Why health care is so expensive

[tvashtarkatena]

A very good article on the most expensive health care in the country and what it can teach us about health care costs:

 

Article

 

Most of the ongoing debates, govt v private, single payer v insurance, seem to be complete bullshit.

[kevbone]

It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but it’s a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. “Lonesome Dove” was set around here.

 

McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.

 

The explosive trend in American medical costs seems to have occurred here in an especially intense form. Our country’s health care is by far the most expensive in the world. In Washington, the aim of health-care reform is not just to extend medical coverage to everybody but also to bring costs under control. Spending on doctors, hospitals, drugs, and the like now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. It’s also devouring our government. “The greatest threat to America’s fiscal health is not Social Security,” President Barack Obama said in a March speech at the White House. “It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.”

 

The question we’re now frantically grappling with is how this came to be, and what can be done about it. McAllen, Texas, the most expensive town in the most expensive country for health care in the world, seemed a good place to look for some answers.

 

From the moment I arrived, I asked almost everyone I encountered about McAllen’s health costs—a businessman I met at the five-gate McAllen-Miller International Airport, the desk clerks at the Embassy Suites Hotel, a police-academy cadet at McDonald’s. Most weren’t surprised to hear that McAllen was an outlier. “Just look around,” the cadet said. “People are not healthy here.” McAllen, with its high poverty rate, has an incidence of heavy drinking sixty per cent higher than the national average. And the Tex-Mex diet has contributed to a thirty-eight-per-cent obesity rate.

 

One day, I went on rounds with Lester Dyke, a weather-beaten, ranch-owning fifty-three-year-old cardiac surgeon who grew up in Austin, did his surgical training with the Army all over the country, and settled into practice in Hidalgo County. He has not lacked for business: in the past twenty years, he has done some eight thousand heart operations, which exhausts me just thinking about it. I walked around with him as he checked in on ten or so of his patients who were recuperating at the three hospitals where he operates. It was easy to see what had landed them under his knife. They were nearly all obese or diabetic or both. Many had a family history of heart disease. Few were taking preventive measures, such as cholesterol-lowering drugs, which, studies indicate, would have obviated surgery for up to half of them.

 

 

from the issuecartoon banke-mail thisYet public-health statistics show that cardiovascular-disease rates in the county are actually lower than average, probably because its smoking rates are quite low. Rates of asthma, H.I.V., infant mortality, cancer, and injury are lower, too. El Paso County, eight hundred miles up the border, has essentially the same demographics. Both counties have a population of roughly seven hundred thousand, similar public-health statistics, and similar percentages of non-English speakers, illegal immigrants, and the unemployed. Yet in 2006 Medicare expenditures (our best approximation of over-all spending patterns) in El Paso were $7,504 per enrollee—half as much as in McAllen. An unhealthy population couldn’t possibly be the reason that McAllen’s health-care costs are so high. (Or the reason that America’s are. We may be more obese than any other industrialized nation, but we have among the lowest rates of smoking and alcoholism, and we are in the middle of the range for cardiovascular disease and diabetes.)

 

Was the explanation, then, that McAllen was providing unusually good health care? I took a walk through Doctors Hospital at Renaissance, in Edinburg, one of the towns in the McAllen metropolitan area, with Robert Alleyn, a Houston-trained general surgeon who had grown up here and returned home to practice. The hospital campus sprawled across two city blocks, with a series of three- and four-story stucco buildings separated by golfing-green lawns and black asphalt parking lots. He pointed out the sights—the cancer center is over here, the heart center is over there, now we’re coming to the imaging center. We went inside the surgery building. It was sleek and modern, with recessed lighting, classical music piped into the waiting areas, and nurses moving from patient to patient behind rolling black computer pods. We changed into scrubs and Alleyn took me through the sixteen operating rooms to show me the laparoscopy suite, with its flat-screen video monitors, the hybrid operating room with built-in imaging equipment, the surgical robot for minimally invasive robotic surgery.

