THE
ECONOMICS OF HEALTHCARE –
CAN THE FREE MARKET SAVE US?
By
David W Kabel MD
February 19, 2013
During the recent election campaign deficit and reduction
and the growing national debt were among the topics that were hotly
debated. Entitlement spending, and
especially the rising cost of Medicare and Medicaid were identified as major
causes for the growing debt. The debate over Medicare and Medicaid that took
place during the campaign highlighted two different approaches to the
problem. The Romney campaign, in large
part adopting the approach put forth by Vice Presidential candidate Paul Ryan, relies
heavily upon the private sector. Under
the Romney/Ryan plan, Medicare would essentially be ended as we know it and
further Medicare recipients would be given premium support or vouchers by the
federal government to purchase private policies. To deal with Medicaid a proposal was made to
end Medicaid as we know it and to provide block grants from the federal government
to the states to subsidize Medicaid, letting each state decide on eligibility
and benefits. The goal of this approach
was primarily to reduce federal expenditures for Medicare and Medicaid without
taking a system wide approach to reduce overall healthcare spending.
The Obama approach, as embodied by the Affordable Care
Act of 2009, otherwise known as Obamacare, took a more system-wide approach to
healthcare cost. Through a combination
of public and private approaches, the purpose of the ACA is to reduce the rate
of rise of federal expenditures for healthcare by changing the way heath care
is provided and changing the incentives for hospitals and physicians, thus
reducing overall healthcare spending.
The ACA is a flawed piece of legislation, but is probably the best that
could be passed in a bitterly divided congress at the time. In order to get insurance companies,
pharmaceutical companies, hospitals and professional societies on board,
several compromises had to be made, rendering the bill flawed, but nonetheless
an important first step in healthcare reform.
Healthcare costs have in the United States have been
rising faster than inflation for many decades.
There have been efforts to control costs, most of which have met with
mixed success. There has been an
ongoing debate as to whether we should rely on private sector mechanisms and
the free market to control costs or whether more government involvement is
required. I will give a brief history
of previous efforts at healthcare cost containment. This will be followed by an explanation of
why these efforts have been unsuccessful and why healthcare differs from other
sectors of the economy. I will conclude
with a look at what other countries are doing and how this might apply to healthcare
reform in the United States.
Medicare and Medicaid were passed into law and signed by
President Johnson in 1965. It was the
greatest expansion of the welfare state since the New Deal. It was bitterly opposed by hospitals and
medical societies at the time. Future costs
were vastly underestimated. No one in
1965 anticipated the advances in medical technology that would occur over the
coming decades as well as the expanding lifespan of Medicare recipients. In
1965, the average lifespan for an adult male in the United States was 70 years
of age. Today that lifespan is 78
years. The average person reaching age
65 can anticipate living an average of 20 more years; thus receiving Medicare
benefits for far longer than anyone expected back in 1965. That is one of the primary reasons for the
high cost that we face today.
Prior to 1987, hospitals and physicians were all paid on
a fee-for-service basis. The longer the
patient stayed in the hospital the more the hospital got paid. The typical heart attack patient would remain
in the hospital for 2 weeks. After
gallbladder surgery 7-10 days was common.
Compounding this was the fact that Medicare and many private insurance
companies would not pay for outpatient diagnostic workups for things such as
colonoscopies. However, they would pay for
inpatient diagnostic workups at a greater cost. Therefore, many patients would be admitted
to the hospital for diagnostic workups that are routinely done on an outpatient
basis now. In 1987, Medicare and
Medicaid introduced diagnostic related groups or DRGs. In this system, which is still in place,
hospitals are paid a set amount for a given diagnosis regardless of length of
stay or expenses incurred by the hospital. The predictable result of this is that
hospitals and doctors became much more efficient in their delivery of care and
lengths of stay for a given problem became shorter. In particularly complicated cases hospitals
could apply for outlier status and receive additional money, but it was generally
not enough to cover the added expenses.
