May 19, 2004

A Health Care Weblog

Dr. Boyle does not like the health care market that he now faces, in which HMOs use their substantial local market power to drive down their costs by driving down the amount they pay doctors, nurses, and other service suppliers:

CodeBlueBlog: ...the HMO chimera we now face. Positioned as middlemen – with profits their sole motivation-- HMO’s are driving down reimbursements to the point where it is no longer economically possible for reputable physicians to... balance the books.

I don't like the current health care market either--although I would focus on HMOs' and insurance companies' incentives to avoid covering people who are going to get seriously, expensively sick.

So does Dr. Boyle want to replace the invisible hand of private HMOs telling how much they will pay by the strong hand of government regulation? Uh-uh:

CodeBlueBlog: New medications are a critical component of health care, yet patients in many European Union countries have to wait years before they become available. In most European countries, pharmaceutical companies must not only get approval from the national departments of health, but must also obtain pricing and reimbursement approvals before they can introduce a new drug into the market. Because this can result in delays averaging 18 months, many breakthrough medications are simply unavailable for extended periods of time. A study conducted by Europe Economics revealed that, from 1995 to 1997, more than half of the new medications surveyed were unavailable through pharmacies in Portugal, Italy, and Greece. More than one-third were unavailable in Belgium, France, and the Netherlands. The delays serve an economic purpose: Because the new products are more expensive than the old ones, by delaying access to the new drugs, the governments save money...

He likes how government regulation works on the ground even less than he likes HMOs. But you have to pick one or the other. His solution? Blame Bill Clinton. Whatever the matter, it's all Clinton's fault:

CodeBlueBlog: President Clinton’s overblown health care crisis and ill-conceived reform project of the early ‘90’s catalyzed the conversion of fee-based private health insurance into the HMO chimera we now face...

What marvelous powers the man has! Through nothing but pure hypnosis--without passing a bill--while getting his head handed to him on Capitol Hill--Bill Clinton can somehow "catalyze" private firms to drop benevolent fee-for-service plans from the health benefit options and replace them with nasty HMOs! If not for this evil man--Bill Clinton--in what happy and good shape our health-care financing system would be!

Dr. Boyle is a man of strong views and good will (except toward foreigners, illegal aliens, migrant workers, and other freeloaders) trying to make sense of the mess that is our current health care financing system. The fundamental dilemmas are that we want (a) sick people to be treated, (b) rapid technological progress in health care, (c) to spend an increasing share--15% and rising--of our incomes on health care (for if you don't have your health, what use is anything else?), (d) an efficient health care system--with little waste, fraud, and abuse--in a setting in which patients (e) are uninformed and (f) have an enormous desire to spare no expense once they have learned that they are the ones who are sick. Not even in the New Jerusalem will the health care financing system be capable of supporting all these goals. And we need to decide which of these goals are the most important.

So read the weblog--not for his solutions but for his sense of where the problems are.

Posted by DeLong at May 19, 2004 07:43 PM | TrackBack | | Other weblogs commenting on this post
Comments

Wealthiest country on the planet has the most retarded health system on the planet.

Go figure.

Posted by: Boosh on May 19, 2004 07:47 PM

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Basically the docs don't want to share the loot with the lawyers and the insurance guys.

Posted by: Eli Rabett on May 19, 2004 07:59 PM

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I can't speak for Europe, but here in Australia we have a pharmaceutical subsidies scheme, for which approval can indeed take some time (mostly while the government tries to get a 'bulk purchase' marginal cost price to save taxpayer money). But it doesn't usually result in non-availability of new medicines - if they're not approved for the subsidies the pharmaceutical companies are still free to sell them at whatever price the market will bear (subject to normal approval for safety & efficacy), and if they're clearly better doctors will prescribe them anyway.

If some new medicines are unavailable because they cannot compete with the older, subsidised medicines is it perhaps because they are not really much better?

Posted by: derrida derider on May 19, 2004 08:25 PM

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What do people think of this proposal? The basic idea is that people enter a long term insurance health insurance contract and then if they change insurance companies, there must be a corresponding transfer of funds equal to the change in expected costs as a function of changes in their health status while with the previous insurer. Main weak point of article is that Cochrane suggests this can be accomplished by removal of certain state insurance regulations, and would operate well in unregulated environment. But that is in the hand-waving discussion part of the paper. I find the idea intriguing.

