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03/28/2010

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JB

I find Rick's comment about Europeans welcoming the US to the modern health care era a bit odd. Europe, and every other nation on earth, has been a free rider for many years on American medical research. Most estimates find that the US conducts approximately 80% of the worlds medical research. Much of this research is driven by our market style medical system and the incentive structure it creates. When we change these incentives it is only logical to expect a resulting shift in research spending and therefore ultimately reduction in development of new products and services. While Europe and other nations have been more than happy to act as the free rider to American medical advancement, I'm surprised that many of its citizens are pleased with our changes. Although our changes are relatively minor in that they are primarily directed at shifting the payment method rather than cost savings, they could ultimately lead to future cost rationing at rates similar to those used by socialized medical systems.

If we do shift the incentives sufficiently over time to reduce medical research, where will new drugs and medical devices come from? Do you expect to simply rely on the remaining 20% of research plus whatever remains in the US and accept a reduction in the pace of technological advancement, or does the EU plan to substantially increase medical research? Although it seems unlikely that American medical research will drop to the level of Europe, if it were cut in half that could make a significant impact on the health care.

Ultimately it seems quite irrational for Europeans and others to hope for a socialized system or even a reformation of the American health care system.

Steve W from Ford

One of the "costs" of this bill that I have not seen mentioned is the increase in medicare taxes for those whose income exceeds $200 to $250K/yr. We are now committed to using one of the remaining untapped sources of potential tax revenue for a new purpose rather than for saving a program that is widely believed to be the biggest contributor to future insolvency of all federal programs. These revenues can't be raised twice so we have gone that much further towards consigning the federal budget to permanent, and ultimately destructive, imbalance.

We are a large, powerful and currently, at least, rich country. It takes time to bring low such a combination but it can be done.
I fear Mr Obama amd his fellow Democrats have taken us all a huge step towards speeding the eventual denouement.

Jack

JB A few questions:

I doubted the US doing "80%" of medical research but numbers don't seem to be easy to find.

Perhaps we need to divide research into categories. For example in Pharma, I'd generally agree that developing drugs, and applying NIH basic research creates strong stock valuations and is a market based business. But! after developing them it does not strike me as either rational or "market" to sell to other markets at less than half the cost charged to insurance, Medicare, and US individuals. The specter of oldsters renting buses so as to travel to Canada or Mexico to buy back drugs to save 40% or so even after Cdn drugstore mark-ups, or it being illegal to buy over the net from other advanced nations has got to be indicative of a broken system. You're right......... we can't afford to sell wholesale to free-riders while paying full pop at home.

It seems much the same with medical machines with a scan here costing perhaps $400 thru Medicare, to $1400 to insurance or individual while an apparently unsubsidized cost in Japan is under $200. The excuses for such a mess seem ludicrous.

As for price compression wrecking the system? It's interesting to note insurance covered "procedures" being ungodly expensive and those prices soaring at multiples of the inflation rate. While Lasik and other procedures subject to market based pricing pressures continue to decline, serve many more people and are still VERY lucrative.

As for complex new surgeries that might save one's life or mobility being costly few would complain, and especially not if those costs were spread over a large risk pool with the benefits becoming more widespread as the tech developed. But with "medical tourism" developing to offer fairly routine hip or knee replacements at one third or less the US cost, and our overall H/C costs being nearly double other "competitor" nations, haven't we got a pricing problem?

Frederick

This paragraph just floored me. Has he not learned this yet? Milton Friedman answered these questions and as a result billions of people around the world have since benefited.

'Although on balance I think the new law is a mistake, there are three things that can be said in its favor. The first is that it is a genuine social experiment, and we are bound to learn a lot from it—about the size and elasticity of demand for medical services, the reliability of cost estimates by the Office of Management and Budget and the Congressional Budget Office, the reliability of advice given by health economists, the relative perceptiveness of liberal and conservative commentators, the ability of the federal government to manage a vast and highly complex program of social welfare, and, a related point, the relative efficiency of a lightly regulated market, versus a government-controlled market, in providing health services, and perhaps goods and services more generally.'

Dr. A. Bajaj

To Rodrigo,
"I'm sympathetic to the claim that the data sets may be unreliable, but what evidence do you have that they are unreliable?"
All I am saying is, don't base all your analysis on government published data from many countries. Use primary observation if you can as well.

"For people with fewer resources or people who have to buy in the individual market the system operates much differently. I have many friends struggling with medical costs because they can't get coverage, and some who can't afford their medical care despite paying into plans because the cost sharing is so severe."

