Why our Healthcare is so Expensive

[Jaime L]

The Atlantic had an absolutely scathing excoriation of all the ways our Healthcare system fails us. It's a nuanced step by step explanation of the opaqueness built into the supposedly "Free Market" system we have now. It's absurd to prop this system up (as it seems the Republicans want to do), but just papering over it, patching it up as the Democratic led congress seems likely to do (and Obama likely to agree with) is no true fix at all. Really reflects the concerns I have that this "reform" we're going to get in one form or another will miss the point completely. Judging by kind of discourse this country is engaging in it seems to be an inevitability. Most importantly, it covers why even if of our Liberal dreams come true and the unlikely happens and a public insurance option is included in this bill...why it won't be close to enough. Why it's only fixing one aspect of the problem...how we're insured...but it doesn't truly get to the root of why the Health Care Market remains broken and overcharges us for everything we get, whether it's paid by us, by private insurance, by the government.

One of the most widely held pieces of conventional wisdom about health care is that new technology is relentlessly driving up costs. Yet over the past 20 years, I’ve bought several generations of microwave ovens, personal computers, DVD players, GPS devices, mobile phones, and flat-screen TVs. I bank mostly at ATMs, check out my own goods at self-serve supermarket scanners, and attend company meetings by video conference. Technology has transformed much of our daily lives, in almost all cases by adding quantity, speed, and quality while lowering costs. So why is health care different?

Well, for the most part, it isn’t. Whether it’s new drugs to control previously untreatable conditions, diagnostic equipment that enhances physician productivity, or minimally invasive techniques that speed patient recovery, technology-driven innovation has been transforming care at least as greatly as it has transformed the rest of our lives.

But most health-care technologies don’t exist in the same world as other technologies. Recall the MRI my wife needed a few years ago: $1,200 for 20 minutes’ use of a then 20-year-old technology, requiring a little electricity and a little labor from a single technician and a radiologist. Why was the price so high? Most MRIs in this country are reimbursed by insurance or Medicare, and operate in the limited-competition, nontransparent world of insurance pricing. I don’t even know the price of many of the diagnostic services I’ve needed over the years—usually I’ve just gone to whatever provider my physician recommended, without asking (my personal contribution to the moral-hazard economy).

By contrast, consider LASIK surgery. I still lack the (small amount of) courage required to get LASIK. But I’ve been considering it since it was introduced commercially in the 1990s. The surgery is seldom covered by insurance, and exists in the competitive economy typical of most other industries. So people who get LASIK surgery—or for that matter most cosmetic surgeries, dental procedures, or other mostly uninsured treatments—act like consumers. If you do an Internet search today, you can find LASIK procedures quoted as low as $499 per eye—a decline of roughly 80 percent since the procedure was introduced. You’ll also find sites where doctors advertise their own higher-priced surgeries (which more typically cost about $2,000 per eye) and warn against the dangers of discount LASIK. Many ads specify the quality of equipment being used and the performance record of the doctor, in addition to price. In other words, there’s been an active, competitive market for LASIK surgery of the same sort we’re used to seeing for most goods and services.

The history of LASIK fits well with the pattern of all capital-intensive services outside the health-insurance economy. If you’re one of the first ophthalmologists in your community to perform the procedure, you can charge a high price. But once you’ve acquired the machine, the actual cost of performing a single procedure (the marginal cost) is relatively low. So, as additional ophthalmologists in the neighborhood invest in LASIK equipment, the first provider can meet new competition by cutting price. In a fully competitive marketplace, the procedure’s price will tend toward that low marginal cost, and ophthalmologists looking to buy new machines will exert downward pressure on both equipment and procedure prices.

No business likes to compete solely on price, so most technology providers seek to add features and performance improvements to new generations of a machine—anything to keep their product from becoming a pure commodity. Their success depends on whether the consumers will pay enough for the new feature to justify its introduction. In most consumer industries, we can see this dynamic in action—observe how DVD players have moved in a few years from a high-priced luxury to a disposable commodity available at discount stores. DVD players have run out of new features for which customers will pay premium prices.

Perhaps MRIs have too. After a long run of high and stable prices, you can now find ads for discount MRIs. But because of the peculiar way we pay for health care, this downward price pressure on technology seems less vigorous. How well can insurance companies and government agencies judge the value of new features that tech suppliers introduce to keep prices up? Rather than blaming technology for rising costs, we must ask if moral hazard and a lack of discipline in national health-care spending allows health-care companies to avoid the forces that make nonmedical technology so competitive.

