Re: The Medical Marketplace, Free and Unfree

http://news.yahoo.com/s/yblog_thelookout/20110621/ts_yblog_thelookout/man-robs-bank-to-get-medical-care-in-jail

On Sun, Jun 19, 2011 at 12:55 AM, Sharon Fuentes <oneforentropy@gmail.com> wrote:

Thank you for the article.  Dr. Foy and the anonymous contributor have some interesting points that are made here. 

 

However, in 1970 an office visit may have cost between 20-30 dollars.  Now an out of pocket cost for an uninsured patient to see a doctor ranges between 85 - 275 depending on the specialty. 

 

When a person is acutely ill, in an ambulance they do not have time to call around  to see who has  the best deals of the week on cardiac catheterization or trauma surgery that may or may not involve >100,000 dollars of ICU and rehab costs.

 

Drugs are expensive because it is what the manufacturers choose to place the price on the drug in this country.  Drugs for rare diseases can cost thousands of dollars a dose and drugs for common diseases are kept high because the companies will quite cleverly change the position of a molecule, run it through some clinical trials, claim that there is an advantage, send the gorgeous drug rep to the doctor's office with free lunches,  pens, pads, and even plane trips and claim that this new drug is far superior because their own sponsored research shows a statistical significance.  I did a research experiment in medical school. I was in the community for three months and went to about 20 drug company sponsored events.  I paid my own way for those that served food in restaurants.  There were talks marketing drugs, there were dash and dines where you ran in listened and picked up your food, there were listen and get a 50 dollar gift card per each table with each table marketing a separate drug: 4 total.  What did I observe?  An ENT Dr. from my alma mater who picked up six steak dinners to take home to his family,  my community mentors ordering 50 dollar bottles of wine (6 total) for the two of them and the 4 nurses, 65 doctors coming into the bookstore to get 200 dollars worth of gift cards.  Who pays for all of this "advertising"?  The patient.  Drug companies will tell you that their products cost so much because of R&D.  But advertising costs are more than the money they spend on the research that they do.  And lets face it-that sweet little voice on TV telling you that all of these side effects aren't so bad and may also include death-but who listens to the sweet voice that sublimely mentions the risk-the fantastic ad about the drug is what the consumer is watching.  Why else would a cardiac patient with a hip problem ask my orthopedic colleague for Viagra?  After all the TV said just ask your Dr. for a free sample.

 

The technology of today is market driven and extremely expensive.  The "best hospitals" want to advertise shorter ER wait times because their CAT-scan is 3 minutes instead of 15 minutes and their stroke response time is better and that they have a cardiac catheter lab that is operational 24 hours: all of which are good..  My hospital even advertises that our Drs are smarter than cancer:  how insulting to anyone who has ever lost a loved one to cancer despite every surgical intervention and therapy was used.  But quicker is better and it costs-a lot.  But it is not Uncle Sam telling GE to make quicker and better equipment-it is the American health care system as a whole.  The doctors want it, the patients want it and industry provides it.

 

Medical education-the cost of medical education in the 1970s was 3000 a year at UPENN and 55,000 for 2009 not including housing, food and books.  What doctor can open an office and pay their debts in a fee for service only setting charging reasonable rates that the average American can afford?  If Dr. Foy is having to borrow money for his medical education-the debt for a student graduating today can range from 150,000 to 300,000 depending upon if there are student loan debts from undergraduate and if the medical school is private or a state-funded institution.  This excludes those with scholarships or grants.

 

So lets put this in perspective:

My neighbor-one trip to the ER for the worst head ache of his life as an uninsured fee for service patient. It was in 6 different billing statements and very confusing.

 

ER visit 575 to sit there

Dr fee 300 - ER specialist in the NE

Head CT-670

Radiologist fee-396

Lumbar puncture procedure fee-175

Lab tests fee-spinal fluid analysis 428

Supplies fee-355

 

Admission cost and surgical cost for a ruptured berry aneurysm: more than 40,000 at last count and the bills still come with additional charges.

 

So not only does he have all of these bills, he can not work because of the stroke.  He has no health insurance.