 

I was impressed. The place had virtually all the technology that you’d find at Harvard and Stanford and the Mayo Clinic, and, as I walked through that hospital on a dusty road in South Texas, this struck me as a remarkable thing. Rich towns get the new school buildings, fire trucks, and roads, not to mention the better teachers and police officers and civil engineers. Poor towns don’t. But that rule doesn’t hold for health care.

 

[tvashtarkatena]

Please don't cut and post the next 7 pages.

 

The link works just fine.

 

 

[Pete_H]

Interesting article. Thanks.

[j_b]

Well written article with lots of salient points but the conclusions are garbled, which perhaps explains your take on it. The situation described is a thorough indictment of for profit healthcare when doctors try first to max out the money they can make out of their business (I can already hear the “what’s wrong with maximizing profit”). In many ways, healthcare has become not very different than any other sector of the “free market” economy where every service/goods provider is expected to place making as much money as possible at the expense of everything else, including if it means providing services that aren't needed. Everything in this piece apart form the declared lesson to be learned is argumentation for taking healthcare out of the profit making loop.

[tvashtarkatena]

For some, everything is garbled. The author's conclusions were crystal clear to me, and, I'd wager, most other readers as well.

Edited August 11, 2009 by tvashtarkatena

[mattp]

Yes, the author's conclusions were clear to me as well. However, I don't think this article supports the argument that the entire debate is false.

 

I believe that the medical profession's "entrepreneurial spirit" is an issue just as that same dynamic is a blight in my own profession (the practice of law).

 

But I ALSO believe the private health insurance companies are organized criminals just as our friend Prole has argued here. They have taken my premiums for my entire life and when I need actual health services they don't want to pay. And I'm not talking about cosmetic surgery. I'm talking about treatment that makees the difference between my being able to walk and stand and work for a living and my not being able to do so. And while I'm sure that at least a couple of posters here will argue that the current anti-Obama-care outrage is based on genuine belief, I think there is no doubt that insurance companies are major players in the anti-reform effort. That is no surprise. They make a lot of money with the system as it is now. Unless "healthcare reform" means government mandates with subsidies and no effective standards of care imposed but maybe actual limits to how much they have to pay out, health insurance companies don't want it.

[Kimmo]

i think his conclusions were clear, but it hardly makes the argument regarding private vs public moot.

 

here's a fun blurb about taiwan's switch to a public model:

 

Taiwan changed its health care system in 1995 to a National Health Insurance model similar to the US Medicare system for seniors. As a result, the 40% of Taiwanese people who had previously been uninsured are now covered.[5] It is said to deliver universal coverage with free choice of doctors and hospitals and no waiting lists. Polls in 2005 are reported to have shown that 72.5% of Taiwanese are happy with the system, and when they are unhappy, it's with the cost of premiums (equivalent to less than US$20 a month).[6]

 

that 72% satisfaction rate seems to mirror polls from most countries with universal care. what's the US rate: 27% or so?

Edited August 12, 2009 by Kimmo

[tvashtarkatena]

Public v private is an important issue, sure. What hit home about the article is that it is not THE most important factor in skyrocketing costs, and that the enterpreneurial trend in medicine is practically non-existent in the national debate.

 

Which makes it kind of a lot of bullshit, in my view.

[prole]

Public v private is an important issue, sure. What hit home about the article is that it is not THE most important factor in skyrocketing costs, and that the enterpreneurial trend in medicine is practically non-existent in the national debate.

 

Which makes it kind of a lot of bullshit, in my view.

 

I am astounded that a critique of the capitalist market model for health care, for whatever reason described here as the "entrepreneurial trend", is not part of the national debate.

[StevenSeagal]

Whatever the system used, I think one key to longterm cost reduction is increased access to (i.e. Cheaper) preventative care that will help people live healthier lives in their older years. High deductables and spendy office visits discourage people from regular checkups for seemingly minor problems. Moreover, often, the best health insurance that someone with a $30K salary can reasonably afford yields a 5-10k out of pocket for something as simple as a broken leg. Given bad luck and a second accident in the ensuing calendar year, that person's life savings are gone- despite having insurance.

