Why is US health care so expensive and ineffective?

[lethean46]

This lengthy article was published by Time Magazine 3/4/2013.  "Bitter Pill" by Steven Brill.

Subtitle:  Why Medical Bills Are Killing Us.  There is LOTS of good information about the cost of healthcare in this article. 

 

It is an eye opening read.

 

http://livingwithmcl.com/BitterPill.pdf

 

ML

[Guest deepValue]

Big Ag/USDA

 

A healthy populace doesn't need blood pressure medication, even if the government pays for it.

[ItsAValueTrap]

http://livingwithmcl.com/BitterPill.pdf

Thanks a lot for the article!  Now I see why insurance companies pay ridiculous prices for medical services... the consolidation of healthcare providers reduces competition.  From researching DaVita, it is obvious that private insurers pay obscene amounts for dialysis.

 

I do disagree with some of the things in the article.  He attacks certain parties for making high profits and high margins.  Just because certain parties make a lot of money doesn't mean that they are part of the problem.  Some drug companies make a lot of money only because they were lucky.  Developing new drugs hasn't been that profitable of an industry lately.

 

2- I think that a big part of the problem is the limited supply of doctors.  Doctors who emigrate to the US have a very hard time getting licensed.  The US government essentially limits the supply of doctors.  This leads to monopoly-like effects.  When all the doctors in an area band together into a single practice, they have little competition.  This allows them to engage in behaviours that maximize their wealth.

 

Sometimes recommending bad treatment will make them more money.  This is the case in the dialysis industry, as cutting corners flows directly to the bottom line.  The dialysis clinics often pay kickbacks to kidney doctor groups for client referrals (they hire the doctors as consultants).  Sometimes the kidney doctor groups are allowed to own part of a clinic.  This sometimes creates a situation where kidney doctors will refer patients to clinics that cut corners.

DaVita was also engaged in the practice of overprescribing EPO.  The practice was wasteful and endangered patients.

 

Sometimes doctors will recommend too much treatment so that they can make more money.

[ericd1]

Eric - I believe the pre-existing exclusion is coming to an end with the new laws.  Not sure when but you'll be able to get coverage.  And if you don't they will fine you. Wow.

 

I wanted to purchase coverage that extended beyond what my supplemental Medicare would pay, nope not available...like you I don't get it...

[Kiltacular]

I think that a big part of the problem is the limited supply of doctors.  Doctors who emigrate to the US have a very hard time getting licensed.  The US government essentially limits the supply of doctors.  This leads to monopoly-like effects.

 

For me, part of the title of this thread makes little sense.

 

U.S. healthcare (and most modern healthcare...many of the ideas we benefit from started in Germany some many decades ago) has been AMAZINGLY effective.

 

And, that's the "problem" -- one for which there is not a good solution.  In my mind, the "solution" that is being pursued is limiting supply. 

 

Beginning about 100 or 150 years ago, healthcare began to make advances in the West which -- to this day -- have been unending.

 

Once a medical problem is solved -- like, say, kidney dialysis -- decent people naturally feel compelled to provide it for everyone no matter what the cost.  Decent people don't want to play God.

 

But, many of these procedures are simply incredibly expensive -- particularly the ones which start as advances (even if they eventually become commonplace...that's the pattern, of course). Healthcare simply can't eat of all the wealth of even the most prosperous of nations.

 

No one thinks all people deserve to live in palaces but almost everyone feels that most people deserve to have life saving treatments whatever the cost. 

 

That makes sense.

 

Looking for solutions to things that aren't the cause of the problem won't work.  The irony here is that this insight was the beginning of the century (plus) of advances in healthcare that have been so incredible.

 

This is another depressing situation.

[oddballstocks]

I think that a big part of the problem is the limited supply of doctors.  Doctors who emigrate to the US have a very hard time getting licensed.  The US government essentially limits the supply of doctors.  This leads to monopoly-like effects.

 

For me, part of the title of this thread makes little sense.

 

U.S. healthcare (and most modern healthcare...many of the ideas we benefit from started in Germany some many decades ago) has been AMAZINGLY effective.

 

And, that's the "problem" -- one for which there is not a good solution.  In my mind, the "solution" that is being pursued is limiting supply. 

 

Beginning about 100 or 150 years ago, healthcare began to make advances in the West which -- to this day -- have been unending.

 

Once a medical problem is solved -- like, say, kidney dialysis -- decent people naturally feel compelled to provide it for everyone no matter what the cost.  Decent people don't want to play God.

 

But, many of these procedures are simply incredibly expensive -- particularly the ones which start as advances (even if they eventually become commonplace...that's the pattern, of course). Healthcare simply can't eat of all the wealth of even the most prosperous of nations.

 

No one thinks all people deserve to live in palaces but almost everyone feels that most people deserve to have life saving treatments whatever the cost. 

 

That makes sense.

 

Looking for solutions to things that aren't the cause of the problem won't work.  The irony here is that this insight was the beginning of the century (plus) of advances in healthcare that have been so incredible.

 

This is another depressing situation.

