The Real Healthcare Crisis, Part III: Telling Stories
[Note: This is the third part of a series our current healthcare crisis, it’s causes, and why either keeping of killing the PPACA will not solve the crisis. You can find the earlier parts here and here.]
I bring stories, that you might shoot the messenger.
I.
I am lifting my youngest son out of his car seat when it happens. His body stiffens, fists clenched, until he is as hard as a wooden board. His eyelids are wide open, but the eyes themselves roll back into his head; he stares ahead with white, sightless orbs. He is no longer breathing, and he gives no response of any kind to either my initial concerned questions or my panicky cries that follow. He is, I believe for just a moment that goes on forever, dead.
It is not his first seizure. It’s just the first I witness.
His diagnosis is vague-sounding: seizure disorder. One saving grace is that his seizures are infrequent and short. Also, thanks to my wife’s influence, there is no question he has the best treatment available. The Sunday before we meet with the neurologist who will see him regularly for years, the newspaper does a story on that neurologist’s genius. That story centers on another boy whose seizures are constant and life-threatening, and describes removing a small part of that boy’s brain. (“The size of an olive” is how the journalist describes the smattering of grey matter; I can still see that phrase on the newsprint when I close my eyes.) That story ends like a Hollywood movie. At the time of publication, the boy has had no more seizures, and no reductions in memory or cognitive ability have been detected.
The prognosis my son’s neurologist offers is hopeful. Such cases are not uncommon in young children, we are told. More often that not, they grow out of them. The trick is to not have so many seizures that our son’s young, developing brain “learns” that seizures are simply what a brain is supposed to do. In order to “train” our son’s brain, we are given a prescription for a drug that will lessen the chances of seizure. As he grows older, we will taper him off the drug and see if his brain built itself correctly.
There are some bumps along the way, of course. The first drug we try is a bad fit, and the dosage prescribed has adverse effects. “I see two,” our toddler-aged son says one day matter-of-factly. We have no idea what he means until he runs his new bicycle directly into a parked car, and then we deal with the guilt of not being able to have guessed how a very young child might describe having blurred, double vision. And there is still another seizure or two down the road even after we have switched to a more effective drug and dosage. Eventually, however, the seizures stop. Years go by, and we begin to taper him off his medication slowly until we eliminate it altogether. He has not had a seizure since.
The neurologist and the drugs he prescribed have cured our son.
II.
A decade ago, my best friend was diagnosed with multiple sclerosis.
A decade prior to that she had experienced some temporary numbness in her feet, and at the time this had been ascribed to a pinched nerve in her neck. With the new MS diagnosis, of course, that old problem was looked at with a fresh eye.
As we all learned, MS affects different people differently, and the disease is usually treated with one of a variety of drugs in the hopes of staving off long-term adverse effects. For the most part, the disease manifested in relatively benign ways with my friend: a numbness in her feet that would occasionally flare up, some loss of balance, a need for more sleep. The manifestations could sometimes, however, be scary. At one point, her vision began to fail, which we were told was a common side effect of MS that was almost always temporary. The word “almost” was, of course, extremely disquieting, although her sight did return to normal within a few weeks.
The difficulty, once it was determined that treatment was needed, was figuring out exactly which treatment to pursue. Some of the more innocuous drugs available are processed through the liver, but there is a certain segment of the population whose livers don’t do well with those drugs. My best friend is one of them. Other drugs require daily injections in different parts of your body, including — this is true — your lower abdomen. As unpleasant a thought as it might be to give yourself a shot in your own stomach, it was quickly rendered moot; she ended up being allergic to those kinds of drugs.
Finally, her doctor recommended a kind of experimental treatment that was seeing good anecdotal results. The drug, interestingly, had actually been developed to help organ transplant patients’ immune systems accept their new organs. In this it was apparently unsuccessful, but it seemed to work well with MS patients. Better still, this treatment was administered once a month rather than daily. It worked like a dream, and her symptoms largely disappeared.
The problem was that the drug was phenomenally expensive, and because it was experimental health insurers had never approved it as a valid MS treatment. Fortunately, however, a bit of good luck finally showed itself. My best friend, you see, works on the faculty of a large medical university, and that university’s health plan is entirely self-insured. It took a lot of string pulling, but eventually the third-party administrator agreed to accept claims for the treatment at the university’s request — for that policy year. For years afterward, every open enrollment was followed by a period of stress as the third-party administrator would yet again announce the treatment was uncovered, strings were pulled, arguments were made, and eventually –usually two or three months into the policy year — the claims would once again be temporarily accepted. It was an imperfect system, but it worked… until the company that manufactured the treatment drug ceased manufacturing it.
Thankfully, fortune struck twice. As soon as the treatment she had been receiving dried up, a new once-a-month treatment appeared on the market place that has produced similarly positive results for my friend. Better still, health insurers approve this treatment.
Thanks to the miracle of modern medicine, my best friend has been able to live with a potentially debilitating disease relatively unscathed.
III.
My mother is dying of cancer.
She had spent the better part of a year receiving treatment for ovarian cancer, and for a while we had thought she might have beat it. But continued exhaustion led to additional tests, and we now know her rebellious cells have metastasized throughout her body, including her brain. She’s forgetting things rapidly now. She’s terrified she’ll lose the important parts of her before she goes. We don’t know it yet, but her fears will eventually turn out to be well-founded. The last times she talks with my sister, she won’t be able to recall that she has a daughter.
I take her to see her primary-care physician for what will be the last time, because she’s lost use of her right arm. He’s known my mother for decades, and so it is not without some sadness that he lets us know that there’s really nothing to be done at this point. The end is coming, and will be here within a few weeks.
Although…
He did recently meet a local specialist who has recently purchased a new kind of radiation machine that specifically targets cancer in the brain. One of only two such machines in the entire country, it’s very cutting edge stuff. My mother’s doctor offers to write out a referral, but he does warn us that it’s likely a waste of time.
The brain doctor, of course, says otherwise.
“I’m telling you right now, I think my treatment will have a huge impact,” he confidently tells my mother later that same day. “Most likely, with daily treatments we’re talking total remission. But even if we end up being unlucky, we’re still looking at healing your brain enough so that you can live for a much longer time with your memory and use of your arm restored. I think you’ll see results in the next few days”
Two weeks later, my mother asks me to talk to the brain doctor. She isn’t getting better at all. Her memory continues to slip; her useless arm still hangs limply at her side. I try, but he won’t take my calls. When I take her into her daily brain machine treatment the next day, I ask the receptionist if I can speak with him and am rebuffed. When my mom is taken in for her treatment, I slip though the waiting room door and wander the clinic halls until I find him. He is visibly annoyed that I am there, and when I explain why I am he rolls his eyes.
“Of course she’s not getting better,” he says to me with disdain. “She had late stage cancer in her brain. What the hell did you think was going to happen?” Later, when she asks me if I was able to talk to the brain doctor, I lie and tell my mother I was not.
A week later, my mother dies in hospice. Shortly afterward, as I’m dealing with her estate, I review her health insurance documents. The daily brain machine treatment cost my mother’s Medicare supplement company over $10,000 a pop which, when you think about it, makes sense.
Such a rare and revolutionary piece of medical technology costs a clinic millions of dollars, and you have to pay for it somehow.
___________________
When we talk about our health care, we do so by telling stories. We do it so universally, in fact, that we have a tendency to forget that we do so at all.
Most of the time when you get healthcare, the diagnosis and treatment are as clear-cut as math itself. Sounds are muffled in one ear, your doctor sees it is full of wax, drains the wax with a saline solution, and your hearing returns to normal. Your arm hurts the day after you play football with your friends, an x-ray shows a minor stress fracture in your forearm’s radius, and after a short time in a cast you’re as good as new. There’s an additional commonality in these everyday ailments: they’re pretty cheap to treat.
When we begin to get into the more expensive maladies, however, much of what we tell ourselves are clear-cut facts are actually stories we like to tell ourselves. This is important when we begin to consider how to fund a viable healthcare system, because no stable system can pay for everything. This is the case regardless of what kind of system you use: private markets, government-run, or a hybrid like Obamacare. If we’re going to fix our own system, we will ultimately need to make decisions about which of the expensive treatments are worth the money; we will need to do this regardless of whether it’s the government/voters or insurers/consumers who decide.
The problem is that once you start to strip down the stories we tell ourselves to get to the core of what we know, you find how little we actually do know.
The story I tell myself about my son, for example, is a great story. But the fact is that no one really knows how accurate it is. It’s entirely possible (and maybe even likely) that, had we done nothing, my son would have still outgrown his seizure disorder, the way that so many kids throughout history have done. At the end of the day, no one can say whether or not the astounding amount of money that was spent on very expensive drugs, brain EEGs, annual MRIs, and the not-at-all-cheap time of one of the country’s leading brain experts actually did anything at all. And that “no one” includes that leading brain expert, who was always honest and frank with us regarding how shockingly little anyone knows about such things. The most certain thing we can say about all of my son’s treatment is this: His data might eventually be added to other children’s data in such a way that will probably lead to a better understanding of seizures somewhere down the road.
The case of my best friend and her MS is really no different. We tell ourselves that she’s relatively asymptomatic because of her treatment, but in truth this is more a statement of faith than fact. After all, it’s possible she had MS a decade before her initial diagnosis, and that she’s someone whose bad symptom flare-ups occur decades apart from one another. In fact, there were actually long periods in between her various prescribed drugs where she received no treatments at all. Maybe her treatments have helped keep the ravages of MS at bay. Maybe it’s a ridiculously astronomical amount of money being spent for little or no benefit. Who knows?
My mother’s brain doctor was — and I cannot stress this enough — a borderline evil ass**le. That aside, however, it’s worth asking: what is the difference, really, between an insurance company agreeing to pay for my mother’s brain radiation treatment, and an insurer agreeing to pay for seizure or MS treatment?
Before you answer, consider cancer treatment. Radiation, chemotherapy and surgery are as invasive and expensive a group of procedures as one might imagine. We agree to both undergo and subsidize them because we know that they prolong lives. Except, however, that they might not, at least not to the degree that we tell ourselves in our stories.
In 2000, the Journal of the American Medical Association published a study that took a critical look at the survivor rates of cancer patients. The primary method used to judge efficacy of cancer patients is the five-year survival rate; that is, the percentage of those who have survived that cancer five years after the patient’s initial diagnosis. By that standard, modern treatment results have been exemplary. The problem is that these results stem from the fact that we are able to diagnose cancer much earlier than in decades past. What does that mean in terms of how much longer cancer victims really do live with modern invasive procedures? How much longer do cancer patients actually live now than they did a generation ago? It depends on the type of cancer, of course, but for the most part the answer is we aren’t really sure.
Or, more to the point, the effectiveness of cancer treatment — and most other large ticket items we’ll eventually have to make decisions about over the next decade, regardless of what happens with Obamacare — largely depends upon what stories we tell ourselves.
