Asymmetrical Information

I tip my hat to you, Jane, in your continuing efforts to explore this topic rationally. Alas, this has become a matter of Faith for so many that is almost impossible to do so. The shame of it is that there could be some very fruitful areas of exploration, if people could do so without fear of being steamrolled by the factions of Faith.

For instance, has any really interesting work been done to try to measure what amount of intellectual property protection yields optimum outcomes, balancing innovation and competition? It seems that patent lengths and extensions granted are merely arbitrary numbers and ad hoc decisions, without real knowledge of what would benefit the most people. Unfortunately, in an environment where pharmaceutical companies are either assumed to be either Satanic cults, or members of the Heavenly Host, it is unlikely such knowledge will be pursued in a fruitful manner.

Needless to say, read the whole thing.

Thanks, Glen.... I mean Jane ;)

This is one area where I cannot devote a lot of time. My life is spent understanding computers and learning photography. Thanks for bringing tidbits like this up for those of us busy in other realms.

But what about public spening and basic access to healthcare?

Even if we agree with Tyler's point (and I've seen counterarguments elsewhere but I'll let others debate that) the fact is that the US spends as much or more in public health as Italy say but we lack a minimum level of national healthcare. Shouldn't we at least have that given what we pay?

GT, that doesn't make any sense . . . it's like saying, "Given how much we all spend on cars, shouldn't we at least have universal access?" We're not paying for universal access to cars, and if we started a programme to do so, it would cost a lot. National health care advocates point to their expenditure/outcome numbers as a way of "proving" that we don't get much for our money, and therefore could have better health care for less money if we nationalised. These studies indicate that, in fact, we get better health care by spending more money on it, and that therefore nationalising the system, and expanding coverage to universal access, would either involve spending more money, or getting lower-quality health care for most people. In other words, there's a tradeoff.

"It would be a disaster for the world as a whole if we tried to save money on this front with tight price controls."

The extent to which these socialized medical systems piggy-back off US financed pharmaceutical research and US financed medical research in general is an area that I have not seen properly addressed. What percentage of our medical costs go to research? How does this compare with what our socialized friends spend?

Jim English
Chicago

Well, maybe I wasn't clear.

The reason we spend so much on healthcare is that we have roughly as much public spending as European governments plus a whole lot more on private spending.

One thing europeans get out of their public spending is universal care.

Couldn't and shouldn't we have that? Yes, I realize that means we may have to rethink where we spend our public health dollars and, yes, it is politically difficult. I suspect most of our public healthcare is Medicare and the elderly will not be willing to give up any benefits. But this is a blog not a political campaign, We debate ideas even if we think them difficult to implement.

I read somewhere that a huge chunk of Medicare is spent on the last 6 months of life of beneficiaries. We have the technology to sustain people who otherwise would die but at a huge cost. Shouldn't we debate if that's the best use?

Europeans, by and large, don't have as much access to expensive healthcare technology. But they have universal care and even a 6 month wait for elective surgery is better than the infinite wait of someone without insurance (unless he's a millionaire).

GT,

How is it universal care if you have to wait 6 months for so-called "elective" procedures and you do not have access to so-called "expensive health care technology"?

It sounds a lot like we could trade the best medical system in the world for a bad one that has a six month waiting list. Is this a good trade in your mind?

As for depriving necessary medical care to people who may or may not die within the next six months, you are always free to donate your own, but don't try to take away mine or my families.

It never ceases to amaze me that lefties who think that government bureacrats can't be trusted with foriegn policy can be trusted to decide who should live or die.

Jim English
Chicago

Ahhhhh, GT, but that's already nationalised, and it isn't saving us any money, is it? The fact is, Americans aren't willing to think about cutting off health care for elderly people the way other countries are; in many of the Western countries national health care advocates like to cite as cost savers, many operations just aren't performed on people over seventy. Such things don't show up in mortality statistics, but damned well do in quality-of-life--my grandmother's a whole lot better off with her new hips. And the fact is, we're rich enough that we don't have to make such choices.

Some of that spending -- maybe most of it -- also goes back to what I cited earlier: defensive medicine, by doctors who don't want grieving children suing them for letting Mom die. Doctors spare no expense to avoid lawsuits.

But nothing you've said refutes the main point, which is that there is no painless solution: we cannot, as national health care advocates (including, I believe, you) have claimed, expand access without either spending more, or lowering the quality currently received by those who do have access. We certainly can't spend less holding other things (like American values about when to cut off care, and the liability system) constant.

Jim, the system by which young poor people have their wages transferred to old people with a much higher median net worth, so as to extend the old people's lives an extra year, is not sustainable. Old people should get as much medical care in their last year as they can pay for, or as an insurance contract provides coverage for. Medicare is not an insurance contract, it is merely a means for old people to access the wages of young people. Most countries are far more restrictive as to how much old people are allowed to access young people's wages to pay for their medical care, and I have a hard time saying that they are in error. Not that anyone is going to get elected in this country on that platform, however.

I apologize if you posted a cite for your infant mortality statistics elsewhere; I know you've covered this before. I know others have made the point about the role of race and poverty in the U.S. skewing statistics.

I'm doing some quick searching, and the 1999 numbers infant (

U.S.: 7.1
England and Wales: 5.8
Australia: 5.7
Canada: 5.3
Netherlands: 5.2
Scotland: 5.0
Germany: 4.5
Denmark: 4.2
Japan: 3.4

With other countries falling more or less where you'd expect them to fall.

Now, if you disagregate for the race of the mother, you have:

U.S. White: 5.8
U.S. Black: 14.1

I am not going to engage in the fallacy that only white Americans are "real Americans" and should be counted as the real American rate, but there is some factor related to the different experiences of white and black Americans that sways the average infant mortality more than a point away where it would be if this disadvantage were eliminated.

My guess--and I admit, it is only a guess--is that the difference between black and white infant mortality rates has very little correlation with different treatment of premature babies in those two groups. Whatever that factor is, it accounts for more than a point.

And that's assuming that this factor (let's call it P, for short) does not influence any white Americans at all. But if P should stand for either Poverty or Poor Prenatal Care, it stands to reason that some white Americans are affected, and likely to a greater degree than our European peers. Again, independent of the Heroic Measures or Lying Bureaucrats factors that you cite.

My questions:
How did you quantify the effect of "heroic measures" or lying bureaucrats on infant mortality rates in the U.S. vs. European countries? What are the data?