 

As someone who has a lot of experience looking at claims history for a large insurer I can assure you that the expensive high profile procedures are not what's sinking the ship.  It's the death of a thousand cuts.  You only have a few people that have the expensive procedures or expensive medical devices, unfathomable amounts of people are on medications for high blood pressure, depressants etc that seems cheap ($10-60 a claim) but when you add up the sheer magnitude of these claims it's huge.

 

After my experience with this client I have a conclusion for what will solve health care costs in the US, Americans need to:

1. Lose weight

2. Relax

 

Obesity related drugs/procedures/problems and stress related drugs/procedures/problems/ailments are expensive.  Unfortunately to solve these people need to take health into their own hands, this isn't something some company or government can force down from the top.

[meiroy]

 

http://www.bloomberg.com/news/2013-07-28/heart-surgery-in-india-for-1-583-costs-106-385-in-u-s-.html

 

"Shetty is not a public health official motivated by charity. He’s a heart surgeon turned businessman who has started a chain of 21 medical centers around India. By trimming costs with such measures as buying cheaper scrubs and spurning air-conditioning, he has cut the price of artery-clearing coronary bypass surgery to 95,000 rupees ($1,583), half of what it was 20 years ago, and wants to get the price down to $800 within a decade. The same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the U.S. Centers for Medicare & Medicaid Services."

 

[Guest ajc]

 

The same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the U.S. Centers for Medicare & Medicaid Services."

 

Crazy.

 

Slightly off topic, but stuff like this makes me think that places like China, India, etc are going to be responsible for some awesome cost savings across a range of industries during the 21st century.

 

A bit like the story (true, as far as I know) that during the space race NASA spent 1 million dollars developing a pen that could write in a zero-gravity environment.

The Russians took a pencil. (update: This is not what happened, the correct version posted by rmitz is 1 or 2 posts down.)

 

Not that that is generally representative of American industry by a long shot, but when I see needless expenditure somewhere that tale usually pops into my head along with Enron and a few other stories from throughout global history.

[rmitz]

 

The same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the U.S. Centers for Medicare & Medicaid Services."

 

Crazy.

 

Slightly off topic, but stuff like this makes me think that places like China, India, etc are going to be responsible for some awesome cost savings across a range of industries during the 21st century.

 

A bit like the story (true, as far as I know) that during the space race NASA spent 1 million dollars developing a pen that could write in a zero-gravity environment.

The Russians took a pencil.

 

Not that that is generally representative of American industry by a long shot, but when I see needless expenditure somewhere that tale usually pops into my head along with Enron and a few other stories from throughout global history.

 

That story is not true.

 

http://www.snopes.com/business/genius/spacepen.asp

 

Summary: private industry did the research, sold the pens to NASA cheaply, and sold a bunch to people who wanted a "Space Pen".  As well as the russians, since there were real drawbacks with pencils in space.

[Guest ajc]

 

The same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the U.S. Centers for Medicare & Medicaid Services."

 

Crazy.

 

Slightly off topic, but stuff like this makes me think that places like China, India, etc are going to be responsible for some awesome cost savings across a range of industries during the 21st century.

 

A bit like the story (true, as far as I know) that during the space race NASA spent 1 million dollars developing a pen that could write in a zero-gravity environment.

The Russians took a pencil.

 

Not that that is generally representative of American industry by a long shot, but when I see needless expenditure somewhere that tale usually pops into my head along with Enron and a few other stories from throughout global history.

 

That story is not true.

 

http://www.snopes.com/business/genius/spacepen.asp

 

Summary: private industry did the research, sold the pens to NASA cheaply, and sold a bunch to people who wanted a "Space Pen".  As well as the russians, since there were real drawbacks with pencils in space.

 

My mistake, I appreciate the correction (and the link explaining it).

[kiwing100]

 

http://www.npr.org/2013/08/07/209585018/paying-till-it-hurts-why-american-health-care-is-so-pricey?utm_source=npr&utm_medium=facebook&utm_campaign=20130808

[kiwing100]

 

 

http://www.cbsnews.com/video/watch/?id=50148539n

[twacowfca]

The US system is rigged to discourage price discovery and quality of service discovery.  Health care providers are incentivized to provide the most expensive (and profitable) treatments imaginable regardless of efficacy if the treatment at some point in time was approved as having a possible benefit.

 

Many treatments seem to be inexpensive, but have adverse consequences for future health and enormous long term consequences for the financial health of the system.  Most drugs that affect cognition and mood do much more harm than good.  The US has about 6% of the world's population, but accounts for about 80% of legally prescribed narcotics.  This causes dependence and addiction, leading to poor health and multiplied downstream expenses with increased business for the "health" care providers. Patients don't even know that they are being prescribed narcotics. These have been renamed: "opiate agonists" It's sad,  :(

[Guest longinvestor]

The US system is rigged to discourage price discovery and quality of service discovery.  Health care providers are incentivized to provide the most expensive (and profitable) treatments imaginable regardless of efficacy if the treatment at some point in time was approved as having a possible benefit.