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Data is hard to relate to. It is tricky, complicated, imperfect because of a variety of ethical issues (we can never do the kind of random double-blind research experiments that will tell us if smoking causes cancer because it is unethical to trick or force people to smoke and observe them). Same with other issues probably like your son’s seizure disorder. It would be unethical to give some parents/children a placebo drug and tell them otherwise. So we just deal with it the best we can.
There is also the fact that even very smart people can not read all the data. Here our previous information leads to various confirmation biases. IIRC people who are better educated and wealthier are likely to have the trust requirements to do various things like have faith in banks safeguarding deposits (and the FDIC) and potentially this extends to other systems. Basically everything relies on trust in one way or another in the end. You have to trust the experts and sometimes you get the angelic and forthright neurologist and sometimes you get the unethical oncologist.
Stories though. Everyone understands stories. Hence the frequent internet debate write in of “the plural of anecdote is not data.” But going to data is sometimes a very easy losing arguments in a lot of things.
Humans are not Vulcans. We need stories and stories help us process information including difficult decisions on expensive medical treatments.
Speaking of which, I would also be interested in your thoughts on expenses and why Americans pay so much for these treatments compared to Europe and the rest of the world and the rise of medical tourism. My bias says that universal healthcare and socialism allows foreign governments to place price controls on medicines and negotiate with the pharmaceutical companies. Do you think the US has to pay more for other nations to pay less? Are we being snookered by crony capitalism and lobbying? Both? Neither?Report
It seems likely that the imposition of price controls on patented medicine is part of the reason why health care costs are lower in Europe. My understanding is that this accounts for a small but nonnegligible part of the difference.
That said, emulating this is arguably the single worst idea the non-fringe left has to offer, and you know that means something coming from me. High prices are what makes pharmaceutical companies willing to undertake the tremendous cost of developing and testing new drugs.
Price controls in Europe have already sucked a lot of profit out of drug development, and price controls in the US would worsen the situation quite a bit. Paying less for drugs now at the cost of having fewer new drugs available at any price in the future is a pretty lousy deal for anyone under fifty.
I suspect that another factor is income inequality. Doctors make a lot of money in the US, and one reason for that is that bright young people have lucrative opportunities in other fields as well, and the pay in medicine needs to be competitive to keep the other fields from luring them away.Report
Price controls from the left,
outright “it’s illegal” from the right.Report
High prices are what makes pharmaceutical companies willing to undertake the tremendous cost of developing and testing new drugs.
Often said, but never demonstrated. Convince me you’re correct.
Offhand, I’ve seen many claims that contradict that — that companies routinely spend more on marketing than drug development, that most drug development involves a few tweaks to allow a re-patenting of a drug and to forestall competition from generics, and that the bulk of research is done through government grants and universities.
But if you’re gonna hang your hat on “Americans should just take one for the rest of the world and overpay on drugs so everyone can have nice new drugs”, well, let’s start by actually demonstrating that’s the trade-off — not just asserting it.
Once we’ve shown that overpaying Americans really ARE driving drug innovation, we can decide whether we want to carry the rest of the world that way.Report
@morat20
The whole point of marketing is that it increases sales, and therefore profits. Assuming the drug companies aren’t utterly incompetent, their marketing insures they have more money to spend, not less.
This neglects clinical trials, which are the most expensive part of drug development. Indeed one could argue that the whole point of Big Pharma is running clinical trials to meet the FDA’s requirements.Report
Profit-oriented firms only do things that they think will make them a profit. If they can sell the drugs for more, then that will result in them pursuing the development of some drugs which they would otherwise have considered not worth developing. The economic logic here is obvious.
The claims you’re citing range from false to irrelevant. Let me ask you this: Why do you think the relative amounts that drug companies spend on R&D and marketing are relevant at all? What is the logic that leads you to believe that this in any way contradicts my claim? I mean, you do get that marketing is supposed to bring in more money than it costs, right?
Anyway, I don’t have time to look them up now, but Derek Lowe has written a bunch of posts refuting this Marcia Angell nonsense in great detail. Here’s one example, but there’s much more.
And I’m not saying the US should take one for the team. I’m saying the US should take one for Americans, because we need those new drugs. And that we should lean—hard—on other countries to pay their fair share, because what they’re doing now is despicable.Report
A couple of comments on the “a few tweaks” meme. First, minor tweaks can actually be a really big deal, in terms of efficacy and side effects. But they have to put them through the trials to find out if they’re actually any better.
Second, this is exactly the kind of drug development that will do best in a price-controlled market. When you can’t sell drugs for high prices, you want to work on projects with a high likelihood of success, because you can’t make up for a bunch of failed projects by charging high prices for the few that succeed.
and that the bulk of research is done through government grants and universities.
Government-funded research usually focuses on identifying targets. Identifying a target doesn’t mean you have a working drug. Pharmaceutical companies need to engineer a way to hit that target with a drug, and the overwhelming majority of drug candidates fail miserably.Report
But we’re still hanging, waiting for you to prove that Americans overpaying for drugs is what allows drug development.
Maybe it’s true, maybe it’s not — but your entire point hangs on it, and all you’ve done is assert it.
If it’s true, you should be able to find some good numbers behind it. I realize it’s a complicated subject, but that’s just another reason not to blithely assert that Americans overpay to fund basic research.
Maybe we do, maybe we don’t. Maybe we just overpay because, unlike the rest of the first world, we have more limited bargaining power (I do note that my insurance company seems to pay a lot less per dose for a drug than I, as an independent cash-only buyer, would).
But you’re gonna have to show your work, not just assert it’s true. I’ve got no reason to believe that beyond the word of pharmaceutical companies who, as you’ve noted, have every reason to charge me as much as possible under any justification they can think of. Maybe it’s true, maybe it’s not — but they’d say it was true either way.Report
Morat,
I am on an iPhone and have no intention of using it to explain how science, technology and markets work together to create health care.
However I would be super interested in using my phone to read how YOU think health care gets created absent the creative forces of markets.
Note this is not the same question as “how do states without markets borrow ideas created by markets.” That is easy to grasp. I want to know how absent a market mechanism you believe modern medical care is created and developed and tested and improved upon.Report
Jonathon Cohn will end this sub-thread with a demolition of this idea that universal healthcare will kill R and D:
“…it’s one thing to say that universal coverage could lead to less innovation or reduce the availability of high-tech care. It is quite another to say that it will do those things, which is the claim that opponents frequently make. That argument requires several leaps of logic, many of them highly suspect. The forces that produce innovation in medicine turn out to be a great deal more complicated than critics of universal coverage seem to grasp. Ultimately, whether innovation would continue to thrive under universal health care depends entirely on what kind of system we create and how well we run it. In fact, it’s quite possible that universal coverage could lead to better innovation.
The single biggest source of medical research funding, not just in the United States but in the entire world, is the National Institutes of Health (NIH): Last year, it spent more than $28 billion on research, accounting for about one-third of the total dollars spent on medical research and development in this country (and half the money spent at universities). The majority of that money pays for the kind of basic research that might someday unlock cures for killer diseases like Alzheimer’s, aids, and cancer. No other country has an institution that matches the NIH in scale. And that is probably the primary explanation for why so many of the intellectual breakthroughs in medical science happen here.
There’s no reason why this has to change under universal health insurance. NIH has its own independent funding stream. And, during the late 1990s, thanks to bipartisan agreement between President Clinton and the Republican Congress, its funding actually increased substantially—giving a tremendous boost to research. With or without universal coverage, subsequent presidents and Congress could ramp up funding again—although, if they did so, they would be breaking with the present course. It so happens that, starting in 2003, President Bush and his congressional allies let NIH funding stagnate, even though the cost of medical research (like the cost of medicine overall) was increasing faster than inflation. The reason? They needed room in the budget for other priorities, like tax cuts for the wealthy. In this sense, the greatest threat to future medical breakthroughs may not be universal health care but the people who are trying so hard to fight it.
The ideal would be to come up with some way of achieving the best of both worlds—paying for innovation when it yields actual benefits, but without neglecting less glitzy, potentially more beneficial forms of health care. And that is precisely what the leading proposals for universal health care seek to do. All of them would establish independent advisory boards, staffed by leading medical experts, to help decide whether proposed new treatments actually provide clinical value.
Of course, the idea of involving the government in these decisions is anathema to many conservatives—since, they argue, the private sector is bound to make better decisions than a bunch of bureaucrats in Washington. But, while that’s frequently true in economics, health care may be an exception. One feature of the U.S. insurance system is its relentless focus on short-term good. Private insurers have little incentive to pay for interventions that don’t yield immediate benefits, because they are gaining and losing members all the time. As a result, money invested on patient health may very well help a competitor’s bottom line. What’s more, the for-profit insurance industry—like the pharmaceutical and device industries—responds to Wall Street, which cares more about quarterly filings than long-term financial health. So there’s relatively little incentive to spend money on the kinds of innovations that yield long-term, diffuse benefits.
The government, by contrast, has plenty of incentive to prioritize these sorts of investments. And, in more centralized systems, it can do just that. Several European countries are way ahead of us when it comes to establishing electronic medical records.
Another virtue of more centralized health care is its ability to generate savings by reducing administrative waste. A universal coverage system that significantly streamlined billing (either by creating one common form or simply replacing basic insurance with one, Medicare-like program) and cut down on the need for so many insurance middle-men would leave more resources for actual medical care—and real medical innovation.
… the truth about universal health insurance: You don’t have to choose between universal access and innovation. It’s possible to have both— as long as you do it right.”
http://www.pnhp.org/news/2007/november/does_universal_healt.php
Also, any savings from universal healthcare in society and/or in the government (we’re talking hundreds of billions) could be easily redirected to more research and development (e.g. increase taxes and create grants for research and development, targeted to important diseases like AIDS, cancer, Alzheimer’s, and not just slightly improved versions of money-maker drugs that have patents that haven’t expired, which is what drug companies focus on too much right now.) That could be as much as 600 billion in savings per year:
” Under the single-payer system created by HR 676 [the Expanded and Improved Medicare for All Act, introduced by Rep. John Conyers Jr., D-Mich.], the U.S. could save an estimated $592 billion annually by slashing the administrative waste associated with the private insurance industry ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). In 2014, the savings would be enough to cover all 44 million uninsured and upgrade benefits for everyone else.”
http://www.pnhp.org/facts/single-payer-system-costReport
@shazbot11
Thanks Shaz
I am on a phone, so pardon my brevity and spelling.
I agree healthcare is a factor of science, technology , and markets. The issue that this guy misses is what Hayek called the knowledge problem. Easily googled.
Bureaucrats can’t solve it. Absent markets health care is a two legged stoolReport
But we’re still hanging, waiting for you to prove that Americans overpaying for drugs is what allows drug development.