What do you think accounts for the racial disparity in infant mortality, how does it relate to the overall state of U.S. health care, and what can or should be done about it? (I apologize if you've already addressed this elsewhere. It just seems out of proportion to talk about heroic measures taken to save babies' lives when there may be much bigger, other factors at work.)

Apparently I typed something that slipped into code. What I was listing were the rates for 1999 for infants (less than 1 year) for the U.S. and several countries considered in our peer group.

Will,

Please don't misunderstand my position. I am not an advocate of Medicare. In fact, I generally oppose any system that seperates costs from the beneficiary of services. I was addressing a theoretical US national healthcare system.

Jim English
Chicago

Brittain33: I don't know the answer. I'm sure poverty accounts for some of it, but my experience at working for a social service organisation tells me that much of that is related not to access, but to complicated other factors that wouldn't be solved by national health care; women living in poverty already have full access to prenatal care, through Medicaid, CHiPs, and a wealth of private organisations that provide free prenatal care. Women living in poverty are vastly more likely to be obese, which harms outcomes, and to engage in risky behaviours that adversely affect infant mortality, such as smoking, drinking, and drug use. Which of these would a national health care system fix?

There may also be racial differences that produce worse outcomes: genetic diseases found predominantly in those with recent african ancestors, or a higher predisposition to certain pregnancy complications.

I have a hard time, however, believing that the problem is that the mothers can't get prenatal care. Aside from geriatric care, prenatal care is undoubtedly the most widely available, affordable sort of care there is in this country.

Some comments:

First, the intellectual property point by Will. Patent lengths are fixed by law; extensions are granted – although not all that frequently – to make patentees whole with respect to demonstrable delays by Federal agencies, whether the PTO or the FDA. It may seem arbitrary and ad hoc from the outside, but really isn't as arbitrary as it might seem.

Second, the length of intellectual property protection is determined by international treaty with virtually every other country on Earth. The US several years ago changed its patent laws to conform to the practices of the majority. We can't monkey with patent term as we can with the tax code, because to do so would upset the reciprocity that underlies international patent law.

And, before someone raises the subject, let's dismiss idiosyncratic tweaks to patent law for particular types of inventions. Such tweaks only complicate matters, generating ambiguity that the law generally is meant to preclude. For example, what exactly is a "biotech invention?" Recombinant therapeutic proteins are surely covered; what about small molecule drugs? No? How about peptides? How big does a peptide have to be to qualify? How about low molecular weight peptides bearing abiological side chains, so they kind of look like small molecule drugs? Many modern drugs fall into that category – biotech inventions, or chemical ones? You see the problem: a smooth gradation between fields dooms "one-off" tweaks to ambiguity and disputes.

Jim English's point is most apposite. The US pays the most for healthcare because we pay for the R&D. The rest of the world basically leeches off of the US by fixing drug prices artificially low, almost on a "cost-plus" basis reckoned from the cost of manufacture. (It's much like the situation on military spending, in fact.) Drug companies recoup their R&D stments in the US; what they make everywhere else is gravy. That's why size of the US market for pharmaceuticals roughly equals the rest of the world combined (for comparison, the US has 6% of the world's population). We're paying the freight for the rest of the world.

Jane's point about cutting off health care for the elderly is also very much on point. The NHS in the UK, for example, basically guarantees UK residents their "three score years and ten," after which they're largely on their own. Those with grave illnesses beyond a certain age receive palliative care, but no heroic measures. Most Brits accept that the money is better spent on vaccinating children than prolonging their lives to the bitter end. Americans would never wear that – we're too individualistic.

Jane's other point is also right on the money. ALL countries ration healthcare, but do so on different bases. We do it by ability to pay; other countries, by the willingness of the state to pay.

Thanks, Occam. I wasn't advocating simply monkeying with the patent lengths, and understand that these are internationallly agree upon. I still think it would be a potentially useful avenue of inquiry, if it could be pursued absent a political agenda. Not that such a thing is possible,of course.

"I read somewhere that a huge chunk of Medicare is spent on the last 6 months of life of beneficiaries. We have the technology to sustain people who otherwise would die but at a huge cost. Shouldn't we debate if that's the best use?"

Aaaah -- at last, GT comes clean. Die, old people, die!

(Sometimes, I think this is the only way for Medicare to work out well.)

Just one point:

First, some of the things we're paying for aren't related to our health care system, but to our tort system, which is much, much much more generous to potential victims than other countries, a situation that most advocates of national health care actively oppose changing

I don't understand how you can say that your tort system isn't part of your healthcare system. It's one of the principal methods through which healthcare is financed. And the reason that so many high-rolling tort judgements get handed down is that you have a big, deep-pocketed, unpopular HMO industry. If you didn't have that industry, you'd have a different set of tort outomes.

That wasn't a brief for tort reform, D2 (although I am in favour of changing class actions and capping lawyers' fees). Tort reform, with or without nationalisation, would probably lower medical costs somewhat by keeping some cases out of the system, lowering malpractice insurance costs, reducing the emotional incentive to keep a disease going past its natural course, and reducing defensive medicine.

But the American public cherishes its right to sue. And I disagree with you that the problem is that HMO's are unpopular; AFAIK doctors are the primary target of most lawsuits, not HMO's, and doctors are really pretty popular. They get sued anyway. As do state and local governments here, all the time, and lucratively. A national health care system like Britain's, constituted here, would reduce lawsuit verdicts, because governments can't be sued for punitive damages . . . but not by all that much, because government employees can be. But that doesn't really matter, because no one is seriously proposing anything along the lines of National Health (for which I humbly thank God every day). Which would leave the doctors, hospitals, and so on still wide open to lawsuits.

I have a passing familiarity with the sort of damages maltreated patients get paid in Britain, and even I, firebreathing tort reformer though I am, cringe at the paltry sums offered when your National Health service, for example, amputates the wrong limb. That just will not fly here, no matter who's paying the health care bills.

Dsquared,

Companies and individuals in every industry and walk of life get sued and lose for massive amounts of money. It's an American cultural affliction, not a product of unpopular HMOs. We dearly love our "day in court," and I find your assertion that, absent HMOs, the outcome would be different to be bizarre.

Jane,

I agree there is no painless solution. I never pretended there was.

D2 said, referring to the tort system, "It's one of the principal methods through which healthcare is financed."

