Asymmetrical Information

While it is anecdotal, I have heard a number of stories from brits (I work in a company with a lot of expats and travelers from the UK) about people who have had to wait a long time for surgery and other treatments that would be done quickly here.

And these were middle class, employed people.

Bolie IV

Jane,

A quick correction. Poor people have Medicaid. Old people have Medicare.

Cheers,

Don

(Go ahead and delete this after you correct)

1. I look forward to hard statistical evidence. When some politician starts talking about children, it's time to watch your wallet or keep a keen watch on the Bill of Rights...

2. Flu is not non-fatal. Simply non-treatable beyond what you stated. Flu epidemics can be scary. My father was born in 1918, and survived that year's epidemic. And then survived smallpox, too.

Bolie, that's the point.
Jane, how can you be so cruel? It's for the Children(tm). Facts,figures and cost don't count when there's children to prorect.

Just because sick children are being treated doesn't mean that we don't have a problem. Here in scenic Hyde Park, many low income people take their kids to the University of Chicago Hospitals emergency room for relatively routine care. Sure, the kid gets to see a doctor, and maybe gets some free anti-biotics for his strep throat, but its much more expensive, to the system, for that kid to see a doctor in a crowded, over-worked ER in an academic medical center than it would be for the kid to see a family practice doctor in an office for the same care.

We have an informal patchwork system of free medicine for the poor in this country that works somewhat well at delivering healthcare. But the waste is staggering. Its not inappropriate to think about ways that society can deliver this care without resorting to the shenanigans we now do.

Of course, that doesn't mean that the pride and joy of the Green Mountain State wouldn't screw things up beyond recognition with his plan, either.

But isn't it inappropriate to make a false claim that children aren't getting treatment?

>>Children with the flu, or other non-fatal maladies for which the only treatment is rest and liquids, do not count.

Why on earth not? I've been to the doctor three or four times this year with my little boy, on false alarms of exactly this sort. Every time, it saved me from a lot of mental stress I'd have otherwise gone through, and every time, the doctor said that I'd done the right thing by coming along, because it might have been something serious. If I was poor, I'd expect exactly the same treatment.

dsquared, while you might, possibly, make a case that there is a state interest in maintaining the health of minor children to the point of robbing my pocketbook, I see no compelling state interest in robbing my pocketbook to avert your mental stress.

Although, based on my anecdotal evidence from the Brits and Canadians, I have to believe the stress from waiting months for an MRI would offset your stress over sniffles...

"Its not inappropriate to think about ways that society can deliver this care without resorting to the shenanigans we now do." It's my understanding that during the Reagan years, high crime and savings were used as excuses to close clinics. Thinking about ways that society can deliver this care doesn't lead directly to nationalized health care.

A long bus ride may cost the parent a day off work, but I haven't seen how national health care in Canada and GB helps working poor parents avoid a day off and the lost pay.

dsquared - are you clear on the concept that same-day appointments are almost impossible under public health care? Have you ever lived in a country with nationalized health care? I don't mean to be harsh. I'm just tired of Londoners assuming that children with the sniffles just die in the streets in America, and Americans assuming that British people go straight to the doctor for any little thing.

I've seen some evidence, from hanging around in ER, that some big city hospitals are, under admin radar, basically set up for true emergencies and to function as a clinic. Haven't seen any formal discussion of this, though.

After writing this rambling post, I need some mental health care.

There is also the Federal Children's Health Insurance Program, which covers a bunch of additional kids that don't qualify for Medicaid because their parents make too much. Its about a $4 billion a year program (from the Fed side, states have to match it). For a variety of reasons, over $10 billion has gone unspent by the states since 1998.

I think it would be fair to say that a major problem in U.S. healthcare is not so much insurance availability as it is the affordability of the services, whether paid for through health insurance or out-of-pocket. It is no coincidence that medical cost increases accelerated just after World War II and again in the late '60's, periods which saw the introduction of employer-sponsored and -paid health insurance and Medicare, respectively. The tax-deductibility of employer-sponsored health insurance and artificially low Medicare premiums induced an artificial surge in demand, accelerating utilization, and then unit cost, of medical care.

Medicare can be addressed in another forum, perhaps, but non-Medicare health costs could be addressed in a couple of ways:

1. Move the tax-deductibility of health insurance premiums away from business and into individual hands. Health insurance companies will tailor their products to the new decision maker, the consumer, including introducing products that use the life insurance model where coverage is retained as long as premium is paid. There is no guarantee this will happen but it certainly seems logical. While premiums may not decrease, the total cost tot the consumer will as they keep a higher portion of after-tax earnings. In fairness, though, I suppose one would have to account for a potential reduction in wage increases as the value of employee benefits to the corporation goes down because of the reduced tax benefits.

2. Get rid of tax-deductibility of health insurance premiums altogether. The demand for health care relative to other non-tax advantaged goods and services will fall, inducing a demand-side fall in utilization and, ultimately, unit cost.