Maybe it’s true, maybe it’s not — but your entire point hangs on it, and all you’ve done is assert it.
Prove what? That there are values of x, y, and z for which x < z and x + y > z? It’s tautological. What do you want? A random controlled study? For a global market, with a fifteen-year development pipeline and…what? Fifty years of data? You can’t even get a natural experiment out of that.
But you want numbers? Here are some numbers: $80-90 billion in profits for the top 11 drug companies, in a good year. Shazbot cites a number claiming $116 billion in annual savings from cutting prices to European levels. Which means it would pretty wipe out pharmaceutical profits altogether. Which is not to say that the industry would fold up shop altogether; there would still probably be some projects with a positive expected return.
It also seems to me that you’re making two contradictory claims: First, that drug companies aren’t really producing anything worthwhile—it’s all minor tweaks to existing drugs that don’t add any value. If that’s true, why does it matter how much they charge? We can just use the old, off-patent drugs, which supposedly work just as well. You can’t have it both ways. High prices can only be a problem if the drugs are actually worth buying.
If you want real efficiency gains instead of this false economy of eating the seed corn. then some obvious places to look are:
1. Increasing the supply of doctors. I’ve heard that the bottleneck is slots in resident programs, but it could be something else. Maybe also look at reducing retraining requirements for immigrant doctors.
2. International consolidation of clinical trials.
3. Making it easier for insurers to deny coverage for treatments of dubious value, pharmaceutical or otherwise. And not crying bloody murder when they actually do so.Report
Shazbot:
I agree that a national health care system need not necessarily lead to reduced pharmaceutical innovation. In principle, greater coverage could lead to greater incentive to develop new drugs. Medicare Part D did this, for example. The key is not to impose price controls or “bargain” for lower prices.
In practice, almost every other country does just that, so I don’t have a great deal of faith that the US won’t go down the same road.Report
Brandon,
Yes, indeed, lets consolidate international clinical trials.
How many people should be forcibly injected with medicine that they haven’t consented to?
(Yes, I’m being NICE here, and leaving the scary shit out of it.)Report
Also, this is just embarrassingly stupid:
What’s more, the for-profit insurance industry—like the pharmaceutical and device industries—responds to Wall Street, which cares more about quarterly filings than long-term financial health.
Drug development has a ten- to fifteen-year pipeline. If pharmaceutical companies cared more about quarterly filings than long-term financial health, then they would cease all R&D immediately. Does this genius think stock analysts aren’t watching the pipelines? What does he think analysts do, just type three or four numbers from the income statement into a spreadsheet, take a seven-hour lunch, and call it a day?Report
Brandon,
oh, you’re hilarious, yes you are.
Do you really think smart money is going to hold onto penny stocks for that long?
ROFL.
Buying and trading pharm companies is like buying and trading oil options.
High risk, low odds of success.Report
Brandon:
I’m not claiming anything.
YOU are.
You take a given fact: Americans pay more for the same drug than, well, anyone else in the first world.
And you then conclude: “And this is necessary, because all that extra money funds the drug research that makes new drugs”.
But you haven’t shown that (1) All — or even some or most — of this extra money goes to drug research (2) That Americans overpaying (and everyone else apparently paying the supply/demand price) is critical to drug development.
You’ve asserted that conclusion as true and based your point on it, but it remains that: An unasserted claim.
I’m not taking it as true. I’m not taking it as false. I’m asking you to do more than hand-wave, because it seems to be the foundation of your original point.
I’m not accepting your assertation as a given. I am challenging it, asking you to demonstrate it’s validity.Report
Asking whether pharmaceutical companies’ profits go to fund the development of new drugs is not really a sensible question. Past profits are not relevant to future investments, except insofar as they lead to the expectation of future profits. And it’s not that past profits fund investments in R&D—it’s that the expectation of future profits lead people to make investments in order to have a chance at earning those future profits.
The capital for those investments can come from anywhere. In practice, yes, a lot of it comes from reinvesting the profits from earlier investments, because firms that have successfully developed drugs in the past tend to have the institutional knowledge and infrastructure necessary for developing new drugs.
But you haven’t shown that (1) All — or even some or most — of this extra money goes to drug research (2) That Americans overpaying (and everyone else apparently paying the supply/demand price) is critical to drug development.
Seriously? I don’t know how much more clear I can make it. If a company doesn’t expect to make a profit on a particular drug, they’re unlikely to spend the money to develop it. Is that part unclear?
I also pointed out that global pharmaceutical profits are roughly equal to, and a bit less than, the savings that Shazbot cited for lowering prices to European levels. You get that money has to come straight out of profits, right? Profit is revenue minus costs. Assuming that drug utilization doesn’t change, then costs don’t change. If revenues decline by $116B per year and costs stay constant, then profits must decline by $116B. Is that part unclear?
Of course, pharmaceutical companies will adjust. Profits won’t actually decline to -$30B per year. But you know how they adjust? They cut projects that they no longer expect to be profitable under the new pricing regime. Is that part unclear?
Seriously, I have no idea which part you’re not following. There’s nothing new in this comment.
And Americans aren’t overpaying. Europeans are underpaying. And that’s an outrage, and we should be pressuring them to stop free-riding and pay their fair share. Which I’ve already said, so I find your “and everyone else apparently paying the supply/demand price” parenthetical puzzling. We should do what we can to get Europeans to pay their fair share. But even if they don’t, it’s not in our interest to emulate them.Report
Assuming that drug utilization doesn’t change, then costs don’t change.
I’m being a bit generous here. In practice, it’s likely that total costs (to drug companies) will go up, because of higher utilization due both to lower prices and to increased insurance coverage (assuming that the price controls are part of a universal health insurance package). Which means that profits go down by even more than revenues.Report
Just to be clear: Your claim here is that the free market utterly fails when it comes to pharmaceuticals? That the US must continue to subsidize private company’s research by paying MUCH more than the rest of the world per unit (comparing a newly generic drug’s cost to it’s brand name predecessor is fun) if we want to continue having drugs developed?
Two questions:
1) Why is the drug market so different? Lots of other fields combine high research and development costs (airplane manufacturers, for one example), competitive markets, and customers big enough to demand giant concessions that cut into profits — and yet continue to exist, innovate, and function like any other marketplace.
2) If the US is going to subsidize private R&D costs, why are we doing it through drug prices and not doing so directly by increasing NiH grants, patenting the fundamental research the NiH does and charging for use, and otherwise making the subsidy transparent and open, instead of a hidden one?
3) Furthermore, if we’re going to subsidize drug development, why are we letting Europe skate? Furthermore, why SHOULD we allow Europe to skate?Report
Well, that depends what you mean by “free markets.” If your definition allows for intellectual property, then no, free markets work just fine, and the problem is the rest of the world imposing price controls. If your definition doesn’t allow for intellectual property, then yes, free markets fail in this case due to the inability of people to capture the positive externalities of innovation.
Regarding your questions:
1. What makes you think that airplane manufacturers don’t charge above-market prices? If they do R&D, they probably* have patents and/or trade secrets, which protect them from competition and allow them to charge prices higher than they would if they didn’t have those protections. It’s probably just less obvious because 1) most people don’t buy airplanes, and 2) airplanes are expensive to manufacture. Pills are comparatively cheap to manufacture. If the cost of an airplane is 20% patent markup and 80% manufacturing costs, and the cost of a pill is 75% patent markup and 25% manufacturing costs, then the airplane is only 1.25x market price while the pills are 4x market price.
You work in software, right? The economics of software are very similar to the economics of pharmaceuticals. If a company sells a software package for $100 even though it costs less than a dollar to distribute, are their customers overpaying? If the government imposed price controls on software, don’t you think that that would affect software companies’ decisions to invest in developing new products?
Yeah, yeah, open source, but nobody has found a comparable business model that actually works for pharmaceuticals. One reason is the hugely expensive clinical trials that drugs have to be put through.
Same deal with movies, books, and music.
Note that I’m not claiming that there’s anything sacred about the prices pharmaceutical companies charge now. It’s just that policy changes that make pharmaceuticals more profitable will result in more investment in R&D, and policy changes that make them less profitable will result in less investment in R&D. It’s continuous, not binary.
2. I don’t see anything hidden here. When a pharmaceutical company develops a new drug, they get a patent on it, which gives them the exclusive right to sell it at whatever price they think will maximize their profits. This isn’t something peculiar to the drug industry—anyone with a monopoly or copyright on any kind of product gets exactly the same privileges with respect to that product. This isn’t a special subsidy—it’s just honoring their intellectual property rights. I guess you could call IP a subsidy, in a way, but no more so for pharmaceuticals than for software, books, movies, or any other invention.
I’m not, in principle, opposed to the government patenting NIH research, except our legal system has never allowed discoveries to be patented, and I don’t know of any country, anywhere, that does. That’s why so much basic research is done by the government—it can’t be patented, so for profit-firms don’t have much incentive to do it (which should give you a hint regarding what will happen if we “bargain” the profits out of drug development). Allowing the patenting of discoveries might require a constitutional amendment, and it’s not immediately clear to me how it would actually work in practice.
Also, I’m not really sure what the point would be. This would make it more expensive to develop new drugs, which means fewer new drugs getting developed. It would raise some money for the government, but this doesn’t strike me as a particularly benign way of raising money. And it might drive drug companies overseas, if other countries decline to honor this new type of patent.
3. I’ve already said twice that we shouldn’t let the rest of the world skate on this. Certainly we should try to get them to pay up. But we can’t actually force them.
Taking a cynical view, it actually makes sense for small countries to impose price controls. If you’re Denmark, population 5.6 million, you can force the pharmaceutical companies to give you a great deal without putting a noticeable dent in their global profits and incentive to develop new drugs. So you get all the benefits of price controls with none of the costs. But the US doesn’t have that luxury. If we impose Danish-level price controls, it completely wipes out the pharmaceutical industry’s global profits and has a hugely detrimental effect on their incentive to develop new drugs. The Danish can have their cake and eat it too; we can’t.
*I checked. Boeing has a lot of patents.Report
I’ve heard the “Big Pharma needs long term protection of patent so it can charge usurious prices for new drugs or it can’t fund research and will go under” before. I don’t buy it for the simple reason that drug companies spend more on advertising/promoting new drugs (see Cialis/Viagra) than they do by a large margin.
They also seem to be more fixated on public consciousness/branding (see Cialis/Viagra which are advertised ad infinitum on TV).
Meanwhile, there hasn’t been a new class of antibiotics in over a decade, and the bugs are learning to eat everything we throw at them, so we’ll be seeing centenarians with huge boners dying from MRSA….Report
“we can never do…”
fuck that shit. it’s being done. people are dying.
Pray we learn enough.
And pray that knowledge isn’t used to kill more people.