I don't think there's much new here (the opaqueness of our system, the perverse incentives for doctors, the overflowing medical administration complex, the broken economics of healthcare which are only exacerbated by government), but he lays out it all out in such, clear and logical fashion. The article is long, but think it's a must-read for anyone trying to understand why costs are increasing exponentially and why it'll never be fixed until we understand that in the end, we're all paying for this....and we need to start asking what we're paying for. Fuck I think this is must-read for Congress and Obama...though God knows they won't. It'll be the same way with a one payer system. Let's stop looking at the Co-pay and start understanding the absurdity of the bills that doctor and hospitals are foisting upon Insurance Companies and the Government itself (read: us). It's like we've fallen for our own ponzi scheme. Just absurd. I can't even do justice to all the ways this article illuminates how we're getting screwed. And I can't believe our "leaders" aren't talking about even 20% of this.

Just read it.

[The Space Pope]

I'm only about half way through, but so far it's pretty ridiculous. It's like he doesn't remember the rest of the world exists.

He's ragging on Health Care being payed for by insurance and seems to be calling that the problem.

And yet, the rest of the world funds health care with health insuance too.

[Caliban]

I'm only about half way through, but so far it's pretty ridiculous. It's like he doesn't remember the rest of the world exists.

He's ragging on Health Care being payed for by insurance and seems to be calling that the problem.

And yet, the rest of the world funds health care with health insuance too.

Hes singling out the US specifically for three reasons, his research was in the US system, hes writing it for a US audience, and because the US is in the middle of a huge health care reform debate.

[The Space Pope]

If Insurance is the problem with funding Health Care, apparently the US is the only country that hasn't figured out how to solve it.

[Caliban]

If Insurance is the problem with funding Health Care, apparently the US is the only country that hasn't figured out how to solve it.

You are making a huge assumption that other countries have "solved it".

[Relic]

thanks for the link

[The Space Pope]

You are making a huge assumption that other countries have "solved it".

Other 1st world countries pay far less then the US for health care (per capita and as a function of GDP)

Other 1st world countries fund it through health insurance, by one means or another.

Apparently one can run health insurance and still pay less.

Ergo, insurance is either not the problem or it's a solvable one.

PS -

Many reformers believe if we could only adopt a single-payer system, we could deliver health care more cheaply than we do today. The experience of other developed countries suggests that’s true: the government as single payer would have lower administrative costs than private insurers, as well as enormous market clout and the ability to bring down prices, although at the cost of explicitly rationing care.

"Rationing!!! OOGA BOOGAA!!!!!"

:lol:

[Caliban]

Other 1st world countries pay far less then the US for health care (per capita and as a function of GDP)

Other 1st world countries fund it through health insurance, by one means or another.

Apparently one can run health insurance and still pay less.

Ergo, insurance is either not the problem or it's a solvable one.

Can you demonstrate that other first world countries have gradually decreased spending on their health care systems reletive to their GDPs.

If so what was the solution?

[Caliban]

Its fun how politicized things have gotten in this country that we cant discuss a pretty well thought out and fairly objective article without somebody quickfinding "ration" in a 10 thousand word article or start jerking off on other countries health care systems.

'

What I like about the article is that it highlights the fact that our current health care business model would NEVER stand up to the traditional market based business to consumer environment.

[DanteGabriel]

Haven't had the chance to get to the article yet but part of the region that I hate the "rationing" bogeyman is that we have plenty of rationing in our current system already. Insurance companies make decisions to deny treatments and coverage constantly. This is not to say rationing does not exist in other nations. It's to say that it exists everywhere, but here too.

Also, I wonder if the "Healthers" that are so paranoid about government-run "death panels" realize that health insurance companies have their own death panels.

[Caliban]

Dante,

Either you didnt read the article, which is understandable because it was extremely wordy and writtten by somebody who is completely outside of the health care industry, or your reading comprehension is worse then your haircut. Whatever was said in the article was not an endorsement of the status quo.

[DanteGabriel]

Dante,

Either you didnt read the article, which is understandable because it was extremely wordy and writtten by somebody who is completely outside of the health care industry, or your reading comprehension is worse then your haircut. Whatever was said in the article was not an endorsement of the status quo.

I'm not even referring to the article, I was specifically just adding to something Triskele said. Which is why I quoted him, and not some section of the article. See how it works?

So look to your own reading comprehension. And my head is shaved.

[The Space Pope]

Its fun how politicized things have gotten in this country that we cant discuss a pretty well thought out and fairly objective article without somebody quickfinding "ration" in a 10 thousand word article or start jerking off on other countries health care systems.

What I like about the article is that it highlights the fact that our current health care business model would NEVER stand up to the traditional market based business to consumer environment.

While an interesting article, there's quite a few things in it that are, frankly, bullcrap. (At least, as far as I've read) Why does pointing this out offend you so much?

