Thursday, March 16, 2006

Expensively mediocre health care

A new study in the New England Journal of Medicine found that, contrary to conventional wisdom, every American -- regardless of gender or ethnicity -- gets roughly equal routine medical care.

Other studies have shown evidence of racial disparities in treatment, and this study doesn't totally refute those. There are still disparities in access to some kinds of specialized care, and the methodology doesn't really address barriers to seeking care in the first place. But once people sought care, they were treated generally the same.

The real kicker, though, is that that the care was rather uniformly mediocre.

The study ... found that though there are some disparities, the world's most affluent health system fails to provide all patients with optimal care at least 40 percent of the time.

"Differences exist, but they pale in comparison to the chasm between where we are today and where we should be," said chief author Dr. Steven Asch of Rand Health and the Veterans Affairs Health Care System in Los Angeles. "No matter who you are, it's almost a flip of the coin as to whether you get the care that experts want for you."

We spend more money per capita on health care than any other nation on earth. And what do we get? Mediocrity.

There are many things wrong with our health-care system beyond the skyrocketing costs. Most reimbursement systems end up giving bizarre incentives to health-care providers, driving up overall costs. And it simply makes no sense that the cost and quality of health-insurance coverage depends on one's employment status. Not only is that bad policy from a public health perspective, but increasingly it is a competitive disadvantage to American businesses and a barrier to hiring, constricting employment and economic growth.

It is time we seriously considered alternatives.

People talk about health-care rationing, but the alternative to rationing is exploding costs -- which eventually leads to rationing by ability to pay. Perhaps exploding costs would be acceptable if we were getting top-of-the-line care for all that money, but we're not.

Should nationalized health care be on the table? Sure. I don't think it's the best alternative, but it's arguably better than the system we have now.

Worried about a huge new bureaucracy? Right now we're subject to a private medical bureaucracy instead of a government one.

National health care limits choice and results in long waiting lists for non-emergency procedures? Well, all systems have their problems. I just don't see the logic in trying to boast about our system and bash every flavor of national health care out there. None of the systems are perfect; they all represent different attempts to address the cost/benefit ratio.

Say what you will about national health care on an individual level, but on a macro level it seems to keep the population pretty healthy at reasonable cost. And it's not at all clear that waiting lists are an inevitable result of a single-payer system.

But rather than looking at the extremes, I think the more useful discussion would be "is there a combination that provides maximum choice while reducing costs appreciably?" And if we can de-link health insurance coverage from our employment status, so much the better.

I actually agree in large part with the Heritage Foundation on this, especially their assessment of the problems with the current system. We may quibble a bit on the details, but their system is workable and, with a bit of residual government involvement, equitable.

My solution would look like this:

Instead of employers providing insurance, they simply boost your pay by the current premium amount, and you go out and buy coverage yourself. Tax credits help ensure that the money is spent on health care, and that the very poor can afford health care. Future increases are left to the market: the cost of health care becomes just one more factor that workers consider when weighing a salary offer.

Medical costs would automatically become linked to performance, insurance products would become more closely tailored to individual needs, you wouldn't lose your insurance coverage when you lose your job (or be forced to change doctors when you switch jobs), and employers would no longer be locked into ever-higher medical premiums -- eliminating a growing barrier to hiring. Small businesses -- the engine of economic growth -- could compete for the very best workers who might otherwise go to large companies simply for the cheaper, better health coverage.

There would still need to be some government involvement, to ensure adequate coverage for people with very expensive medical problems that a true market system, without the "group" aspect of coverage, would lock out. There might have to be a law requiring that everyone have health insurance, much like we do with car insurance. But overall you'd have better coverage and better care without a new bureaucracy deciding what each individual medical procedure is worth.

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Anonymous Anonymous said...

What sort of alternatives are available that wouldn't immediately get branded "socialist" or even "communist" by the noise machine? Someone said to me once that taking the profit out of health care delivery would be a good step, though I don't know exactly what that would mean. I think the power of the status quo--meaning industry, their lobbyists, and their bought politicians--would be able to prevent any move that incidentally led to less profits for the industry...even if a slight dip in said profits would mean a major increase in health care effectiveness.
- Caracarn

3/17/2006 9:12 AM  
Blogger Sean Aqui said...

That's the main advantage of the Heritage approach; it would mean less government involvement, not more. Heritage would like to eliminate the government's role altogether, except for the tax credits. But that's too extreme, because some people will never be able to find affordable coverage on the open market.

And you can hope that competition would winnow the ranks of providers, moving us closer to a single-payer system.