 

The debate certainly needs to focus on reduction of costs and less about which cabal should be monopolizing the system (gov't or insurance). What that involves is at a minimum some form of insurance reform and yes, some level of regulation.

 

This talk of "rationing" is valueless when insured people are already being denied coverage and an accident or illness might still bankrupt them.

 

[tvashtarkatena]

There are two main goals to health care reform: Insure the uninsured (which current proposals will help, and I'm all for it...the current situation is a moral crime), and bring costs into line (which current proposals will do little about).

[Crux]

[video:youtube]

 

[JayB]

I read the article a while ago - seemed like a narrative recapitulation of the data/argument at the heart of the Dartmouth Atlas.

 

Region A spends X% more per medicare patient than region B and the outcomes are the same, ergo X% of region A's spending is wasteful.

 

There are two major premises that underlie this argument. The first is that medicare spending is an accurate proxy for total medical spending in any given geographic area. If per-capita medicare expenditures are the same in Boulder and Biloxi, it follows that the total amount of funding that supports the health care infrastructure is going to be the same in both places, and there are no differences in total funding that might affect outcomes in either area.

 

The second is that no variables outside of the way doctors practice medicine drive outcome-indexed medicare cost differentials between regions. All of the social, cultural, economic, geographic and other differences that distinguish Boulder from Biloxi have no real influence on outcomes. If medicare spends X dollars in a hospital treating a stroke in Boulder, then on average, spending X dollars in Biloxi should get you the same outcome.

 

If these premises are true, then changing the way that doctors practice medicine in high cost areas will generate cost savings equal to whatever the differential between the high and low cost areas is, without affecting the quality of care.

 

If it turns out that total spending on medical care per capita, rather than medicare spending per capita, is what drives good outcomes in the hospital, and that everything that goes on outside of the hospital before the patient arrives and after they leave has a significant effect on outcomes, then it's much less likely that simply stamping out regional variations in spending patterns will be as beneficial as both the Dartmouth Atlas and the Gawende article suggest.

 

This isn't to say that physicians who have a financial incentive to deliver more care than is medically indicated per their best judgment don't exist, or that the additional spending that results from this behavior doesn't increase total medical spending above what it would be otherwise. These are real phenomena. Having said that, in most real cases determining the precise details of what's medically indicated is often as much a matter of opinion as a matter of fact. It's going to be immensely difficult to construct and enforce an algorithmic, centralized body of rules that attempts to make these determinations at a distance without compromising the quality of care that individual patients receive. This problem will be particularly acute for people with complicated illnesses and/or symptoms.

 

I'm sure it's possible to develop mechanisms to minimize self-dealing by physicians, but anyone looking for a magic bullet that will contain costs without compromising the quality of care may well find themselves disappointed by the results generated by doctor-restraining methods based on statistical comparisons of spending patterns that don't take other potential sources of variation into account.

 

Medicare Spending and Outcomes - Causation or Correlation?

 

 

 

One of my favorites - "Why are doctors in region X using so much more oxygen than doctors in region Y for the same sorts of patients?!"

 

 

 

 

 

 

 

[tvashtarkatena]

 

Region A spends X% more per medicare patient than region B and the outcomes are the same, ergo X% of region A's spending is wasteful.

 

The second is that no variables outside of the way doctors practice medicine drive outcome-indexed medicare cost differentials between regions. All of the social, cultural, economic, geographic and other differences that distinguish Boulder from Biloxi have no real influence on outcomes. If medicare spends X dollars in a hospital treating a stroke in Boulder, then on average, spending X dollars in Biloxi should get you the same outcome.

 

 

This was not a premise of this article. Gawande clearly stated so by comparing McCallen's per capita Medicare costs to El Paso's, an area with nearly identical demographics, culture, and health statistics.

