Economic aspects of health care

Great Debates
81

I actually do not disagree with the statement that life expectancy, lifespan (two different things btw …) and death rates (another related but not quite the same thing) are inadequate measures to judge a healthcare system without controlling for other confounding variables.

And there certainly are, as your cite posits, genetic contributions to longevity, especially to being a member of the outlier group of centenarians. What those genes are however is not yet something too well worked out, and how much they differ, if at all, between the subpopulations identified by racial and ethnic groupings is not established.

Take, for example, that factoid about Hispanic American life expectancy. How does a purely genetic explanation explain that Hispanic Americans (largest group of Mexican descent) have a life expectancy at birth 2.5 years more than non-Hispanic Whites but that Mexicans have a life expectancy 2.1 years less than non-Hispanic White Americans? One could, outside the scope of this thread, have some interesting discussions about the “Hispanic Epidemiological Paradox” but waving it away with a blithe “the difference is genetic” is … not that interesting discussion.

Meanwhile you do seem to be fixated on a concept of American exceptionalism. You believe that the American population is just very very different than comparably wealthy other countries, be they Canada, countries in the EU, or of the East. I have for many years served as part of our group’s QA apparatus and this is something I hear all the time when a doc has received poorer than average scores on some metric “my patients are different” … and when you look at the data closely they almost never are.

Is it, for example, true that “the sociocultural and lifestyle differences between Europeans and Americans are even greater than those between various groups of Americans”?

No. If anything the most significant difference between Europeans and Americans is that America has more internal divergence socioculturally with significantly greater income and wealth inequality than most of Europe. Our middle is smaller and top 1% and top 0.1% wealthier. Yes, overall we spend more and consistently save less. But saving variability within the United States is even greater and how to see what that factoid informs.

This thread was about the economics: we are simply not getting a great return on investment in healthcare spending. We spend more and have less to to show, at least to 2014, for it than a wide variety of other comparable countries.

Will, if supported, the ACA move that needle over time? I think so. IMHO.

82

Hourly or annually, the $18 figure is too high for fast food. We need better jobs at lower income levels. The McD job ($9/hour, less than 30 hours) is the lowest rung; medical secretaries are several steps up and out or on the way out of poverty, we would hope. It’s beneficial to our economy to have these opportunities in employment, and of course they are going to come from our largest and growing sectors…and this is all kind of simplistic.

The real challenge is in those jobs being seen as the administrative waste, overhead, bureaucracy, and so forth contributing to our own distress, and the fiscal health of this huge sector as an overall negative. I don’t think this is entirely wrong. We do have much invested in health care, beyond matters of health, and it’s been beneficial to a lot of people in a lot of ways. Employment is one of them.

It’s a high-stakes problem all around.

83

Yeah that was supposed to be $18K.

The point is that if the economy replaces jobs at median or higher with job growth at lower than median what happens to the median, what is the impact on who is “the middle” and who is in it?

84

All else being static, the median is a smaller number, and the “middle” is still partly numerical and partly a socioeconomic construct. It’s a good social science question. One that I can’t see worrying about looking at these relatively new medical behomoths from the outside, unless you know of some way that income inequality is increasing within them.

85

Oh there is no question that the healthcare industry has seen a similar income inequality process that the economy has as a whole. The very top, the 1%, or even the 0.1%, is making much more, there is longer term slowed growth or even decline in income in much of the rest of the upper half both in salary of the same jobs and with some shifting to providers compensated relatively less, and there is growth in job numbers at the lowest portions of the pay scale, including positions that do not get health insurance as a benefit.

The very top that is growing in compensation is not the physician portion but, like in other industries, the top level executives.

Meanwhile the physicians are not increasing in salary much, some, especially those in smaller independent groups, are struggling, and hospital employed physicians are expected to start getting downward pressure on income as many hospital systems begin to belt-tighten. Care is (and done correctly this is a good trend IMHO) shifting to include more mid-level providers as part of teams with physicians.

And by far the biggest number of new jobs are at the lowest pay levels in the industry, as noted above.

86

I think there is a role for market forces in health care though, but not all health care services.

For outpatient services, elective surgeries and pharmaceuticals, competition could drive up quality and drive down prices because you do not need those things immediately like ER care. I’ve used sites like pharmacychecker and goodrx to find the best deals on medications. However as the article states, patients really can’t determine ‘quality’ of health care the way we can determine quality of a TV. If one surgery at one clinic has a 1% death rate, but a 2% death rate elsewhere, individual patients are not going to be able to determine that fact and pick the place with the lower mortality rate.

To truly get the benefit of competition we not only need totally transparent pricing everywhere, we need to open up to international competition. Importation of medical devices and medications as well as people going overseas for care. Doing that would probably drive down prices. If a surgery costs $80,000 here but you can get it done by western quality standards for $5,000 in the Caribbean, then that should help make health care more affordable.

