Health Care-Becker

The best way to evaluate America's expensive health care system would be to estimate the effects of different kinds of healthcare on the quality and quantity of health for individuals of various ages, incomes, races, and other categories. To my knowledge, no researchers have come close to doing this. Instead, the American system has sometimes been found wanting simply because life expectancies in the United States are at best no better than those in France, Sweden, Japan, Germany, and other countries that spend considerably less on health care, both absolutely and relative to their GDPs. Life expectancy is surely one supremely important measure of health since individuals in rich countries are willing to pay a lot even for small increases in their probabilities of surviving different ages (see the studies in the book "Measuring the Gains from Medical Research", ed. By Kevin M. Murphy and Robert Topel, 2003). Studies show that an additional year of life is worth over $120,000 to the typical American adult, apparently also including older adults, where "worth" is measured by willingness to pay for a one-year improvement in length of life. One can easily see without a lot of fancy calculations that the large sums Americans are willing to pay for improvements in health imply that they would pay a considerable fraction of their incomes in order to achieve significant improvements in their life expectancy, and also in their quality of life. Similar conclusions apply to other countries since the willingness to pay in different countries for an additional year of life varies approximately proportionately to their per capita incomes. Although such calculations show that improvements in life expectancy are worth a lot to most people, national differences in life expectancies are a highly imperfect indicator of the effectiveness of health delivery systems.for example, life styles are important contributors to health, and the US fares poorly on many life style indicators, such as incidence of overweight and obese men, women, and teenagers. To get around such problems, some analysts compare not life expectancies but survival rates from different diseases. The US health system tends to look pretty good on these comparisons. A study published in Lancet Oncology in 2007 calculates cancer survival rates for both men and women in the United States, the United Kingdom, and the European Union as a whole. The study claims that the most important determinants of cancer survival are early diagnosis, early treatment, and access to the best drugs, and that the United States does very well on all three criteria. Early diagnosis helps survival, but it may also distort the comparisons of five or even ten-year survival rates. In any case, the calculated five-year survival rates are much better in the US: they are about 65% for both men and women, while they are much lower in the other countries, especially for men. These apparent advantages in cancer survival rates are large enough to be worth a lot to persons having access to the American health system. Several measures of the quality of life also favor the US. For example, hip and knee replacements, and cataract surgery, are far more readily available in the US than in Europe. The cancer survival and quality of life advantages enjoyed by US residents indicates that Americans get something for the large amount they spend on health care, but they do not indicate that the bang for the health buck is greater in the US, or even that the US health delivery system is reasonably efficient. Indeed, the American health system has several characteristics that may considerably lower its efficiency. The American system ties medical insurance to employment by allowing company spending on medical premiums to be fully tax-deductible. Companies introduced health benefits during World War II in order to get around wage controls to be competitive in attracting employees. It was maintained as income tax rates increased during subsequent decades. This employer-based system is partly responsible for the high number of Americans who have no insurance coverage, since many small companies do not provide insurance to their employees. In addition, the system favors persons with high earnings since tax deductions for insurance premiums are worth more to them. A much better approach, so far opposed by President Obama, would provide a certain number of dollars each year to every person-perhaps $2500- as tax credits to be used only to buy health insurance and pay for medical care. Unused amounts in any year would be folded into health savings accounts (see my discussion of these accounts and other health care issues in posts for April 15, 2007 and January 13, 2008), and unused balances in any year would be carried over to spend in later years. This approach gives the same tax incentives to everyone, and it would encourage individuals to economize on their health care spending since unused balances would be available to spend in the future. It would also induce many persons without health insurance to get some since otherwise they lose access to this tax credit. Health insurance is expensive in the US partly because most states mandate coverage of various health expenditures that have little to do with insurable risks. For example, the majority of states require insurance companies to cover the medical costs of all birth deliveries, even though these deliveries are mainly planned, and the expenses are known beforehand. The proper insurance approach would cover only unusual birth expenses caused by complications in the delivery and post delivery stages. By getting rid of unnecessary mandates, health insurance would become much cheaper, especially in states with the more onerous mandates. The President wants to establish government-run health insurance companies to compete with private companies. This is a bad idea because experience from government-owned enterprises in other sectors conclusively shows that that they are run inefficiently, in good part because of political interference. Moreover, government enterprises do not compete fairly since they generally are subsidized, often generously and in hidden ways. Private health insurance companies in the US compete very strongly, although they are hampered by mandates and other regulations that frequently have nothing to do with effective and honest coverage of health needs.