Edited August 13, 2009 by tvashtarkatena

[JayB]

Whatever the system used, I think one key to longterm cost reduction is increased access to (i.e. Cheaper) preventative care that will help people live healthier lives in their older years. High deductables and spendy office visits discourage people from regular checkups for seemingly minor problems. Moreover, often, the best health insurance that someone with a $30K salary can reasonably afford yields a 5-10k out of pocket for something as simple as a broken leg. Given bad luck and a second accident in the ensuing calendar year, that person's life savings are gone- despite having insurance.

 

The debate certainly needs to focus on reduction of costs and less about which cabal should be monopolizing the system (gov't or insurance). What that involves is at a minimum some form of insurance reform and yes, some level of regulation.

 

This talk of "rationing" is valueless when insured people are already being denied coverage and an accident or illness might still bankrupt them.

 

I'd like to see people live longer, healthier lives, and reduce the costs of medical care as well. There's good evidence that certain kinds of preventive care help people live longer and stay healthier, but the evidence that preventive care saves money is, on balance, broadly negative.

 

http://content.nejm.org/cgi/content/full/358/7/661

 

Moreover - a great deal of the most important preventive measures are things that doctors have very little capacity to influence in a meaningful way. Obesity, smoking, drinking, stress - etc. I haven't seen an analysis of the relative importance of say lifestyle factors vs screenings - but I'd wager that these are much more significant drivers of costs and mortality than most of the risk factors that doctors can actually do something to help mitigate.

 

One model that might work on both fronts is coverage that rewards people for maintaining a healthy weight, quitting smoking, getting regular screenings, etc. Safeway already has a plan like this - at least for non-union employees - and I suspect that they're not alone. It'd be interesting to learn what, if anything, is preventing other insurers from following suit.

 

I suspect that for most insurers, for paying for screenings as part of a broader set of preventive incentives would pencil out, even if the only thing that really saves them money are the lifestyle changes that they reward with lower premiums.

 

 

 

[JayB]

 

Region A spends X% more per medicare patient than region B and the outcomes are the same, ergo X% of region A's spending is wasteful.

 

The second is that no variables outside of the way doctors practice medicine drive outcome-indexed medicare cost differentials between regions. All of the social, cultural, economic, geographic and other differences that distinguish Boulder from Biloxi have no real influence on outcomes. If medicare spends X dollars in a hospital treating a stroke in Boulder, then on average, spending X dollars in Biloxi should get you the same outcome.

 

 

This was not a premise of this article. Gawande clearly stated so by comparing McCallen's per capita Medicare costs to El Paso's, an area with nearly identical demographics, culture, and health statistics.

 

"Nearly identical" depends on the statistical filter that you put the populations through, and it's possible that the filter that Gawende used failed to capture some of the key variables driving the cost-of-care variations between these cities. Any time that you have two nearly identical data sets generating outputs that are significantly different from one another, despite having been fed through the same model, it's at least worth asking if there's a variable that the model in question doesn't capture that's driving the said differences. Eliminate altitude from variables included in the the differential rates of medical oxygen use in different regions, for example, and it's possible to completely miss the key variable driving rates of oxygen use in Denver that are several fold higher than in Dallas.

 

There's a more careful analysis of the differences between the locales studied in the Gawende story here:

 

http://www.thehealthcareblog.com/the_health_care_blog/2009/06/mcallen-is-now-a-tale-of-three-counties.html

 

Having said that - it's possible that that self-dealing on the part of physicians is the single most important driver of cost-differences between McCallen and El Paso - and that this analysis will stand up to even the most detailed and rigorous scrutiny. I found Gawende's analysis much less compelling on that front than most people, but I'll concede that it's possible that Gawende is right.

 

Even if that's the case, I'm not sure that this evidence (or the much larger data set generated by the Dartmouth Atlas) supports the claim that this is the best explanation for all regional variation in medicare spending patterns, much less that we can safely extrapolate conclusions derived from this data to all medical spending. I'm even less confident that we'd be well served by using such data to impose rigid, aggregate driven constraints on how physicians operate if the goal is to reduce costs without compromising the quality of care for individuals.

