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06/07/2009

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Anonymous

Jack,

Do you propose a sort of indentured servitude or slavery system for providers?

Jim

Anonymous

One graph you should look at-
average spending on health care vs. GDP per capita for the developed countries. There is a near linear relationship. In fact, so much of the variation of spending on health care is accounted for by GDP per capita, that there is no relationship between health care and any other factor.

This suggests that health care is a luxury good and the reason we spend so much money on health care is because we have so much money.

Anonymous

"Insurers do try to limit their costs by refusing to approve low-value procedures--but in the face of combined pressure by provider and patient, the insurer is often forced to back down."

is this a reference to specific research or conjecture?

Anonymous

Jim?? What would cause you to ask such a question?

......... and Anon 9:48........ I'll take your word, perhaps, for the spending slope paralleling GDP.......... but! as is widely reported the US spends 15% (as reported here and perhaps higher) while other developed nations are spending from half as much to 10 or 12%.

15% of our $14 trillion economy is $2 trillion or something on the order of $21,000/ household, which is growing at some 3 times the rate of inflation while not serving everyone. Think there might be some potential here for a different model? Like NOT leaving some 40 million to showing up half-dead at the ER for the most expensive and least efficient means of H/C?

If wiser policy in the US were to save even 5% of GDP that would add to $700 billion/year or $7,000 per household. I don't expect any such savings to occur, but surely we can shoot for slowing the rise, hopefully before H/C consumes an even higher percentage of our household budgets.

And.......... a question: With soaring H/C costs gobbling away at median incomes that have been flat for all too long, and with energy nibbling away as well, how exactly can we expect a demand driven recovery with folks returning to retailers, the remaining auto dealers, or perhaps even to purchase a bit of our housing inventory?

Jack

Anonymous

For following piece was written by Leo A. Gordon, M.D. of Los Angeles, California. It was published in the Journal of the American Medical Association on February 24, 1984. It is pretty much what you can expect from health care in the future.

"I saw your ad on television and came over here this morning to talk to you about my gallbladder."
"Yes. I'll remove your gallbladder for $529.69 with no extras. I'll do it next Tuesday in under an hour, you can go home the next day. You can pay cash, in which case they will be a 10% discount, or you can use your credit card, in which case the will be a 10% processing fee by my office. Any questions?"
"Yes. Could you tell me a little bit about the procedure?"
"What's to tell? You saw the ad, and I just told you what it meant. Gallbladder removal for $529.69, no extras."
"Yes, I know that, but what about the medical aspects of my case?"
"Oh, a wiseguy! You get the price, now you want the extras!"
"I thought extras meant hidden costs in other charges"
"well, you were wrong."
"Let me get this straight. You're low price is just for the isolated act of removing my gallbladder? What about information, kindness, rapport, compassion, all the things doctors are supposed to be involved with?"
"Ah, the unending desire for a superior product and a low price. Listen, you brought this on yourself"
"what do you mean?"
"Remember about 10 years ago, when competition and consumerism began to govern medical practice? Remember when the government began contracting, regulating and consumerizing medicine. Remember when they equated gallbladder removal with ball- bearing production? Well, those actions caused two things to happen. First, it lowered the cost of medicine for the consumer. Second, it allowed me, through marketing and sales analysis to become the premier biliary surgeon in the United States. My landmark bill, SB 980867 'Limited Partnership Cholecystectomy For the Public,' which, by the way, was a rider on AB 78956 'Pollution Standards in Henry County,' sailed through Congress and became law. The public demanded it and the public got it. I'm franchised in 30 states now!"
"You mean for your price, all I get is a mass-produced product?"
"Look, you want talk, understanding, rapport, information? Those are personally demanding things. Go to the professors up the street. But don't expect a price like mine!"
"I'm shocked. Are all doctors like you?"
"Who said I'm a doctor?"
"What? How can you remove gallbladderand not be a doctor?"
"Economics, my friend, economics. The government found it increasingly easier to deal with operating room technicians than with doctors. It set up technical schools for these people and taught them to perform cholecystectomies, then legislated medical licenses for them. I employ over 200 of them. It makes economic sense."
"But does it make medical sense?"
"Medical sense became subordinated to economic sense in the late 1980s. Medical sense will forever be subordinated to economic sense, if I have anything to say about it. I have a smooth operation here, no pun intended"
"I'm uncomfortable with your setup. I don't mind paying a little extra for the things you've discounted from your operation. I had no idea that those aspects of medicine cost money."
"Listen, let me level with you. A lot of people don't think of it this way, but when you go to a surgeon, you are purchasing a 'share', as it were, of his expertise. It is helpful to think of it here as being analogous to a product. It is precisely because the share is not a physical entity that people have racked their brains trying to assess its worth. Surgeons naturally feel that a share is quite valuable and that it can be judged in terms of its visible results and its life-saving capacities. Medical consumerism, in seeking lower-cost shares, overlooked one important fact, that such shares or products are the basis for the free enterprise system. A durable master-crafted product commands a greater price than a poorly made mass-produced one. And so it is with medical shares. I sell cheaper ones, because I find it easier to do so and rely on volume and speed to make a profit. Those selling higher-priced shares must become involved in individual commitment, understanding, allegiance, technical excellence and rapport. I have no margin for them in my setup. What I have created is the logical medical extension of free enterprise marketing. Some shares are just plain worth more than others."
"I really don't know what to make of this."
"Make of this what you will, but remember one thing and one thing only -- $529.69, no extras. Nobody can beat that!"