World is a bit bigger than IRBs and American research.Report
Maybe I’m misunderstanding but you seem to be saying that if we tell sympathetic stories we can justify paying for anything and everything? Not to mention that these folks got care under the current regime so I’m not sure what the crisis you speak of actually is.Report
The problems, as have been noted a few billion times, are that health care costs are very high and growing at an unsustainable rate and 10’s of millions of people didn’t have access to health insurance and the health care that comes from having HI.Report
I think the stories here may distract more than they illuminate. The reason for that is that these stories tell us about doctors — generally but not always caring, smart, and skilled professionals — and patients. Tod’s analysis of the stories, but not the stories themselves, tells us that medical treatment is believed to be mostly effective but sometimes is not.
But if the subject under discussion is health insurance reform, all these stories do is illustrate that advanced, scientific medical care is terrifyingly expensive. And no one has yet figured out how to make it less so.
I’d be interested in stories about American, Canadian, British, German, and Japanese people who require advanced scientific medicine. What did it cost, and how did they pay for it? If they live under significantly if not completely socialized medicine regimes, what kind of taxes did they pay? How much of that went to the doctors, the medical and administrative staff who made the doctors’ work possible, how much went to facilities, pharmaceuticals, and so on?
I just had an ER visit. Got an ultrasound, a CAT scan, some labs, and some drugs. The raw bill was X, my insurance negotiated it down to Y, and then paid 80% of Y leaving me to pay the rest by depleting my MSA and working out a payment plan for the rest with the hospital. I still need to make arrangements with the doctor and the ultrasound technician for my 20% of their negotiated fees. The punch line is that my 20% will set me back about two grand that I hadn’t factored in to my medium-term budgeting. I’m fortunate to have only discomfort with this — but there are people for whom that would be a serious hardship, in your community as well as mine. And neither my wife nor I can afford to get sick again until January.
I think there must be a better way, because there was a whole lot of bureaucracy after the care was dispensed to figure out who pays what and who gets what. These are the stories that would illustrate who pays whom and how much.Report
I’ll try although how useful this is I don’t know as I only witnessed part of this and was a small child at the time for the rest, nor have I ever known the answer to your last question about how the money is divided up. It may also not count as advanced scientific medicine
My mother was born with a condition that caused her spleen to effectively destroy red blood cells resulting in severe anaemia. Shortly after birth she had an operation to remove the spleen, which required an extended stay in hospital. This was covered by the NHS and I doubt my grandparents who were trainee teachers at the time could have paid for it from their own resources, though I’m not sure medical insurance was an option for those on a low income in 1950’s England.
About 40 years later it was discovered that the operation had missed a few spleen cells and the organ had spent the intervening decades slowly growing back to a size where it began to cause problems again. At this time in the late 80’s my mother was working part time as a doctor herself and probably could have had insurance or maybe even paid from savings but again she went to the NHS. I she was in hospital for several weeks and that we went to see her most days, I also remember watching cartoons in her hospital room and thinking that ‘seriously’ ill just meant ‘will be here a long time so we have plenty of time for stuff like that’. It was only a few years later I realised her life had been in danger.
The thing about the NHS, the central point really is that it is free at the point of need. If you are a British citizen (see later for a fuller explanation of this caveat) you will never see a bill or even be told what the costs were. I expect you could find out but don’t know anyone who has.
But I hear you cry, it can’t be really free and of course it isn’t. I’ll cover this in the explainy non story bits that follow – I got my numbers off the interweb so if you find an error I’m not likely to defend it.
The NHS has a budget of £108.9 billion a year paid by taxation, or very roughly £1710 per person annually ($2756 if you’re interested). The original plan to ring fence one tax (national insurance) for the NHS and other aspects of the welfare state being long gone I doubt there is a better way to calculate an individuals share but in any event payment and treatment are uncoupled. What you pay depends entirely on your tax situation and what you get on your medical condition, doctors opinion and the resources available for a given treatment. It is entirely possible to get treated without having paid a penny.
For a very rough idea of what it costs those who do pay though, the average UK salary is £26500, income tax is 20% and national insurance for employees 12% (I’m simplifying slightly), making a total tax of £8480 a year. Of this about 18% goes to health so £1526. The observant will note this is less than the per capita figure above and the reasons of course are that some people are paying in a lot more and that there are other taxes not based on income, which I’ve ignored.
Deciding what to pay for.
The National Institute for Clinical Excellence (NICE) decides what treatments will be available and what budget and staff each should have out of the total. I’d emphasise that they do this for treatments not individual patients as I’ve seen a lot of people get wrong. No one other than her doctors asks “Should Mrs Smith get chemotherapy” but they do ask “Should this particular type of chemotherapy be available for bowel cancer”. At worst you get decisions like “Not recommended for the early stage of the disease” or most controversial “Not recommended above age x”.
Going private.
Suppose a British person doesn’t want to use the NHS, perhaps they want a treatment that isn’t covered or they object to the long waits for non urgent surgery, which is *the* big problem for a lot of people. Then they are perfectly free to purchase an insurance policy that will pay for quicker or different treatment or to pay up front. Although I don’t think they get any discount on their taxes for doing so.
One thing I have been told about going private is the risks to the critically ill. NHS hospitals tend to have junior doctors and consultants whereas private ones just have the top consultants. What that means is in the private hospital you get your operation from the best surgeon in the county, then he goes home for the night. If you take a turn for the worse at 2am the nurses have to call him in or call an ambulance to take you to the NHS hospital. In the NHS hospital you get your operation from the second best surgeon in the county and when he goes home the third best takes over for the night shift. If you take a turn for the worse at 2am there is a doctor in the building.
Foreigners
Due to worries about health tourism the government is trying to push the idea of billing foreign visitors who use the NHS in urgent cases and requiring those who need ongoing treatment to return home to get it.
And that turned out longer than expected.
shorter version
My mum is alive because of ‘free’ healthcare
No one is charged by the NHS if they live here
Medical decisions are never based on your finances
Taxes are pretty high to cover this
Really short
Wooh socialism!!Report
@matty
Thanks for the thorough explanation. I’m an American living in Japan, covered under the national “public option”-style scheme. I wish I understood the system better, but all I know is that I got an MRI for $80. The only waiting list involved was the nurses, waiting for me to decipher the forms.
I paid about $2200 this year for insurance. Visits to the doctor for joint pain and skin problems generally cost five to twelve bucks, with prescriptions costing a similar amount. If I have to get an X-ray, add five to eight bucks.
I have an American friend here with Crohn’s disease who’s had some bad episodes and extended hospital stays. His doctor lobbied for him and got him enrolled in a special “long-term (chronic) sufferers” plan that basically pays him (my friend) a small stipend to be sick. He has been kind of a health care refugee—with a preexisting condition, he was pretty much uninsurable in the U.S., so he had little choice but to stay in Japan where he could at least get treatment when he needed to be rushed to the hospital with an intestinal blockage. I mean, in the U.S., he would have been rushed to the hospital, but then would have been hit with a basically unpayable bill. It was a no-brainer for him to give up returning to the U.S. and stay in Japan, where he can’t speak the language, but knows he’s covered.
That’s the way I feel, too. I’m (knock on wood) generally healthy, and as an American male utterly averse to going to the doctor, but I was able to start my own business knowing that if I got hit by a bus, I wasn’t ruined financially. If you get sick or hurt here, you need to worry about whether you’re going to get better or not, but not whether you can afford it. I’ll take that any day of the week over the U.S. system. My family in the States has labored mightily to convince me that this is socialist hell, but I’m not really seeing it.Report
Matty,
I would take NHS in a heartbeat.
I would also move to London in a heartbeat so…..Report
(There is a revealed preference thing going on here, though… right?)Report
That was a good story, @matty , and a good insight into what happens with a single-payer system — eventually it is so integrated into the rest of the taxes and availability of services from the government that separating it out from the rest of taxes and what the government does becomes impossible. For us in the USA, that would represent a very significant change from the prevailing system.
The comparatively modest shift in how insurance is paid for and to whom it is made available that is currently underway fails to inspire confidence that what Britain has achieved can be realized here in even the medium term. So maybe we also need to look for stories about how NHS was created and began functioning.Report
Burt, NHS was passed because the Labour Party won massively in a general election in 1945 and was genuinely a socialist party at the time. They had the votes and little in the way of veto points to prevent them from passing NHS. The devestation wrought by WWII helped since there wasn’t much in the way of vested interests to lead a fight against NHS. The doctors tried but were basically bribed into going along with it.Report
That’s a story too — the doctors tried to oppose it but they, or at least enough of them, were “bribed” into going along with it. What was the bribe? A political payoff to the leaders of the lobby, or the promise of steady and comfortable employment for the profession as a whole, or some other coin?
Last I heard, like being a barrister or being an accountant, it’s a high-paying white-collar sort of job to be a physician in the UK, and the most talented have room to increase their earning potential within the system in an honest fashion.
Also the last I heard, wealthy people got better care than not-very-wealthy people there, so if that story is true, then money must still play into it somehow, perhaps legitimately and perhaps not. Who gets that money?
I would hope that we would not have to endure something as devastating to us as WWII was to the UK in order to reform our system of paying for health care.Report
Burt, I think the bribe was that doctors would continue to be well-paid professionals rather than being paid the salary equivalent of other civil servants like a public school teacher. Scandinavian doctors went along with universal healthcare because they thought the government would be a more reliable source of a paycheck.
The problem with getting a better, more rational healthcare system in the United States is that there is no consensus on what that system should be and that our political system is so riddled by veto points, you can’t create a rational free-market or government based system because the opponents could just invoke a veto point.Report
That is where the ‘going private’ comes in. I was dismissive because of the warnings I’ve had about the risks it poses in ongoing critical situations but it does offer a number of things the NHS doesn’t that may be considered better.
-Much faster access to specialists
-Better facilities, not so much in medical terms but things like comfortable beds, better hospital food
-Optional ‘treatments’ like cosmetic surgery
-More personal attention, book an appointment with a GP (family doctor) on the NHS and you may get ten minutes to establish what if anything he will prescribe. Book an appointment with a family doctor through a private healthcare company and you may get an hour or more to discuss your problems and how they may or may not relate to your health.
Those are the benefits the rich are paying for and they are doing so by going outside the system. As to where the money goes, I believe most of it goes to the profit making medical companies that supply these things but there are insurers who allow the slightly less wealthy to spread the payments so they must get some too.Report
A good friend of mine is dead because of the current crisis.
I could explain to you why, but I think i’d rather just give you the hard numbers:
Health care is costing America entrepreneurs by the thousands. It’s just
more cost-efficient to live in another country and use their system.Report
Here is a story of someone wealthy and unsympathetic who had the best treatment available and got better.
Here is a story of someone much poorer but also much more sympathetic who had less spectacular treatment who died.
Here is a law that is not particularly related to either story above but will make me a lot of money.
Please vote for it.Report
Every story in America.Report
The irony is that I agree with Jaybird, you agree with Jaybird.