 

 

[tvashtarkatena]

What struck me was that no one in the biz knew where they were on the cost per capita curve, and the McCallen providers where surprised and at a loss to explain why they were the highest in the country.

 

The article never suggested or recommended 'imposing' anything, but it seems to be that requiring that this information be provided and disclosed to both to the consuming public and practitioners, would do much to bring the high end outliers in line. Consider it mandatory food labeling (which had done wonders for the ability of consumers to either choose wisely or not give a shit) for health care.

Edited August 13, 2009 by tvashtarkatena

[StevenSeagal]

Well, tuned by Glenn Beck this morning, in time to hear this gem:

 

"Obama is in bed with huge pharmaceutical companies and in bed with massive insurance conglomerates, and together they are plotting to take away your private coverage..."

 

huh? So he's plotting with the private sector to take away private coverage?

 

He then launched into yet another hypothethical "don't use a gun at these rallies! If you know anyone planning violence, turn them in! If it DID get violent- and god forbid it ever did-..."

 

covering his ass for when some nutjob decides to cap a senator.

 

 

 

[StevenSeagal]

That was followed by this academic explanation for global warming:

 

"the earth is like an ice cream cone and, oh, you don't think the earth is melting because, well, we're next to the sun, which is this, like, this orb right next to us that is about 2 million degrees...:OH NO ITS BECAUSE OF CO2!!!!"

 

 

Even a child can understand that, right? So what's with all these libtards and their worship of science?

 

 

[prole]

He then launched into yet another hypothethical "don't use a gun at these rallies! If you know anyone planning violence, turn them in! If it DID get violent- and god forbid it ever did-..."

 

covering his ass for when some nutjob decides to cap a senator.

 

 

Whew, that is crazy. Who could possibly be that crazy?

 

 

[StevenSeagal]

Just heard another gem. This one was from Michael Medved. At least now we're getting at the real value system in place here and which is being foisted daily on the masses of mouth breathers:

 

 

Caller:

I think we already have healthcare rationing

 

Medved:

Ok, I agree, but I would rather have free market elements rationing my care than some big government entity.

 

Caller:

But that's still rationing and it's still making it very difficult for people to obtain coverage

 

Medved:

Look, at least with the private sector in control, if you don't like your current insurance you can just switch to another. And if you don't like any of the options being offered, you also have the freedom to choose to pay for your medical bills yourself! Unlike in Canada where you're not allowed to not use the government plan! The free market rations lots of things, like cars and houses...everyone buys the best product they can afford!

 

 

 

Right. So you can just switch plans if you don't like it! That is, unless you are:

 

-old

-sick

-have a family history of illness

-have ever been sick before

etc.

 

Better to have some insurance industry goon bending me over than a government bogeyman

 

The second point he makes is even more obvious. I definitely feel better knowing that if my insurance sucks, I have the option of just paying for, say, heart bypass surgery out of my own pocket! Thank god I have the option of shelling out that extra 150,000 I had laying around for a rainy day, I mean that's why you save money, right? Just in case?

 

Yep, the best product they can afford, beautiful system- to each according to his wallet. Just like, you don't get to buy that BMW until you make enough money, in this case, you don't get the good treatment until you work for it. If you make less than $40K a year, at least you have the freedom to buy a plan that will help delay your bankruptcy for a year or two in the event you get sick or have multiple injuries. That is, if they decide to cover it. And just bask in the freedom to switch to an equally expensive plan of a competitor that will offer equally incomplete coverage for you, AND your family! Best of all, you don't HAVE to support these insurance companies if you don't WANT to! If that doesn't sound good, then maybe you just need to work harder!

 

 

 

 

[Pete_H]

Freedom ain't free.

[JosephH]

Ask Bill Coe what he thinks on the health care topic. He's one of the owners of a small business. It would be good to hear his level of satisfaction or disatisfaction with the current health care system. I'm self-employed and the current system sucks. But then I felt it also sucked when I was employed by a large corporation as well.