 

The article fails to mention the cost of litigation. There is reference to losing a license if drug X - the standard of care is not prescribed.  But I doubt the first place the patient and the family will run to is the medical board when it comes to failure of meeting the standard of care.  Texas changed the constitution to place caps on punitive damages in 2003/04 in all lawsuits. They sold it to the public as a way to lower the cost of health care, medical malpractice premiums and to stop the "mass Exodus" of Drs from Texas. The group that spoke to us as we left the state institution said that Texas had seen the greatest increases in premiums from 1996 to 2000.  She quoted the increase was 15% a year.  But miraculously after tort reform, the premiums had gone down and Texas should be proud that they were helping to control the cost of health care and keep Drs.  I asked her how much since the legislation passed had the premiums dropped she sheepishly said a total of 12%.  That was 2007. Where was the cost savings? To the Dr?  No.  Texas is a great state to be in the med malpractice insurance business..

 

Is  the answer going back to the good old days of the early 70's the answer. No.  Is it  ObamaCare? No.

 

The US has the best health care that money can buy.....  But so do other regions of the globe where people travel to for procedures that cost less than here in the US with the same quality.

 

I worked in Socialized medicine and I have seen the good side and the bad side.  I chose to work in it because I did not go into medicine to listen to patients cry because they had to chose between food, electricity or their medication to keep them alive. I did not go into it to sit in a room full of M.D.s saying that it is a damn pity that the patient can not come up with the 80,000 needed to treat their cancer all the while eating a free lunch provided by a company that markets chemotherapeutic drug.  I went into it for the patient-not the premiums I was trying to lower for myself, not the perks of having the title, and not for the headache of what we deal with here on a daily basis.  When I worked in Europe and a patient came when it was too late to help them, it was because they were either too stubborn or uneducated and not because they could not afford it.

 

I would love to see a system that would work here in the US  where everyone has access (and by access I mean the ability to get the care they need and not going bankrupt by doing it) and there is less paper pushing for reimbursement.  But doctor heal thyself.  We need to accept accountability of the areas where we directly add to the cost of medicine (medical device and pharmaceutical).  Why do we feel so entitled to these at the cost of the patient?  Why does a patient have to be a millionaire after a medical mistake? 

 

I disagree with my colleague Dr. Foy.  I do not think that there would be lower costs if there was consumer sovereignty and no government interference. If this were the case, Drs would collectively take a stand, say they would work for less because the market would show that the average patient can not afford more than an office visit and God help them for a catastrophic medical illness.  Hospitals would cut the wages of all the staff, services and new equipment would not be purchased every other year because it is 2 minutes quicker than the older one. If there was all of this deregulation and free market access, would there really be lower costs?  I heard this argument in Texas when they deregulated electricity and allowed cable companies free reign-all of the politicians (after cashing the checks from special interest) assured the public that a free market would mean lower costs. Now Texans are paying an average of ~50% higher rates for electricity and there are fewer cable companies from which to choose and the costs are high.  Here is the kicker-your health is not about choosing an electrical company or your cable TV.  It is not so simple and there are multiple factors that affect how one acquires medical services. 

 

In particular I take issue with this statement:

"So who's to blame? The answer: a system that has been developed by government intervention to interfere with consumer sovereignty and make every individual pay for every other individual's medical expenses so that the individual consuming the care does not bear the full price at the point of utilization. We should not conclude from this example that the run-up in healthcare costs is solely due to increased spending on pharmaceuticals, for this situation applies to everything from doctor visits to laboratory tests to diagnostic studies to minimally invasive and full surgical procedures. Very simply stated, consumers now use many medical services that they would simply reject if they had to pay for them out of pocket -- and truthfully, in most cases, they would be none the worse off for rejecting them."

 

I perform autopsies.  I find out the cause of death if possible.  I have seen it at the hands of the physician and I have seen it at the choice of the patient.  Doctors are human and we make mistakes. Patients are human and they make mistakes.  But the heart breaking mistakes in the case of some of my patients (I call them my patients even though they are dead) is the choice they made to not seek medical help or get their medications because they could not afford it.  So they rejected services because they could  not afford an out of pocket service and they paid the ultimate price for their decision and they were worse off for rejecting it.

 

So I call Dr. Foy to task:  He should for twelve months simulate an average American family with no insurance, two adults and two children with minimum wage earners for both parents and try to create a budget, to feed his family, buy clothes for his children, pay his bills, and then try to decide what he is going to do when his 4 year old is diagnosed with acute lymphoblastic leukemia.