Huh?

D2, are you under the impression that tort judgments consist entirely of past, current, and future medical expenses? Not so, not so at all.

The major part of the damage award is for "pain & suffering."

And if you happen to see any mention on TV of various proposals to cap damage awards for medical malpractice, be aware that the presentations rarely mention that it is ONLY pain & suffering that is to be capped through tort reform. In California, for instance, pain & suffering is capped at $250K, but THERE IS NO CAP on medical expenses or on other economic damages (lost wages, etc.).

Will,

One thing you could do is look at how many owners of granted patents pay the various maintenance fees. There are fees due at (roughly ) 4, 8, and 12 years after issue. As I understand it, the percentages of patents kept in force decreases substantially with age. Let's face it, if you are not making any money off a patent, you are not likely to continue to pay maintenance fees. These numbers could give you an idea of the economically effective average age of patents.

If I understand GT's original point, it can be summed up like this: Even if it did not reduce costs, couldn't we gain the added benefit of universal access by nationalizing the system? I think that's a fair reading of his original post.

My response is that, no, we could not gain the added benefit of universal access because our current system already has a form of universal access. No one in the US is denied essential health care because they lack insurance or are poor. Non-essential care is rationed based on the ability to pay, but that is true for the insured and the un-insured. My family has great health insurance, but I'd have pay for any liposuction out of pocket. So, since the current system already provides universal access, nationalizing the industry might change the quality of that benefit; it would not create a benefit that does not already exist.

One quick story to illustrate why I believe no one need lack required care. My sister-in-law lost her 2+ year long bout with cancer. While she had insurance, her treatment blew through the caps on her policy within about 6 months, yet the doctors and the hospital did not quit treating her. 'Til the end, (that is, until she decided to quit fighting) no expense was spared by her medical team to try and prolong and improve the quality of her life.)

An interesting question about why the difference in infant mortality rate between whites & blacks exist in the US.

Just a data point; ten years ago, our friends had their first child, who was 9 weeks premature. This was in Cleveland OH, and their premie was at the Cleveland Clinic's neo-natal unit. This is a world class medical facility in the heart of downtown Cleveland.

Of the 15 or so babies in the neo-natal unit at the time, our friends had the only white baby there, the rest were premature black babies. I was shocked, and asked a nurse why this was.

She said the majority of the premie black babies were the result of drug abuse. It was heart breaking to see these tiny little babies writhing and twitching and crying, and some not even 2 lbs big...

So my guess is there is some sort of corrolation between infant mortality, rate of drug use in mothers, and rates of illegitemacy (which at latest estimates is as high as 70% in the black community).

-f-

"Women living in poverty are vastly more likely to be obese, which harms outcomes, and to engage in risky behaviours that adversely affect infant mortality, such as smoking, drinking, and drug use. Which of these would a national health care system fix?"

In fact, it would probably make things worse since the incentive to engage in such risky behavior would be even greater.

Also, anyone who thinks the malpractice insurance fees aren't a large part of the problem, must not know any doctors. I know of a prominent neurosurgeon in Seattle who claims to pay over $300K per year. I know of an MD who gave up his practice to enrol at the Univ. of Washington School of Dentistry, because he was sick of paying his malpractice insurance premiums.

Following up on David Walser's April 20, 2004 04:05 PM post, I found the following story interesting from the standpoint of access to health care:

http://victorhanson.com/Articles/Private%20Papers/How_Bad_Is_It_In_America.html

David,

That wasn't my point so I guess I wasn't clear enough.

My point is that we need to rethink what we spend the money on. As Jane points out that will not be cost-free as to make someone better we will need to make others worse.

But I think it a good move and at least we should be debating it.

As I read thru the comments I was about to mention Victor Davis Hanson's article until I saw that Kernon already had.

With emergency room care morphing into public health clinics, the availability of local government and charity health service clinics and experiments like Tenncare, I am curious how anyone can say that people don't have universal access to basic healthcare. Even the homeless can get basic care in connection with many of the shelters where they get room and board.

Following the links to Cowen's post, I find he is citing a McKinsey study. He links to it but I didn't have much luck with the link.

So what we have is one study of this issue, about which we know very little. Let's grant the accuracy of the statistical results. On what basis do the authors claim that

"The reasons for this result can be traced directly to the huge differences in the way the health care sector is organized and governed across these three countries."

That's a rather strong claim, yet Cowen, Jane, and many commenters here swallow it whole, without knowing anything about the analysis that produced such a sweeping conclusion. I suspect it's not the persuasiveness of the (unknown) argument but rather the fact that it supports preconceived notions that accounts for this reaction.

It is interesting that in discussing health care results that reflect badly on the American system, such as infant mortality, the cheering section offers all sorts of excuses around race, habits, etc. But when numbers reflect well, or are thought to, then it is clearly the superiority of the American system that explains it all.

Jane talks about the difficulty of measuring health-care quality, and she is right about this. But then come a series of rationalizations and unsupported assertions, all leading to the inevitable conclusion that critics are simply misguided, and the numbers don't mean what they seem to.

Yes, malpractice insurance is rather excessive. And I certainly agree that excessive litigation leads to excessive testing (etc) to reduce exposure to legal damages. Nearly every woman of childbearing years that is treated at an ER or Urgent care clinic here in the US undergoes a pregnancy test even if the patient is first asked whether there is any possibility of her being with child. This is done in some cases for moral reasons (I certainly would not disagree with such a test if the treating physician thought there was any chance that the patient may not be fully truthful) but mostly it is done to avoid future litigation in the event of medical treatments that may harm a child in utero.

Here in Arizona, our OB pays about $68K/year in malpractice insurance. Treating about 4 patients/hour for 6 hours/day (2 hours for paperwork, clinic oversight, etc.), 5 days/wk, 50 wks/year implies that her insurance costs add about $11 to the cost of every patient that walks through the door.

Jane,

Good post except for using the word 'system'. Health care is not a system, its an industry with several specializations within it.

"I read somewhere that a huge chunk of Medicare is spent on the last 6 months of life of beneficiaries." Sure. If you think about it, this is like saying: "I read that a huge chiunk of the payouts on auto collision insurance are on cars that are totaled."