I am totally with you on that. Our healthcare system's wildly skewed pricing desperately needs fixing. The question is how to do it. We have two choices in he long run: a single intermediary system like a utility, or a free market.

"For example, we could create a national tax-funded single-payer system guaranteeing
a basic benefit and allow private insurers to sell supplemental coverage. Such a system could be FAR more efficient than the patchwork system that has developed here in the USA while being essentially cost-neutral or cost-reducing to consumers. And a national single-payer system would have far more leverage and motivation to introduce cost-saving reimbursement reforms than does our patchwork of insurance companies."

That is the first choice I alluded to. It will be like Medicare, and be a single intermediary (I don't like the term single payer, since we will all be paying!). There are problems with that system, though I agree with you that it will probably reduce costs somewhat. The biggest problems are stagnation of technology, quality of delivery and "customer service" quality. E.g., look back on telephones as a utility. A call to India, for example, used to cost $3 for the first minute and $1.99 every subsequent minute in 1990. THis was under a more or less utility type system. IN a freeer market like today, it's more around 3 cents, with better quality. IN a free market healthcare, people will pay according to their abilities, the current bloated costs will fall dramatically and instantly, so a visit to your doctor will be anywhere from $10 to $500, depending on your doctor's location and your ability to pay, and innovation will not be stifled.

It may be hard for folks to imagine that a visit to a doctor may be $10, or a medical procedure that today costs $2500 may be $250 under a free market, but rest assured, the free market works, if it is allowed to! It;s been proven time and again.

While both a single intermediary, utility-style system and a purer free market system will drastically reduce costs, the free market system will reduce them faster, and will not stop technology innovation.
The one thing we have to accept is that in a utility style system we will all get the same (lower quality) health care, while in a free market we will get differential quality healthcare based on our ability to pay.

To make an illustrative analogy with the car industry, we are currently all wanting to drive a mercedes but can't pay for it. A utility style system will give all of us a hyundai to drive, but the hyundai will change slowly over time, so ten years from now w ewill all be still driving a hyundai that looks like one today.
A free market system will give some of us ferraris, and some of us hyundais, but overall the quality of a hyundai ten years from now on will be like a ferrari today!
:)


Jack

Dr Bajaj: Trouble is, today, many are paying the Mercedes price and driving a Hyundai or nothing at all. (As am aside, I can't help pointing out that the Hyundai is a reliable vehicle offering a very high value per dollar while the Mercedes, despite its elegance, is a offers a poor value per dollar. Most folks couldn't pay the maintenance costs were they given one.)

Generally I agree with your desire to use the power of markets. During the Clinton effort I favored some combo of a federal voucher and an HMO concept. But as we've seen with HMO's it's tough to get the balance right, and we've waited too long.

Today, as sadly seems the routine for America, we're trying to design the future amidst a crisis made the worse by recession based layoffs, firings, early "retirements" that exacerbates the employer based "insurance" model.

I'm sure that as a practicing Dr you know that trying to make a "market" based system that relies upon individual choice simply won't work. Using your analogy of a complex automobile you can imagine what you'd get if the chassis headed down the assembly line with the consumer trying to select and properly compensate "good" door fitters, painters, or even whether certain engine/driveline combos were a good idea.

The "choices" are vastly more problematic in medicine as one "consumer" may go through life with few health costly health problems while another may betin life with genetic problems or costly, unexpected diseases, both acute and chronic, making "catatstrophe" "insurance" a cumbersome instrument.

Perhaps there is something to be learned (ha or not!) from the airline biz. Before or after "dereg" the contract enforced by the FAA with obvious benefits to air travel in general, has been to get you there safely. Before dereg the cost for a route was fixed so airlines competed on service quality. Dereg has brought down prices much faster but service has suffered and many of the carriers are next to bankrupt.

Were the biz truly "free enterprise", though a drop in safety would affect confidence in flying for all, surely some carriers would be cutting maintenance corners which would create further delays and cost lives. Interestingly, the "dereg" forgot to dereg airports with the result that it costs the same to land in the prime hours as in the off hours.

Well, Doc, on H/C there are more rounds to come with NO going back to the patchwork mess of yesteryear, so it will be interesting to see what mix of regulation and market will evolve. Medicine is surely an area where neither a "free market" nor a highly regulated "utility" is the ideal. Fortunately, ha! we're used to budgeting half or double what other nations spend so we've maring for error.

Rodrigo

To Dr. Bajaj,

"All I am saying is, don't base all your analysis on government published data from many countries. Use primary observation if you can as well."