Our solutions are probably radically different on many issues though.Report
It seems to me that a big part of our health care crisis is very much a social construction about what health care ought to be available and what health outcomes we should expect. A few generations ago our social construction of those things was very different, with much lower expectations. At the low end, we were more likely to accept that sometimes you got sick for a week, while now we believe most illnesses should receive a doctor’s care. We were more likely to accept that cancer killed, while now we believe that cancer should be fought with every conceivable tool available. And costs rise with those expectations, but we haven’t achieved an agreed-upon social construction about who should pay those costs.
A few years ago I heard a guy on NPR talking about the treatment he needed and how his insurance company wouldn’t cover it. “This is my life,” he said, “isn’t it worth any cost?” And yet he wasn’t suggesting paying any cost himself. “Any cost” is much easier when it’s others’ costs, rather than our own. Even if we build a new social construction that we all collectively care for each other, it doesn’t automatically resolve the issue of rising expectations and costs. Indeed the decoupling of direct costs from outcomes potentially exacerbates that problem.
That’s not a prescriptive argument about what we ought/ought not do, and not a critique of rising expectations, simply a descriptive statement (as I see things) of part the structure of the issue.Report
Spot on. And it’s going to get a lot worse as Boomers go not-so-gentle into that good night.Report
A good flu epidemic will lessen that problem for us.Report
Patrick,
but the last flu panepidemic hit the 15-25 year olds the hardest…Report
Where you been, Zed?Report
James, I agree that a few generations ago our social construction regarding healthcare was different but not in the way you expect. Even though America did not implement universal heatlhcare in the same way that other developed countries did, from the end of WWII till the 1970s a majority of Americans would probably be inclined to agree that access to healthcare was a human right rather than a market good that had to be paid for.
Anecodte time, I watch a lot of TCM because I like older movies. Between movies, TCM likes to show old shorts that movie theatres used to show when going to the movies was an all day or night afair. A couple of weeks ago, I saw an info-short about what we would now refer to as paramedic and first responders, back then ambulance drivers. The last theoretical emergency in the short were the paramedics responding to a woman who went into labor while shopping for groceries. The ending narration was about how access to first rate health care was a right that all Americans could automatically expect from birth simply because they are Americans. The short was from somewhere between the late 1940s to early 1950s and the message was pretty clear that access to healthcare is a right rather than a privilege.Report
Lee,
I’m skeptical that the anecdote supports the conclusion. But either way, it doesn’t really get at my point, which is not about the expectations to access to health care per se, but to how much and what outcomes we expect.
Here’s a nicely organized overview of the changes from the late 1800s to the present.Report
Okay, I misunderstood your point. Medicine can do much more for people now than it could in the past and people have higher expectations for the treatment they receive. I do not see any evidence that these higher expectations are contributing to the crisis in healthcare. If fewer people sought healthcare in the past, they did so because they couldn’t access it do to geographic isolation or lack of money. We do know that a lot of people still sought medical treatment during the days when a lot of it was just quackery rather than ignore treatment altogether. Its wh we had a patent medical controversy and one reason why the FDA came into existence.
Now that medical treatment can usually do something for most people that need treatment, its really not surprising that people are demanding access to treatment. I don’t see any evidence that most people have entirely unrealistic goals regarding treatment but they want to take their chanes and live at least a little longer. Naturally, people are going to demand access to treatment regardless of their ability to pay for it.Report
I do not see any evidence that these higher expectations are contributing to the crisis in healthcare.
Because higher expectations are most costly.
That doesn’t mean they’re bad. In fact it’s great that we can reasonably expect more cures and less just managing of pain. But the cures do cost considerably more than just pain management. Or in other words, you get what you pay for!Report
a majority of Americans would probably be inclined to agree that access to healthcare was a human right rather than a market good that had to be paid for.
This statement does not really mean anything for the simple reason that almost all of these words (access, healthcare, market good, paid for) can mean any number of different things. Deciding that everyone ought to have a modicum of access to a certain range of health goods and services is an entirely different thing than deciding what that range of goods and services ought to be and deciding how these things ought to be funded.
I really don’t understand the progressive conception of right. I am happy to call healthcare an entitlement, but to call it a right means that we are defining right as “some thing that we think everyone ought to have.” And that is a really poor definition of rights.Report
What cancer did he have and what were the treatments?
And yes I think it is a bit shocking if he and/or his employer has been paying for insurance and then the insurance company decides not to cover his treatment unless I am given additional evidence that he had an extremely rare and deadly form of cancer with only extremely experimental and often not effective treatments. Or if the Cancer was discovered way too late and he was practically a goner. Or he had some kind of super catastrophic insurance that covered nothing? On your facts presented, I’m going with shock.
Isn’t that the whole point of insurance? You pay into a pool when you are healthy and well and then get covered when you are sick and need medical care.
Why have insurance at all if they don’t cover anything or can be capricious? When can and should a person expect their insurance to cover medical expenses and when can and should a person not expect this?
And I’m pretty sure that people aren’t rushing to the doctors for every little thing including people with really good insurance. I don’t go to the doctor every time I have a cold. The last time I went was because of an eye infection. Before that I had really bad bronchitis and I was weezing for days before making an appointment and I good insurance during both times. Good for a grad student anyway.Report
What cancer did he have and what were the treatments?
It’s been a long time. I’m not even sure I caught that part of the story, or if I did I’ve forgotten it. I was just struck by the assumption that his cure was worth an unlimited amount of other people’s money, but not of his own. (Not that I don’t understand the joy of having other people cover your bills; the $180 inhaler I got last week only cost me $20, and you won’t find me standing on principle insisting I reimburse my fellow insurees the balance.)Report
I don’t know if I think of it as covering.
I think of it as a pool of money. The money I place in the bank is going to be used for to cover loans but is still mine. I pay my monthly premium for your inhaler and when I need something, the pool covers me.
What’s wrong with this as an idea? Do you think it would be better if there was no such thing as health insurance? Why is it better to pay the full 180 up front instead of being part of a pool and paying 20. That is a relatively cheap option. I think very few people would be able to afford cancer treatment if insurance did not exist and this includes a lot of relatively well-to-do to well-to-do people. Or serious surgery like for a begin tumor.
Being independent and self-sufficient is fine and dandy but sometimes we are all in above our heads and need help. I don’t get people who are too proud or ornery to accept help if and when they need it.
This woman is absolutely perplexing to me. The university could have done better but it seems she rejected help at every possible opportunity. Though there was potentially an untreated and undiagnosed mental illness in her case:
http://www.slate.com/articles/news_and_politics/education/2013/11/death_of_duquesne_adjunct_margaret_mary_vojtko_what_really_happened_to_her.htmlReport
ND,
It all depends on your relative inputs to and withdrawals from that pool, right? If I’m withdrawing more than I put in, I’m gaining at the expense of those who are putting in more than they’re withdrawing. That’s great for me, not so great for them.
It may be the best way to handle things. It’s reasonable for me to conclude that I’m willing to take the risk of paying more than I receive to offset the risk of needing more than I can afford to pay for. That doesn’t mean, though, that I can necessarily expect no limit on how much I withdraw, regardless of how great my need is.Report
Most people do, I think, when you get down to it. You see it when we complain about or propose the remediation of the covering of smokers, the obese, poor people who are assumed to have made bad life decisions, and residents of ungrateful beneficiary states.Report
Good point, Will.Report
@jm3z-aitch
There is also a large deal of random chaos in these decisions. Thanks to how huge they are.
My dad worked on a case that I linked to once here. A man and his sister had the same insurance. They also had the same form of cystic fibrosis. The insurance company agreed to cover the sisters 10,000 dollar a month medicine but not the same medicine for the brother. At least not until a lawyer got involved and pointed out the inconsistency that probably got lost in the mess.
So the guy on NPR did not get covered but I imagine that someone with the same form of cancer probably did get covered for the same treatment but there was some kind of internal inconsistency applied because different people review different documents, etc.Report
ND,
some insurance companies have had policies to deny all coverage above a certain dollar value (make up a reason , pick a reason for it, just deny it!)
Not saying that most companies aren’t chaotic, just that some can be … remarkably systematic.Report
First, the editing:
My mother’s brain doctor was — and I cannot stress this enough — a[n]
borderlineevil ass**le.Fixed it for you.
This is the deeply uncomfortable conversation that absolutely nobody at the national level seems to want to have about healthcare cost reform. It is simply impossible to let everyone explore every treatment option for every malady and simultaneously keep costs for burgeoning ever outward. At some point, if there is to be a serious effort at cost containment, there must be a clear-eyed approach to what treatments and tests are worth the money and which aren’t and who will pay for any of it.
But no. A simple provision that would have compensated physicians for their time when they discuss end-of-life plans with their patients became “death panels.” While there are a few green shoots of discussion about how to contain healthcare costs within the medical community (about which maybe I’ll post something one of these days), it’s not a discussion we’re willing to have honestly on a national level, nor do I see it happening anytime soon.Report
It is simply impossible to let everyone explore every treatment option for every malady and simultaneously keep costs for burgeoning ever outward. At some point, if there is to be a serious effort at cost containment, there must be a clear-eyed approach to what treatments and tests are worth the money and which aren’t and who will pay for any of it.
This a very unpleasant truth. The longer that we are unwilling to acknowledge this truth, the more damage will be done.
Discussions of justice, fairness, rights, cruelty, and the lack of caring will have as much relevance to this truth as, say, any physics problem.
“Deacceleration trauma”, I think is the clinical term.Report
Plenty of us are very willing to acknowledge this unpleasant truth. The admin had an entire board to try to determine what treatments were effective and they wanted to poor money into research on which treatments worked. They. Were. Addressing. This. Openly. It was the R’s who didn’t want to talk about it and started spewing stuff about death panels.Report
No form of insurance, private or public, will cover all treatments. This is not controversial, except to people who want to call addressing that “death panels”.Report
“poor money” is a nice typo.
In any case, I’m pretty sure that the argument “if we don’t do this then PEOPLE WILL DIE” was one of the front and center arguments given for the Affordable Care Act and the whole “well, people will, in fact, die and it’s dumb to pay for treatments that won’t work and we’ll save money by not giving treatments that won’t work to people” kinda had a back burner.
As a matter of fact, one of the things that people worried about was whether their own silver-plated plans might go away because of the scope of the whole “won’t work” thing and how that might be calculated and whether stuff that they were covered for at the time might not be things that they’d be covered for in the post-Affordable Care Act future.
And remember what they were told? Do you want to say it with me?Report
No form of insurance, private or public, will cover all treatments. This is not controversial, except to people who want to call addressing that “death panels”.