Time-Consistent Health Insurance
John H. Cochrane
The Journal of Political Economy, Vol. 103, No. 3. (Jun., 1995), pp. 445-473.
Stable URL: http://links.jstor.org/sici?sici=0022-3808%28199506%29103%3A3%3C445%3ATHI%3E2.0.CO%3B2-6
Abstract
Currently available health insurance contracts often fail to insure long-term illnesses: sick people can suffer large increases in premiums or denial of coverage. I describe insurance contracts that solve this problem. Their key feature is a severance payment. A person who is diagnosed with a long-term illness and whose premiums are increased receives a lump sum equal to the increased present value of premiums. This lump sum allows him or her to pay the higher premiums required by any insurer. People are not tied to a particular insurer or a group, and the improvement is free: insurance companies can operate at zero economic profits, and consumers can pay exactly the same premium they do with standard contracts.

Posted by: jml on May 19, 2004 09:40 PM

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Two plots relating national expenditures to expectation of life at birth:

1. Percent of GDP spent on healthcare:
http://anonymous.coward.free.fr/scpo/pct-gdp.png

2. Per capita expenditure in US dollars on healthcare:
http://anonymous.coward.free.fr/scpo/exp-percap.png

Posted by: rc on May 19, 2004 10:08 PM

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So health care is an entitlement program for which there are no problems with incentive effects - nothing about that in BDL's (a) through (f) of desirable attributes....

Posted by: Joe Mealyus on May 19, 2004 10:27 PM

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The host's list was not a list of desirable attributes, it was a portrait of unresolved conflicts that lead to a big dilemma.

For example, the desire for

(d) an efficient health care system--with little waste, fraud, and abuse

conflicts with (e) and (f).

But does the host suggest that we *want*

(c) to spend an increasing share--15% and rising--of our incomes on health care (for if you don't have your health, what use is anything else?)

Isn't it more true that we just kind of end up spending that much, get pretty crappy aggregate population health statistics for a developed country with all that money, and we don't really understand why?

In any case, I think that the argument over whether health care is an entitlement in the US is over. We have made a social decision (through developments health profession ethics, law and regulation) that if you are sick enough and can be delivered to the door of the ER, you get treated regardless of whether you can pay. There are some exceptions, but I think that is true for the most common serious conditions.

So we have a de facto entitlement, some aspects of which are quite inefficient. So, let us move on to a more constructive stance.

Posted by: jml on May 19, 2004 11:05 PM

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From this recommended blog: Because people know a good thing when they see it, smart consumers who are pinched for cash drop their health insurance because now they are covered. Covered for cuts and scrapes, for pregnancy, for cancer -- you name it. It can be a $15.00 problem or a million dollar problem. In addition, foreigners, illegal aliens and migrant workers pass the word around their community and in their home countries: free care in the U.S. at the hospitals.

Here comes low-flying pig, er, weflare queen on her Caddilac. Why did you recommend that asshole, Brad? Temporary insanity?

Posted by: bubba on May 19, 2004 11:46 PM

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Free care only if you are in such bad shape medical ethics and/or regulations say you cannot be turned away. For many things, but not for all. Is that a good thing that people know when they see it?

Posted by: jml on May 20, 2004 12:09 AM

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If you want to get a feel for the broad spectrum of views the medical blogging community has, try http://www.medlogs.com/ .

It's an aggregator of some huge number of medical/health news sources. I scan it every day.

Posted by: Linkmeister on May 20, 2004 12:16 AM

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Some Points:

I was there in the early '90's when the market did what markets do, i.e., jumped ahead of Hillary (whose intentions were outlined early in the presidency) and anticipated drastic reimbursement reductions, or worse. This was exacerbated by the word out of Washington (and Jackson Hole -- lead by Uwe Rhinehardt) that "managed competition" effected through HMO's would be the predominant reimbursement strategy (read: mandated). I cannot accurately recount for you the panic created in the health care community at that time by the asseverations coming daily from Washington declaring a “health care crisis” that would require a total overhaul of the health are system.

If you look back you will see that beginning with the Clinton crisis declaration, HMO enrollment expanded dramatically, and private insurers began cycling their prices higher and stratifying their policy products to make HMO-like options the most appealing financially. This phenomenon is verified by the meteoric rise in the market capitalizations of HMO’s during this period. Once begun, this process continued, as it would, until its maximum economic benefit began to be eroded by competition and negative market and provider/patient feedback. Notice there are select markets allowed to operate openly, in some ways, within the current health care system; but, each market has its own set of rules which is one reason why the health care market, as a whole, is so inefficient.