Here in Minnesota, HMOs are required to be nonprofit. That doesn't totally remove the profit motive, but it helps. It also leads to the odd situation that UnitedHealth, a huge for-profit health services company, is based here but does hardly any business here.

3/17/2006 10:18 AM  
Blogger Bill said...

I'm not sure how your plan (or Heritage's) would deal with the 80/20 rule, i.e. 20% of the population (the sickest) are responsisble for 80% of the costs. In other words, it isn't you or I going to the doctor for our annual physical or electrocardiogram that are the cause of the vast bulk of health care costs. It's the folks with advanced cancer undergoing radical treatments and such. I don't quite see how market forces are going to play into this. Is the cancer patient going to shop around for "the best deal in chemo"?

The other issue is that competition as it's played out in the marketplace is skewed. It's about competing for the well patients (who aren't costing very much) not for the truly sick ones who are costing the most. They are still not likely to be able to afford coverage. What will they do?

Full disclosure: These are not my ideas, but things I've gleaned from reading Paul Krugman. He has a great deal to say on the topic. Some interesting reading.

3/17/2006 4:06 PM  
Blogger Sean Aqui said...

Bill, Thanks for the excellent comment.

Your concern is why I said there will have to be at least *some* government involvement, to ensure there is care for those individuals who are simply too sick to find coverage on the open market.

Beyond that, I think the general idea is that costs will be reduced in four ways:

1. Harsh price competition, as patients finally start caring about what their care costs and start scrutinizing charges.

2. Reducing overuse of medical services, as people begin making decisions about what care they actually need;

3. Reduced bureaucracy, inefficiencies and counterproductive incentives;

4. Improving overall health and early detection. By insuring everyone you reduce the risk of acute conditions turning into chronic ones due to lack of care; can catch and treat illnesses in the early stages, which is far cheaper than treating late-stage illness; and slash the number of people getting their primary care in emergency rooms, the most expensive place to do so.

3/17/2006 4:22 PM  
Anonymous Devil's Advocate said...

National Health Insurance systems,such as exist in France, Belgium, Germany, The Netherlands, Italy, and Spain, go a long way towards insuring that most people receive adequate ccoverage. They eliminate the "moral hazard" problem: everybody is covered. They eliminate the multiple layers of bureaucracy that doctors and patients have to deal with in the U.S.. They also allow the government to use its "buyer power" to negotiate drug and medical services prices. The system is financed through "Social Security" payments that are means-tested. And, yes, -- gasp --, taxes are higher in those countries. Since there is no such thing as manna from heaven, if you want services, you have to pay for them.

In those system, doctors are free to charge patients either the government-negotiated price, or whatever they want above that price. The patient is reimbursed the government-negotiated price. The system ensures that doctors have a financial incentive to 1) choose the profession; 2) to provide good medical care.

Reducing overuse of medical services by having people making decisions about what care they actually need presupposes that patients have the same knowledge about their illnesses and treatments thereof as medical personnel. They don't.

Medical care is not a commodity in the sense that one can shop around for it, and decide to acquire it on the basis of price/quality ratio. The reason: there is asymmetry of information between the patient who has no medical training and the doctor who has the medical training.

Most of the time, the patient has no clue of what his/her symptoms mean (do abdominal pains signal duodenum cancer, appendicitis, or just unusual acccumulation of gas?) Having no clue about a diagnosis, implies having no clue about treatment, hence this effectively prevents the patient to make decisions about what kind of care he/she really needs.

3/19/2006 10:22 AM  
Blogger Sean Aqui said...

Good points.

I see two problems with a single-payer system:

1. The single-payer has an incentive to make reimbursement decisions that have little or nothing to do with the actual cost of services. There's a standard move by Medicare, for example, to arbitrarily raise reimbursement rates slower than actual costs rise. That may provide some incentive for health providers to economize, but pushed too far it provides incentives to cheat, stop offering certain services or cut corners on care. With a market-based system, competition limits the price-setting power of both providers and insurers, and allows consumers to choose their own balance between cost and quality.

2. Operations and reimbursement methods are subject to political interference.

While I agree that doctors have far more knowledge than patients, that's not really what patients are shopping for; they're shopping for insurers, who are on an even footing with the doctors. Patient choosiness on care will save money at the margins, knowing that excessive claims may drive up their premiums, or that uncovered procedures have to be paid out of their own pocket.

It seems to me that the diagnosis is not usually what costs serious money; it's the treatment. Second opinions can weigh in on both diagnosis and treatment options, and most patients -- in consultation with doctors -- can render reasonably informed decisions about how to treat their diagnosed malady. The insurer serves as a final check, by deciding whether and how it will reimburse for the chosen treatment.

3/19/2006 10:52 AM  

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