“For years Dr. Linda Halderman operated a general surgery practice in California’s San Joaquin Valley, where she treated patients ranging from those with serious, life-threatening conditions to those seeking elective, cosmetic treatments. In a recent piece in Investors Business Daily, Halderman recounted the story of a woman patient who had not had a mammogram in several years even though her family had a long history of breast cancer. “But I don’t have insurance,” the woman told Halderman when the doctor asked why she had neglected to get a test that costs $90. Yet the woman was in Halderman’s office for $400 Botox treatments that she was paying for.”
So begins Steven Malanga’s new essay, which can be read here. (Full disclosure: he is not only a senior fellow at a think tank I work for, but one of my favorite writers on economic issues.)
Mr. Malanga writes at some length about the discrepancy between the healthcare that we are willing to pay for and the healthcare that Americans want. Dr. Halderman’s story perfectly illustrates the point.
Having trained and practiced in another country with a “free” healthcare system, I have my own recollections: the patient who had thousands of dollars of work-up for a stress headache but took the subway to the hospital to avoid the $20 parking fee, the patient who refused to pay a token practice fee for her family doc (to cover prescription refills and the like) but insisted on every problem being investigated by a specialist or sub-specialist, etc.
Mr. Malanga’s observation is good, one that isn’t given much thought in the all too glib rhetoric coming out of Washington these days. Listening to Democrats, it would seem that all things wrong with American healthcare could be resolved with the creation of a few committees and a new entitlement or two. Republicans – who have been more right than wrong in this debate – focus increasingly on sound-bite politics, hitting on tort reform, rather than something more meaningful (let’s be honest, my friends, health-insurance premiums didn’t double since 2000 because the trial lawyers are suing Merck over Vioxx).
Americans today pay just 13 cents directly for every health dollar spent. It’s one reason that health costs continue to rise, but the value doesn’t necessarily increase. We are, after all, always ready to spend – spend, that is, someone else’s money.
Until that core economic problem is addressed, health costs are likely to continue to rise, albeit drawing more heavily from the treasury in the future if the Democrats succeed this year in passing legislation.
13 responses so far
1 balconesfault // Nov 12, 2009 at 4:26 pm
Americans today pay just 13 cents for every health dollar spent.
I do not understand this, without qualification. Do you mean that Americans pay just 13 cents out of pocket (versus in insurance premiums) for every health dollar spent?
Does that figure include spending on over-the-counter medicines, and alternative health treatments like chiropractors and accupuncturists and massage therapy which are commonly not covered by insurance plans? Vitamins and suppliments? Personal trainers and health club dues? Running shoes?
2 joemarier // Nov 12, 2009 at 5:46 pm
Good point. Going by FSA reimbursment rules alone, I’m above that number for the year, though.
3 Reason60 // Nov 12, 2009 at 6:17 pm
So that’s what is causing all the bankruptcies for the uninsured- they are spending too much on Botox!
Seriously? This is your argument? For someone who works at a think tank, I would think you should be more familiar with the saying that the plural of anecdote is not data.
Your argument seems to be that if people shouldered more of the cost of their health care, they would be more responsible in choosing it; Fair enough.
But choice has very little to do with health care; the vast majority of our health care costs are near the end of our life; The next largest segment of costs are for catastrophic illnesses like cancer.
In a free marketplace, people can choose when and where and what kind of product to buy; and if they cannot afford a product, they simply do without.
But no one can choose when they get cancer; No one can choose not to get old and sick. We are forced into a market in which we cannot choose our need, or what product we need, or how to get it.
Insurance is the marketplace’s response to the random lottery of sickness and death. But insurers are very good at reading actuarial tables and statistics- and they correctly assign premiums based on risk, which means that for some people, there will be no insurance at any price, so great are their odds of illness.
The idea that the marketplace can provide a product for everyone regardless of means is a flat contradiction- the marketplace is efficient precisely because those who cannot pay are excluded.
Ultimately, we are faced with a scenario in which people who can’t afford to participate in the marketplace get sick and need care, and cannot afford it.
We have to decide if we are willing to provide them with care, or let them die. Right now, we are letting them die.
4 Bebe99 // Nov 12, 2009 at 6:25 pm
As an employer I had an employee ask me to drop their health insurance (that I pay for) and take 1/4 of that amount in extra pay. Why?- because he can go to the emergency room for free. But that’s the exception. 90% of my people want the insurance–even tho they tell me over and over that they rarely use it. Because 90% of them ARE responsible and ARE planning for emergencies. And these people aren’t making high salaries.
Due to economic necessity we have recently switched to a high deductible plan with Health Savings Account. It was a difficult adjustment to give up the $25 copays for doctors and drugs. But I can see that this is a much better plan for those of us who are healthy. Because there is the potential to SAVE when you don’t need healthcare. So yes, we need to look at healthcare differently, and if health insurance companies are gouging people, then high deductible plans can be the answer.