'course, this analysis doesn't address intrusive state regulation of the health insurance industry and health providers and any number of other cost-increasing regulatory schemes hatched at both the state and federal level. Whooo...now I can take a breath...

How can one argue with Catastrophic Coverage and an accompanying tax-free MSA?

By all means, spare no expense to relieve dsquared of mental stress!

Good thing he doesn't live in Canada--the health care waiting list capital of North America--though.

>>dsquared - are you clear on the concept that same-day appointments are almost impossible under public health care? Have you ever lived in a country with nationalized health care?

I live in one right now, in what my estate agent tells me is a perfectly representative part of London and they aren't. And let me get this straight: are you telling me that anyone in the USA can get an MRI scan on the day they turn up, without paying for it? I paid a couple of hundred quid last year to see a dermatologist privately and quickly rather than wait six months, which is roughly the choice that Americans with a nasty rash face, isn't it?

No, I see my dermatologist within a couple of days, and did when I had a crappy HMO. Waits of a week, except for big name doctors, are really rare. Waiting six months is outlandish.

>>By all means, spare no expense to relieve dsquared of mental stress!

The wonderful thing is that, as everyone knows, the fact that nationalised healthcare systems are almost always lower-cost than their private sector equivalents, you can save my mental stress, cheer up a few sniffling kiddies and come away from the deal with as much as 5% of GDP in your back pocket (depending on whether you decide on the French model or the UK). Talk about doing well by doing good!

I find endless fascination with the fact that discussions of health care are about insurance and not medicine. It is possible to find information on the AMA web site describing their efforts to restrict entry into medical schools in order to keep physician compensation high. And of course the deep pocketed insurance companies certainly aren't going to discourage high costs in medicine. How would they do business otherwise?

The wonderful thing is that, as everyone knows, the fact that nationalised healthcare systems are almost always lower-cost than their private sector equivalents, you can save my mental stress, cheer up a few sniffling kiddies and come away from the deal with as much as 5% of GDP in your back pocket (depending on whether you decide on the French model or the UK). Talk about doing well by doing good!

Of course, since everyone knows it, you are neatly relieved of the obligation to provide anything as mundane as fact in support of that. Good thing everyone knows it, or you'd be in real trouble.

None of us here are talking about health insurance - we are talking about pre-paid health care. And that is the big problem with the system here in the US. Insurance is like what you have for your car - you pay all expenses associated with normal operations and the insurance kicks in for unexpected events. However, PPO's, HMO's etc are not really insurance. They are picking up the tab for just about everything from routine care to catastrophic events. Demand is not constrained by price because the real prices are invisible to the end user. Most people would probably tell you the price of a doctors appt is whatever their co-pay is, when in fact that is probably 10% of the actual price.

Also - something interesting is starting to happen here in VA. Docs are going into very private preactice, where they limit the number of patients and each patient pays a membership fee, the one I'm familair with charges $1000 per year. However, you are guaranteed same day appts, the doc will make house calls, etc. It's an interesting model, but one that could really fire up the class warfare rhetoric if it were to become widespread.

I don't yet have an opinion on single payer v. current system. But it strikes me as a little cruel to suggest that the working class families who are too rich for Medicaid but too poor to afford private health insurance are doing fine by just visiting the ER when things get bad enough. It doesn't take an MD to understand that waiting until a small problem turns into a crisis makes treatment more expensive and more difficult. A key example is the problem of asthma, from which poorer children suffer disproportionately. This is due to a variety of factors, but certainly one of them is the lack of consistent health care. These children go on to become very expensive asthmatic adults, not to mention often negatively affected psychologically depending on the seriousness of the condition. The ER just isn't a solution to problems like these. As such, millions of children are undertreated in this country, unless you count the school nurse and her bottle of Tylenol.

The drawback of the ChIPs program is that the states are free to set the eligibility for coverage as high as their AFDC eligibility requirements, pre 1996. Some states had very, very high requirements, like Mississippi, leaving a very large gap in coverage among the working poor.

Jane asks for unbiased studies demonstrating undertreatment of children. I don't have any off hand. But I've seen more than I can recall. What would be interesting is actually seeing a study in which someone concludes that working class and poor children are actually getting adequate medical care. Now that I've never seen, I don't imagine I will.

http://news.bbc.co.uk/1/hi/health/799814.stm

Country / % GDP spent on healthcare
UK / 5.8
France / 9.8
Germany / 10.5
USA / 13.7

Source: World Health Organisation.

Thank you and I assume that some sort of apology will be forthcoming soon, David?