And this anonymous doctor-I would like to be able to drop off the autopsy reports of those patients who chose not seek medical care because they could not afford it and let him talk to the wives, the parents and the young children of these patients in their time of loss and so flippantly tell them that statement.

I welcome any criticism about my point of view.  However, please refrain from any personal derogatory comments and keep in mind I am a physician, not an economist and I do not claim that my beliefs are better than Dr. Foy or the anonymous Dr, they are based upon my personal experiences and observations as a physician who has worked here and abroad.  Data to support the stats re loans, insurance premiums and tort reform in Texas can be found on the web and I ain't pulling them out of thin air.

 

Sharon

 

 

 

On Sat, Jun 18, 2011 at 4:51 PM, MJ <michaelj@america.net> wrote:

"If we returned purchasing power to patients -- in effect, restored consumer sovereignty -- healthcare spending would decline dramatically."

The Medical Marketplace, Free and Unfree
Friday, June 17, 2011
by Andrew Foy, MD

The idea of consumer sovereignty was central to Mises's understanding of the market economy. According to this understanding, consumers shape the pattern of resource use and the assignment of resource rewards according to their preferences. The outputs being produced at any date, the methods of production being employed, and the rewards being given to the various owners of productivity are those dictated by consumers.

Market prices are described by Mises as reflecting an "equilibrium of demand and supply." It is on this basis that Mises views any government interference with market prices as a disturbance to the equilibrium that will, in general, produce results that are worse than the conditions the government wished to improve. Government intervention in the provision of medical goods and services is a perfect example.

In a previous article, I suggested that government intervention, not market failure, is responsible for today's out-of-control healthcare costs. There are a multitude of reasons why this is so, but the most important, in my opinion, is the loss of consumer sovereignty brought about by government intervention, which would not have occurred under market conditions.

Prior to the advent of Medicare and Medicaid, individuals paid for the majority of medical goods and services out of their own pocket (Figure 1) and utilized health insurance as a rational tool for mitigating financial risk posed by catastrophic events.[1] During this time a real market existed for the vast majority of medical goods, and services and prices were reasonable. However, after the advent of these programs, third-party spending on routine medical services increased, and out-of-pocket spending fell dramatically. To match the coverage of these government programs, especially Medicare, the private-insurance market took a reactionary turn for the worse, which was encouraged by earlier legislation that allowed health insurance to be purchased with pretax dollars from an employer. The move to third-party payment was further accelerated by passage of the HMO Act of 1973.


Figure 1. Sources of personal health expenditures

The act gave HMOs greater access to the employer-based market, providing for the rapid expansion of managed care. Finally, as Thomas DiLorenzo has pointed out,

Layers of regulation plague every aspect of medical care and health insurance in America … each state imposes dozens of regulatory mandates on health insurers, requiring them to include coverage of everything from massage therapy to hair implants.

A colleague of mine, who practiced before and after this dramatic shift occurred, and whom I will not name due to his academic affiliation, neatly summarized how third-party payment for routine medical services has led us to the current situation we are in with regard to healthcare costs. He wrote to me:

I have lived through those times when the patient and the doctor each had a sense of responsibility regarding the patient's health. There was, in effect, a "contract" between the two that resided in the awareness that the doctor was the expert and would do the best he/she could for the patient and the patient, in return would pay for those services. There were no guarantees but an expectation of ethical behavior by both parties. Healthcare costs were reasonable and in those instances where payment was beyond the reach of a patient's resources, arrangements could be, and were usually made.

The system worked and worked well. Enter third party pay and it all went to hell in a hand-basket because it now became possible to charge whatever the system would bear.

Because of this change, medications, tests, and procedures that in many cases provide only marginal benefits are now widely used despite the fact that they may cost much more than the procedures they were intended to replace.

In a real market, many of these "breakthroughs" would simply not be viable. But because the test of viability in America's government-managed healthcare system is not consumer sovereignty, we have a situation where Medicare, Medicaid, and politicized private-insurance companies pay hundreds of dollars a month more for a drug that decreases total event rates by a few percentage points compared to whatever that drug replaced or was intended to augment.

The following is an example of a real and very popular drug that I use on a routine basis that I will call drug X. Drug X works by inhibiting blood clot formation (when a blood clot forms in a vessel in the heart, one can have a heart attack). Drug X and drug Y work together by acting on different substrates of the clot-formation process to ultimately effect the same outcome -- stopping clots from forming. Drug X costs on average $141.82 per month. Drug Y costs a couple of dollars per month over the counter at your local drug store. What does the data tell us about the two?