I strongly object to the unfair, contextually predatory characterization of me as having ill will towards “freeloaders” (foreigners, illegal aliens, migrant workers et al) of which I am accused. Here is what I wrote in my CodeBlueBlog concerning the ER waiting room:

"If you walk through the waiting room,where patients sit for 5 and 6 hours to see a doctor for these mundane ailments, you’ll see a population predominantly composed of the young, the poor, immigrants, illegal aliens, migrant workers, and a smattering of the middle class.

Although this population is disparate, it has a common bond drawing it to the ER at all hours, for any physical complaint: no health care insurance."

My adumbration of the typical emergency room population was based on two data sets. First, the CBO report of 1/24/2004 that characterizes the uninsured population as: 39% under the age of 24; 51% as other than white, non-Hispanic; 91% without a college degree; and, by the way, 86% with health status ranging from good to excellent.

Second, my own 24/7/365 experience and observations of over 15 years servicing a community hospital ER that logs 100,000 visits a year. My assessment that migrant workers and illegal aliens are also heavily weighted in the ER population is certainly skewed by my geographical location in South Florida; however, the CBO and all other federal reporting groups on health care admit freely that they have no way to accurately gauge the number of these visits themselves, due to the vagaries of locating and studying this transient and sometimes elusive population.

One of my Blog objectives is to illustrate where health care dollars go. The Emergency Medical Treatment and Labor Act (EMTLA) of 1986 that obligates emergency rooms to assess and treat every person who walks through the doors is an example of the unanticipated consequences principle, and, without passing judgment on the populations affected, it needs to be addressed in any serious discussion of health care spending.

In my practice I, as with most other physicians I know, have yearly written off 40% of anticipated collections (without a tax deduction) for those who cannot – for whatever reason – afford the bill. This will surely evoke the perfunctory snide replies about “rich doctors,” but it is a fact, and it represents only a part of the countless hours every good physician I know spends in labor, efforts, and liability risk taking care of all comers.

Responding ahead to those who will snipe, let me say that if you look at the network of federal and state regulations governing physicians and the manner of reimbursement (fixed and regulated basically by the federal government’s Medicare scale), we are de facto public utilities. With that in mind, try asking Adelphia or ConEd to write off the portion of your bill that you cannot afford to pay. You’ll soon be using a flashlight to watch history unfold through your living room window.

Finally, as a new Blogger, still searching for the right way to connect, elucidate and reveal, in a style and form that will be heard yet understood, I am honored to be read and mentioned (and to have survived!) on this site by someone as astute and important as Professor DeLong. Thanks.

Tom Boyle

Posted by: Thomas P. Boyle on May 20, 2004 04:37 AM

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Another reason why breakthrough drugs are less easily obtained in Europe -- more ethical research requirements. It has become more and more common for European (and non-European) ministries of health to deny approval for research protocols that employ an unapproved drug versus placebo, the US FDA standard. Simply put -- it is not enough for a drug company to prove that their new medicine is better than placebo, i.e., better than NOTHING (what a concept). The company must actually prove that their new medicine is better than any of the other drugs currently available for treatment of the same medical condition.

Posted by: The Goddess on May 20, 2004 05:54 AM

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Excellent post rc.

We should learn from Costa Rica.

Posted by: bakho on May 20, 2004 06:28 AM

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It's really hard to compare European countries with the U.S. because, among other things -- European countries have more homogenous populations, by and large, and certainly, their consensus on health care systems predates the more recent influx of immigrant populations, these being modest by our standards in any event. Consensus on the availability of health care is easier to achieve if large numbers of people haven't convinced themselves that lack of access occurs mostly as the result of morally culpable traits, such as laziness, or to socially undesirable populations about whome the majority cares very little to begin with.

But in reality, almost all of us are just one benign employer away from being there, indigent and hopeless in the face of a calamitous medical event.

Dr. Boyle, jml, others, as the daughter of someone who was denied access to needed care in an emergency room I can tell you that our "system" doesn't even reliably provide that kind of safety net, in spite of the no doubt many really well-intentioned doctors who would like it to, and who would like to think that it does. It doesn't. "Fortunately" my father's condition was hopeless (not that the ER personnel had any idea -- indeed, they made sure that they couldn't know). No harm no foul?