Some years ago, stopping by our Jr. Hi. to deliver a lunch somebody had forgotten, I encountered on of my kids' friends in the office. She was trying to turn in an incompletely filled-out form for free inoculations. I knew she came from a disfunctional family, but I failed to draw the proper conclusions.
I offered to take the form to her home and get her mother to sign it. After a quarter hour, standing on the porch in the rain trying to explsin the thing to the mother, she signed that she didn't want her kid to have inoculations. I pointed out that that wasn't what she meant. "Oh, hell," she said, taking the form back and shutting the door, with my new Cross pen to boot.
I thought, on my way back, that I should have helped the kid complete the forgery, which, I figured out too late, was what she had been doing.
Now. The inoculations were free. It was not money that was the problem. It was the parents.
I'd be interested in studies of what the inoculation rates are in areas where they are free, which is most places, one way or another.
And I should say that it's not money that causes me to delay my next prostate exam.

"The wonderful thing is that, as everyone knows, the fact that nationalised healthcare systems are almost always lower-cost than their private sector equivalents"

Actually, someone did a study not too long ago comparing the services offered by Kaiser with the British National Health service and concluded that without question, the Brits would be far better off in terms of cost per service and service in general (and absolute cost) by just handing off their entire NHS to Kaiser.

What happens if you add back in the R&D costs for your medical equipment and pharma, up the queue times to what Americans currently expect, add in the litigation rights that those countries lack, and pay American level wages to medical workers? Do we still save money then? & from where? All of the abovementioned, except the medical research y'all are dependant on, are guaranteed to be off the table during negotiations.

Amitava: as an asthma sufferer, I've read a fair number of studies on the subject, and they seem to show that poor parental compliance with treatment regimes, inability/unwillingness to take time off work, and poor planning (failure to make or keep appointments), are the dominant factors, not price. Also, you should keep in mind that study after study apparently shows that providing free alternative health care, in the form of general practice clinics, does not significantly alter usage of the emergency room by those who currently use it for primary care. (I haven't seen the studies; I'm quoting a public health professor I interviewed.) This seems idiotic, but there you are; some people seem to let things go until there's a crisis, and then panic. The idea that we can reduce our costs through preventative care is one of those things that seems logical, but doesn't seem to have any empirical basis.

There's a difference between getting adequate care and having access to it. Poor children undoubtedly have access to adequate care, through Medicaid. If they aren't getting it, it's the fault of their parents, not hte system -- and unless you're willing to take the kids away from parents who can't get them to the doctor's office on a regular basis, I don't see how you can remedy it.

"Country / % GDP spent on healthcare
UK / 5.8
France / 9.8
Germany / 10.5
USA / 13.7

Source: World Health Organisation.

Thank you and I assume that some sort of apology will be forthcoming soon, David?"

Couple of things. First of all, when I go to the WHO site, I learn that health care spending in the UK is 7.3% of GDP. See http://www.who.int/country/gbr/en/

That'll teach you to cite your sources!

Now to my larger point. Continuing on the site, one learns that Ghana spends 4.2% of GDP on health care. Applying dsquared's logic, we learn that if the UK rejected its current health care system in favor of the superior Ghanaian model, it would "do well by doing good," lowering costs by over $750 per capita per year, and saving over 3% of GDP or some $45 billion (WHO data).

The point, of course, is that to some extent you get what you pay for. Ghana gets a very different set of health care services than does the UK, and blithely suggesting that one model is better because it's cheaper is the height of folly unless one controls for the quantity, quality, technology, and type of care. (And a few posts up, one didn't).

Ummm, dsquared, I'm not sure how PAYING 5% of GDP equates to 'having 5% of GDP in one's back pocket'. Further, while your numbers are, in fact, numbers, they say nothing of how we could get the same quality of care we get at that price.

For example, your question regarding the MRI--with one stipulation the answer to your question is yes. In the US a person could get an MRI on the same day they showed up, without paying--IF THEY NEED IT. And sometimes, without needing it. It depends on the office. To be honest, most people don't just show up wanting MRIs.

For the right money, you can see any type of doctor you want--when you want to--but that goes for almost any western country. For a reasonable amount of money you can see virtually any type of doctor you want within a week or two. For no money the wait can sometimes exceed a month--for a particular service. But, since there are so many choices a bit of looking can net quicker appointments. In socialised med nations choices are more limited. Operating outside the medical system results in much higher fees.

As far as free care goes, it's everywhere. From free GPs to free plastic surgery. Often the only problem is the wait I described above--and that only pertains to initial appointments.

Ummm, dsquared, I'm not sure how PAYING 5% of GDP equates to 'having 5% of GDP in one's back pocket'. Further, while your numbers are, in fact, numbers, they say nothing of how we could get the same quality of care we get at that price.

For example, your question regarding the MRI--with one stipulation the answer to your question is yes. In the US a person could get an MRI on the same day they showed up, without paying--IF THEY NEED IT. And sometimes, without needing it. It depends on the office. To be honest, most people don't just show up wanting MRIs.

For the right money, you can see any type of doctor you want--when you want to--but that goes for almost any western country. For a reasonable amount of money you can see virtually any type of doctor you want within a week or two. For no money the wait can sometimes exceed a month--for a particular service. But, since there are so many choices a bit of looking can net quicker appointments. In socialised med nations choices are more limited. Operating outside the medical system results in much higher fees.