Indeed, there’s always rationing. When we are individually responsible, we ration individually. When we’re collectively responsible, we ration collectively. It’s the rationing that bothers us, which leads to two plausible claims:
1. Nobody should have to ration their health care when they desperately need it.
2. Nobody should have others ration their health care when they desperately need it.
Those are our terms of debate, presented most fairly to each side, I think.Report
Its much easier to argue with what is convenient and gets big press then the actual nuts and bolts of what people have advocated for. Cutting costs has been one of the major points about HCR for , like you know, decades. It has been HCR advocates who have continually pointed out the high prices we pay and that we can’t keep going with this level of expenditure. But that stuff is boring and the talking heads on TV didn’t yammer about it enough, so obviously we should talk about what is the hot story on CNN or Fox.Report
Its much easier to argue with what is convenient and gets big press then the actual nuts and bolts of what people have advocated for.
The problem is that you can always point to someone else and say “no, I paid attention to *THEIR* nuts and bolts, not the nuts and bolts that the crazy libertarians were saying were nuts and/or bolts.”
What gets big press is actually measurable insofar as we can actually link to it (or show a youtube of a speech or something).
Now if we want to argue about whether there were obscure bloggers out there who argued that, actually, the price of coverage for most people will go *UP* following the Affordable Care Act’s implementation (or black markets would bubble up following shortages), I’d *LOVE* to do that.
(I’m less interested in what people advocated for because people will tend to advocate for unicorns that poop Krugerrands.)Report
It was actually during the PPACA debate that I switched my Facebook “political views” from “Moderate Republican” to, eventually, “centre-right.” I came up with an excuse to change it to “Natural Law Party” in the interim. I don’t even think “livid” was the right word for it, but it was something. But their “death panels” tact (along with, to a lesser extent, a sudden and unconditional embrace of Medicare economics), embraced by a lot of people with whom I had felt a political kinship, left me pretty disillusioned (which was significant, for someone who wasn’t even really a “true believer” before…).Report
Russ,
Can I ask you an off-topic question? What are your thoughts on a medical practice that does not answer the phone, but requires patients to leave a message then calls the patient back (sometimes hours later, and sometimes resulting in games of phone tag)?Report
They don’t answer the phone at all? Report
No. And the recorded message instructs us not to call multiple times “as this delays response time.” Have you heard of other practices doing this?
Here’s the upshot. Two weeks ago they never called back when I left a message telling them I was having a severe asthma attack, I never got in to see them, and that night I ended up at the emergency room. It’s possible that due to shortness of breath I couldn’t make myself clear enough on the message for them to understand who was calling or hear my phone number well, but doesn’t that just underline the problem with this method?
I’m now looking for a new doctor. I like the doctor I have there, but not nearly enough to compensate for that outcome.Report
That is a terrible, terrible policy on sooooooooooo many levels. It is piss-poor patient care and opens them up to all kinds of liability if they fail to offer prompt responses to their patients’ emergent medical problems (like, say, yours).
You should absolutely find another provider.Report
James,
Is this only during off-hours?
It seems like standard practice for “aah! i can’t breathe”
is indeed to transport thyself to the nearest emergency room
(before one collapses on the ground, and your friendly
campus police decide to do it for you *cough* real story *cough*).
(I am not a doc, but the alternate thing would be use of an epipen, maybe?)Report
Russell—Thanks. Obviously I think it’s a terrible policy, but I’m relieved that you’re not saying, “Oh, yeah, everyone’s doing that these days.”
Kim–No, during office hours (and I know how to respond to asthma attacks, thank you; lots of experience).Report
James,
Okay, that’s truly ridiculous.
Incomprehensibly poor service.Report
@russell-saunders
How much do misunderstandings about the way in which medicine works contribute to exploding costs? The simplest explanation of what medicine does is that it makes people better. For many people, this is about as much as we think about medicine. Thus, when told that a “medicine” exists for an 85-year-old woman’s brain cancer, we assume this woman will get “better”. But we never define what “better” means. Even if the brain cancer itself is cured entirely, the woman is still 85 and dealing with all that typically ails an 85-year-old person’s body. But the cancer may simply have it’s progress stopped… no small feat!… but to family members expecting “better”, this might not be enough; they may push for more or different treatment. All to make a sick 85-year-old woman into a healthy 85-year-old woman. My amateur guess is that there is a pretty slim margin between those two things. But when you’re dealing with hopeful patients or hopeful family, that is rarely realized.Report
Well, I don’t know how much of the exploding costs are related to poor understanding per se. I think a better way of framing it is that most people don’t want to think about cost-benefit analyses when considering their own or their loved ones’ mortality.Report
That makes sense.
But I’m wondering more about how often the doctor says, “We’ll be able to treat the condition,” and people here, “Full recovery”? Obviously, you can’t really quantify that and I doubt it is common in your particular specialty. But I’m sure it’s common.
My dad had to have various back surgeries in the not-too-distant past. When I spoke with him about it, I asked how it all went. “Good. They took care of it.” “Oh, great. So everything is normal.” “Well, no. I still have limited feeling in my leg.” “But I thought you said they took care of it?” “They did.” “But you still have nerve damage.” “I’m always going to have nerve damage. They made the effects of the nerve damage better than they were or could have become.” “Why don’t they just fix it?” “They can’t.” It took a while for that to compute for me.Report
Kazzy,
that’s an excellent point.
Doctors could do a much better
job of explaining what the risks/benefits of surgery are.
Did your dad hear the .2% chance of dying per surgery?
(that’s just for general anesthetic…)Report
It isn’t clear to me that what we really have is a rationing problem.
We know that there is a finite number of awesome neurosurgeons in the country and if you’ve got N neurosurgeons who can perform Incredibly Rare Procedure and M people out of the 308 million who need it… well, it’s not baldly the case that you have a rationing problem. It depends on how big N and M are.
There are a very large number of fairly straightforward procedures that make up the vast, vast bulk of medical procedures. Setting broken limbs, delivering babies, dispensing antibiotics are I’m guessing somewhere near 1, 2, and 3.
We have a relatively mediumish number of reasonably complex procedures that make up the iron center of the problem, where rationing is more of a condition of location than actual scarcity.
I think this is perceived as a much bigger problem than it actually is, societally-speaking, because the folks who are most likely to be impacted by this sort of geographical scarcity (the rural folks) are the ones who are also coincidentally most swayed by the “death panels” argument, because they’re the ones most likely to know somebody who couldn’t get treatment so they expect they’ll be the ones that will get the short shrift… an expectation that matches their existing experience, regardless of how true it actually *is*.
Finally, you get Incredibly Rare Syndrome people who have a relatively large impact on the overall cost of health care, but not crazily so given the fact that, yanno, they’re actually Incredibly Rare.Report
Couple of thoughts: Net net. SOMEONE’s gotta pay for it. It really doesn’t matter who. In the end, it all comes down to rationing, either by price or time, and some “evil insurance committee” deciding on approving treatment or a “death panel” of gov’t ‘crats. The system, in all its forms only has so much money. My real concerns are that the more gov’t gets involved, the more favoritism, sweet heart deals, and political influence come to bear. So you’ll have a situation where a drug is not approved for use to treat X and so you mother will worsen and die, but because Senator Smith has pull, the committee with quietly approve its use for him.
The receiver of treatment, for the most part, doesn’t pay for the service and doesn’t care about the cost. There is little price signaling and what there is, is muted through the insurance bureaucracy. When you’re not paying the cost of care and someone else is, it’s very easy to justify a position that treatment x/procedure y should be covered and to use political rather than medical reasons to justify that decision.
The current health insurance bureaucracy and gov’t related products have a lot of waste and inefficiencies in them. Cleaning that out would free up a lot of money.Report
Damon, can you point of any instance of your concerns being true from a country that has some form of government provided universal healthcare? Opponents of universal healthcare like bringing up all these theoretical horror stories of some sort but they never provide any evidence for this.
Second, you are assuming that a system where people pay for the entire costs of healthcare themselves would function in the same that all other markets for consumer goods would function. This ignores the reasons why healthcare is different from other goods. First, a lot of healthcare decisions affect the public at large and not just the person receiving treatment. Vaccination is a good example of this, failing to be fully vaccinated not only puts yourself at risk because when people do not get vaccinated, the diseases that were eliminated like polio or scarlet fever return. However, if parents had to pay for the costs of vaccinating all their children themselves than there is a chance that monetary concerns would lead to less vaccination and more public health hazards. Do we really want to return to the days of cholorea outbreaks?
Second, most people do not want to be sick and do not want to die. The same goes for their loved ones. If they think that something will cure themselves or their loved ones, they are going to go for it even if it is not economically prudent to do so. Its human nature.Report
Lee,
I’m sure I can site many examples from the UK or Canada, but criticizing “single payer” wasn’t my point. Everything this world is subject to rationing, with either price or time. Someone will be making the final decision on whether you get that treatment-either your personal insurance committee, the limitations of your policy, a gov’t committe, what have you since there simply isn’t enough money to pay for everyone to consume as much health care as they want to consume.
Re last paragraph: Yep, quite true.
Re you second para: I don’t think that’s a good example as we have quite a few “anti vax” folks around but I think I get your point. There are certainly legit public health reasons for such things, but I think it’s really outside my points. My point was that when the consumer of a good does not pay for the cost of the service, or pays indirectly, like with premiums, they are less aware of the cost impact of their decisions and tend to consume more of the product, driving up costs. I really don’t understand why health insurance has to be so different, conceptually, from auto insurance. I don’t pay my auto insurance so geico can cut a check to my mechanic for an oil change, why should everyone pay insurance premiums for annual doctor’s visits or such?Report
Damon,
time to ER is a great way to ration health care.
More Suburbs for All!Report
Having lived in both, reduced access to ER’s is not a huge suburban problem, though it is a pretty big rural one. Yglesias has commented before on how cheap Medicare is in some rural states.Report
Will,
odds of survivability from stroke and heart attack (let alone complications from having a baby) go down dramatically, depending on how far away you are from a hospital er.
(I’d like to see the numbers, actually…)Report
The ER is the most socialistic place on earth.
They rather ruthlessly assign care solely by need and urgency.
Why is why your nasty ear infection might mean hours of painful waiting, whereas that healthy looking guy with his tiny little sports injury gets treated right away for what looks to you like a big bruise (but is more along the ‘ruptured spleen’ area).
I admit, when I was waiting to be seen after dislocating a knee (many years ago), the fact that I was waiting around in pain because other people had more pressing problems was a bit of a cold comfort. (And if my knee had remained displaced, I’d have been seen sooner. But it was back where it belonged, and thus the problem wasn’t getting any worse…)Report
morat,
oh, that’s good to hear (that it wasn’t getting steadily worse.)
You know, the military does it the exact opposite way?
The closer you are to fighting condition, the earlier
you get served. (the thought is getting more men
back on the front line).Report
Makes sense for the military. 🙂
Luckily for me, my kneecap had ended up back where it belonged. (Unfortunately, as I was wearing shorts at the time, I have seared into my memory what a leg looks like when the kneecap is relocated outwards and upwards. Ugh).