5 mdjoey // Nov 12, 2009 at 11:59 pm
The New England Journal of Medicine study broke it out many different ways so we can understand our sad reality. Americans spend $752 per person per year more than Canadians, when total spending is considered. This likely includes waste and indifference, on the part of doctors and patients, which occurs when everyone thinks they are getting something with “someone elses” money. Have a headache, ask for an MRI and you’ll get one, no questions asked. Why should the doctor examine you, take a careful history, employ more cost-effective, less invasive treatments when the patient wants what they want. A thorough exam will likely be reimbursed for less than $100, a 5 minute exam to order the test will pay $75, and the doctor has less risk of being sued if you should happen to get hit by a bus the day after the test.
Need medicine for your acid indigestion? Ask your doctor for the purple pill, hey it’s only $30 per month (for you). The insurance company pays $250 for 30 tablets, antacids are dirt cheap and generic over-the-counter proton-pump inhibitors like prilosec are a lot cheaper, but why not get “the best”, it only costs $30. Of course, with your insurer spending hundreds of millions on these pills, your premium will go up next year, and we’ll complain about their price gouging. Before Claritin went over the counter, Americans spent $5 per insured member per month on this drug, yet only a fraction of the insured members have allergies. We all pay when resources are wasted.
There is no way for an average patient (or doctor, for that matter) to figure out the true cost of anything, what with managed care contracts wildly varying discounts based on volume and the Fee-for-service reimbursement system that rewards you for doing more services, not making people well.
Few people know that the best treatment for prostate cancer might be to NOT do surgery, yet the trend today is to replace traditional $9,000 surgery with Robotic surgery for $25,000. Of course the patients are happy to get the new tecnology, the hospital can hold itself out as a center of excellence, but is there any real evidence this patient lives longer after consuming 3-4 times what a Dane or a Canadian might consume. Give us price, give us outcomes (how long till I’m back at work, what’s the complication rate or readmission rate of a procedure at location X vs. location Y, and how many visits and cost is needed to establish a diagnosis and treatment plan at each facility. Armed with the data, I’d want to have the least invasive operation that has the lowest complication rates and is close to the top in cure rates. Then I know I’m getting value, not fluff for my money.
Multiple this by how many americans seek care each year, and what we get, and you’ll see we do indeed spend 13 cents for every dollar of care that is given. And much of the 77 cents was wasted, ineffective or duplicative, not a worry for docs and patients who only worry about the copay and deductible, leaving ’someone else’ to foot the rest. Till this is explained for what it is, a shift to value based competition just like any other successful american industry, the costs don’t have a cance of dropping, no matter what the plan.
6 SFTor1 // Nov 13, 2009 at 1:37 am
As previously mentioned I just came back from a retreat for men with cancer, where I help out. 6 out of 11 men were bankrupt. All had health insurance before they got sick. All had lost their homes. All had kids.
Seems to me there’s some hidden costs there too.
7 balconesfault // Nov 13, 2009 at 7:06 am
mdjoey: Few people know that the best treatment for prostate cancer might be to NOT do surgery, yet the trend today is to replace traditional $9,000 surgery with Robotic surgery for $25,000. Of course the patients are happy to get the new tecnology, the hospital can hold itself out as a center of excellence, but is there any real evidence this patient lives longer after consuming 3-4 times what a Dane or a Canadian might consume. Give us price, give us outcomes (how long till I’m back at work, what’s the complication rate or readmission rate of a procedure at location X vs. location Y, and how many visits and cost is needed to establish a diagnosis and treatment plan at each facility. Armed with the data, I’d want to have the least invasive operation that has the lowest complication rates and is close to the top in cure rates. Then I know I’m getting value, not fluff for my money.
I understand your words … but I don’t understand the practical implications for healthcare policy in context of this discussion.
Is the answer to make sure the bulk of the $25,000, or even $9000, comes from the pocket of the consumer, in order to incentivize him to look for the most cost-effective treatment?
It seems to me that there are any number of $25,000 procedures out there which don’t have cheaper alternatives … unless the cheaper alternative is “die quickly”.
So now we have a dilemma. We don’t want someone having to die quickly because $25,000 will send them into bankruptcy … we do want them to choose a less expensive technology to save their life (and quality of life) if that technology offers “the lowest complication rates and is close to the top in cure rates”.
We also have to be practical here, and realize that most patients aren’t going to have the inherent knowledge to pick and choose in many circumstances. Informed choice has a price tag, both in the time (and intellect) it takes to be informed, and even in the resources to be able to shop between physicians for multiple options when time is ticking and each doctor visit costs money, and while to those of us who regularly drop $50-100 on a nice dinner with the wife this isn’t a big deal, to a lot of people a couple of $50-100 doctor visits blows the family budget for the month.
I guess we could have a table of more expensive procedures that insurance/society will cover as necessary, and more expensive procedures that insurance/society won’t cover because mdjoey (or a panel of informed mdjoeys) has looked at the data and concluded that the procedures are fluff, not value.
But having seen the political hay that’s been made in the last few months simply over the idea of counseling being provided to the elderly to help them work out their end-of-life options before they’re in crisis mode, it’s going to take an awful lot of growing up in a hurry before anyone will take that concept seriously.