I'm leery about extrapolating from my own anecdotes, even though I have traveled as well. What I would say about world health care is that, like US health care, it can be a mixed bag. I have been to private hospitals in Chile that could compete with the top tier clinics in the USA, and rural hospitals in the provinces that are barely more than a cinder block building with some examining tables.

What I would say based on my observations is that if you have the means to pay and need an expensive specialized service, the USA is a great place to be. If you have no cash and need insulin you're better off somewhere else.

"A free market system will give some of us ferraris, and some of us hyundais, but overall the quality of a hyundai ten years from now on will be like a ferrari today!"

I think there is another way it could go. There is no purely free market system that has 3rd party private intermediaries as payers. In a purely unregulated insurance market the vast majority of people won't be insurable for any conditions they might need care for, or won't want to buy the insurance products they have access to. So it would be reasonable to assume that in our hypothetical free market the dominant paradigm is one in which health care seekers get only the health care services they can personally afford.

The most fundamental difference between our system and the hypothetical free market is that the pool of dollars sloshing around in the health care system is much smaller. Risk pools allow people to leverage resources order of magnitude greater than their personal buying power when they need to buy health care services. But in our pure free market there are not enough meaningful risk pools to matter, so everyone buys according to their personal budget constraint. It's easy to see how that will result in drastically lower health care spending.

So what would be different in a hypothetical world where the system has settled into a steady state (assume all the transition effects are settled)?

A lot of care would be cheaper. Visits to the General Practitioner would probably go down in price. Well established generic would probably be cheaper (indeed, they are pretty cheap now). Some branded prescription drugs would probably be cheaper.

A lot of specialized care would be gone. Treatments requiring networks of highly specialized providers would probably prove economically infeasible in a no-leverage health care market. Modern hospitals rely on highly trained cross-functional teams that require years of specialized schooling and expensive technology to function. Indeed, there is probably a spending threshold that must be met to keep some specialties from disappearing. The need for certain types of care is relatively price inelastic and may have nothing to do with prices at all. For example, dropping the price of a heart bypass does not seem likely to induce people to increase the number of bypasses they demand. Risk pools subsidize the existence of specialists by, essentially, making everyone who is covered by a risk pool a wealthy man while they shop for health care.

The level of technology used in medicine would decline. Technology is expensive. Its costs decline over time, but its deployment depends on the market's willingness and ability to pay. A no-leverage health care market would almost certainly have fewer cat scanners, mri machines, and other advanced tools per capita.
Treatments for hemophilia and other rare conditions could disappear entirely because their manufacture is inherently an expensive endeavor and the market for the drugs is very small and mostly poor. Development of new technologies and drugs would also stall, because the development costs the market could absorb for them would be much smaller and the potential profits much leaner, or nonexistent.

A lot of care would get worse. Experience is one of the biggest predictors of medical mishaps. Some experts (I can't remember where I read this) suggest shopping for a facility that does at least fifty of the type of procedure you need done per year in order to ensure your surgeon is experienced. The volume of infrastructure and staff intensive procedures performed would almost certainly decline in the no-leverage world, contributing to a lower quality of care even for the people who can pay.

None of us wants a truly free market in health care. It's GOOD for the system to have an intermediary payer that can pool resources where they are needed. In a world without risk pools we are all sicker and poorer by a large margin.

I think what is needed is a free market in provision, but a single intermediary. The single intermediary could guarantee access and function more efficiently than a national patchwork of for-profit insurers without the pernicious profit motive that leads to some of the most egregious excesses and inadequacies of private insurance.
And it could more surely leverage changes in reimbursement models and encourage the dissemination of best practices than for-profit insurers.

The trick is how to structure the intermediary so it performs the function of allocating resources efficiently and contains reasonable cost control measures that account for the incentives faced by health care seekers (get all the care I need) and health care providers (make my patient well and bill as many services as possible).

In the end you have to strike compromises between encouraging innovation and guaranteeing access, and controlling costs. While you can wring some cost savings from restructuring the system - probably a lot - those goals will always be somewhat in conflict.

Innovation need not necessarily suffer relative to what we have now, however. Someone, today, is already making decisions about which new health services and technologies are covered and which are not, after all. It doesn't seem obvious that pushing new treatments through would be any more difficult under a single-payer than under multiple for-profit insurers who all want to pay out as little of their premium dollars as possible.

I want to talk about your telecom example, because I think it applies but not in the way you are using it. It's late, though, and I'm getting fuzzy. I do appreciate talking to you and look forward to continuing our conversation.

Michael J. Szanto

Medical Costs in the past half century have grown at a really rapid and unsustainable rate. This comes from what is in many ways inelastic demand for medical services. It is probably true that federal programs like Medicare and the tax policies on employer provided medical plans have helped lead to medical inflation.