87

That’s not the problem. It’s not hard to impose regulations that require that kind of data to be available. The problem is that patients may not be able to interpret it correctly. The broader question is one of outcomes, which is a lot harder to measure than simple mortality rate, and moreover, one has to consider outcomes in comparison to initial risk factors. One hospital might have a higher incidence of high-risk patients, and even worse, one hospital might be trying to gin up much better numbers than another by simply refusing to operate on high-risk cases, and indeed some specialty hospitals actually do this.

In terms of health care delivery, I think it’s more important to just recognize that non-profit hospitals generally have better outcomes at lower cost than profit-seeking corporate conglomerates, but other than that I have no problem with health care services from doctors to clinics to hospitals being provided through regulated capitalism and private ownership. The elephant in the room is health care finance. Everything about the insurance model is completely counterproductive when it comes to medically necessary procedures; such health care needs to be financed through a universal community-rated model with regulation of private providers, at least for the vast majority of the population. If the rich want to opt out and pay for private coverage that lets them go to boutique hospitals where their lunch is prepared by top-rated chefs (yes, such places exist) I see no problem with that. I do see a huge moral problem with the rich getting fundamentally better basic medical care.

If a surgery costs 16 times more here than somewhere else, then something is seriously broken and government regulators are not doing their job. It should cost about the same after adjusting for cost of living. All the reasons it costs so much more here stem from the broken system it has to operate under, relating to the cost of administration throughout the system: (a) the provider costs of collecting payment, (b) having to cover the costs of non-payment, (c) providing artificially inflated costs which are then discounted for insurance billing, but not for out-of-network or out of pocket payments, and (d) closely related to that last one, just rampant profiteering because they can.

Unfortunately in the present system there’s really no job for government regulators to do, as the whole thing is a chaotic mess of competing market forces. In a community-rated model, rates and fees are uniform and a common set of fees are negotiated up front.

88

That article I posted showed that in India, even if you paid all the health care workers at western wages, health care would still cost less.

They claim the reasons health care is so much cheaper in India (aside from the lower wages) are things like

[ul]
[li]Hospitals and clinics are more spartan[/li][li]More responsibility is handed over to lower paid, lower wage workers and physicians do the more specialty work[/li][li]India concentrates its equipment and specialists into urban areas, whereas the US has them spread out everywhere[/li][li]Indian surgeons, scanners, etc are used more often per day[/li][/ul]

89

This was something that happened to very significant degrees in liver transplant programs for example. Some programs would only accept the lower risk patients which of course gave them better outcomes numbers, which then attracted more patients, making their program more profitable.

Developing measures to compare outcomes that account for the patient mix is far from simple.

More on the subject of report outcomes in a risk-adjusted manner and how to interpret such appropriately here.

90

Yes, and health care also costs less – much less – in every other country in the world. It’s not news to anyone that the US is a unique outlier, and while I don’t dispute that the factors mentioned in the article may contribute to efficiency and cost reduction, they don’t address the major structural problems that are due to the private insurance system.

For example, the article says that an Indian doctor is establishing a hospital in the Caymans that will perform heart surgeries and other major operations for about 40% of what they cost in the US. Well, guess what the OECD average per-capita health care cost is compared to the US? It’s almost precisely 40% (39.69%)!

91

I’ve long thought that there is a much simpler and more obvious reason why the capitalist market model doesn’t work with health care.

That is, that a market system ONLY works, when the profits to be made, are derived DIRECTLY from achieving the most desired outcome. That works with cars, used or new. It works with any product that people have the ability to make decisions on, after giving careful consideration to multiple choices. But since medical care isn’t that kind of “product,” market systems simply don’t apply.

Similarly, it should be obvious that an “Insurance” model ALSO has no application to overall health care. The insurance approach to anything is the same: the profits come from minimizing payouts, and accurately calculating risk. Overall health care has GUARANTEED costs, not just risks.

Taking those two obvious basics into account, should make it easy again to recognize why the American health care system is the insane mess that it is, since the powers that be have insisted absolutely on forcing BOTH of those inapplicable models to be the primary elements controlling health care.

The choices being suggested here and elsewhere, all have natural and logical CONSEQUENCES to them. I haven’t seen where enough people making proposals have admitted to these very natural consequences, and that is just a bit on the ingenuous side of things. For example, suggestions which call for people to make complicated and detailed financial choices during an emergency (under the market competition model) have as a natural consequence, either that people wont WANT to make such choices, especially during an emergency, but also the vendors would do as all vendors in other markets do, and will HIDE the costs, making it almost impossible to make valid comparisons at all.

The natural and logical consequence of requiring medical care to depend on the patient’s standing in the community (including personal lifestyle choices), means that some people would be sentenced to death or very painful and expensive lives, based on the sociopolitical climate of the moment, AND it would alter the power status of various actors in the marketplace: that is, the AMA, which is already too powerful in deciding what treatments should be recognized and covered by “insurance,” would ALSO be in charge of who gets care at all.

It’s an obvious fact that people who can’t afford to pay for medical help, in a society which demands that each person pay all of their own way, will suffer and die. Pretending they will somehow get care anyway, requires a double sort of self-blinding.