I have lots of ideas about health care the first being a really modest proposal: That new drugs be subejcted to comparative testing to demonstrate their efficacy, not to say cost-efficacy, versus old drugs.

But more radically, our goal as a society, I believe, should be the long-term decoupling of insurance from employment, and a redefinition of what we mean by insurance.

The costs of daily upkeep, of living, should not "load up" health insurance policies. As a feminist from the time I was 10, I nonetheless believe it to be insane that contraception should be "required" coverage. That's just one example, there are others.

Second, at some level, if we are going to provide health care through insurance, then we need to require people to buy it. One way or another, and to provide economic assistance to those who truly can't afford it.

We can provide high and low options, etc., such that those who want lots of choice and extras can pay more, while making sure everyone can get coverage when they land in the ER with a heart attack.

It's too big and it's too complicated to get at it from the top down, but it won't improve by tinkering. Oh yes, by and large, I represent health insurers (and providers) and I see the legal/business side of this from the inside out every day.

I am an agnostic. Every side has its share of greed and good intentions, but at least so far, all sides are more interested in pointing fingers at the other than really trying to do anything about it.

Cheers.

Posted by: Barbara on May 20, 2004 06:34 AM

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Thanks to Tom Boyle for providing some facts to contemplate. Not enough people realize that our doctors treat many people with grave ills for a fee that doesn't even pay their phone bill. The time provided to the patients is really a free treatment by the doctor.

This load, in fact, is concentrated on providers in large cities where there ARE emergency room facilities. In much of rural America there are no ERs or doctors who accept Medicare patients.

The whole discussion, though, seems a little silly, considering the number of nations like us who have socialized care.

Solely for the case of argument I might grant that Canada's care is a Model T variety that could be better. Now, search your memory for an example of a country that politely refused the automobile on the grounds they were looking for something better, and willing to wait to get it.

The interminable discussion of the marginal effects of demand pricing is about the same as an endless discussion about the shape of seats in a lifeboat you're PLANNING to build.

The simple fact is that only a NUT would go to a doctor if they didn't think they needed it. A fraction of the amount spent treating dull-blown illness would make clinics as common as firestations, and putting them both in the same building might not be a bad idea.

And in the sense of actually doing it, Dr. Boyle has obviously been there.

Posted by: serial catowner on May 20, 2004 06:59 AM

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It was enscribed above:

In any case, I think that the argument over whether health care is an entitlement in the US is over. We have made a social decision (through developments health profession ethics, law and regulation) that if you are sick enough and can be delivered to the door of the ER, you get treated regardless of whether you can pay.

But part of the political problem it that we are ambivalent. Sorry for the vague references, but Uwe Rhinehardt wrote somewhere that America has decided to treat health care over a minimum (what?) as a consumption good like any other. And I remember reading the output of some right-wing think tank saying that the result of the debate over the Clinton plan was that health care is not a human right, but an incentive to work hard. And the post refers to "sick enough."

Part of the problem is that some people oppose a government-run system simply because it is government run, irrespective of such considerations as efficiency. Some of this opposition is self-interested (especially insurance companies, who fear being dealt out of the game) but some isn't.

I think that awareness of this view was a motivating factor in the Clinton Administration decision to not to propose something like single-payer, a decision which now looks like a mistake; perhaps our host can confirm this or not. Of course, certain opposition from insurance companies also played a part.

So, I think we can't assume consensus on goals and consider means; for some, the means are the goals.

Posted by: Jonathan Goldberg on May 20, 2004 07:00 AM

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I just went over to CodeBlueBlog. The top post at the moment describes Hillary Clinton thus:

... Hillary is the little kid in the back of the class with a finger up her nose.

He bases this in part on a long quote from our host!? Via National Review Online, no less.

Quite disappionting. All heat, no light in that post.

Posted by: Jonathan Goldberg on May 20, 2004 07:14 AM

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Goddess:
> The company must actually prove that their new
>medicine is better than any of the other drugs
>currently available for treatment of the same
>medical condition.

This isn't a good thing. Or would you support limits which prevent car companies from releasing new models of car if they aren't better than all existing cars? Even if they cost less? Better according to who? Consumer Reports rated the Passat and the Civic best family cars- should Mazda have been banned from releasing the 6, Toyota forced to withdraw the Camry, Ford the Focus, unless they could "beat" the Passat? Sounds like you think monopoly is the best way to go.