Multiple studies have been performed to answer the question: Does drug X improve cardiovascular outcomes compared to drug Y alone after a patient has had a major cardiovascular event or a stroke? The answer, unequivocally, is yes. By how much? The answer is a few percentage points, give or take.[2] Does it eliminate the risk all together? The answer, unequivocally, is no. It should also be noted that drug X in addition to drug Y confers a minor increase in the risk of having a major bleeding event. So the question is: How many people, in the appropriate clinical setting, knowing this information, would buy drug X for $140 per month? Probably not nearly as many who take it now for nothing or for a small copay. Leaving aside the issue of brand names and patents, under conditions of market competition, do you think the company who makes drug X would lower the price to entice more buyers? If they did not lower the price, or simply could not lower the price due to production costs, I would venture to guess that drug X would not be marketable outside of a small niche of patients.

Now ask yourself, is the doctor who recommends drug X the bad guy? Of course not: drug X does provide a benefit beyond drug Y itself, and furthermore, if he didn't offer it and the patient had a heart attack (which could happen despite being on drug X) the doctor could be at risk of losing his medical license. After all, drug X is part of the standard of care. Is the patient the bad guy? Of course not: if you were offered the chance to take a drug that had a defined benefit and wouldn't cost you that much, you'd be silly to reject it. Is the pharmaceutical company the bad guy? No, they have a responsibility to their shareholders to make a profit, so they should sell their product at the highest price possible.

So who's to blame? The answer: a system that has been developed by government intervention to interfere with consumer sovereignty and make every individual pay for every other individual's medical expenses so that the individual consuming the care does not bear the full price at the point of utilization. We should not conclude from this example that the run-up in healthcare costs is solely due to increased spending on pharmaceuticals, for this situation applies to everything from doctor visits to laboratory tests to diagnostic studies to minimally invasive and full surgical procedures. Very simply stated, consumers now use many medical services that they would simply reject if they had to pay for them out of pocket -- and truthfully, in most cases, they would be none the worse off for rejecting them.

The RAND Health Insurance Experiment was a prospective social experiment (and to this date, the only social experiment) in which health insurance with different levels of benefit coverage was randomly assigned to individuals, and subsequent health outcomes were compared across experimental groups. The results showed that while spending increased as benefit coverage increased, health status and health outcomes did not improve. There was very little evidence to demonstrate that having a high level of benefit coverage improved population health on average.[3] The RAND Health Insurance Experiment debunks the idea that patients are not capable of being prudent consumers of medical goods and services.

So what does all this tell us about solving the current problem with healthcare costs? I think the answer is relatively straightforward: if we returned purchasing power to patients -- in effect, restored consumer sovereignty -- healthcare spending would decline dramatically and prices for medical goods and services would reflect the true value to consumers in a competitive market.

Under free-market conditions, would there be a role for health insurance? The answer is clearly yes, but health insurance would much more closely resemble the rational/catastrophic model that developed spontaneously before the onset of serious government intervention into the healthcare industry. Can we get back to that model? Yes, in theory, but it would require that we abolish all government insurance programs, deregulate the system at the federal, state, and local levels, and get rid of all the existing tax deductions, exemptions, and subsidies for the purchase of health insurance.

The main objection to restoring consumer sovereignty as I have described is the progressive appeal to social justice. Paul Krugman tried to make the case for this in a recent editorial entitled "Patients Are Not Consumers" in the New York Times. Krugman's logically flawed and contradictory arguments can be boiled down as follows:

1. Healthcare is a right and the doctor-patient relationship is sacred; therefore, patients should not be viewed as consumers.
2. Doctors and patients cannot be trusted; therefore, a third party must intercede in the decisions made between the patient and his or her doctor, because somehow, without any personal knowledge or previous interaction whatsoever, the third party knows what the patient needs better than the other two connected parties (doctor and patient).

(If you think these two points are contradictory, you are not alone.) Krugman writes,

Here's my question: How did it become normal, or for that matter even acceptable, to refer to medical patients as "consumers"? The relationship between patient and doctor used to be considered something special, almost sacred. Now politicians and supposed reformers talk about the act of receiving care as if it were no different from a commercial transaction, like buying a car ­ and their only complaint is that it isn't commercial enough.