END OF ARTICLE

My advice Don't get sick.

Jim

Anonymous

For following piece was written by Leo A. Gordon, M.D. of Los Angeles, California. It was published in the Journal of the American Medical Association on February 24, 1984. It is pretty much what you can expect from health care in the future.

"I saw your ad on television and came over here this morning to talk to you about my gallbladder."
"Yes. I'll remove your gallbladder for $529.69 with no extras. I'll do it next Tuesday in under an hour, you can go home the next day. You can pay cash, in which case they will be a 10% discount, or you can use your credit card, in which case the will be a 10% processing fee by my office. Any questions?"
"Yes. Could you tell me a little bit about the procedure?"
"What's to tell? You saw the ad, and I just told you what it meant. Gallbladder removal for $529.69, no extras."
"Yes, I know that, but what about the medical aspects of my case?"
"Oh, a wiseguy! You get the price, now you want the extras!"
"I thought extras meant hidden costs in other charges"
"well, you were wrong."
"Let me get this straight. You're low price is just for the isolated act of removing my gallbladder? What about information, kindness, rapport, compassion, all the things doctors are supposed to be involved with?"
"Ah, the unending desire for a superior product and a low price. Listen, you brought this on yourself"
"what do you mean?"
"Remember about 10 years ago, when competition and consumerism began to govern medical practice? Remember when the government began contracting, regulating and consumerizing medicine. Remember when they equated gallbladder removal with ball- bearing production? Well, those actions caused two things to happen. First, it lowered the cost of medicine for the consumer. Second, it allowed me, through marketing and sales analysis to become the premier biliary surgeon in the United States. My landmark bill, SB 980867 'Limited Partnership Cholecystectomy For the Public,' which, by the way, was a rider on AB 78956 'Pollution Standards in Henry County,' sailed through Congress and became law. The public demanded it and the public got it. I'm franchised in 30 states now!"
"You mean for your price, all I get is a mass-produced product?"
"Look, you want talk, understanding, rapport, information? Those are personally demanding things. Go to the professors up the street. But don't expect a price like mine!"
"I'm shocked. Are all doctors like you?"
"Who said I'm a doctor?"
"What? How can you remove gallbladderand not be a doctor?"
"Economics, my friend, economics. The government found it increasingly easier to deal with operating room technicians than with doctors. It set up technical schools for these people and taught them to perform cholecystectomies, then legislated medical licenses for them. I employ over 200 of them. It makes economic sense."
"But does it make medical sense?"
"Medical sense became subordinated to economic sense in the late 1980s. Medical sense will forever be subordinated to economic sense, if I have anything to say about it. I have a smooth operation here, no pun intended"
"I'm uncomfortable with your setup. I don't mind paying a little extra for the things you've discounted from your operation. I had no idea that those aspects of medicine cost money."
"Listen, let me level with you. A lot of people don't think of it this way, but when you go to a surgeon, you are purchasing a 'share', as it were, of his expertise. It is helpful to think of it here as being analogous to a product. It is precisely because the share is not a physical entity that people have racked their brains trying to assess its worth. Surgeons naturally feel that a share is quite valuable and that it can be judged in terms of its visible results and its life-saving capacities. Medical consumerism, in seeking lower-cost shares, overlooked one important fact, that such shares or products are the basis for the free enterprise system. A durable master-crafted product commands a greater price than a poorly made mass-produced one. And so it is with medical shares. I sell cheaper ones, because I find it easier to do so and rely on volume and speed to make a profit. Those selling higher-priced shares must become involved in individual commitment, understanding, allegiance, technical excellence and rapport. I have no margin for them in my setup. What I have created is the logical medical extension of free enterprise marketing. Some shares are just plain worth more than others."
"I really don't know what to make of this."
"Make of this what you will, but remember one thing and one thing only -- $529.69, no extras. Nobody can beat that!"