If you have a major illness and hospitalization that threatens your life, your bills are going to be huge. If you are old you are more likely to die since your body is less resilient and you are more likely to have complicating factors. How do you predict which patients are going to die and which will pull through and live longer? My grandmother had 3 major hospitalizations in her later years - each time we were told she likely would die. She died about 10 years later. My father was in the hospital as a patient twice in his life - in his 20s for an appendectomy and when he died last year. He was still seeing patients 2 days before he went into the hospital, and he never came out.

How can you know when to cut off the care? You can't. I can't. The doctors can't. And certainly congresscritters and bureaucrats at HCFA can't.

Bernard,

It is completely relevant to consider all of the factors that skew or elevate one countries statistics vs. another country.

It would be like comparing 2 different schools and saying one is better and the other is worse based on the test scores of the children.

If someone else went into the school and found that the better school had all children that were first generation japanese-americans who have the culture and ethic of hard work and studying hard and the so-called worse school had a set of children with single parents (like me) that don't spend much time with their children or their homework (not like me) or their entire culture and work ethic doesn't come close to the other school's children.

Those are similar to the factors that have to be considered when looking at health care system/industries (got the word industry in there for ya liberty lover).

Questions for you would be:
1) Why wouldn't 'the way' infant mortality is counted be a factor to you?
2) Why wouldn't 'how many people choose to be obese' in this country as opposed to others be factor in the outcome of diabetes or heart problem rates?

Measurements in science can really only be compared if you are comparing the same thing. It is very very very hard to do to compare the health care industry here to another country. You can only line up various columns (probably over hundred's of columns on a spreadsheet at plug in numbers such as:
1) How many day wait average for hernia surgery? (other countries might have rations)
2) How many day wait average for dental operations?
3) How many hour wait average for this and that medication to be filled?

Here is another way of putting it. If you have two different sources of heat and you want to figure out which one can heat faster, you'd have to compare by using 2 beakers of the same size with the same amount of water in them. The time lapsed would matter, the degrees of temperature would matter but ultimately when comparing which heating system (industry) is better it would be very difficult if one beaker had water and the other beaker had glue.

First, some of the things we're paying for aren't related to our health care system, but to our tort system, which is much, much much more generous to potential victims than other countries

Total cost of malpractice in the health care system is estimated by the U.S. Department of Health and Human Services at 1% of health care spending. That's not just litigation awards, that's an estimate at the total cost of malpractice awards.

Complete red herring argument. US health care does not cost more because of our legal system, and arguing otherwise is a sign of either ignorance or a desire to deceive.

On the other side, many of the outcomes measured are both difficult to measure between countries

Of course this doesn't stop you comparing countries when it suits your purposes. Your argument: "You can't compare the attributes of health care systems across countries! Except when I want you to!".

No other country tries as hard to save premature babies as we do

How about some actual statistics here? You are measuring outcomes between countries, and not even coming up with a single reference in doing so. So let's see the numbers. What evidence do you have to back up the claim that no country on Earth tries as hard to save babies as yours?

Standards for many things, such as infant mortality, can vary widely between countries, which makes direct comparisons challenging

Didn't stop you though, now did it?

Especially when you're comparing, say, the United States, with the world's highest rate of obesity, with Japan, with one of the world's lowest.

Of course, the health care system has nothing to do with obesity rates, now does it?

Here's a recent news item: http://www.cnn.com/2004/HEALTH/diet.fitness/04/20/obesity.doctors.ap/

Title: Fewer doctors urge weight loss.

And of course, why should they? We all know obesity is a preordained condition about which a health care system can do absolutely nothing.

So crude comparisons don't work. What does?

Well, you seem to be betting on a combination of factually incorrect statements, agitprop, and weak argument. I wouldn't bet MY health on it, but you're free to do as you please.

By the way, this essay suggests that most of the productivity benefits of health care spring from pharmaceutical consumption. Of course we lead pharmaceutical production but also pay the highest prices

You might want to make a note here that the majority of the most popular pharmaceuticals in the US were developed with public money.

So apparently, financing the development of those pharmaceuticals with public funds is just peachy, but allowing the people who paid for the development of the drugs to actually, you know, have some of those drugs when they get sick...well, we don't want to get the government involved in health care now do we?

In summary, I hope you are only incompetent and writing completely uncritically, as opposed to being dishonest and thinking people are going to believe the crap you write.

felixrayman,

You wrote:
"You might want to make a note here that the majority of the most popular pharmaceuticals in the US were developed with public money."

"Total cost of malpractice in the health care system is estimated by the U.S. Department of Health and Human Services at 1% of health care spending. That's not just litigation awards, that's an estimate at the total cost of malpractice awards."

You get pretty uppity with the host and then pull these completely unsupported gems right out of the ether. Care to back these up?

As you wrote:
"In summary, I hope you are only incompetent and writing completely uncritically, as opposed to being dishonest and thinking people are going to believe the crap you write."

Jim English
Chicago

Jane Galt wrote:

The problem with this is twofold. First, some of the things we're paying for aren't related to our health care system, but to our tort system, which is much, much much more generous to potential victims than other countries, a situation that most advocates of national health care actively oppose changing. This raises costs not only for malpractice insurance, but also because of the proliferation of unnecessary tests and procedures designed to mitigate the doctor's risk of getting sued, rather than the patient's risk of getting sick. While the dollars are recorded as health care spending, no amount of change in the health care system will alter these patterns.

To which felixrayman spewed:

Total cost of malpractice in the health care system is estimated by the U.S. Department of Health and Human Services at 1% of health care spending. That's not just litigation awards, that's an estimate at the total cost of malpractice awards.

Complete red herring argument. US health care does not cost more because of our legal system, and arguing otherwise is a sign of either ignorance or a desire to deceive.

I wonder what the difference in administration costs is between the U.S. and countries with more fully nationalized programs. We have 50 different states coming up with 50 different sets of health care regulations, plus who knows how many dozens of insurance companies all with devoted staffs adjusting policy and internal regulation measures to comply with them. These staffs also calculate their own actuaries, develop billing systems, negotiate with companies to sell their insurance, and generally carry out all kinds of redundant activities with other insurance companies.

Meanwhile patients are forced to change doctors and sometimes medicines if they change jobs, and must spend significant time analyzing their insurance choices.

I know the Conservative Mantra is that this kind of mechanism leads to greater efficiency, but in this case what you are really trying to optimize is the quality of medical care. Smoothness of administration would be a plus as well, it's just not as important as the care itself, and when consumer choice is limited by the Balkanization imposed by insurance companies, optimizing for one actually hurts optimization of the other.