As far as free care goes, it's everywhere. From free GPs to free plastic surgery. Often the only problem is the wait I described above--and that only pertains to initial appointments.

Ummm, dsquared, I'm not sure how PAYING 5% of GDP equates to 'having 5% of GDP in one's back pocket'. Further, while your numbers are, in fact, numbers, they say nothing of how we could get the same quality of care we get at that price.

For example, your question regarding the MRI--with one stipulation the answer to your question is yes. In the US a person could get an MRI on the same day they showed up, without paying--IF THEY NEED IT. And sometimes, without needing it. It depends on the office. To be honest, most people don't just show up wanting MRIs.

For the right money, you can see any type of doctor you want--when you want to--but that goes for almost any western country. For a reasonable amount of money you can see virtually any type of doctor you want within a week or two. For no money the wait can sometimes exceed a month--for a particular service. But, since there are so many choices a bit of looking can net quicker appointments. In socialised med nations choices are more limited. Operating outside the medical system results in much higher fees.

As far as free care goes, it's everywhere. From free GPs to free plastic surgery. Often the only problem is the wait I described above--and that only pertains to initial appointments.

http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?cmd=Retrieve&db=PubMed&list_uids=11799029&dopt=Abstract&holding=f1000

CONCLUSIONS: The widely held beliefs that the NHS is efficient and that poor performance in certain areas is largely explained by under investment are not supported by this analysis. Kaiser achieved better performance at roughly the same cost as the NHS because of integration throughout the system, efficient management of hospital use, the benefits of competition, and greater investment in information technology.

Here's my national health care / universal insurance plan:

Create a nation wealthy enough that everyone can pay their own health care costs out of their own pocket with cash.

One thing curiously missing from the ER-as-clinic commentary is this: people don't wait for things to become crises to go to the ER; they go to it like it's a clinic.

If you're very poor, and won't be paying anyway, why would you care about going to clinic rather than the ER?

I've seen an ER patient come in with - I kid you not - a paronychial infection. That's when the skin around your cuticle becomes infected. It wasn't a bad one at all; she just wanted to be treated on a Friday night at the ER. The resident who saw her gave her some antibiotics and told her to come back if it didn't get better.

hi D^2, and the number of MRI machines per capita in each of the countries is?

my understanding of nationalized healthcare is a rationing of services through delay or as in D^2's skin problem, you go to a private service. D^2 may we assume that the better physicians pursue a private practice.

finally, we all aware that no one in europe bears their fair share of pharma development expenditures, which is why most pharma r&d is performed in this country. reminds me of nato and who bears the cost of defense.

dsquared posted:

>Country / % GDP spent on healthcare
>UK / 5.8
>France / 9.8
>Germany / 10.5
>USA / 13.7

These numbers really don't mean much at all. Take pharma expenses. Buyers of drugs in countries outside the U.S. typically pay much less for them than do American buyers purchasing the same pills. Advocates of single-payer healthcare will often point to this and say: AHA, this proves that single payer systems, with lots of buyer power, can control costs by negotiating for a better price.

The reality is that the lack of price controls on drugs in the U.S. is what makes this possible. U.S. based pharma companies generally cover their true (economic) costs and make a profit in the U.S. market. After that, the marginal cost of selling pills to Canadians and Europeans is next to nill, so they can accept thin contribution margins in these markets. Make no mistake though: if the U.S. imposed price controls on prescription drugs, most U.S. pharma companies could no longer make a profit, because their one big ticket, high margin market would go away. Our current pharmacopia would continue to serve us well, but you could kiss the new drug pipeline goodbye.

"Actually, someone did a study not too long ago comparing the services offered by Kaiser with the British National Health service and concluded that without question, the Brits would be far better off in terms of cost per service and service in general (and absolute cost) by just handing off their entire NHS to Kaiser."

Yup, but Kaiser is the closest to the NHS that you can get in the US. That's why I chose Kaiser when I moved from the UK.

"These numbers really don't mean much at all. Take pharma expenses. Buyers of drugs in countries outside the U.S. typically pay much less for them than do American buyers purchasing the same pills."

But pharma costs are (at least back in 1998) 9% of US healthcosts. So you haven't explained much of the delta between UK & US health costs

There's also medical equipment, for which we also pay the economic cost, and of which we purchase more; medical worker salaries; litigation expenses; less rationing of care; and so on.

How should the free market handle pharmaceutical companies' pricing?

Elimination of import controls on drugs? Let everyone mail order from Canada/Europe?

I mean, the Pharma companies let other governments push them around, and the US bears the brunt. Wouldn't the best strategy be to say "Instead of controlling your prices, we'll let our citizens buy from the lowest bidder. Then you can do something about the leeches who we have been profiting from our market"?