END OF ARTICLE

My advice Don't get sick.

Jim

Anonymous

very good

Anonymous

This is too big a question to be tackled from just one side.

Anonymous

Judge Posner,

A very interesting recent article in the New Yorker discussed some of the concerns you outlined, including the replacement of the professional model with the business model and rational limitations on treatment, which the author views as intimately interrelated. I think your cultural explanation and suggestion that what works for Europeans won't work here is intriguing, but another way of saying Americans are less fatalistic is that they have a strange (to me) fixation with prolonging quantity of life regardless of the quality attached to such extension, and a somewhat primitive view that more consumption of a good thing (especially when they do not directly face the marginal cost of that consumption, as you point out) always bears a direct relationship to the value obtained by that consumption. Indeed, the culture may have local variations on this point and on professional v. business models (though the latter seems not to be quite a binary choice so much as a spectrum with many variations) as the author of the New Yorker piece suggests.

David Lundeen

http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?currentPage=all

Anonymous

When you think about it, it makes MORE than fiscal sense to find that kind of money in the budget. You could stop doing so many things--overseas aid, special interest funding, etc.

I am of the opinion that it is immoral to not provide health care to many more people and don't mind paying my share. But then, these plans always make sense in the short term, but such a large budget increase in the long term will probably turn out to be unwise and perhaps cause even more damage, not to be too utilitarian. Maybe if destruction of the entire system is inevitable, it's better to have many people benefit now, and fewer in the future rather than nobody, ever.

Anonymous

Interesting how "globalism" works; Not subject to international pricing pressures are drug companies, docs, lawyers, politicians, CEOs, seemingly Wall Streeters, and perhaps oil companies who benefit from cartel pricing.

Anonymous

Listen, let me level with you. A lot of people don't think of it this way.

Anonymous

What do they think? And what type are they?

Jack

Anonymous

I caught Prof Posner on Charlie Rose last night and it was quite good; Rose seemed to draw a lot out of him and it was more interesting than his essays.

I've not read his "Failure of Capitalism" and probably will not for the reason that I so completely agreed with him that A. We (the world) are in a depression and a downward spiral that will be VERY tough, perhaps even impossible to pull out of, and that B "economists" including bankers, Wall Streeters and academics did a POOR job of forecasting and that those (and I think there were many) who warned that the sky was falling, were so universally ignored.