[The Space Pope]

The author also seems to have a significant Anti-Hospital bias. (Understandable given his father's death)

Although I found his comments on ER costs interesting:

Consider the oft-quoted “statistic†that emergency-room care is the most expensive form of treatment. Has anyone who believes this ever actually been to an emergency room? My sister is an emergency-medicine physician; unlike most other specialists, ER docs usually work on scheduled shifts and are paid fixed salaries that place them in the lower ranks of physician compensation. The doctors and other workers are hardly underemployed: typically, ERs are unbelievably crowded. They have access to the facilities and equipment of the entire hospital, but require very few dedicated resources of their own. They benefit from the group buying power of the entire institution. No expensive art decorates the walls, and the waiting rooms resemble train-station waiting areas. So what exactly makes an ER more expensive than other forms of treatment?

Perhaps it’s the accounting. Since charity care, which is often performed in the ER, is one justification for hospitals’ protected place in law and regulation, it’s in hospitals’ interest to shift costs from overhead and other parts of the hospital to the ER, so that the costs of charity care—the public service that hospitals are providing—will appear to be high. Hospitals certainly lose money on their ERs; after all, many of their customers pay nothing. But to argue that ERs are costly compared with other treatment options, hospitals need to claim expenses well beyond the marginal (or incremental) cost of serving ER patients.

It does ignore the Preventative Care part of the equation, but it's an interesting thought.

[The Space Pope]

Finished it. He seems to be proposing something closer to the Swiss system (which is a pretty good one) but the whole thing suffers due to his major, unyielding hard-on for "The Free Market" and it's many godly powers. Government regulation, on the other hand, is the boogeyman.

He seems to think transparency will result in lower prices for service, despite people in need of medical service not generally being in the position to "shop around". Nor are they generally qualified to know wtf the are talking about.

His proposition for people directly paying for routine care is also fairly stupid, as it hamstrings preventative care.

He's also incredibly over-optimistic about peoples ability or desire to save for medical care. That's setting your self up for a huge fucking problem.

[ztemhead]

anecdotal story, bearing in mind I haven't read the thread, but I thought it might be useful and on topic anyway. I'll catch up later.

the other day in the taxi I drove a woman on ACCESS (that's the AZ state medicaid program) 50 miles through the desert to her doctor's appointment for a routine ultrasound. Cost to the state, which is passed on to the fed, $139. Along the way we must have driven past a couple hundred other offices that also could have performed the procedure.

the whole thing is sales and marketing driven, at the expense of the taxpayers and often health of the patients.

[The Real Will]

He's ragging on Health Care being payed for by insurance and seems to be calling that the problem.

And yet, the rest of the world funds health care with health insuance too.

I haven't read the article yet, but this isn't quite true. Countries with large public hospital systems (like Australia and, I believe, the UK) are not reliant on health insurance to pay for their healthcare. Although private health insurance is often available to supplement the system.

Not that I think this would be a viable path for the US to pursue at this point, as they'd either need to build massive numbers of new hospitals, or the government would have to take control of hospitals already in existence (I can see that going over well with Rush).

Actually, I think that Obama and the HCR folks missed a trick here. Obama should have announced that his plan was simply to seize every hospital in the country, offer treatment their for free and pay for it through taxation. After the opponents finished having a screaming apoplexy, he could have allowed himself to be talked back to simply instituting public health insurance. Everyone would feel like a winner.

[sologdin]

if the "Healthers" that are so paranoid about government-run "death panels" realize that health insurance companies have their own death panels

the average birther/healther/deather/teabagger/militia-member/racist generally believes that an act by a private market participant is a priori a good thing, being free yet subject to the iron laws of bourgeois economics, and being rationally maximizing & self-interested yet contributing to the common good via the invisible hand because that's what selfishness does as a matter of course.

this hypothetical average BHDTMR also believes that an identical act by the government is evil, socialistic, fascistic, nihilistic, and for the exclusive benefit of special interests, such as the jews, the NAACP, and unlawful aliens who have no right, apparently, to be present in the united states, but manage somehow to draw greater benefits than natural born citizens, as distinguished from the identical private act, supra, because non-selfish actions for the public good actually create worse conditions than those subject to the attempted remedy and consequently pave the road to hell.

[Lyanna Stark]

People in the UK getting a bit put out that the NHS is slandered in the US health care debate

[mcbigski]

Yes JL, the root of the problem is that we think someone else is paying for it. Which is why making it government cheese still won't actually result in cost savings without additional benefit restrictions.

We ought to decouple health insurance from employee benefits. Give all citizens a health care voucher and let them choose their own plan or doctor. Obviously, there would need to be provisions initially for prior conditions and some sort of guaranteed renewable provisions. There'd be a whole lot of details to work out, but it would allow us to cover everyone and still keep the individual empowered.