In any case all of this regulation and redundant compliance just seems darned inefficient and I would be curious to hear whether Jane or anyone else who pretends to be familiar with the universe of issues surrounding health care distribution (enough to, e.g., criticize plans that were developed by policy experts such as Clinton's) knows anything of the levels of cost involved.

(I am not arguing in favor of increased nationalization here, just trying to bring in an additional factor for consideration.)

Felix is a Follower of the Faith. He cannot be reasoned with.

ABR,

I don't have hard numbers or percentages of the admin costs of complying with varying regs and billing/compliance across different insurers, but it is a significant factor. I have participated in a panel sponsored by HFMA/AHA which is trying to address the issue. Within the healthcare provider side of the problem there is a desire for some form of uniform billing procedure that all insurers would recognize. The technology is in place to do this. HCFA already requires a uniform billing form, but even the state Medicaid intermediaries require enough different coding that billing cannot be called uniform.

The various insurers require different coding and billing information than Medicare and Medicaid do. A cynic might think that this is a conscious effort to complicate the system and slow down or halt payments, thus increasing profit for the insurer.

In Texas the legislature passed a bill requiring payment of clean claims within 45 days. The insurance companies convinced the Governor to veto the bill. It was finally implemented two years later. I never heard a reasoned argument against paying proper bills within a reasonable time.

ABR, I'm not sure that the Balkanization you refer to would necessarily be eliminated by a nationalized program. I'm not familiar with the European models, but in Canada each province has a great deal of latitude over how health care is delivered, within broad federal guidelines for universality. Plus within the provinces there are lower level administrative bodies responsible for the actual health care delivery. Saskacthewan, for example, has 12 Regional Health Authorities each with their own CEOs, CFOs, etc responsible for budgeting, long-term planning and day-to-day operations for all the health care facilities in their region (which of course have their own administrators).

There are other models, of coure, but overly centralized planning has its drawbacks as well. The closer to the ground you push the decision-making, the more you have to deal with "redundant" levels of administration and varying regulations and procedures.

ABR,

I think administrative costs are generally over estimated. Among larg(ish) employers (let's say over 150 lives) the admin fees the employer pays range from $10 to $20 per employee per month. The actual claim costs for most employers range between $250 and $500 per emp. per month. So, the administrative cost of an employer funded plan range between 2-8% of the claims cost.

To put that into perspective, state health premium taxes range between 2-3% on fully insured programs. In the past, our company has administered small group health plans on the behalf of insurance companies and I know we charged about 5% in admin fees (on groups over 2 lives)- and making a nice profit.

On the provider side (the cost of filing claims) I know less about. Although, most complaints I see is in dealing with Medicare/Medicaid and hours of complying with coding regs as opposed to dealing with a balkanized insurance world. I do know that if physicians decline ALL third party payments (no government/ no insurance) they can charge way less and still make a nice living. Check out the fee schedule for www.Emergiclinic.com. Dr. Berry charges less than half of what other docs charge. However, if Dr. Berry were to only accept Medicare and not private insurance, all associated costs of 3rd party payment would reappear. That would suggest single payer systems would not really decrease the provider's cost of filing claims.

An equally important issue is cost shifting. When Medicare reduces reimbursements, the cost goes up for the private payers- which makes sense since the cost of doing business for the provider did not go down when medicare reduced their reimbursements. Another form of cost shifting is unreimbursed care for the uninsured. I.e. the cost for the indigent who shows up at the ER and receives $100,000 of free care is mostly paid by the private payers.

ABR - There are several studies available of the question of how much administrative efficiency could be gained by having a single payer health care system. Jane has addressed this topic in the past. I hope you'll forgive the lack of links to the studies and to Jane's discussions of the topic. I'm too lazy to google right now. ("Too lazy to google," soon to become a cliché!)

Two quick observations, there is not a lot in the way of potential savings here. Studies that purport to find materials savings conflate "marketing" costs with "administrative" expenses (of the kind you address in your post). In theory you could save marketing costs, but you'd still have to educate doctors about new drugs, medical devices, and techniques. Just because you only have "a single payer" of all the bills, the need to disseminate information about new developments does not go away and it is not obvious that the traditional marketing approach would not be the most efficient way to accomplish that goal.

With respect to administrative costs, I'd argue that, again, there is not much in the way of available savings. This is true for two reasons: First, much of the administrative burden is at the local doctor's office where, typically, one person is responsible for making all insurance reimbursement claims. Would it be easier for this person if they only had to learn one system instead of three? (According to my sister, who files claims for a doctor, there are three primary systems insurance companies use.) Of course it would. But the three systems are very similar and the time savings of using just one vs. three would be minimal. The primary time savings is in learning each system -- so having a single payer system would save 5 to 10 minutes an hour over the current system in processing claims -- not a lot of jobs will be eliminated because of this savings. At the insurance company level, there would be no savings at all in processing claims. Those people are already using one system.

On the other hand, having a single payer system might increase administrative costs. Recently, one of our doctors told us he would be dropping our insurance company in June. Why? Our insurance company was asking for additional paperwork to document claims. We complained to our insurance company, as did a number of other patients of other doctors. The insurance company dropped its demands and we get to keep our doctor. With a single payer system, who would we have complained to and to what result?

J.R.,

Insurers and third party administrators already have to use a standardized coding system (ICD-9 codes and CPT codes). Further all payors have to use the exact same format for all electronic claims- ANSI x12 standard for 837 transactions.

Two quick observations, there is not a lot in the way of potential savings here. Studies that purport to find materials savings conflate "marketing" costs with "administrative" expenses (of the kind you address in your post). In theory you could save marketing costs, but you'd still have to educate doctors about new drugs, medical devices, and techniques.

Just an aside from someone working in the medical device industry, the largest item in our company’s “marketing” budget is actually for training physicians on how to use our products and/or train other physicians on how to use our products. I believe Jane had pointed out in an earlier series that a significant portion of the marketing budget in the pharmaceutical industry was free samples given to physicians who gave them to their patients for free. Just as it is important to make sure we are consistently talking about “marketing costs” rather than “administrative expenses,” IMNHO it is important when making comparisons of “marketing costs” to make sure that we (a) understand what constitutes a “marketing costs” (which can include physician training and free medicine) and (b) that you compare apples to apples.

