Let’s say I develop a strange rash on my hands. Over the course of a couple of days, it gets worse. My fingers swell up. Benedrayl does not to ease the burning itchiness.
I call up my GP and ask for a ballpark figure on the cost. She tells me she has to know what I have first. And that requires actually seeing me. For all she knows, it could run as cheap as $150 to tens of thousands of dollars, depending on just what the deal is.
I could go to a Doc-in-the-Box and ask them for an estimate. But it’s going to be the same situation. To give me a treatment cost, they need to diagnose me first. They can’t do that sight unseen.
But let’s say I manage to get doc to diagnose me for $100. They determine I’m experiencing chilblains and advises me to buy a thicker pair of gloves and to limit my exposure to the cold. But maybe they are wrong, right? If I’m being a smart consumer, wouldn’t I get a second opinion? That’s what I would do if my car had something wrong with it, right?
So despite the fact that I’m miserable because my fingers itch like the dickens, I drag myself another Doc-in-a-Box, since none of the GP’s with private practices have openings in the near future. The doc determines I have an infection and prescribes a course of antibiotics. So now I’m out of another $100, plus whatever the antibiotics cost.
Am I supposed to find another doc who can break the tie?
Or should I take the antibiotics and put on an extra pair of gloves and hope for the best?
It’s nice to liken health care to other commodities. But it’s different. If a patient is miserable enough (as I was when I suffered from my first bout of chilblains), they simply aren’t going to be able to “comparison shop”–which also presumes that there are options to choose from or that all options are equally effective. And medicine isn’t yet so simple that a patient can diagnose themselves. For the “comparison shop” approach to work, doctors would need to provide free diagnostics. I don’t think that makes much sense.
Health care does not behave like other commodities in a market situation. There is an entire field of economics called health care economics which is dedicated to how health care behaves economically. If you are going to argue the “competition will lower prices” argument, I recommend a basic familiarity with Kenneth Arrow and others in the field.
Anyway, as for the OP, I’ve read some studies. From memory, the biggest factor is the excessive bureaucracy generated by having umpteen different healthcare systems that don’t communicate well and does a lot of gate-keeping. Thats about 35 %.
Inefficiency, overprovision, overequipping etc is another 30 % or so.
Then there are lesser cost-adders, like defensive medicine is 9 %, medical malpractice insurance is about 2 %, and higher salaries for medical workers is about 6 %. Higher drug prices, I don’t remember how much that was. But the two top ones, bureaucracy and medical inefficiency is almost 70 %. These numbers tend to be fairly consistent over time, although you can play around a bit with categories. What goes into medical inefficiency in particular.
Note that this is not percentage of total costs, but percentages of the money spent in excess of an average developed world system.
Just wanted to point out that in addition to these points, there is another reason R&D cannot be responsible for, or a major factor in, US healthcare spending:
R&D spending is just not big enough to show up.
The biomedical research spending of the entire world is ~270 billion. The US provides less than half of that. In the US, the biggest single contributor is the government, through the NIH which provides ~30 % of US biomedical research spending. The remaining amount of US research spending is ~75 billion dollars.
The overspending in US healthcare is about 1 500 billion. The total private-sector research spending is 5 % of that, and the entire planets research budget is 20 % of that.
Other developed nations populations age too. Many have longer lifespans than the US and they still manage to spend half as much money while getting better results.
Aging does not explain the US uniquely high costs because aging is not a uniquely US problem and it is not particularly worse in the US.
Let me describe how it works here in Quebec (each province has its own system, but I think they are all similar). You go to a doctor. he gets paid by the province on the basis of his specialty and whether it is a full checkup or less. There is no copay and you pay him nothing. Similarly if you go to a hospital. Doctors are reasonably well-paid, although none get wealthy from it, but I think 200,000 for a GP and maybe up to twice that for a neurosurgeon might be in the right ball park. The hospitals are given a global budget to divide as they see fit. Hospitals are, to say the least, spartan. They do have all the high-priced equipment, just not enough of it to use willy-nilly. It took me a month to get an appointment for a CT scan, although it was definitely not an emergency. The food in hospitals is lousy, to say the least. Hospitals are definitely non-profit.