In past recessions (but not depressions) it's been housing and autos that have pulled the cart out of the ditch, today what I see of housing is the Catch 22 that housing will not rebound until housing rebounds, and about the same for the auto biz. With credit cards maxxed out that leaves the small stuff we pay cash for to haul the cart and it's not enough, not nearly enough.

As Posner mentioned on Rose, we've the double whammy of being left with a huge and growing debt and the deficits of the last eight years that were also not creating a strong economy and growing job market, so now the massive spurring needed IS going to sink us in levels of Debt/GDP we've not seen since WWII.

Posner, wisely, I thought, separated beneficial make work projects that we could do now with existing tech, such as going through our homes and buildings to make them far more energy efficient from "new tech" which may well be beneficial in 5 years or longer but will do little to spur this ailing economy in the near term.

Posner seems to be, mostly, on the same page as the President and admin but criticized them for not coming with an agreed upon plan of action and beginning to implement it Jan 21. But, with the clumsy bank bailouts, the auto mess, and a couple of intractable wars to continue or end, I thought that a bit much to expect as the politics of change are much harder to implement than an academic opining "shoulda, coulda, woulda". But in short Posner seems to agree this is one tough mess to clean up.

Anonymous

Price and Wage controls? Is "Triage" a Health Care Concept WHO's time has come? Shall it be setup along the lines of "need" or "ability to pay" or perhaps the elimination of "non-necessary" services and procedures and the concentration of efforts and resources on more "basic" medical care.

neilehat

Anonymous


As a Swede I must say that I´m pleased that I´m living in Sweden. Okey, our taxes are rather high, but we can relay om our healtcare when we get sick, no matter if you are rich or poor. Admit, this is rather humanly!

D

Anonymous

Three elements to help manage health care expenses?
1) How can life span be seriously considered a metric for the U.S. health care system when the population does such a pathetic job of taking care of themselves? Individual accountability for one's choices (diet, exercise, etc) seems a significant contributor to any cost containing solution.
2) Dividends distributed by publicly traded health insurance companies also seem a huge siphon of health care dollars away from care needs.
3) While very tough to organize, the level of care provided to one in their final stages should correlate with their existing quality of life. Dignity and comfort for the patient would remain huge priorities.

Anonymous

Anon 10:49,

I have personally witnessed the following in emergency rooms and the full and expensive resources of the system were focused on the problems:

"I swallowed my gum"

"my husband forgot our anniversary"

"My son is leaving for camp tomorrow and needs a physical exam and a note or he can't go"

A coke bottle up the rear and "I have no idea how it got there"

A key chain in the bladder and "I have no idea how it got there"

Drug dealers who jumped out of a 5th floor window with bed sheets as a parachute (it didn't work) to escape cops who were breaking in the door.

Countless drug and alcohol induced injuries and overdoses.

"I fell two years ago and my ankle hurts"

And on and on and on.

Anonymous

jack,

this is anom at 9:48

I got the graph from Dr. Phelps (U. of Rochester), Healthcare Economics.
I think you're missing the point of a luxury good. If an item is a luxury good, a consumer substitutes luxury goods for other goods as he gets more wealth. Additionally, the more "excess wealth" (money left over from food and other necessities) a consumer has, the more he can spend on luxury goods. Therefore, it can be expected that more wealth can lead to a greater percentage of money spent on health care.

Anonymous

Anon 9:48: I have the concept and markets are often "very curious", and different for different folks.

"We" (some of us) are wealthy enough to support the arts and gambling, "luxury goods" I suppose though often it's poorer folk who gamble and spend more on lottery tickets than those who can more easily afford to do so.

But more to your point, in terms of "markets" our H/C system is a kluge that seems to have been designed to combine the worst aspects of socialism with virtually none of the good aspects of capitalism.

Sooooooooo, we've surely a split "market" with those with the better grades of insurance -- which goes up to some VERY premium levels -- spending as if the most luxurious of benefits had zero costs or a cost so minimal as to amount to zero. In that sector I see virtually NO cost containment aspects, so, I look further for some cost containment effects, but where?