The person that saw me first, to set up some X-rays and the like, kept me distracted with stories about what a pain it is to reset the kneecap if it stays out long enough for the muscles to start to swell.
It was several months before I had full mobility back. I don’t recommend the experience at all.Report
Kim,
Suburbs?Report
Damon,
I’m less than ten minutes by ambulance from a top-notch trauma center. Being that close, our medical costs decrease because we can afford to treat problems “as they arise” rather than trying to deal with them as chronic conditions.
I’d wager that attempting this if you’re 30 minutes out from a hospital is not the best treatment.
Plus, like i was saying to will, the odds of survivability from stroke/heart attack go down dramatically the farther out you are.Report
I liked the first image for this post better. Switich it back.Report
doneReport
Thank you.Report
You could have said please.Report
Demanding seemed to work just fine.Report
Does anyone know why American corporations–the General Electrics and General Motors, that do offer their employees health care–aren’t pushing for national health care? Given the costs to these firms, both directly for the coverage and the paperwork-labor costs, I wonder if they wouldn’t be better off with a tax increase in exchange for dumping those costs. I know the former VP of my college, a staunch Republican, became somewhat conflicted on the issue, being ideologically opposed but thinking it would probably be a cost-savings for the college.
Does anyone here have better insight on this than me?Report
I’d think that being vaguely in favor of a policy if you think it over =/= being willing to shell out the bucks for lobbying and access to push for said policy.Report
If we’re talking about the bottom line of the firm, then lobbying simply makes sense. At the very least, public statements in support aren’t very costly.Report
James, but the bottom line for the firm might be hurtful for them as individual rich people that will have to pay for universal healthcare and other welfare state programs through their income tax. They might decide that bottom line for the firm is less important than their own bottom line.Report
They might decide that bottom line for the firm is less important than their own bottom line.
Oh, come on, Lee, no executive would ever think that way!Report
Management prioritizing their personal well being over the firm they have a fiduciary responsibility to? Impossible!Report
My impression is that they were.
http://www.nytimes.com/2007/10/06/business/06auto.html?_r=0
http://nextlevel.gehealthcare.com/policy-update/Report
I concur with North.
Also I imagine that most people are like the former VP of your college. Stereotypically most executives in big business are Republican and generally opposed to various welfare systems. Maybe they feel conflicted, maybe they don’t. They are obviously not willing to spend the money or effort to lobby for reforms or an NHS system in the US.Report
James,
they are. they absolutely are. Big Auto was a big supporter.
Of course, they let the unions be the front lines (talking with people).Report
It’s worth taking into account that the shareholders, being richer than the average American, would be likely to shoulder a disproportionate share of the tax burden associated with nationalized health care. Even if it saves money for the firm, which I’m not sure it would, it may be a bad deal overall for the shareholders.Report
That seems plausible.Report
I imagine its for the same reason that the American tourist industry isn’t lobbying for federally guranteed vacation time with pay like they have in Europe or that the fast food restaurants aren’t lobbying for food stamps; the individual program might help their particular industry but it will hurt their class interests overall because you need taxes to pay for a lot of it. Most of these taxes would come from raising taxes rates on the rich, who happy to be the individuals in control of the lobbying organization.
Lets use the tourist industry as an example. We have a lot of tourist focused ranging from amusement parks to beach resorts to hotels in major cities that would really benefit if Americans had guaranteed time off with pay like they do in Europe. Imagine how much money could be made if a decent plurality of American families spent the entire month of July or August on vacation? At the same time, guaranteed vacation with pay would be expensive because employers would still have to pay for the time off, including in the tourism industry. In the name of class interests, they might feel a need to lobby for two or four weeks guaranteed paid vacation.Report
the American tourist industry isn’t lobbying for federally guranteed vacation time with pay
Good point. But, heh, the Michigan tourist industry did lobby the state to mandate that public schools could not start until after Labor Day, to try to squeeze out more in-state vacation spending before the end of summer. That really screwed us up when our kids were young enough to need someone to watch over them, since my college starts before Labor Day. It also pushes the end of school date back. So effectively they shortened the amount of time my kids and I have off together by two weeks each year. Fuckers. Ever since I’ve refused to do anything in state on Labor Day weekend.Report
J@m3z
How do you parse GE Healthcare in your question?Report
Sorry, I don’t know enough about it. I was only using them as a general reference to distinguish between corporations that do offer health insurance to most employees as part of their benefits package (GE, GM, my college, etc.) and those (Wal Mart, etc.) who do not offer health insurance to a large proportion of their employees.
Although as a kid I was covered by my mom’s health insurance, and she worked for GE. I guess it was pretty good?Report
James,
GE has some interesting numbers.
I’ve heard comments from their CEO (relayed through a few layers),
but it was roughly, “It costs our corp X for health insurance… Of course,
we do own the health insurance.”Report
They don’t seem to be fighting it either, but ot the extent that they like the status quo, one possibility might be that big companies have a major advantage in the current system. Thanks to their huge group size and buying power, their plans are much better. Providing healthcare is a pain, but it doesn’t really put them at a major disadvantage. If you want a good group plan, go to work for GE or IBM. If you want a crappy group plan or no plan at all, go to work for one of the small companies that compete with GE or IBM.Report
Actually most large companies effectively self insure for medical. The hire an insurance company for the network and to manage the claims process, but pay the claims directly. In this case the risk is on the company not the insurance company, which gets a fee for service only.Report
Another story which, I think, illuminates a problem:
When I was a kid, grownups used to say such things as “you’re smart, you should be a doctor” and “if you want to make a lot of money, you should be a doctor”.
I don’t say this to the kids I know. I don’t know of any grownups who say this to kids (and I have a number of kids around who are somewhere around the age that I was when I was being told this).
Do you (yes, you!) tell kids that they should be doctors? (Do you tell them to explore different ones?)
Any doctors out there! Do you tell your kids that they should consider your profession? (Do you tell your kids to look into a different profession entirely?)Report
I’m leery of telling my kids they should be anything. But that’s just me.Report
I’d tell a capable and dedicated kid that they should be a doctor.
Not a smart one.
I could tell you some stories about “smart” doctors. They aren’t
complimentary.Report
You’re better off with universal healthcare. This is as obvious as the fact that gay marriage is moral and anthropogenic global warming is occurring. Deniers in all three debates are left with red herrings and obfuscation. (See Cohn’s total destruction of the “best argument” that the deniers have to offer about how universal healthcare will lead to reduced R&D here: http://www.pnhp.org/news/2007/november/does_universal_healt.php )
You will never notice that there is some fancy procedure that you want that you can’t get if you live in the UK or Canada. And in some cases, you are better off without the fancy procedure, which explains a lot of why the UK and Canada spend less and get better (or as good) health outcomes.Report
In other words, choice is overrated. Our technocratic overlords know better than we do as to what the appropriate level of risk, the optimal level of coverage, and the perfect basket of healthcare goods and services is for each and everyone of us.
And if we disagree with any of that, we must hate the gays. OK. Got it.Report
I’m curious: What’s the difference between our elected overlords and the fine risk adjustment officers at Aetna?
Isn’t what’s covered and isn’t already decided by the whims of technocratic overlords?
I mean sure, you can free-ride on the ER’s and hope you don’t get a nasty case of the cancer — but hey, you can also do meth. Life’s full of fun choices like that.Report
Choice and competition.
In a reasonably functional market producers serve customers and seek their business.
Economic exchange is positive sum and both parties expect to benefit. Thus producers compete to cooperate by attempting to make their product better or more efficient
Health care has been screwed up and is no longer a functional market. It is being screwed up more each day by bumbling progressive with no clue.Report
For starters, you have a choice as to whether to enter into a relationship with Aetna or to choose one of their competitors. And you’d have even more choice if the government had not conceded so much of its regulatory and rule-making power to a decidedly unelected bureaucratic apparatus that is all but completely captured by the insurance industry. You know, the same insurance industry that lobbied in support of the ACA.
What’s more, to what exactly are you objecting? There may be lots of good reasons to support a universal healthcare system, but the argument that Shazbot11 makes is simple not one of them. The argument for universal healthcare is not that everyone is better off; it’s that the upside to making some people better off outweighs the downside to making other people worse off. Policies have tradeoffs. The government doesn’t have some magic wand that makes everything rainbows and unicorns.
Also, the free rider argument is another false point. When you go to the ER, they give you a bill, which tends to contradict the “free” part of free rider.Report
Actually, it’s not quite as simple as that.
Remember that competition amongst health insurers drives premium costs up, not down, because one of their two major functions is to act a negotiator of the fees providers are able to charge you.
https://ordinary-times.com/blog/2012/07/07/health-insurance-competition-doesnt-do-what-you-think-it-does
Also, unless you are the owner of a business you really don’t have any more control than you do if your governor is choosing a program. (You may be a single contract consumer, but if that’s the case you’re not paying competitive rates.) Otherwise, you get whatever plan your employer dictates, regardless of your personal needs or desires.Report
What percentage of that money is actually recovered in those cases? The people who are poor enough that they can’t afford health insurance probably aren’t exactly the quickest at paying large, unexpected bills. Somebody somewhere eats the difference.Report
I’m not talking about the cost of premiums. I’m talking about the cost of actual health services.
And right now we have a system that combines the worst of both worlds, so I’m not going to defend it. Personally, I would prefer a system that guaranteed everyone catastrophic coverage and then let people buy other services a la carte on a largely deregulated private market.Report
Strongly disagree,Tod though my comment is aimed at reasonably working markets.
A market is a way of solving problems for each other via division of labor and exchange. Together we can produce unimaginably more than apart.
We are all consumers. To get currency of consumption, we produce or serve others. We find out what they need and attempt to produce it for them thus making moolah we can use for consumption.
Any one making good moolah attracts competitors who want in on the action. But consumers choose the best need fulfiller. This creates an arms race to solve new needs better and cheaper.
If this is not occurring you do not have a functional market.
The idea that only the leaders of a company have choice is completely wrong. Profit is made by serving needs better and cheaper. I don’t have access to computer to counter every argument but markets create unimaginably more choice than the alternative.
We need markets (and great safety nets) or future generations are screwed.Report
No one “eats the difference,” because the pricing structure for medical services is inconsistent and without transparency. If you can’t pay what hospitals charge, they will cut you a deal. They probably maintain their pricing fiction by claiming to write the bill down to show an operating loss, though.
The free rider canard was contrived to justify the individual mandate.Report
j r,
So you’re saying that the indigent patients who don’t pay the full bill still always manage to cover the cost of the procedure so hospitals don’t lose money on the deal?Report
@troublesome-frog
No. I am saying that the price structure is so opaque and so dysfunctional that it’s almost impossible to tell where a hospital is making a profit and where it is loosing money.Report
Just to get this straight:
No one free-rides, because the ER gives bills, and even though those bills often aren’t paid (or aren’t paid in full), that’s okay, because the bill they issued wasn’t the real bill but just some made up numbers because nobody knows what health care costs and what they ended up paying — even if it was nothing — was probably the ‘real’ cost anyways?