"Better" or "worse" in the drug world is rather individual, anyway - like cars. Claritin isn't "better" or "worse" or "the same" in effectiveness compared to Allegra. Claritin works better for some people, Allegra works better for some people, they both work well for a few people, and they are both completely ineffective for some people. This is true for anti-histamines, blood pressure medicines, anticoagulants - all sorts of medicines. Some people have side effects from drug one, but none from drug two. Having alternatives, even ones which are, over large patient groups, inferior, allows us to have options when the "better" medicine doesn't work well with the minority's body chemistries. Having large varieties of antiseptics, antifungals, and antibiotics available retards the growth of resistant strains, and presents alternatives when they do develop. Just beating zero makes the product potentially useful in the marketplace. Medicine is more trial and error than is normally acknowledged.

Posted by: rvman on May 20, 2004 08:37 AM

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rvman,

In a way, you have a point; there are definitely classes of medication where patients' responses are very idiosyncratic, so having a large armamentarium is useful.

However, there is also lots of evidence that oftentimes physicians prescribe newer drugs that are *not* as effective in their particular patient than older drugs.

Posted by: liberal on May 20, 2004 09:53 AM

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rvman, it's fine to have new drugs, but such drugs should come with some kind of indication has to how they compare to old drugs. As liberal says, new drugs can be two or three times as expensive as an old drug that is really just as good. It is THIS pattern that launches truly unnecessary expenditures. The goal isn't to keep the newer drug from the market, but to subject it to market forces (i.e., it will be far closer in price to the old drug). The real problem here is the absence of a prudent purchaser with sufficient information. This is a breakdown in market forces and I think it's appropriate to fix it either by letting insurers make the market work or through regulation. One way or another it should not be left to manufacturers to exploit this gap by gouging consumers or payers.

Posted by: Barbara on May 20, 2004 12:07 PM

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Barbara,
re your comment below:

Sorry that happened to your dad. But I was not saying that the current system of health entitlement was well designed, or fair, or efficient, or much good at all. I was just pointing out that it exists and that it costs serious money, and that throwing the scare phrase "ANOTHER entitlement"
around sets up a false dichotomy. Let the anti-entitlement advocates try to role back professional ethical standards, state and federal hospital regulations, and let us see how far they get. The won't get an inch, unless they go through the back door and sneak something on society. So it is a fact that has to be faced.

In the health care market where there are pervasive info and incentive problems, market failures as in health insurance, regulation and the need for social decision making in regards to minimum standards and protocols for drug development have to be suqarely faced. We do that in other industries, why not health care? The "for-profit market forces" revolution in health policy that started about 25 years ago has not turned out as planned, has it? Will anyone claim that it has?

"Dr. Boyle, jml, others, as the daughter of someone who was denied access to needed care in an emergency room I can tell you that our "system" doesn't even reliably provide that kind of safety net, in spite of the no doubt many really well-intentioned doctors who would like it to, and who would like to think that it does. It doesn't. "Fortunately" my father's condition was hopeless (not that the ER personnel had any idea -- indeed, they made sure that they couldn't know). No harm no foul?"

Posted by: jml on May 20, 2004 12:58 PM

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That doctors have neither the incentive nor the responsibility to keep up with best practices in their field is not the fault of the pharmas - their mandate is to provide treatment options. AMA is falling down on their job - they should be providing comparative data to their people.

FDA's job in all this is to keep objectively unsafe medicine off the market, not to regulate quality, just like the NHTSA's is to keep unsafe cars off the road, not demand that all cars match up to Mercedes or Lexus.

Posted by: rvman on May 21, 2004 10:42 AM

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rvman wrote, "That doctors have neither the incentive nor the responsibility to keep up with best practices in their field is not the fault of the pharmas - their mandate is to provide treatment options. AMA is falling down on their job - they should be providing comparative data to their people."

The AMA's role is, unfortunately, to ensure doctors maximize their income. That goal is often at odds with the goal of providing good health care at reasonable cost.

Posted by: liberal on May 22, 2004 08:14 AM

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> As liberal says, new drugs can be two or three times as expensive as an old drug that is really just as good.

Quite so, and this is a product of a US pharmaceuticals industry that

a) has benefitted from the systematic deregulation of DTC marketing (i.e. convincing people to 'ask their doctors' about treatments most don't need, said doctors having been loosened up with lots of free meals, free samples and free tchochkes);

b) uses 'me too' copycat drugs and 'tweaked' versions to retain patents, and thus the large margins on supposedly 'better' brand-name medicines.

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