It appears that those coming in paying cash have no opp to dicker and instead are charged MORE than what the "insurance" company pays for the same treatment. Medicare? a clumsy attempt to put downward pressure on fee for service that clearly shorts your primary GP while often over-rewarding specialists. Those "not covered" and falling into the ER half-dead for the priciest care on the face of the earth? They may see the "luxury pricing" but if they weren't able to pay for "insurance" they're likely not able to pay ER bills either.

So......... back to the "dilemma" of why the US pays $150% of what other nations pay and leaves 50 million out. I don't see the cost inflation being driven by "wealthy" consumers, but by the fact of there being "cost containment" aspects ranging from none to clumsy and ineffective that would clearly give little incentive toward increased efficiency and LOTS of opportunity for individual Doc-shops to charge much more than similarly skilled scientists in other areas could earn.

This part is not quite right:

Additionally, the more "excess wealth" (money left over from food and other necessities) a consumer has, the more he can spend on luxury goods.

Jjjjjj: The ONLY sector that has gotten wealthier during these last three decades of tremendous increases in med care costs, has been those in the top quintile with the lower quints actually becoming poorer as a flat median wage is nibbled to death by H/C and energy costs. So there is no surplus of dollars rushing to bid up prices for "scarce?" medical care.

Therefore, it can be expected that more wealth can lead to a greater percentage of money spent on health care.

Jjjjj: Well, this doesn't work too well either, as the US continues to spend an even higher PERCENTAGE of its (nearly the largest) GDP per capita than do those where, ha! "medical bankruptcies" are virtually unknown instead of being the #1 cause as is the case in the US.

Ha! Perhaps just for fun here, we could see if we could employ known economic principles to design a H/C system substantially WORSE than that of the US! This could be a real challenge!

And, Ha! Ha! while WE might not be able to do worse, and Congress "loses it's nerve" (translation is too beholden to self dealing H/C interests, perhaps they could invent something worse!

I see only two possible schemes: One would be similar to Canada -- and expanded Medicare with government trying to figure out the "right price" and stumbling along with some form of fee for service with "procedures" trumping wholistic care and all of today's squabbling over the price being wrong or outdated.

Or, something like an improved version of HMO's and provider networks seeking subscribers and their voucher with service above that mandated by a patient bill of rights.

Of the two the second should have incentives to seek efficiencies and contain costs while providing their best service in order to gain more subscribers.

Obama tack seems to be to push us all into "insurance" companies and leaving for later the obvious conclusion that once we're all in the pool who needs or would want insurance companies at the party????

Jack

Anonymous

Great! Thank you!

Anonymous

great post sir..
thanks for sharing. really helped a lot here.
-------------
Tiffanys

Anonymous

I'm going to focus on the Judge's last paragraph. It seems that we want to have our cake and eat it, too.

We want longer lives, but we don't want to make the personal efforts (such as exercising and reducing our caloric intake) that might help. Instead, we want pills and heroic treatments. This is why some critics have used the term "sick care" to describe the US system rather than "health care."

The rise of Type II diabetes testifies to the problem we've run into. A friend of mine managed to drop 70# and no longer needs medication. Most similarly situated people will just take the pills.

A system of regular health *maintenance*, combined with some personal responsibility, would likely prove to be far cheaper than only fixing things when they're seriously damaged.

Anonymous

"But international comparisons of health that are limited as they largely are to differences in longevity are crude."

Straw man alert! As I commented in the other thread, researchers have tried to make more careful comparisons to compute Potential Years of Life Lost (PYLL) by country and found that the US healthcare produces among the worst results in the OECD despite tremendous expenditure. (The only countries that are worse are in Eastern Europe.)

Link for download:
http://www.oecd.org/LongAbstract/0,3425,en_2649_34631_16361641_1_1_1_1,00.html

Anonymous

We're becoming fatter and fatter, with several hours sitting down. It's just a trend.

-- a reader in tiffanys

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