Yeah, that makes no sense. But whatever you’ve got to do to justify your faith that the free market ponies can save this mess is okay, I guess.Report
@morat20
That’s not what I’ve said at all. The problem is that people have started using the term free rider, which has a specific economic meaning usually pertaining to the provisioning of public goods, in a weird psuedo-ethical way to complain about people behaving in ways that they don’t like. Getting a cheaper price for something does not make you a free rider.
And who said anything about free market ponies? There’s two ways to have an intelligent conversation. One is you can listen to what the other person is saying and respond to it and the other is you can accuse the other person of holding all sorts of stereotypical positions. I see no need to default to the latter.Report
Oh, I see. Well, I guess using the term “free rider” to describe the fact that ER’s are legally required to stabilize patients, regardless of ability to pay, and do so — and then pass the resulting unpaid bills (of which there are many) onto the public at large is wrong.
Call it “CraptasticStatusQuo” if you like.
The end result is the same: We socialize the costs of health care already. It’s just we require the poor to use the ER (which charges everyone else more to make up for it) when they can’t see a doctor, we require the middle class to liquidate all their assets and go bankrupt before tossing the bills on the public (if they happen to be uninsured and unlucky), because America does not allow “inability to pay” to keep you from live saving medical treatment.
And thus society pays for it, one way or the other.
We have socialized medicine in the US. We just have the least efficient system — both in costs and outcome — of the first world. The only thing we’re first in is generating misery and poverty as a result.Report
j r
That’s the thing, though–the way emergency room care works is that it’s nonexcludable and the costs are borne by others if you don’t pay, so it’s subject to the same set of problems as a textbook public good. The same holds true for the ability to buy insurance for preexisting conditions. There’s really no getting around the fact that somebody pays for healthcare, even when the people receiving it don’t cover the costs.
I’ll definitely agree that the sticker price for emergency room care is stratospherically above the actual cost to provide emergency room care and that a patient defaulting on a bill of $40,000 for a band-aid doesn’t actually mean a $40,000 loss for the provider. But let’s not pretend that the costs are $0 or even very close to $0.Report
Let’s talk economics. A normally functioning market matches people’s willingness to pay for a particular good with the amount of that good that producers are willing to provide. Public goods are a problem, because they are indivisible. You can’t sell someone one unit of national security. The free rider problem is a conception that helps explain how the normally operating price mechanism can fail to capture a person’s real willingness to pay for an indivisible public good; therefore leading to the under-providing of that good.
The key to the free rider problem is that it involves willingness to pay and not ability to pay. A person who wants something, but cannot afford it is not a free rider. Further, for normal goods, like goods and services at an emergency room, the ability to be divided and sold as individual units means that there is no free rider problem, because each person buys at the point where his willingness to pay intersects with the producers willingness to sell. Price discrimination is part of a normally functioning market. Price discrimination is not free riding.
The leisure traveler looking to buy tickets for a trip three months out has more leeway than the business traveler who has to find a ticket for tomorrow. So if they end up sitting next to each other on the plane, you wouldn’t call the leisure traveler a free rider because he only spent $200 on his ticket while the business traveler spent $500. That is simply not what the term means.
If you are intent on stretching the term well past its intended purpose to describe behavior that it was never meant to describe, fine. Go for it. However, realize that when you do that, you are categorizing everyone who pays a lower price for something as a free rider. What’s more, you’re saying that people who pay less taxes than other people are free riding when they use the same services. So, according to your logic, a middle class person who pays taxes at an effective rate of 27 percent is free riding when they use the same public park as the person who pays taxes at a 33 percent rate. Essentially, you are making the same rather daft point that Romney tried to make with his 47 percent line.Report
Yes, we Canadians lack the right to choose between death, bankruptcy, and adequate medical care.
Please do not straw man me. I just said that you were reasoning as badly as the people that hate the gays, not that you hate the gays. There’s a difference.Report
Straw man? Come on. Please do better than this.
There are plenty of good arguments for universal healthcare systems, but your argument is completely incoherent (you have no basis to dictate to some else what makes them better off without specific knowledge of what their situation and preferences are).
And then you take three positions that have no epistemological similarity to each other and try to tie them all together by means of some phony equivalence. Choices between healthcare systems are a function of preferences for varying levels of risk and individual health priorities. Gay marriage is an ethical and moral question about the recognition of common humanity. Global warming is the domain of the hard sciences.
The only thing that these three positions have in common is that they are things that political progressives happen to believe. The only “reasoning” that you’ve employed in tying these things together is a false belief in the necessary superiority of progressive political beliefs. And that’s fine, but at least attempt to make a passable attempt at an argument instead of relying on mere assertion.Report
The analogy might be a little closer if there was no way to keep the leisure traveller off the plane and you had to accept whatever the he ended up paying, even if it was below the per-flyer cost of fly the plane. And in that case it would look a lot more like a free rider problem. In fact, I’m guessing that this is pretty much exactly the analogy the coiner of the term had in mind when he came up with the term. (Baumol? Who was it?)
I don’t have my original textbook handy, but yours is the narrowest definition I have seen, but I suppose that the key aspects of the model depend on the type of problem you’re trying to solve. The definition I recall is that a free rider is one who makes use of a non excludable resource without paying the cost of his usage of that resource, ultimately resulting in either underprovision or overuse if enough people do it. Which is pretty much exactly what happens when you have emergency rooms which can’t exclude anybody else from using them without paying the full cost of their usage.
If you prefer, I suppose we could use the terms “makers” and “takers.”
I’m pretty sure that the problem most of us had with Romney’s line wasn’t that we disagreed with the basic fact that some people get out more than they pay in and that the rest of us pay the difference. We just weren’t onboard with the implication that they’re wastes of good oxygen and that the rest of us should view them with contempt and ignore their public policy preferences.Report
I do disagree with that basic fact. It’s not very difficult to see the myriad of ways that the supposed makers draw the most benefit from the system and the supposed takers are held in place by a number of exploitative institutions. Rather, it’s not very difficult to see this once you unplug yourself from the red team-blue team matrix.Report
I heard a panel on C-span this AM discussing how because the charges for proceedures may vary by a factor of 3 depending on the hospital, or for imaging depending on where it is done, companies are pushing folks to the lower cost options, including if needed paying travel expenses for the patient and a companion. (this is all domestic right now). One area discussed was joint replacement surgery where charges for the proceedure varied from 20k up to 110k in Ca, the mean was around 28k as I recall so they said we will pay up to 30k for the proceedure, and told folks who offered this price. (This was the health insurance arm of CalPers). Kroger looked at non emergency imaging prices and set a max payment and again told folks where they could get the service. In both cases the quality measures look about the same. This does hurt the academic medicine institutions because they have higher costs, but save the consumer and the companies money.Report
Here is a link to the site of the organization that sponsored the event and the event in particular:
http://www.allhealth.org/briefing_detail.asp?bi=310
Note the concept is called reference pricing.Report
When you’re sick (or old), you need to be surrounded by people who act like they care about you.
Just having to fight all these battles above makes people sicker.
Sad.Report
Regarding Story 2, “Thanks to the miracle of modern medicine, my best friend has been able to live with a potentially debilitating disease relatively unscathed.”
Isn’t it also true that thanks to the ridiculously convoluted and inhumane system of health insurance, your friend had to live for many years scared of not finding her lifesaving treatment covered? I know people who have been in similar situations. “Strings were pulled” for your lucky friend. Others suffer in agony and the insurance companies do not care, ever.Report
We’ll get into this more in the next post, but keep in mind that it was a drug that was not approved for the treatment prescribed.
It isn’t that insurance companies don’t care, it’s that they only cover a certain number of defined treatments. A huge part of those defined treatments is that they have to have been proven to be effective treatments.
A surprising umber of people, for example, get upset when insurers decline to pay for homeopathic or Reiki treatments. I myself have seen people push hard to get acupuncture as a cancer treatment and magnets lined in their clothing as preventative medicine paid for because they believed those things would work, despite there being no scientific basis to back up those beliefs.Report
I understand that. I also understand that, as far as “experimental” treatments go, there are the studies showing some basis to try the treatment out and see if it works.
If the treatment has been shown to not work, does not work, is proven to be no better than random chance like homeopathic or Reiki, by all means disallow. If someone is not responding to the “usual” treatments, and there is an experimental treatment with some form of potential, it shouldn’t be up to some bean counter to say “sorry, you just have to live in agony because you didn’t Know The Right People To Pull The Right Strings For You.”Report
It’s not a “bean counter” making the decision not to approve treatment, it’s part of the insurance contract that you don’t pay for treatments that have not bee approved or (in the case of this MS drug) even tested yet.
A “bean counter” didn’t keep my friend from having treatment. A “bean counter” was who, year after year, went through the chain of command to literally have the insurance contract broken in order that she could get treatment.
I get that you have a story about insurance companies that works for you, but it isn’t very accurate.Report
Tod,
I’ve had insurance companies refuse to approve verified treatments,
that our doctor assured them were medically necessary to prevent
inevitable hospitalization.Report
I would obviously need more detail than that, but insurance companies are not actually allowed to do this.
They may reject a treatment that is not covered in the policy, and they may reject a treatment where the doctor’s recommendation goes widely against current medical consensus. But they can’t reject a doctor recommended treatment just because they don’t want to flip the bill.
Nor, really, would they want to. Partly because hospitalization is incredibly expensive, and partly because were a patient to die or suffer long-term ill effects due to the rejection of a prescribed treatment covered by the insurance contract they would be financially liable for substantial amounts of money.Report
Tod,
not having looked at the contract, I couldn’t say whether or not it was actually covered.
Their policy was that the medicine was overprescribed, so they wouldn’t approve it, even with a doctor’s note saying that alternative treatments were unsuccessful.Report
Haven’t had time to read all the comments (actually only read New Dealer’s at the top). Wanted to add my own friend’s stories (he’s an emergency room physician) but instead he just gave me this link. He has told me multiple similar stories, many which predate HIPPAA regulations but he’s a bit concerned about “something” getting back to him.
Kudo’s on your OP Tod, wish I had more time to spend here.Report
Haven’t had time to read all the comments (actually only read New Dealer’s at the top). Wanted to add my own friend’s stories (he’s an emergency room physician) but instead he just gave me this link. He has told me multiple similar stories, many which predate HIPPAA regulations but he’s a bit concerned about “something” getting back to him.
Kudo’s on your OP Tod, wish I had more time to spend here.Report
“wish I had more time to spend here.”
Me too, ward! Miss you, dude.Report
And thanks for the link.Report