people totally insensate to costs and in a position to run up the cost of anything are the Rich.  Regular normal people, even those with insurance, cannot run up the cost of 18% fthe entire US economy. And these normal people generally do not get liposuction, nose jobs, and all that frivolous optional health care that pretty much only the rich can indugle in without reason or warrant... beacuse insurance doesn't cover it.  

When The Rich are denied the opportunity to get health care (read that "run up the cost" of health care) to the same extent everybody else is then he might be on to something. But really we should be taking the opposite tack.  Allowing everybody to access what they need without fear of going broke.

Secondly, why be horrified that more people can get medical care with insurance which drives up the cost? You must realize that big corporations and a few super duper rich people  have made a billions and billions of  dollars off of this insurace thing over the years. Why not brag about entrepreneurs and free markets and Big Business? And genuflect at how  insurance companies help people? Why blame the customer for using the product.  A product that, if it were not needed would have fallen on its face  faster that a pet rock. Find out  who's been making all the money off this racket all these years. It hasn't been the people trying to do teh prudent thing by taking care of their health care cost potential needs.

 

[haha]

The only people totally insensate to costs and in a position to run up the cost of anything are the Rich.

This is a rather strange conclusion. Did you read what the Martha said? Costs started up after Medicare. Makes good sense. Suddenly, the demand curve for medial services shifted upward, simply because there was more money to throw at it.

 

[maddythebeagle]

I would respectfully disagree that an educated patient cant help control costs.... My experience with some doctors is that they dont effectively investigate and listen to patients and would rather just run tests....the old "I dont know....let's throw a bunch of stuff and see what sticks"...The HMO concept has made this worse in my opinion....even seeing a specialist doesnt always work either....because some specialists even have a special focus...

So I think the discussion should be in having an educated patient who helps direct the care and save costs....

 

[razztazz]

would respectfully disagree that an educated patient cant help control costs.... My experience with some doctors is that they dont effectively investigate and listen to patients and would rather just run tests....the old "I dont know....let's throw a bunch of stuff and see what sticks"...The HMO concept has made this worse in my opinion....even seeing a specialist doesnt always work either....because some specialists even have a special focus...

So I think the discussion should be in having an educated patient who helps direct the care and saves costs....

Right on... and even worse it's hard to even BE an educated patient when you cannot even get a price for something.
Any perfectly good medical knowledge you acquire will be dismissed by the MD because only HE can know anything about medicine. Without any relevent testing. Just XRAY vision apparently.

I know I had a couple hundred thousand dollars wasted by misdiagnosis after misdiagnosis, failure to identify an adverse drug reaction. Misdiagnosed that as a "new illness". I told the assholes the whole time to read the medical literature but their minds were made up. I had to give them some credibility for a while but knowing more about medical conditions than they did I sh*t canned them. And they wonder why people sue. And then we get shtheads blaming people like me for running up the cost of health care.

 

[Martha]

I would respectfully disagree that an educated patient cant help control costs.... My experience with some doctors is that they dont effectively investigate and listen to patients and would rather just run tests....the old "I dont know....let's throw a bunch of stuff and see what sticks"...The HMO concept has made this worse in my opinion....even seeing a specialist doesnt always work either....because some specialists even have a special focus...

So I think the discussion should be in having an educated patient who helps direct the care and save costs....

Fair enough. But how do you do this? I don't know how you can tie decision making to cost. If you potentially have cancer, you want the biopsy and best treatment. You don't want to be priced out of appropriate treatment orr too worried about your big deductible so you wait and see what happens. But if you are having some trouble with your tennis elbw, maybe doing nothing is best. What about carpel tunnel? My DH has carpel tunnel and won't do anything about it. It bugs him a fair amount. That is fine, it is his decision. If he was a secretary, he would need to do something about it or lose his job. These decisions should be based on outcome evidence, risk and need.

I like the emphasis on evidence based medicine that was mentioned a few months ago on another thread and that Rich advocates.

 

[Rich_by_the_Bay]

Evidence-based medicine (EBM) is something I know a bit about, and probably is the golden nugget that providers can seek in order to provide value-oriented care. It has been estimated that in addition to improving outcomes, it would drop costs about 30%. This jives with my last "report card" while I had HMO patients: my "outcomes" were favorable and my charges were close to 30% below the mean (small, statistically insignificant meaningless sample, but interesting).

The other part is due to financial and political issues and probably the providers are not the right pressure point. In my mind, it relates to the fact that health care does not respond to capitalism and market pressures in a way that other service sectors do.

I am no economist, but simplistically, important health services cannot simply be withheld if unpaid for (like a car could), there are moral and ethical standards and risks that come into play that are unique, and the absence of rationing (a societal issue) means that issues such as age, frailty, comorbidity and others cannot be factored in when determining who gets services like dialysis, bone marrow transplants, and even complex surgery. Consumers cannot effectively compare the value and quality among providers.

Any successful system in my opinion will have to address universal access, probably governmental subsidy for big ticket items, and at some level a degree of rationing sanctioned by society, with providers held harmless assuming they follow the rules.

Yesterday I took on the care of a 93 year old woman with advanced pancreatic cancer and no living relatives who cared enough to come visit her. She is now in the ICU on a ventilator, bless her soul, and will likely remain there for weeks or longer. The cost of her care is astronomical, everyone agrees that her benefit is negligible, and no one is empowered or protected in doing anything about it. One of many.