>>What happens if you add back in the R&D costs for your medical equipment and pharma, up the queue times to what Americans currently expect, add in the litigation rights that those countries lack, and pay American level wages to medical workers? Do we still save money then? & from where?

Then the price goes up, I suppose. So what? I claimed that you could have a UK-quality healthcare system with universal coverage, for roughly the amount that the UK pays for it. I didn't claim that you could have a US-quality healthcare system with universal coverage for the amount the UK pays; that would have been stupid. I simply think that the USA is spending too much money on healthcare, and that the amount it's spending is too unequally distributed.

Well, in some cases, we couldn't, which was my point. If we stop paying all the economic costs of drugs and equipment, we can't have a UK quality system, and neither can the UK. Nor would universal payer eliminate litigation, which is a big driver of costs here. Nor can we attract people to go through ten years of medical education at the wages you pay your doctors, or five years at the wages you pay your nurses, and y'all are already importing the half of third-world doctors and nurses that we don't use. The US gives a big subsidy to the rest of the world, and if you had any brains at all, you'd be frantically trying to convince us not to go there, rather than making superior remarks.

Aside from all that, we don't want low-quality, indifferent health care. I'm sure we could save a lot of money by switching to the Tanzanian no-healthcare model, but that's not really desireable.

"dsquared, while you might, possibly, make a case that there is a state interest in maintaining the health of minor children to the point of robbing my pocketbook, I see no compelling state interest in robbing my pocketbook to avert your mental stress."

Oh, please. Insuring children would cost all of $10. If you want to oppose insuring old people and adults on cost grounds, fine, but kids care is practically free.

"What happens if you add back in the R&D costs for your medical equipment and pharma, up the queue times to what Americans currently expect, add in the litigation rights that those countries lack, and pay American level wages to medical workers? Do we still save money then? & from where? All of the abovementioned, except the medical research y'all are dependant on, are guaranteed to be off the table during negotiations."

I believe this is where the discussion ground to a halt last time. Did anyone ever find numbers for this?

One misconception I don't see addressed often enough is this issue of cost. What we pay now for medical care costs money. To go to a national (single-payor) plan would simply replace the cost in money with a cost in time. When the cost shifts to time, there is less money to be made with the apparent result that there will be fewer service providers.

We actually have no further to look than the most recent SARS outbreak. The countries with the worst infection and death rates _all_ practice socialized medicine in some form or another. (Yes, Hong Kong apparently has 90% or so of it's citizens in a single-payor system. Surprised the heck out of me.) See medpundit here (scroll down to Socialized SARS) or here (scroll down to Reader on SARS.)

This seems to put the lie to socialized medicine being cheaper. It may cost less money (which I doubt), but will definitely cost more time and hence more lives.

What numbers do you want? We pay our medical workers higher wages than Britain; their doctors don't clear anything near the $200K+ annual salary of the average doctor. We certainly pay the economic costs of the research, since we're the only major market priced significantly above marginal cost. Queue times in America are much lower than elsewhere, as anyone will tell you, and the amount of medical equipment per capita is much higher. And our litigation costs are much, much higher, both in terms of direct cost, and "lawsuit prophylaxis". These things are all non-controversial. You can look up any of the data yourself.

No, no apology. You post a claim like that without a cite and I'm going to challenge you on it. I don't care if you wind up having the data or not; I'm still going to want to see it.

I think if you'd posed the costs in terms of purchasing-power dollars per capita, that might have made an even stronger case for your claim. But that would also have required a little in the way of data.

"We certainly pay the economic costs of the research, since we're the only major market priced significantly above marginal cost. "

Don't think you're right there, Jane. Pharma gross margins run on the 90% range; Large-molecule therapeutics run on the 80% range. I don't think that the pharmaceuticals are selling in the EU/Canada for *that* much of a discount relative to US prices.

Marketing costs for pharma companies are about equal to R&D costs; I'd say that the EU picks up less of the tab for the R&D, but as you're selling to a single formulary, the marketing costs also are lower in the EU.

I think this is a cue for us to talk about the difficulty of pricing information goods with high fixed costs but low marginal costs, no?

I don't have any US vs. UK numbers to compare actual health costs, but I and my employer would pay 30% more for NHS taxes (which are based on income) than we pay now for my health insurance premium.

I don't have any US vs. UK numbers to compare actual health costs, but I and my employer would pay 30% more for NHS taxes (which are based on income) than we pay now for my health insurance premium.

What do you mean gross margin -- revenue minus operating expense, or revenue minus production cost? The former, as far as I know, runs in more of the 2x to 3x range for most drugs, but I could be wrong. But from what I know, where it doesn't, this tends to be because the market is small, and in those markets, the drugs do tend to price at big multiples. When we say "marginal cost" here, it's not useful to use gross production margin, since there are other considerations that have to be priced in to make even marginal pricing in foreign markets profitable: local production facilities and/or shipping, taxes, local allocations, distribution, etc. I see that one could be confused about what I meant by "marginal cost", but I meant the marginal cost of producing, selling, and delivering abroad, not the marginal cost of production, since obviously any company that priced at pure marginal production cost would be not long for this world. I apologize for any confusion.