What has gone wrong with us?

I take this to be Krugman's variant of the social-justice argument -- because healthcare is a right and the doctor-patient relationship is sacred, patients have a right to whatever they and their doctor agree to; they should not be forced to pick and choose.[4] Of course, healthcare is not a natural right, as natural rights define what somebody else, including the government, cannot do to you. They do not oblige anyone to act on your behalf, and they do not oblige you to act on the behalf of anyone else, except to respect the fact that others have the same rights as you. If a right to healthcare were recognized, it would necessarily enslave each of us to everybody else's healthcare needs. But Krugman does not really believe healthcare is a right, as the next part of his argument reveals. He writes:

About that advisory board: We have to do something about healthcare costs, which means that we have to find a way to start saying no. In particular, given continuing medical innovation, we can't maintain a system in which Medicare essentially pays for anything a doctor recommends. And that's especially true when that blank-check approach is combined with a system that gives doctors and hospitals ­ who aren't saints ­ a strong financial incentive to engage in excessive care. …

[T]he point is that choices must be made; one way or another, government spending on healthcare must be limited.

As the above passage makes clear, to Krugman and progressives like him, healthcare is not really a right, and the doctor-patient relationship is not really all that special. Instead, healthcare is a privilege to be granted at the prerogative of the ruling class. Progressives do not reject the idea of consumer sovereignty because it is economically or ethically flawed, but rather because the act of being a consumer requires that an individual's natural rights be fully protected. The recognition of such rights represents a check on arbitrary power, and as such it is the enemy of the state and ruling elites like Krugman, who have an insatiable lust for power and control over the rest of us.


Andrew Foy is a medical resident at Thomas Jefferson University Hospital in Philadelphia, PA. His writing was featured in Jonah Goldberg's recently edited book Proud to be Right: Voices of the Next Conservative Generation. The opinions expressed here in no way represent those of the institution where he works.


Notes

[1] Carlstrom C. "The Government's Role in the Health Care Industry: Past, Present, and Future."

[2] It is often stated that, in the appropriate clinical setting, drug X, in addition to drug Y, decreases the risk of having a cardiovascular event by 10–20 percent, whereas I have stated it is only a few percentage points. Both statements are true. The larger risk reduction refers to "relative risk" and the smaller risk reduction refers to "absolute risk." Let's say the risk of having an event is 4 percent and taking a drug lowers it to 3 percent. Under this condition, the drug would confer a relative risk reduction of 25 percent and an absolute risk reduction of 1 percent. Obviously, the former sounds much more impressive than the latter. Therefore, when discussing risk reduction I prefer to speak in terms of absolute risk, which makes more sense from a consumer perspective.

[3] Newhouse, J. Insurance Experiment Group. Free for All? Lessons from the RAND Health Insurance Experiment. Cambridge: Harvard University Press, 1993.

[4] I have no doubt that the majority of "thought leaders" in the field of health policy would disagree with the assertions made in this paper ­ namely, that denial of consumer sovereignty by government intervention is responsible for uncontrollable medical costs ­ but this only mirrors the majority of mainstream economists who have ignored the Austrian School for so long and at the nation's peril. They will say that the problem of consumer sovereignty and medical costs can be minimized because other nations with extensively government-run healthcare systems pay less for healthcare than the United States. And while it is true that other nations spend less per individual, it only reflects the fact that they have been, up to this point, stricter with rationing and price controls. However, it must be noted that these other countries are also experiencing medical costs that are spiraling out of control, and the same argument I have presented in this paper can be applied to each of them.

Hagist and Kotlikoff studied the growth in healthcare spending for ten developed countries over the time period 1970–2002 and found that, "Government health care expenditures have grown much more rapidly than the economy in all developed countries. Between 1970 and 2002 these expenditures per capita grew at almost twice the rate of gross domestic product (GDP) per capita in 10 countries studied: Australia, Austria, Canada, Germany, Japan, Norway, Spain, Sweden, the United Kingdom and the United States."

Where consumer sovereignty is violated by government intervention results will be worse, not better, than the conditions government wished to improve -- medical goods and services are no exception.

http://mises.org/daily/5359/The-Medical-Marketplace-Free-and-Unfree

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