8 sinz54 // Nov 13, 2009 at 10:17 am
reason60:
But many conservatives don’t want universal coverage.
National Review has admitted this.
And the health care proposals coming from the GOP these days focus on cost containment, NOT expanding coverage.
This is an issue of basic social philosophy: What are the goals of a health care insurance system? It’s liberals, not conservatives, who insist that everyone must be covered with a generous plan, even if the market can’t do it.
At the opposite end of the spectrum from the liberals are Michelle Malkin’s Social Darwinists: Life is tough, there are winners and losers; and if you fall ill with cancer, it’s not my problem.
I fall somewhere in the middle. We can’t pay for Botox treatments and labiaplasties and memberships in health clubs for every American who wants them regardless of their ability to pay. But no American should have to face death or bankruptcy because of catastrophic illnesses like cancer, heart disease, kidney failure, or spinal cord injury. And that will require a more substantial role for government than we conservatives are used to.
9 D House // Nov 13, 2009 at 12:50 pm
I’m sure you’re a great doctor. But a lawyer you obviously ain’t. Suing Merck for Vioxx isn’t a medical malpractice suit, it’s a products liability suit. Products liability suits drive up the cost of drugs, not physician care. Drug manufacturer suits have no effect on medical malpractice premiums and defensive medicine, which, in fact, are significant drivers of costs increases in health care (as opposed to drug development). Those costs are driven up by medical malpractice suits, which could be curbed significantly with tort reform. See, e.g., Texas.
10 SFTor1 // Nov 13, 2009 at 11:08 pm
Let’s see if we can make this simple:
It costs a lot of money to have a population in poor health.
We—all of us—end up paying in the end.
To make your labia more attractive is something you have to pay for yourself (hint: counseling may be cheaper than the knife.)
Hence Sinz’s musings.
11 mdjoey // Nov 14, 2009 at 1:03 pm
to balconesfault: “I understand your words … but I don’t understand the practical implications for healthcare policy in context of this discussion”, I am saying that when one has something as serious as prostate cancer, study after study has found the BEST treatment is generally non-surgical. People who do not have surgery generally live longer, and it seems there isn’t a lot of difference between the $9k or $25k procedures. Medication, radiation, hormonal therapy work better and we live longer.
But, docs and hospitals are paid per procedure. Hospitals want you to know (with expensive ad campaigns) that they now own the daVinci Robot, and you should have it used on you. Healthcare reform should include revamping the fee for service and relative-value-unit payment systems. For a man who “wants this tumor out of me” an oncologist who counsels you for a full hour, educates you and your family, brings in a radiation specialist into the room and together you work on a treatment plan, these 2 docs might get a few hundred bucks.
This is the part that is wrong. We have a system where hours of human touch (what studies say we want from our doctors) are NOT reimbursed, but lots of less effective tests and questionable treatments are richly rewarded, by private insurance and medicare/caid. This is upside down, and feeds into the expensive ‘defensive medicine’ mind set (you’re telling me I don’t need a PET scan ($5000) or another MRI ($2000) and I could take a shot and some pills ($250)?) When that patient eventually dies (we ALL die) 13 yrs. later, I’ll be sued because “perhaps” the patient could have lived 14 years if I’d only gotten the PET scan and ordered 25x more tests and treatments. This will pull a few hundred thousand out of healtcare money to defend the suit, and reward the “victims”. We all lose under this system, which is more than perpetuated with the current plan. Your doctor visit will be replaced by lower level providers, who will have enough training only to listen to your complaint and order tests from a checklist or computer screen algorithm.
I’m not proposing a panel or a table. The data for each service should be public, by disease state or procedure code. If you take up an hour or two of your doctors time to pick the best option for yourself, your doctor should be compensated well for that time, you are literally planning the rest of your life. It’s no different from european schools where the test results for the whole class are posted in the hallway after finals. The kids know themselves who beat them and who they need to beat, and adjust their performance accordingly. The headmaster looks at the scores to see which teacher should go for a refresher course. All in the name of providing the best outcome.
THIS cannot be done by a panel, or by Washington. Give people and their doctors the data, make the price, outcome, morbidity, complication rate available by doctor, by hospital, by state and PAY the doctors to explain it (using their experience and wisdom without fear of lawsuits), and the people will pick the procedures or treatments that offer them the most value. This must be done on a doctor-patient level, and must be appropriately reimbursed.
12 SFTor1 // Nov 15, 2009 at 1:27 pm
mdjoey, that all sounds very nice.
My contention would be that in a large number of cases people have no way of knowing what is best for them. They need the help of a robust medical provision system that needs to look neither to health insurers nor the courthouse to decide a course of treatment.
13 balconesfault // Nov 15, 2009 at 4:26 pm
I appreciate mdjoey’s response. But I’m still not sure what the proposal is here.
What is the incentive for someone to choose the best “value” option, rather than the one that they come to believe will give them the greatest chance of survival, regardless of cost?
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