With that caveat, all my friends in health care tell me that drug projections have to earn out pretty much their entire R&D allocation in the US market -- do you have different information?

"What numbers do you want?"

Back whenever, you more-or-less said the reason that other countries get away with much less medical spending than us is that they're freeloading off our medical research. I never saw support of this, but it does seem plausible.

Medical investment dollars? Medical R&D dollars? Heck if I know, it was your assertation, I'd just like to see it backed up.

"Don't think you're right there, Jane. Pharma gross margins run on the 90% range; Large-molecule therapeutics run on the 80% range. I don't think that the pharmaceuticals are selling in the EU/Canada for *that* much of a discount relative to US prices."

Remember: Every drug that makes it to market not only has to pay for its own R&D costs, but for the R&D costs of the other 999 experimental drugs that the company produced that never made it to market. False starts of that sort are unavoidable. And, of course, there also has to be a profit for the company that's above that provided by basal investments (T-bills, muni bonds, etc.) or else no one would invest in that company. U.S. buyers are subsidizing the rest of the world's pharmaceutical expenses. If we adopt Hillarycare, it means no new drug development - ever.

- Firebug

I have a 21 year-old cousin who has severely malfunctioning kidneys, which forces her to have good health insurancere. A few years ago, her spiteful mother decided that she would no longer be kept on the family health plan as a dependent.

Now, she can no longer attend college because she has to work at a 40-hour-a-week dead-end job (which she hates) to secure health coverage. She also works part-time as a waitress, which pays her better than the other job. But since she needs health insurance, she has no choice but to keep it.

Certainly, a nationalized health plan would be to her benefit. I am sure there are many in a similar position who it would also help.

I read the whole thread. Fugger I'm confused :)

Anyway, it seems both systems have there strengths and weaknesses. Someone said in a socialised health system you have to wait too long everytime you see a doctor. That is not always true. Myself, when I need a doctor, and I use the Australian socialised system, I make an aapointment and go same day. No problems. I pay there on the spot, but get it refunded later (quite quickly too). Then when I go to the chemist for my script, I'm buying drugs the government has negotiated a lower price for. But I get it all on the same day.

The problem comes in when you need something that your averege GP can't provide. If you need surgery it gets classified as either emergency, in which case you get immediate treatment, or elective, in which case you get a long horrible wait, typically of months. Better government funding could help the waiting lists but given the Australian style of State and Federal governments bickering over who pays what portion it isn't easy to attain.

Contrary to supposition, the UK does in fact attract people to go to medical school, including everyone in my family except me. I also believe that we have a couple of pharmaceuticals companies ... my God yes I was right! We do! Glaxo, Amersham, Beechams, Zeneca! Rule Britannia! Also there are a thick 60 million of us, all paying above marginal cost for our pharmaceuticals, so I dispute that we're not a "major market". (One might also point out that although France has price controls on drugs, it also has significant state subsidies to pharmaceutical R&D which a lot of pharma companies take advantage of; these are counted as part of its "healthcare costs").

I also dispute that litigation risk would be invariant under different healthcare regimes. A lot of the reason why litigation costs are so high in America is that HMOs and hospitals are unpopular with juries. This is a political reality that can't be assumed away, or assumed not to be part of the problem.

Your statements about "what we want" appear not to be shared by a lot of your countrymen and unlike you, I don't think it can be good for the world for Americans to pay over the odds for their medical care.

The government is even less popular with juries, D^2; New York pays out a nice percentage of its capital budget in lawsuit verdicts and settlements every year. We are a litigious people, and the importance of the trial lawyer lobby to the party that's pushing health care reform means that won't go away.

I know that people in Britain go to med school; I simply stated that it was unlikely that you could get sufficient Americans to sit through eight years of school or more in order to make under $100K -- $165K for an agency head. The opportunities for hard working science types are rather different. Starting with your pharmaceutical industry, which does quite a lot of its reserach here, and which, I'm told, plans for its drugs to earn out their economic costs here, just like our pharma industry. The fact that you have a legacy of pharmaceutical firms from the 19th and early 20th centuries lingering in country does not mean that you have a market capable of supporting them, any more than British Airways could support its current operations solely on British travelers.

And nor is the US a large enough market for a drugs company - they have to develop and sell to global markets.

I concur on same day appointments. I made one for my wife yesterday because she was having trouble with hay fever and needed stronger pebsription anti-histamines. No problems. I've lived in bad areas where its not been possible to get same day treatment, and I had to fight a few years ago to get acylovir on the NHS - but generally my experience and my families experiences have been good.

That doesn't seem to be true, actually; pharmaceutical companies are now threatening to stop selling to anyone who rexports here, rather than losing the American market.