However, in the real long run, I believe that we will see a more typical pattern found in technology, and medicine is really a part of the technology economy. Lower costs and greater effectiveness. A $100 computer today can do million times what a 100 million computer could do 30 years ago.

Often times, the most effective treatments in medicine and dentistry are really cheap. Aspirin or statins as opposed to stents for example. I do realize that most of the statins did cost billions to originally research and test, but I think even the R &D process of drugs will eventually come down and it only takes so long for the companies to recoup their research costs. Floride is another example of a cheap treatment.

Technologies like nanotechnology, lasers, and greater computer automation will continue to reduce costs and enhance the effectiveness of medical care.

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A lot of men do not understand how a woman feels as they protest this Bill and I wish to share a short short, As we advance into the 22nd century, a lot of woman are so connected to the past of a day that the sense of valuer for her is becoming lost and the respect in that concept will be only ancient in origin.
Hi everybody, I stopped by to blog again with you all and to show you how the cause and effect of a work of uniting the views of 173 million inter faced sites has forced Government to sign this Bill to Law and now it is where It needs to be, in Court. Officials seek to balance, I seek to un-balance because I want the same as 89% of the People want, a honest Reform.
I am sorry but this Bill to Law needs to go back to formula. It is not built on equal standing between Social Grace of People and The People.
First off, somehow there is just to many people that do not understand the function of the Governing Bodies within Government. First, there are around 60 Personal that hold seats that write these Laws, both Democrat and Republican. Then this Bill for Law goes up for a vote and there is around 500 or so Republican and Democrats that vote. The sling talk of this of being the Obama Bill is not Political Correct within the use of words.
Now lets get to the issues of this Bill of Law being Unconstitutional.
I agree this new Health Care Law borders on a Constitutional Infringement and within the rush of putting it into action, a balance of dollar issues is lost. The placement of threats against the People is in fact Unconstitutional, as will as force pay.
Unfortunately the Law Suites against the Bill needs to be restructure within the Concepts Of Constitutional Infringements through the voice of the People it is this Voice that guides the destiny of the Country and the decisions within that Court. .For Example, the weight of 100 million people, and their words in Court bring weight of value to not destroy this Bill of Law but to take it back to formula.
I must agree with people that this Bill to Law is built within the concept of Social Grace and I do not blame people one bit for the out cry of the burden place against Companies and people that make a great deal of money.
The use of FASC Concepts 10% per cent on a yearly income that may have been used by Officials is in error because this forum of mine looks into the economic conditions within each home before a placement of payment can go forward, and we believe in the freedom of choice. {As of yet there has been no reply by Officials of Government if they used our Concepts.}
To show people that I do not belong to any Governing Parties or Insurance Companies, please enjoy the Roll back Concepts of FASC under economy buster at our site.
This issue we find unfair, According to information, that Tax Payers pay for over 75% of all Medical Cost for Government Officials. As it would seem this Social Grace, is not of a equal standing, as stated in Bill 101 of the New Health Care Laws. Government Officials are Civil Servants According to Law and should not be above the Law of this 10% Force Pay on a Yearly Income. Health care for U.S. Politicians receive the Countrys ,New health care plan to cover all government people (When the President, Senators, ... leaves office do they lose their federal employee health care or go on cobra like concept... Make them pay for their own Health care just as we do if they refuse to pay tax, what then ? { you can find this story also at the page for economy buster and the link } ...
My big complaint is that the 10% based, Health Care Forum Bill 101 is lacking inter structure and will not help the economic effected people, and will burden people who all ready have insurance.
This 1900 pages of Law is untested and only in theory. The fact still remains that because this Health Care System is a $100 Trillion Dollar per year system ,we feel that the Court should place this new Tax Theory { Bill to Law} under Court Supervision for 3 years, because of the failure of Officials to fix the existing Tax System. Without further in site of a balance, only a way to balance the existing in a concept that still eludes practical guidelines. As in I see no back up ideas like {plan B} and it, this Tax Plan is still based on a dollars being a constant flow of cash.
According to information that there is a plan to lay off City and County workers, that it is considered cheaper to put them on unemployment and Social Services then payroll. What would be more practical is to have every other weekend off or for those who wish, each weekend off. This includes Postal Workers. Also as in Deer field Beach Florida a out side contractor has offered a Bid Per Purposed Contract and lay offs will be against employees under so much time in and on that County job.
We do understand that Governing Officials are desperate for this Health Care Money, so as a concept of a way to balance trust again between Officials and the People, any Government official that has a Job Concept, they must put up a Bond as a Contractor would to build a project. Once the Job Conclusion has reached a successful point in it creation, Officials receive a refund.
As stated before, this Health Care Dollar belongs to the People, and I do have this Little Health Care Bug in my Hands. The balance of the views of 250 million people and all this diversity created by Officials is slowly coming to a silence, because I speak for the People and I offer respect to the views in a building block to a Health Care Reform, because of my concept to reform Government within this Health Care Issue, and I would ask the United States Supreme Court to place this Health Care Dollar under Court Supervision until it is deemed worthy of a People right to be a part of or not.
In 3 years our budget / deficit, can be a positive balance of $1.2 Trillion Dollars. But first we must put forward a Job, work force to strategically rebuild the United States in a anti / war crime forum. To place Factories where they serve that area of city or town.
I watched for 7 years this failure reach where it is today, “ I saw this”, but there was no intervention by Officials. Officials had their hats handed to them by Scam Artist, and The Arabic Drug Empire, cave dwellers. This issue has not one thing of how I believe, I can only share with you what I have watched for over 30 years take place and there must be a unity by the people to bring a reform to this new Law and to our Government.
No I am sorry President Obama, Officials need to earn trust again, and to become as one with the People. This is a way to say, look into the economic conditions at persons home before you over burden their lives, with this Bill to Law. This is why you was voted into Office.....
FASC Concepts in and for Pay it Forward covers the web see why we have become the largest web site in the United States, and we give our thank to the thousands of people who post by us, as one voice.
on google , yahoo, and aol www.fascmovement.mysite.com