Although slightly out of date (7/24/2002), this HHS report entitled "Improving Health Care Quality and Lowering Costs By Fixing Our Medical Liability System" has much to say about the cost associated with malpractice litigation. Here are some samples:

"Americans spend proportionately far more per person on the costs of litigation than any other country in the world. The excesses of the litigation system are an important contributor to “defensive medicine”--the costly use of
medical treatments by a doctor for the purpose of avoiding litigation."

"The leading study estimates that limiting unreasonable awards for non-economic damages could reduce health care costs by 5-9% without adversely affecting quality of care. This would save $60-108 billion in health care costs each year. These savings would lower the cost of health insurance and permit an additional 2.4-4.3 million Americans to obtain insurance."

http://aspe.hhs.gov/daltcp/reports/litrefm.pdf

Wow, just capping non-economic damages alone could reduce health care costs 5-9%. How could that be if the TOTAL costs of malpractice litigation is only 1% of health care costs? felixraybob?

Jim English
Chicago

Wow, just capping non-economic damages alone could reduce health care costs 5-9%. How could that be if the TOTAL costs of malpractice litigation is only 1% of health care costs? felixraybob?

Probably because felixraybob was not actually talking about the total costs of malpractice litigation but rather citing a figure as to the cost of malpractice awards which does not include the costs of defensive medicine and presumably other litigation costs in which there is not an actual award (e.g. successfully defending yourself from a lawsuit, settling a lawsuit before it goes to trial or verdict is granted, etc.).

Doug,

"It is completely relevant to consider all of the factors that skew or elevate one countries statistics vs. another country."

I agree completely. My point is that Jane didn't do this, she just pretended to. Her post consists of talking about measurement difficulties, but then making a bunch of statements that she provided no supporting data for.

1) Why wouldn't 'the way' infant mortality is counted be a factor to you?

It would be. And if you or Jane have actual information about this I'd like to see it. I'm not interested in unsupported claims.

"2) Why wouldn't 'how many people choose to be obese' in this country as opposed to others be factor in the outcome of diabetes or heart problem rates?

It would be. Did I say otherwise?

I don't disagree with anything you say about making comparisons. My point is that I see lots of allegations being made without anything resembling careful analysis.

Look at the malpractice issue. There are states, like California, that have caps on pain and suffering awards. Are medical costs significantly lower in those states? I don't know. But if I really wanted to know the effect of the tort system on medical costs I might try to find out. We don't see that here. Instead we get the usual rants and anecdotes.

You're right that glue in one beaker and water in the other leads to bad results. But that's not the argument being made here. Instead the argument is that if the heat source we like shows up badly it must be because the beaker has glue in it, never mind looking to see.

So apparently, financing the development of those pharmaceuticals with public funds is just peachy, but allowing the people who paid for the development of the drugs to actually, you know, have some of those drugs when they get sick...well, we don't want to get the government involved in health care now do we?

I never asked the government to develop those drugs. Hey, if we get the government out of the basic research business in pharma, will you stop making this argument? I frankly wonder how often the government gets involved in industries no citizen asked it to, just so people can grant it credit for the industries' successes -- in formulating arguments for further involvement still!

This is not to take anything away from the individual NIH/etc. scientists working for cures, mind you.

My concerns about nationalizing health care are threefold:

(1) De-listing. If the government insurance monopoly makes a no-coverage decision for a condition, what will I do? Let's not assume that nationalized systems always cover every condition everywhere. They say "no" just like insurance companies do.
(2) Direction of research funding. Will listing/de-listing decisions and other coverage decisions, in affecting what treatments get paid for, affect what treatments get researched (derived demand)? Do we want some Super-HCFA making these decisions?
(3) Enabling busybodies. Right now, it's none of your damned business what I eat, drink, smoke, etc. You can't tie my behaviors to your outcomes, so you don't have rights claims on my actions. I look at an editorial like Hillary's recent NYT piece, and I think "responsibility to this person means answerability to the modern puritans in the public health field." If I raise the costs of a pool everyone's forced into, am I going to face social sanction?

Thorley,

You may be right but here is the actual quote from felixraywhosits.

"Total cost of malpractice in the health care system is estimated by the U.S. Department of Health and Human Services at 1% of health care spending. That's not just litigation awards, that's an estimate at the total cost of malpractice awards.
Complete red herring argument. US health care does not cost more because of our legal system, and arguing otherwise is a sign of either ignorance or a desire to deceive."

He does seem to redefine "total cost of malpractice" to mean total "malpractice awards" but not very well. This would exclude out of court settlements as well as the items you mention. I would be interested to see how HHS worded it. But there in lies the problem.

Jim English
Chicago

The McKinsey study referred to by Tyler Cowen is not itself available online without forking over a hefty fee, but I have found a number of second-hand descriptions of it, so I have a sense of its findings. The McKinsey study looked at three aspects of productivity in the health care system, which are labelled "clinical," "administrative," and "other." What Cowen refers to are the findings on clinical productivity--on that issue, McKinsey finds the US system superior. What Cowen leaves out is that the advantage in clinical productivity is more than offset by the inferiority of the US system in the administrative and other areas. For example 92% of the US edge in clinical productivity over Germany is offset by the superior administrative efficiency of the German system alone.

Another point is that the clinical productivity comparisons are based on comparing care for only four conditions--diabetes, lung and breast cancer, and gallstones. These of course four significant health conditions, and it is surely valuable to compare how well they are treated in different countries. But it is questionable whether you can base conclusions about the productivity of an entire health care system on such a limited sample. That's not even to mention the fact that service-sector productivity measurements are always problematic, as an economist like Cowen should be aware.

I'd also like to second a couple of points made by other commenters.

First, Jane's point about obesity, et. al. treats these factors as given, but in fact, they are at least partly the outcome of our health care system--in econometrician talk, they are endogenous, not exogenous.

Second, I, like many other commentors, would like to see some solid data before accepting Jane's point about heroic efforts to save infant lives.

felixrayman:

You might want to make a note here that the majority of the most popular pharmaceuticals in the US were developed with public money.

Nonsense. NONE of them were developed with public money; a few were discovered with public money, but the vast difference between discovery and development is generally lost on laymen.

"Developing" in the pharma sense refers not to identifying the new chemical entity (that's discovery), but to determining its safety and efficacy first in preclinical (animal) studies and later clinical (human) trials. Developing a pharmaceutical therefore entails lengthy, tedious, and expensive studies directed to finding suitable formulations, assessing pharmacokinetics, performing ADME (availability, distribution, metabolism, excretion) studies, identifying and synthesizing metabolites, the lot.