Comments

[Anonymous]

Not as easy as you make it sound. Lots of costs associated with not just acquistion of hardware and software but space and personel. Then there is the matter of entering data--more personel. And the matter of maintenence. Of course the feds could fund all this with less that they gave to GM. Altering work flow and making it efficient is another matter. As I mentioned above, the Brits tried it from a centralized approach and fell flat on their faces. In a way it is a lot like balancing your check book. You can do it a lot faster with a pen that you can with a computer. It is coming though but slowing and piecemeal.

Jim

[Anonymous]

Jack, I presume,

I am not opposed to the IT conversion. In fact I am all for it, but------

Next week I will be handed a master in medical informatics degree at Northwestern University. I will look kind-of silly in a cap and gown at age 72 but what the hell. As you know, inforamtics is the dicipline that underpins the EMR and medical IT. The main impediments to universal implementation of the "full" electronic medical record are cost, physician acceptance, change in workflow, time and the question of whether implementation will save money and/or enhance revenue. Since the costs of a failed attempt are so high and assessing the probability of success are so uncertain, only about 25% of hospitals and less physicians offices are fully implemented. While the VA system is good, the VA delivery system is not the medical model for most of American healthcare which still occurs in thousands of physician offices and hospitals with 200 beds or thereabouts.

E-prescribing is only one aspect of all of this. It is simple, can be done easilly at low provider cost on existing hardware. Medicare will shortly make it mandatory for all providers who accept Medicare.

The EMR is coming but slowly and piecemeal. In my opinion, the answer is the establishment of web based low cost physician-patient portals for such as personal health records, appointment requests, lab results, e-mails and managing insurance claims. The rest will follow.

The insurance companies are involved big time but claims info is not adequate for populating a complete electronic health record and I know that you would agree with me that it would be a bad idea to let them be the keepers of all health records. For that, the Swiss and the Swedws have good distributive systems.

By the way, would you like me to send you an announcement of my graduation with a self-addressed and stamped envelope? You know, a little something to get me started on my new career.

Cheers,

Jim

[Anonymous]

I get the prescription from the VA which pays less than half what Medicare pays for the same.

[Anonymous]

do not need to smoke and drink:)

[Anonymous]

Jim! Kudos for the new degree! I'd think those with past med experience and the IT stuff would be a triple threat in designing the change-over.

I'd agree with what you've written of the status quo, and TRUE that in the VA an IT system could be imposed from top down.

I'd also agree that some form of web-based or other system with a uniform standard would be the way to go. I worked in "IT" if you could call it that many years ago when each "spread sheet" was designed in house for a specific task and was order of magnitude more costly than simply tailoring Excel etc.

Part of your description tells us of the fragmented "horse and buggy" collection of doctor shops, which I'd generally compare to the days when a car buyer bought the chassis from one outfit and had the body built elsewhere. In short I think, and hope, that those days are nearing an end. For another comparison one of the major reasons smaller banks have sold out to the juggernauts like Wells or BoA is that they too could not keep up with individual IT costs and their legacy systems were ready for the dumpster.

Ha! there has been all this concern over patient privacy, and I don't mean to dismiss it, but today MUCH of that concern is that of being bounced out of "insurance" eligibility OR being discriminated against in the work place. I'd expect that one we're ALL in the pool with little incentive for industry to continue to discriminate, that concern over privacy will be much less.

As for "insurance companies" holding all the records, that's kinda lost on me as in the new paradigm I see no need for them at all. Far better that they take their "expertise" capital and GROSSLY over paid execs and either go into banking or some such, OR take on a provider role. Ha! then they'd only have themselves to argue with and hopefully? have far less need to spend millions lobbying Congress for favors and goodies to prolong a wasteful and unstable system.