Jane,

pharmaceutical companies are now threatening to stop selling to anyone who rexports here, rather than losing the American market

Would you rephrase that?

From what the comment suggests, that if they can make enough money from the 250 million of you that the European and RotW markets are inconsequential, then I'd want to take a serious look at the cost base and patent implimentation.

The profit margin here is enormously larger. Looked at from one side, that's because we're doing something wrong. Looked at from another, it's because you're doing something wrong -- morally wrong, that is. Specifically, free riding on our medical research by using a combination of monopoly pricing power, and an implied threat to break the patents of any firm that won't use cost+ pricing, rather than pricing to economic cost. Europe gets something for nothing; we get higher drug prices.

But if we go the way of Europe, the subsidy stops. And so does the flow of new drugs and technology, which can't be financed on the health care model in place in any European nation. For all that he's said, D^2 knows you can't cover the capital costs of risky R&D with cost+ pricing; either the R&D stops, or you get enormously wasteful price grants, as happens in our defense industry -- not known for its cost effective nature.

The profit margin here is enormously larger. Looked at from one side, that's because we're doing something wrong. Looked at from another, it's because you're doing something wrong -- morally wrong, that is.

I'll leave the moral argument - either you believe that universal access to healthcare is a right or you don't. That argument has been won in the UK, so to belabour the point is something of a waste of all our time. Personally speaking, universal access is something I approve of. The access method, however, is debateable.

The economic argument is more interesting.

But if we go the way of Europe, the subsidy stops. And so does the flow of new drugs and technology, which can't be financed on the health care model in place in any European nation.

Really?

How do you explain the huge amounts of medical and drugs R&D that do happen in Europe. Or for that matter, Cuba?

sorry about the triple post--don't know what happened there

The huge amounts of medical and drug R&D that happens in Cuba? For the Cuban market? This I have to see -- cite please?

As for the rest, same deal -- it earns out here, or it doesn't earn out. Look at the margins. With a 1-in-1000 chance of making it to market, a 10-20 year development cycle, with only a 5-10 year earnback (and much of that often depressed by price competition from similar molecules), it's simply not possible to earn back your capital costs plus associated overhead at cost+10. Do the math. You'll find you get a negative return.

It isn't a moral argument about universal health care; it's a moral argument about wanting to have new drugs but not being willing, as a nation, to help shoulder the costs. Would it be moral of me to provide universal health care here by stealing money from the Bank of England to finance it?

I've got to be honest and say I've completely lost track of the point you are making.

It isn't a moral argument about universal health care; it's a moral argument about wanting to have new drugs but not being willing, as a nation, to help shoulder the costs.

There is another cite in one of the many threads here pointing out that the reality is the money poured into R&D in European systems compares with US ones. We are "shouldering" cost, its just collectively through pretty heavy taxation. Well, actually, thats the rest of Europe - while its recently gone up my tax compares to what I was paying living in California.

Cuba exports medical know how but they provide the facilities and training. The US companies are hosing the internal market - I'd be annoyed if I were you.

But we do basic scientific research also at a higher rate than y'all do, funded by the government. That's a separate basket. The private research, which is the stuff that produces usable drugs and equipment, is funded by our market.

I am annoyed. But I'm annoyed at other countries for using patent threats to get us to bear the full price of R&D.

However, there are numerous drugs and treatments which exist because of my taxes and the work done in my country's health service - Invitro Fertilisation springs to mind first, plus recent British advances in gene therapies.

Should these be denied to you because you didn't pay tax here? Or should you be free to buy these on the open market at a fair price?

If your real beef is third world countries allowing generic drug manufacturer while the patent is still live - then that, frankly, is a very different discussion to the one we are having.

They are freeloading, of me and you, to be frank, not all those drugs are American - on the other hand, I'm open to the alternatives that some of these countries have.

However, there are numerous drugs and treatments which exist because of my taxes and the work done in my country's health service - Invitro Fertilisation springs to mind first, plus recent British advances in gene therapies.

Should these be denied to you because you didn't pay tax here? Or should you be free to buy these on the open market at a fair price?

If your real beef is third world countries allowing generic drug manufacturer while the patent is still live - then that, frankly, is a very different discussion to the one we are having.

They are freeloading, of me and you, to be frank, not all those drugs are American - on the other hand, I'm open to the alternatives that some of these countries have.

Jane,

Interesting topic, as always.

Thought you'd find this very recent study of interest:
New Kaiser Family Foundation study(opens to a .pdf file). It offers discussion of and citations to a number of studies which found those without insurance to have far more unmet health needs and delays in seeking out necessary care.

And why would insurance companies have cost-sharing mechanisms in place if not to deter some from seeking out services? Are you assuming that the only services that are deterred are unnecessary?

Interesting note: prescription drugs are around 15% of medical spending in Canada. It's 10% in the US, projected to rise to 15% in the next decade.