The Government (primarily through the NIH) funds more basic scientific research as well as more applied clinical research, but not that sort of development - and that's where the most of the expenditure is incurred.

For this reason, it is no more appropriate to say that most pharmaceuticals were developed with public money than it is to say that Columbus developed America, and for the same reason.

Objective proof of this point: the difficulty most universities experience in licensing NIH-funded drug-related opportunities to big pharma. Only rarely has a drug candidate even been identified; usually the technology consists of results suggesting some modest activity of a class of compounds. Such opportunities are SO early stage, so plentiful, and so almost certain to fail, that big pharma generally doesn't want to be bothered. (Think of an unknown trying to sell his screenplay in Hollywood and you've got the idea.) Just getting above the noise is difficult.

The Government funds much (ca. 50%) of the basic research that yields conceptual advances, and thereby helps to support the infrastructure that leads to pharmaceuticals, but that's not the same thing as developing pharmaceuticals.

Goodness, Mark, I don't think it's in question -- ask any neonatologist from another country. After you find the neonatologists from other countries, of whom, I have it on fairly good authority, there are very few. Most very premature babies end up having huge, expensive problems, often including massive brain damage; most other systems regard it, from what I understand, as a waste to try to save these babies. I'm afraid I don't have data, only interview authority, and I don't have time to look it up, but please go ahead and do so; the people who assured me of this seemed quite reliable to me.

As for obesity being endogenous, this is a subject I've spent a fair amount of time researching. None of the public health or obesity experts I spoke to regarded obesity as being endogenous to our medical system in any significant way; indeed, they were utterly unanimous on the failure of even very expensive and intrustive preventative public health campaigns to produce statistically meaningful results. Nor did medical intervention, such as having your doctor urge you to diet, seem to help. I suppose one could class access to weight loss drugs and surgery as a differential, but these are prescribed only to the morbidly obese, have extremely high morbidity and mortality rates, and in the case of the weight loss drugs, have no better long term effectiveness than dieting, which is to say almost none (IIRC, on the order of 5% of obese patients manage to maintain significant weight loss results for five years without surgery). I interviewed one public health expert who was specialising in the area of obesity among the poor, and according to her, the great frustration of her work is that the problem for the poor isn't their lack of access to health care and information about obesity -- indeed, lack of insurance is surprisingly unconcentrated on those in poverty, thanks to Medicaid and so on -- it's that for whatever reason, they resist education and intervention measures.

Indeed, it's rather surprising that you should cite obesity as a consequence of the lack of health care access, when our television screens and magazines are filled every day with doctors lamenting the fact that there is no effective medical treatment for obesity. The only thing that really works, long term, is behaviour change. Exactly how would increased access improve outcomes? (Keeping in mind, of course, that a high proportion of the health-care-less poor are illegal immigrants who can't qualify for Medicaid, whom I presume our fictitious national health care system is not going to cover -- not unless we want everyone in Mexico showing up at Mount Sinai, anyway.)

That goes double for smoking, which is also disproportionately concentrated among the poor. And at least in New York City, anyone who can afford a pack-a-day habit at $7-8/pack can afford a doctor's visit and a prescription for the patch.

Nor do we seem to have good medical cures for drinking and drugs -- try Mark Kleiman on the subject, if you don't believe my shifty libertarian assertions.

I certainly wouldn't regard a McKinsey study as dispositive. But at least it's actually trying to examine outcomes, instead of making gross international comparisons of highly multi-factorial outcomes.

The religious nature of this debate is highlighted by the proposition of some that people are fat due to lack of access to health care services. By this reckoning, the Donner Party might have had the finest health care in history! Trust me folks, I lived a couple of years in Asia, and people ain't skinnier there because they have superior health care services, and in case you missed it, mass popular culture is not exactly devoid of the message that being fat is unhealthy. Short of deputizing doctors to kick in your door at midnight, in order to stop you from eating a bag of chips before you go to bed, or to force you on a five mile run each morning, there isn't really much the health care system can do to keep you from stuffing your pie-hole, using the remote control for exercise, and dying more quickly.

You're still being shifty, Jane. The issue is not how many neonatologists there are in the UK, say, but how infant deaths are recorded and, more important, how the differences affect the numbers.

In 2001 the US rate was 6.85 per 1000 live births. The UK rate was 5.4. If you completely remove the category "disorders related to short gestation and low birth rate, not elsewhere classified" from the US rate you get it down to 5.75. Now, I'm not sure this exactly fits the deaths you're talking about, but I suppose it's close. Are you saying none of these are counted as infant deaths in the UK? Even if they aren't, our rate is still higher, and the UK has the highest non-Us rate listed by Brittain33 above.

In both countries neonatal deaths (less than 28 days) were about 2/3 of the total.

Will's hit the nail on the head. The controversy is religious, or at least philosophical, even shading into political - namely, the role individual choices and responsibility should play in our values, and ultimately in our society.

Weight loss requires a desire to do so, plus a willingness to accept responsibility for one's decisions, to work, and to make sacrifices. In a word, character.

And not much character, either: a little bit of work, some trivial sacrifices, and a heaping helping of individual responsibility.

So the philosophical/political question is whether individuals should be accountable for their own decisions (or, to put it bluntly, whether people have a right to make stupid decisions). Unfortunately, contemporary leftist thought favors collective responsibility ("we're all to blame for _______") and collective victimology ("we're all victims") so that its proposed collective solution seems to follow naturally. We see it in this debate: people are fat because …we don't have a collective health care system. The premise is merely a vehicle to reach the goal.

Nonsense. NONE of them were developed with public money; a few were discovered with public money, but the vast difference between discovery and development is generally lost on laymen.

"Developing" in the pharma sense refers not to identifying the new chemical entity (that's discovery), but to determining its safety and efficacy first in preclinical (animal) studies and later clinical (human) trials

You're lying.

From a Public Citizen report:

"It is fair to say that without the NIH there would have been no Taxol. The agency identified a component of the Pacific yew as having anti-tumor activity as long ago as 1963 and identified the chemical responsible for this activity back in 1971. In 1983, the NIH began the first of several clinical trials of Taxol; BMS was essentially absent from the scene until it signed a CRADA with the NIH in 1991. When in 1992 the Food and Drug Administration approved Taxol for the treatment of ovarian cancer, BMS relied upon six studies, five of which had been conducted by the NIH."

