Sunday, June 14, 2009

Show Me The Money

Quote of the week from Tyler Cowan:
The demand for universal coverage sounds like a moral imperative to “take care of everybody,” but in reality it would make only a marginal difference when it comes to the overall health of the American population. The sober reality is that universal coverage is another way to spend money, which may or may not be a good idea.

The most likely possibility is that the government will spend more on health care today, promise to realize savings tomorrow and never succeed in lowering costs. It is rare that governments successfully cut costs by first spending more money.
No where is this better seen than in the case example of "prevention" being promoted in the most recent Time Magazine article, "This Doctor Does Not Want to See You." (Recall that Cleveland Clinic is one of those magic centers that provides Medicare care at less than the national norm):
The Cleveland Clinic and its 10 sister hospitals employ 40,000 people in Ohio, Florida, Canada and the United Arab Emirates. Cosgrove's idea is to turn those campuses into living laboratories, where healthy behavior is rewarded (with cash incentives if necessary) and people start thinking about health as an investment and a responsibility. In a demonstration of this commitment, Cosgrove even created new executive positions, including chief wellness officer, chief empathy officer (now changed to chief experience officer) and arts-program curator. These are not titles you're likely to find in any other organization.
And for good reason. "Chief Wellness Officer?" "Chief Empathy Experience Officer?" "Arts-program Curator?" Who are they kidding? Are these positions going to save money or merely blow through precious resources in the name of a political self-service?

When the government can show me they can balance the budget for our existing Medicare or Medicaid programs (the larger of which still only pays eighty percent of health care costs, by the way), then I'll start believing that they might be capable of handling the much ballyhooed $1.5 trillion dollar reform package soon-to-be presented before Congress responsibly.



Andrew_M_Garland said...

Lack of Competition in Health Care Insurance

It is the lack of competition in healthcare insurance and government intervention that is increasing the cost of health care and the cost of insuring for that care. Ironically, this drives the call for further government control.

According to David C. Rose, Professor of Economics at the University of Missouri-St. Louis [edited excerpt]:

Medicare is a good deal partly because the government drives a hard bargain with health care providers by offering artificially low payments. In a competitive market of many insurers, no one insurer could do this.

Artificially low payments don't cover the full cost of procedures, so health care providers shift costs to everyone else. In other words, the lack of competition in today's market leads to higher insurance costs for people who aren't old enough to qualify for Medicare. Extending Medicare-like insurance to everyone won't work, because no one will remain to pay the shifted costs.

[ The same applies to emergency room (hospital emergency department) prices. The law EMTALA forces ER's to treat all patients equally regardless of ability to pay. They must shift these costs onto those who can pay. This produces the amazing $10 ER aspirin. -ag ]

In a competitive market, driving such hard bargains is impossible, so prices reflect actual costs. The Obama administration plan will give us the worst of both worlds.

-- Artificially low premiums will drive most private insurance out of business.
-- There will be no place to shift costs.
-- Shortly, we will have no reduction in cost from cost shifting.
-- We will have substantially less competition.
-- Less competition will result in higher actual costs.

This has been the experience in countries with nationalized health care. Many have an even worse looming entitlement problem than the United States.

dweiss said...

Cost reductions will be key, of course. Emphasizing preventative medicine is exquisitely important, bbut so is theneed for good, eccurate, risk stratification methods. Just as not everybody needs to, for example, watch their sodium intake, so, too, not everyone who meets some of today's criteria for certain intervenions necessarily needs them. Not everyone who has "high X" or "low Y" needs "drug A" or "surgery/device B".

Sudden death risk startification is a clear (and expensive!)example: not everyone meeting SCD-HeFT/MADIT II criteria needs an ICD and most people who have sudden death would not havemet the criteria anyway. The cost in unneeded devices and lost lives and productivity is staggering.

Companies/academic institutions with novel accurate risk stratification technologies need to be nurtured and supported.