This all begs the question: where is this research freeloading happening, if prescription drugs are only 10-15% of medical spending?

Medical equipment, which operates under similar, although not identical constraints, is also underpriced in Europe. Or so I'm told.

"What do you mean gross margin -- revenue minus operating expense, or revenue minus production cost?"

Revenue less COGS - large molecule therapeutics being larger 'cos biotech fermentation/purification is more hassle than synthetic chemistry.

Marketing expenses I've seen run in the 15-25% of revenue, R&D similar range (running from memory here, so apologies for vagueness).

"The former, as far as I know, runs in more of the 2x to 3x range for most drugs, but I could be wrong. "

Sounds in the right range.

On R&D: As far as I know, as 50% of the pharma market is in the US, if you can't get a US market of 100,000 patients for a particular compounds indication, chances are it won't be developed. So, the US may pick up a disporportionate amount of the R&D costs, but it also has a disporportionate influence on the direction of drug development.

Figures for costs of drug R&D are about $40-50 million out-of-pocket costs for the clinical phase, and about $400 million total when you capitalise the costs forward to the drug launch date, and include the costs of failed drug candidates and the overhead R&D costs for the drug discovery & preclinical testing phases.

Failure rates run about 50% in Phase I, 70% in Phase II, and 50% in Phase III, and 85% in the Registration phase before entry to market.

Failure rates are (much) higher in pre-clinical (animal testing) and discovery phases, but the per-compound costs there are less (and, in the discovery phase, dropping).

(Source is from a paper by Myers & Howe at MIT-Sloane).

Clinical testing is the bottleneck and where the big bucks are spent.

As another datapoint, a disproportionate number of(clinical) trials of drugs are done in the UK, 'cos of lower costs and less concerns about liability (but not preclinicals, due to a more militant animal-rights movement in the UK). This may mean that the UK medical system is picking up some of the overhead associated with running clinical trials.

On Cuba's biotech/pharma: Cuba has made a big investment in biotech (Heber Biotech has as many technical employees as Genentech), after Fidel heard some guy make claims about interferon, but it hasn't produced a lot of drugs; it's brought in about a quarter of the hard currency it was supposed to.

Partially this is because their focus has been on infectious diseases & immunology, and partially it's because their therapeutics can't pass more stringent W.European regulatory standards. A Canadian company, York Medical, has a lot of deals with the Cuban biotech sector for development/commercialization of therapeutics from Cuban research institutes.

(Sidenote: Foreign companies in Cuba using Cuban employees have to hire them through the Cuban goverment, and pay the Cuban government in Peso Convertable [which is 1:1 with the dollar]. The Cuban employee gets paid the same nominal amount, but in Peso National, which has a 20:1 exchange ratio with the dollar. So the Cuban government makes a 95% profit on selling Cuban labor. How's about that for extracting surplus value).

"Failure rates run about 50% in Phase I, 70% in Phase II, and 50% in Phase III, and 85% in the Registration phase before entry to market."

Sorry, got that wrong:

Failure rates during clinical testing are:

Phase I (safety): 25%
Phase II (efficacy, small trial size): 50%
Phase III (efficacy, larger trial size): 15%
Post-Clinical FDA Filing/Approval: 25%

ACTUAL EVIDENCE that lack of insurance leads to unhealthy outcomes:

The full study by the American College of Physicians is at http://www.acponline.org/uninsured/lack-contents.htm. Excerpt from the forward:

"Uninsured Americans are far less likely to have a regular source of care or to have recently seen a physician. They are more likely to delay seeking care, even when ill or injured, and more likely to report unmet medical needs. They are more likely to forego even those services that many of us take for granted, such as annual exams, well-child care visits, prescriptions drugs, eyeglasses, or dental care.

As a result of this reduced access to care, uninsured Americans are more vulnerable to adverse health outcomes. Because uninsured Americans do not have the same access to care, they are more often hospitalized for conditions, such as diabetes, hypertension, pneumonia, or ulcers, that the insured are able to manage as outpatients through physician care or medications. Uninsured Americans are more often diagnosed with cancer at a later stage and, as a result, suffer a lower survival rate.

Uninsured children are much less likely to receive medical care for normal childhood illnesses, such as a sore throat, an earache, or asthma. They are also less likely to receive recommended childhood immunizations. Even if an uninsured child suffers a serious illness or injury, such as appendicitis or a broken bone, they are often unable to seek medical care.

Evidence from these studies indicates that reduced access to care and poorer medical outcomes do not affect only the chronically uninsured. Even those with gaps in coverage - as short as one month or as long as a year or more - are less likely to seek care, pursue preventive care, or even to have prescriptions filled.

A lack of insurance is not simply an inconvenience. It is a real barrier to access and definitely contributes to poorer health. With 44 million Americans uninsured, and 100,000 more added to their ranks each month, their vulnerability to poorer health has reached epidemic proportions."

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