Much the same story is true for many other of the top-selling drugs.

Need I point out that it is proper form to give citations so that others may follow up should they have the desire?

Public Citizen: The Health Research Group
"Taxol: How the NIH gave away the store"
Health Letter 19:8 (August 2003)

http://www.citizen.org/hrg/healthcare/articles.cfm?ID=5273

Back issues available at $3 per, although sometimes reprints come from unlikely sources (hat tip to Google, naturally):

http://www.american-buddha.com/taxol.nih.htm#TAXOL:%20%20HOW%20THE%20NIH%20GAVE%20AWAY%20THE%20STORE

You're lying.

"Lying" is a little strong; "mistaken" I'll go for.

Actually, taxol is a fairly famous case, which for some reason didn't come to mind.

Here are the top-selling drugs (2003):

Lipitor
Zocor
Zyprexa
Norvasc
Erypo (Procrit)
Ogastro/Prevacid
Nexium
Plavix
Seretide (Advair)
Zoloft

http://www.forbes.com/technology/2004/03/16/cx_mh_0316bestselling.html

Which were DEVELOPED with Federal funds?

BTW, the third of these would be especially apropos.

Need I point out that it is proper form to give citations so that others may follow up should they have the desire?

You mean like the non-existent citations the author of this post gave in the parent article for the assertion that "No other country tries as hard to save premature babies as we do".

Stuff like that?

Felixrayman,

Actually, in the parent article Miss Galt linked to the following blog article:

http://www.marginalrevolution.com/marginalrevolution/2004/04/where_is_health.html

[3 beat pause]

Or had you forgotten? o_O

[Pause]

Now that you know that your statement is inaccurate would you prefer to apologize to her *before* you start providing citations to support your claims or afterwards? O_o

And what hard facts does said article have about the assertion that "No other country tries as hard to save premature babies as we do"?

Three beat pause.

The article mentions no such thing.

Please tell me where the linked article provides evidence for the statement "No other country tries as hard to save premature babies as we do".

Whose statement was inaccurate? Yours?

Read the posts before you respond to them next time, please.

Journal of Medical Ethics, Vol 25, Issue 6 440-446
Withholding/withdrawing treatment from neonates: legislation and official guidelines across Europe
HE McHaffie, M Cuttini, G Brolz-Voit, L Randag, R Mousty, AM Duguet, B Wennergren and P Benciolini
University of Edinburgh, Scotland.

"Representatives from eight European countries compared the legal, ethical and professional settings within which decision making for neonates takes place. When it comes to limiting treatment there is general agreement across all countries that overly aggressive treatment is to be discouraged. Nevertheless, strong emphasis has been placed on the need for compassionate care even where cure is not possible. Where a child will die irrespective of medical intervention, there is widespread acceptance of the practice of limiting aggressive treatment or alleviating suffering even if death may be hastened as a result. Where the infant could be saved but the future outlook is bleak there is more debate, but only two countries have tested the courts with such cases. When it comes to the active intentional ending of life, the legal position is standard across Europe; it is prohibited. However, recognising those intractable situations where death may be lingering and unpleasant, Dutch paediatricians have reported that they do sometimes assist babies to die with parental consent. Two cases have been tried through the courts and recent official recommendations have set out standards by which such actions may be assessed."

Journal of Pediatrics Nov 2000
Treatment choices for extremely preterm infants: An international perspective.
de Leeuw, Richard MD; Cuttini, Marina MD, et al

When confronted with the birth of a depressed 24 weeks’ preterm infant, the overall response of neonatal doctors in 10 European countries, with the exception of the Netherlands, is to resuscitate and start intensive care. In Italy, Hungary, and Estonia over half of them would do so even if intensive care would not be withdrawn once started. In the remaining countries the so-called “individualized prognostic strategy”16 prevails: intensive care is initiated with the understanding that it may later be withdrawn if it appears to be ineffective or if it appears to impose too heavy a burden on the patient. In contrast, in the Netherlands most physicians would withhold resuscitation from the very start, a behavior consistent with the guidelines of the Dutch Association of Pediatrics. 17

After further deterioration of the infant’s condition, the attitudes of European doctors diverge. In Germany, Italy, Estonia, and Hungary, continuation of intensive care is the preferred option, whereas the opposite is true in the other countries. However, limitation of intensive care appears to have a different meaning according to nationality and ranges from the continuation “of intensive care without treating emergencies” (in Italy, Spain, Germany, and the Central and Eastern European countries) to the clear-cut decisions made in the other countries: withdrawal of mechanical ventilation and, in France and the Netherlands only, deliberate termination of life.

In a comparable study from Denmark, 18 the proportion of pediatricians willing to resuscitate a baby born after 24 weeks’ gestation, with a birth weight of 650 g (no Apgar score given) was 82% with parents asking for everything possible to be done to save the baby and 63% with parents unable to make a decision. In a US study carried out in 1992, 19 about 95% of the respondents were willing to resuscitate an infant at 24 completed weeks’ gestation, and 60% were willing to initiate full intensive care. With later decompensation of the same infant, about 45% would encourage withdrawal, a figure strikingly close to our finding of 46% of the total sample (data not shown) favoring limitation or withdrawal of intensive care.

The accompanying editorial states:

With subsequent neurologic deterioration, more variation in approach was found both among and within countries. However, in no country would the majority of physicians continue full intensive care without involving the parents; nevertheless, very few physicians who favored continuing care after neurologic deterioration would change their course of action even if the parents opposed it. On the other hand, many physicians who favored limiting or discontinuing care would reverse that decision in the face of parental opposition. In France, a small majority of physicians would limit or withdraw intensive care without involving the parents in the decision. Although nationality was the strongest determinant of approaches to this hypothetical infant’s care, even after adjustment for potentially confounding variables, significant variation was found within countries.

Money quote:

"nationality was the strongest determinant of approaches to this hypothetical infant’s care"

"The United States has high neonatal intensive care capacity, with 6.1 neonatologists per 10,000 live births; Australia, 3.7; Canada, 3.3; and the United Kingdom, 2.7. For intensive care beds, the United States has 3.3 per 10,000 live births; Australia and Canada, 2.6; and the United Kingdom, 0.67."

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