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I don't think anybody is going to study 2700 pages. It's just not worth it!

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Gerber Medicare Supplement

Wow, the US looks so stupid! We just signed a huge entitlement into law when we can't even afford the current entitlement programs that we already have going.

The problems will just be magnified and worsened with government involvement.

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"pre-existing condition" that private healthcare insurers do not see as a "normal" part of one's life in this country?

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yes Only in a low populated society with huge natural resources can the state support everyone, with no one really working hard. That model is gone out the window as the world population has exploded and grown in almost every country (including the US). The only exception is a few middle eastern countries that are exploiting their oil resources and have relatively sparse populations.

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This post is really very appreciable. your post is very advantageous for me and very good.
your claims about the American health care system. I'm sympathetic to the claim that the data sets may be unreliable, but what evidence do you have that they are unreliable? Or are you arguing that the American system must be exceptional and therefore the data must be wrong?
For people at the higher end of the income spectrum who are working in corporate or academic jobs with a high degree of security and excellent group health care plans, the American system may appear to work fine for now. I assume this is where you're coming from and I apologize if I'm in error.
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sesli sohbet

A noble yet futile effort by Posner to find a silver lining in the ObamaCare cloud.

Like the commenter above, I am hard put to understand the argument against tax-subsidized employer-provided health insurance. My employer, like many nowadays, offers a considerable menu of different health insurance plans, from a variety of providers, at a varying range of costs that depend on the extent of the coverage, the annual deductible, the out-of-pocket cap (if any), limits on out-of-network health care providers, and other variable that a rational economic decision maker should consider.

It is a gross oversimplification to assert that tax-subsidized employer-provided health insurance renders the recipients thereof senseless to the costs of their own health care.

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A noble yet futile effort by Posner to find a silver lining in the ObamaCare cloud.

Like the commenter above, I am hard put to understand the argument against tax-subsidized employer-provided health insurance. My employer, like many nowadays, offers a considerable menu of different health insurance plans, from a variety of providers, at a varying range of costs that depend on the extent of the coverage, the annual deductible, the out-of-pocket cap (if any), limits on out-of-network health care providers, and other variable that a rational economic decision maker should consider.

It is a gross oversimplification to assert that tax-subsidized employer-provided health insurance renders the recipients thereof senseless to the costs of their own health care.

Steph of FAP Turbo

Obamas health bill passed the house, but it has to go to the senate now. If it passes the senate, what does this all mean? If it means universal health care, will that heavily effect my taxes when I start to work? (I am a senior in high school and planning to work after I graduate) What will be ALL the potential results if the health care bill gets passed?

FAP Turbo

There is no final draft of the bill, and there won't be until AFTER they vote on it. They might not even vote on it, but just "deem" that it had passed.

America wasn't supposed to be about Kings and Queens imposing their will upon the peasants, either, but that is apparently what we've got.

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The healthcare reform legislation would offer or subsidise healthcare coverage for 32m people – about a tenth of the population – who are uninsured. It would also mandate that every American and legal US resident receive minimal coverage.

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