There is some bureaucracy of course, but I think it is pretty lean.
There are private insurance companies that provide for certain uncovered items. For using a private lab to analyze blood tests, for example, instead of killing a day to get it done free in the hospital. I have such insurance through my fprmer employer.
I guess the important point is that the hospital, not getting paid for each action, each pill, each look in from a nurse, has every incentive to control costs. Does this result in worse care? Not from the statistics I have seen. The really bad part is that some non-emergency procedures (e.g. knee or hip replacement) can take a long time to get scheduled. It looks like a relatively small amount of extra money would go a long way to fix that. Incidentally, 48% of the provincial budget goes for health care. My provincial taxes are somewhat higher than my federal taxes. Worth every cent.
The way it would work is you would go to the website of a couple of doctors and see how much they charge for an initial consultation. You would then make an appointment with the doctor, they do not need to know what you have to charge a standard rate for initial consultation. Wanting a second or third opinion would not be affected by whether the healthcare system is single payer, totally private, or anything in between.
For a market to work not everyone needs to be a marginal customer. There just needs to have marginal customers existing.
A lot of medical problems a person develops are related to previous medical problems that same person has had.
For example, suppose I have a recurrent condition that requires a course of medication (antibiotics, whatever) to fix me up. Doctor A has treated me before, has documented this condition, and will prescribe the same meds again after a brief consultation. His/her consultation fee is more expensive that Doc B’s, but I’ve never seen Doc B, have no history there, and Doc B may have limited or no access to my medical records at Doctor A. I save money in the short term by paying the higher fee at Doctor A rather than go through the process of establishing myself at Doc B’s, which might include expenses such as repeating basic labs or X-rays, etc. Long-term, establishing myself at Doc B’s might be cost-effective, ** if and only if ** Doc B’s costs are going to stay lower than Doctor A’s for all of the treatments I might need. Since I can’t predict future cost structures and have only limited notions of what treatments I might need in future, I don’t have access to enough information to tell whether moving to a different practice is really cheaper.
Medical treatment is rarely a set of discrete events, so comparing the initial consultation fees at various providers isn’t going to tell me how much it REALLY costs to obtain diagnosis and treatment once we figure in the costs of repeating tests, obtaining records, etc.
Just to pick one statistic, GP compensation in Quebec rose 34 percent between 2006 and 2010. And there’s nothing atypical about that; as I noted above, the Canadian system and the US system are about equally effective in controlling (or not controlling) health care cost increases these days.
Again, US costs are higher in absolute terms because they’re starting from a higher base that arose from cost control failure in the past, but the differences between the two systems are basically irrelevant to cost control any longer.
If all the doctors charge the same amount for consultation, then what?
If all the doctors in an area except one have no immediate openings, then what?
Sure seems to me the best and easiest thing would be to have the government involved in setting prices, rather than pretending that consumers can or even should dictate them. I don’t think it’s in the interest of public health for eveyone to flock to the “lowest bidder” provider. Not when it comes to people’s lives.
Not quite. New drugs cost a buttload of money to do the R&D on. And not all of them make it to market, so their costs get rolled into the ones that do in order for the company to stay in business. The primary problem is the patent process. By the time all the R&D is done and the human trials are completed, the companies have maybe 4 or 5 years left on patent to do their cost recovery. If we extended the patent protection by as little as 5 years more, drug costs would plummet.
My IRL job is in healthcare.
This is a good overview.
If you want more, and richer detail, the most-respected recent article was a 26,000 word article in Time in 2015 by expereinced journalist and lawyer Steven Brill. I haven’t found a link to the article without a paywall. He has since spoken at many of the biggest healthcare conferences, like AHIP and MGMA.