Jack

[Anonymous]

Just 2 obvious counterpoints to Becker's argument, which reads like talking points from a second-rate right wing think tank:

1. There are numerous other indicators besides life expectancy on which the US performs quite poorly despite its spending rate. Merely one other is infant mortality.
2. Unhealthy "lifestyles" can't neatly be assumed to be exogenous to analyzing a health system. You make no argument whatsoever for exogeneity and it is quite plausible to believe that some bad "lifestyle" choices would not be made in a world where health care and advice was more broadly available to populations disproportionately likely to engage in
such behavior.

[Anonymous]

Great! Thank you!

[Anonymous]

"I feel like when I delivery their babies, I am subsidizing WalMart."

WalMart is knocking up its employees? You would have thought it would make the news.

"1. There are numerous other indicators besides life expectancy on which the US performs quite poorly despite its spending rate. Merely one other is infant mortality."

You name one that has been debunked ad nauseum. The Europeans just don't count the preemies. Makes the numbers look much better. The US looks very good when this is accounted for. Since this seems to be your best argument, I will assume that 'numerous' means 'one'.

One last piece of the pie is that the US is very diverse. Americans of Japanese decent live longer than the Japanese, Americans of Nordic decent live longer than the Nordics, and Americans of African decent live longer than the Africans.

When you add all these together, the average does not look great compared only to the longer-living countries.

[Anonymous]

People can live longer. The problem with the age limits of the USA is the diet of its people and our chemical exposure in this country.

Animal testing proves our chemical way of life shortens life.
Let alone the fact chemicals are detrimental to our health.

When people are free of chemicals there cancer rate drops along with high blood pressure.
The examples are endless just wanted you all to be aware.

[Anonymous]

Has anyone bothered to read the cancer study that Becker is refering to? You can find it here:

http://v1.theglobeandmail.com/v5/content/pdf/CONCORD.pdf

What caught my eye was that while the US does do very well in age adjusted cancer survival rates there was one nation that beat the US in 6 out of the 8 gender/cancer type categories analysed: Cuba.

Given that not only does Cuba spend considerably less on healthcare than the US (about $570 versus $7500 per capita in 2008 PPP US$) and that it has universal healthcare but that it is Communist as well should have made Becker (given his political inclinations) pause when he decided to cite this study.

I guess he didn't expect anyone to actually bother to read it.

[Anonymous]

"This approach gives the same tax incentives to everyone, and it would encourage individuals to economize on their health care spending since unused balances would be available to spend in the future. It would also induce many persons without health insurance to get some since otherwise they lose access to this tax credit."

You need to address the problem of finding an insurance policy that is affordable if you have a costly preexisting condition-just try to get a policy after being treated for cancer.

[Anonymous]

"I guess he didn't expect anyone to actually bother to read it."

Or maybe just believe it.

[Anonymous]

"The best way to evaluate America's expensive health care system would be to estimate the effects of different kinds of healthcare on the quality and quantity of health for individuals of various ages, incomes, races, and other categories. To my knowledge, no researchers have come close to doing this...."

Isn't this what estimates of potential years of life lost (PYLL) seek to accomplish? Perhaps you think the work on this isn't up to par, but if so it needs rebuttal; pointing to the straw man of life expectancy doesn't cut it.

Estimates by country and gender for the OECD may be downloaded here. As you can see, for health care for females the US comes second last in the OECD on the PYLL metric (ahead of Hungary). We do slightly better among males, also beating Portugal, the Slovak Reublic and Poland. Still, even for men, the US PYLL results are worse than in such healthcare cheapskate countries as the UK and Japan (if memory serves each spends about 40% of what the US does per capita).

[Anonymous]

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[Anonymous]

Both George Will and Greg Mankiw basically argue that we don’t need a government role because we can trust the market to work — hey, we do it for groceries, right?
Um, economists have known for 45 years — ever since Kenneth Arrow’s seminal paper — that the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough. To act all wide-eyed and innocent about these problems at this late date is either remarkably ignorant or simply disingenuous.(Paul)
-----------ED Hardy,abercrombie

[Anonymous]

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[Anonymous]

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[Anonymous]

If you have to do it, you might as well do it right.

[Anonymous]

The inefficiency of "government-run enterprises" is a wholly unjustified assertion. Explain how Medicare manages a 4% overhead while private firms doing essentially the same job routinely spend 14-25% on overhead? This is just most glaring of several unjustified assumptions and assertions in this post.

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[Anonymous]

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