92

I can rarely access full articles on hospital systems, or much of anything really from inside the industry, but I’ve seen mention of what is called an upward pressure, forcing income to the top of merged systems especially. The rest of us would probably call it a giant sucking sound from above as every spare cent is reclaimed to bolster stock prices, yes, exactly like other industries. The trend is cost-cutting and its purpose is better valuation, but as you’ve said, there is also a trend of improving the quality and delivery of the care itself. Possibly a dumb question but is that along the lines of other industries as well, essentially putting more work on fewer people, some of whom coincidentally won’t be earning as much?

It’s good that you support that trend, it’s pretty common where I am. Just learned today though that mid-level providers object to the term “mid-level providers", or so the internet tells me.

93

FWIW I don’t think quite so or at least far from exclusively so. IMHO it is more that there really has been some realignment of the economic incentives and the care models. ACOs, bundled payments, better use of groupwide quality metrics linked to payments, use of EHRs, the hospitalist trend, and overall a generation of care providers who are more willing to integrate clinical protocols into real practice and to function as parts of clinical teams. Sometimes just doing things smarter - spending a bit more (in person power and cost) to preemptively manage those at highest risk of costing the most and thereby reduce their hospitalization rates resulting in net savings, for example. When a large group can present the data that proves they have succeeded in reducing those populations costs they can now get paid more. Or at least increasingly so.

Part of that is having each member of the team spend as much of their time at the top of their scope of practice and skill set and less of their time doing things that someone with less expensive compensation could do.

No question it is very much a work in progress and in some cases the result is as you describe, especially if management is shortsighted, as management sometimes is.

94

Great answer. Thanks for that and all the other info you’ve provided in this thread.

95

I’m mostly going to skip the issues others already have demolished here, and just address some things that have been left:

Actually, how the healthcare system deals with the immediate and long-term effects of traffic accidents can be fairly relevant. However, traffic accidents just are not a significant factor. There is simply not enough of them. Just do the maths. In a population of 320 million people, how many 18-year olds have to die in traffic accidents to move the lifespan a significant amount, say 1 year? How does that number compare to say, the number of people the US lost in combat during the entire Vietnam war, or through WW2 ?

There has been one study that purported to show a large effect from traffic accidents and violence, Ofstedth and Schneider or something. It got so shredded that the authors had to go out and admit that not only did they know it was wrong, they had never intended for it to be right!

The study still has some kind of undead existence on rightwing blogs and sites, but that doesn’t make it anymore right.

Actually, developed countries are compared after mortality rates are calculated using standard WHO definitions. There is even a standard reporting form. When a country only partially use the definitions, reports from sources which use non-standard definitions are weighted up against sources that use the WHO definitions. Numbers can get quite uncertain for third-world countries where almost no-one uses standards, but for professional statisticians, internal differences in the First Worlds are not that challenging.

Notice that nations with lower infant mortality than the US often have lower rates of stillbirths as well.

The reason measures like lifespan, infant mortality, maternal mortality, years lived in good health etc. are used as measurements in public health is that they are large overarching measures where a lot of confounding factors cancel out. What is interesting here is that no matter which one of the measures you use, life expectancy, maternal mortality, infant mortality, etc, the US tends to place very similarly for all of them. Mid 40s to low 50s among nations meaning that most developed nations place higher.

There is a limit to how many confounding factors you can evoke to explain away poor placements when your score is fairly close on measurement after measurement.

There are subsection of healthcare with a lesser number of externalities, yes. These tend to be characterized by low cost per procedure and higher price elasticity. Lasik, vanity procedures etc. This is entirely in accordance with theory and observed experience. It does not mean that the healthcare market as a whole operates in the same way.

Perhaps it would be more accurate to say that countries which use markets to a greater degree has higher healthcare costs, and that less use of markets tend to be associated with greater efficiency.

Has it worked for contract adjudication? Military defence ? Basic education ? Epidemic control ? Large infrastructure projects? Because in the real world it hasn’t worked in every area, and there are some pretty accepted economic reasons why not.

96

First of all, thank you Tee. Kind words.

If one does want to do the math then please allow me to link to the CDC’s numbers tables. See Table 17: Age-adjusted death rates for selected causes of death.

Total age-adjusted death rates all causes in 2015 is (all per 100K) 733.1, of which heart disease is the number one at 168.5 and malignant neoplasms is next up at 158.5.

Motor vehicle-related injuries is at 11.4. Not a great number but less than the numbers associated with either poisoning (14.8) or suicide (13.3).

Let’s be clear this number sucks. That link is a 2016 CDC study of our rates in comparison to the nineteen other comparably high-income OECD countries. Some of our sucking is more miles driven but more of it is not using our seat belts as often, speeding, and driving impaired.

These are preventable deaths and it is very worth trying to get us near our peer countries’ age-adjusted death rates, or at least more in the middle of the pack for deaths per 100 million vehicle miles traveled.

But even if we halved the number we’d have moved the total age-adjusted death rate for all causes only from 733 to 726, a difference less than year to year statistical noise. It’s not the explanation for our poorer than peers life expectancy.

97

And also for the fun … an informed analysis of the Robert L. Ohsfeldt and John E. Schneider American Enterprise bit and how they came to such a silly and false result.