It's sad,  :(

 

Even on the cost side, there are pernicious practices of protecting medical suppliers with volume purchases most of which gets wasted/thrown away. The regulatory regime around sterilization of medical suppliers guarantees that unneeded supplies are bundled, packaged together, many of them thrown away unused, nay, untouched. Plus the regulations surrounding sterilization are clothed in pseudo-science ("old grandma's tales")of disinfecting, again with the purchasing volume protection of suppliers. An interesting study worth conducting would be side-to-side comparisons of per capita volume sales of common medical supplies between USA and other western nations which have far less wasteful healthcare systems (dubbed as "socialized" by the vested US healthcare industry and ignorant Americans). Seen in the context of 17+% annual healthcare cost inflation, the results of this study should be eye-opening but unsurprising. And no, Americans do not live longer than the population of these countries.

 

Someday in the coming centuries, archaeologists would be able to dig up huge landfills of never-used medical supplies and will have enough to treat all of mankind and all yet-to-be-discovered creatures on the solar system. It is criminal :(

[ItsAValueTrap]

The regulatory regime around sterilization of medical suppliers guarantees that unneeded supplies are bundled, packaged together, many of them thrown away unused, nay, untouched.

Sounds like DaVita... (a Berkshire Hathaway holding)

 

I do think that unused product should be thrown away.  From looking at DaVita, it is a good idea for nurses and dialysis techs to throw away unused product.  A lot of them are worked to the bone and they take shortcuts in sterilization.  (This is if the clinic doesn't have a lot of private-insurance patients.)  If they aren't practicing good sterilization practices then patients will get infections and possibly die.

 

What DaVita did is that they worked with their suppliers to buy medicines in packages that are unnecessarily big, increasing the amount of waste.  More medicine "used" = more profits for the manufacturers = more kickbacks for DaVita.  It's totally unnecessary waste.

The private PBMs are actually fighting that type of waste.  They won't pay for a pharmacy claim at all if the quantity is too much.  Sometimes the PBMs go too far... if a medicine comes only in packages of 5 and the patient only needs 1 dose, sometimes the PBM won't honour the claim.

 

2- Surgery used to be a pretty dangerous operation until people learned about bacteria and sterilization.  I wouldn't slam it as pseudo-science.  It's about as scientific as it gets.

[ItsAValueTrap]

This causes dependence and addiction, leading to poor health and multiplied downstream expenses with increased business for the "health" care providers. Patients don't even know that they are being prescribed narcotics.

Addiction to restricted substances is a huge problem, but I wouldn't be so quick to blame.

 

Some people are legitimately trying to get themselves off illegal drugs.  I think it's a good thing that the for-profit drug companies are trying to find solutions to that problem.  Unfortunately, the current solutions (e.g. methadone) are almost as bad as the actual drugs.  But I think that the net benefit on society is positive.  The FDA does a pretty amazing job and they take all this stuff really seriously.

 

*Once a drug gets approved, a lot of abuses do occur because the drug manufacturers are incentivized to price gouge and to sell as much as possible.  This creates waste, certain drugs being overprescribed (e.g. DaVita and EPO, highly addictive drugs, etc.), etc. etc.  Many companies try to defraud and game Medicare.

[colinwalt]

Atul Gawande of "The Checklist Manifesto" fame has written some great stuff on the state of US healthcare:

 

http://www.newyorker.com/magazine/bios/atul_gawande/search?contributorName=atul%20gawande

 

 

All his articles are worth reading, here are some of those relevant to this thread:

 

http://www.newyorker.com/reporting/2011/01/24/110124fa_fact_gawande (Can we lower medical costs by giving the neediest patients better care?)

 

http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande (What a Texas town can teach us about health care.)

 

http://www.newyorker.com/online/blogs/comment/2010/12/the-cost-conundrum.html

 

http://www.newyorker.com/talk/comment/2007/07/23/070723taco_talk_gawande (SICK AND TWISTED)

 

http://www.newyorker.com/archive/2005/11/14/051114fa_fact_gawande (THE MALPRACTICE MESS)

[Guest longinvestor]

The regulatory regime around sterilization of medical suppliers guarantees that unneeded supplies are bundled, packaged together, many of them thrown away unused, nay, untouched.

2- Surgery used to be a pretty dangerous operation until people learned about bacteria and sterilization.  I wouldn't slam it as pseudo-science.  It's about as scientific as it gets.

 

Sexual harassment is illegal, but sex is not. Nobody in their right mind would question if sterilization is good or not for surgery or healthcare. Of course it is.

 

I was talking about how sterilization is regulated (and interpreted), some of the assumptions around how medical supplies are packaged and the packages and over-packages are "sterilized" and the idea that once the boxes are opened the contents are either used or thrown away. I was involved with a few medical supply companies. The disproportionate volume of medical supplies shipping to US healthcare versus the rest of the world was startling to me. There is no rational way to explain why so much more gets sold to US healthcare. There is a huge initiative called "Lean in healthcare" underway amongst some of the progressive healthcare companies where stuff like this is getting questioned and suppliers under the gun are naturally trying to hide / rebel under the protective regulatory regime. There is simply too much waste in the system, aka the 17% medical inflation! twacowfca had it right when he was talking about the lack of price discovery in US Healthcare. It is not a free market like hamburgers.