[JayB]

Just heard another gem. This one was from Michael Medved. At least now we're getting at the real value system in place here and which is being foisted daily on the masses of mouth breathers:

 

 

Caller:

I think we already have healthcare rationing

 

Medved:

Ok, I agree, but I would rather have free market elements rationing my care than some big government entity.

 

Caller:

But that's still rationing and it's still making it very difficult for people to obtain coverage

 

Medved:

Look, at least with the private sector in control, if you don't like your current insurance you can just switch to another. And if you don't like any of the options being offered, you also have the freedom to choose to pay for your medical bills yourself! Unlike in Canada where you're not allowed to not use the government plan! The free market rations lots of things, like cars and houses...everyone buys the best product they can afford!

 

 

 

Right. So you can just switch plans if you don't like it! That is, unless you are:

 

-old

-sick

-have a family history of illness

-have ever been sick before

etc.

 

Better to have some insurance industry goon bending me over than a government bogeyman

 

The second point he makes is even more obvious. I definitely feel better knowing that if my insurance sucks, I have the option of just paying for, say, heart bypass surgery out of my own pocket! Thank god I have the option of shelling out that extra 150,000 I had laying around for a rainy day, I mean that's why you save money, right? Just in case?

 

Yep, the best product they can afford, beautiful system- to each according to his wallet. Just like, you don't get to buy that BMW until you make enough money, in this case, you don't get the good treatment until you work for it. If you make less than $40K a year, at least you have the freedom to buy a plan that will help delay your bankruptcy for a year or two in the event you get sick or have multiple injuries. That is, if they decide to cover it. And just bask in the freedom to switch to an equally expensive plan of a competitor that will offer equally incomplete coverage for you, AND your family! Best of all, you don't HAVE to support these insurance companies if you don't WANT to! If that doesn't sound good, then maybe you just need to work harder!

 

 

 

 

 

Is it really true that all insurance plans offer equal value for money? That there's no way to expand the number of options that people have nor the ease of changing from one plan to the next other than via the government creating a health insurance company that they own and operate? Or that this is the only conceivable mechanism for providing coverage to folks that can't currently get it? Sufficient - perhaps. Necessary? I'm not so sure. That it represents the optimal mechanism for doing so is even less clear.

 

I lived right next door to a hospital in NZ from October through March, and conversations about who got treated for what and how were a staple of daily conversation. This doesn't make me an authority, but it's not like I'm speaking from a position of complete ignorance when it comes to the merits of one system versus the next.

 

Different people will take away different lessons from hearing the details of a gazillion different cases in a single-payer environment vs the environment we have here, but my observation was that if you have an accident or illness that mostly requires labor-inputs to fix, and the diagnosis/treatment are obvious - the system over there will be pretty good at taking care of you. If you have extreme trauma - all things being equal, you'd be more likely to survive the experience in the US. If you have a chronic condition that requires expensive diagnostic tests or treatments, especially imaging or expensive drugs, and/or your disease has some subtle manifestations and/or requires seeing a specialist - I think you're quite a bit more likely to suffer more and die sooner than you would here. If you have a premature/sick fetus/baby - my sense that it's less likely to survive in NZ than it is here, particularly if you're located a long way from Auckland. It didn't look like prevention was a particular strength of their medical system either, given the regularity with which advanced pathologies that showed up in the ER. Also not a terribly good place to be if you're over a certain age and have a condition that'd be particularly costly to treat - although New Zealanders did seem to be considerably more stoic and philosophical about calling it quits than we are.

 

Also on the plus side - everyone was covered. I don't mean to understate the significance of that. Just to suggest that, at least from my perspective, it wasn't free from some fairly substantial tradeoffs that came along with the particular mode of providing that coverage via single-payer/provider model. Part of that stems from the fact that if forced to chose I'd rather be broke than dead, but I realize that not everyone shares that opinion.