The first real attempt to bring free market principles
and competition into the overall healthcare system was the concept of managed
care around 1990. This resulted in the
formation of health maintenance organizations.
There have been several varieties of health maintenance organizations
but they all share certain characteristics.
A hospital or group of hospitals and physicians, often employed by the
hospitals would contract with insurance companies to provide care for a group
of patients for a set fee per patient.
This arrangement is known as capitation.
There were usually preferred panels of physicians and hospitals as
well. The providers were willing to
negotiate lower fees in exchange for being exclusive providers for a particular
group of patients. If the contracted
providers were able to care for the patients in the HMO for less than the
capitated amount then there was a profit to be shared by all providers. If, on the other hand, the cost of caring
for these individuals exceeded the group’s capitated amount, then the
organization would lose money. HMOs were
successful in holding down the rate of rise of healthcare costs between 1993
and 1998 when healthcare inflation was at its lowest level in decades. Initially, HMOs and managed care did bring
efficiency to the healthcare system but after 1998, healthcare inflation rose
back up to double digits. It remained
there until 2009, when costs again began to drop. There is ongoing debate as to whether the
recent drop is because of the recession or because of actual changes in
behavior of physicians and hospitals to lower costs.
Most of you are probably familiar with the scope of the
problem with healthcare. We spend 2.6
trillion dollars a year on healthcare in the United States which represents 17%
of our gross domestic product. It is
estimated that this will rise to 25% of GDP by 2026. The Netherlands spend the next highest
amount of GDP on their healthcare which is 12% with Switzerland following at
10.6%. Despite spending more of our GDP
on healthcare than any other country we still have 50 million uninsured in the
United States. All of the European
Union countries, Japan, Taiwan, and Singapore provide universal coverage for much less than
it costs in the US.
In addition to higher costs, we also have worse outcomes
in the United States. In a recent survey
by the Organization of Economic Cooperation and Development, a group of 34 countries in Europe, North and
South America, and Eastern Asia, the numbers are striking. The United States spends $8,200.00 a year
per person on healthcare while the OECD average is $3,200.00. US public money is 8% of GDP while the OECD
is 7%. Despite spending more money on
healthcare we have fewer physicians and hospital beds per population, fewer
hospitalizations and shorter lengths of stay, but more preventable
hospitalizations. The life expectancy
in the US is 78.2 years whereas in the rest of the OECD, which includes some
countries which are less developed than we are, it is 79.5. Since 1960 the growth in life expectancy in
the US has gone up 8.3 years versus and average of 11.2 years in the OECD at
large. We have fewer primary care
physicians on average but more MRIs, CTs, total knee replacements,
tonsillectomies, and cesarean sections take place in the US. An average hospital stay in the United
States costs $18,000.00. In the rest of
the OECD the cost is $6,200.00. There
are a few things where the US comes out on top.
It has the best survival rates in breast cancer and colon cancer,
probably related to extensive use of screening tests. However, even the breast cancer data has
been called into question in that some experts feel that the widespread use of
mammography has resulted in detection of small tumors that may never have
caused a problem but are still treated with expensive and debilitating
chemotherapy and radiation.
So why are costs higher in the US? I will attempt to outline some of the
reasons. As I have just alluded to,
increased utilization of technology is widespread. Again, using OECD data, we have 2-1/2 times more
MRI scanners per million population than the OECD average. Not surprisingly, we have twice as many MRI
examinations. Similar numbers apply for
CT scans, and many types of surgeries, all without corresponding improvements
in outcomes.
Utilization also varies widely by geography. This is true both nationwide and within the
state of Iowa. Where there are higher concentrations of physicians, such as the
East Coast, Florida, Texas, and California, utilization tends to be higher per
population. There was an article
published in the Des Moines Register within the past 2 months showing the rate
of utilization of prostatectomy within the state of Iowa. In some metropolitan areas within the state,
the rate of prostatectomy was 2-1/2 times higher than in others. These differences in utilization have not
been shown to result in improvements in outcome.
Physicians and hospitals do charge higher fees for their
services than in other countries that have fee for service. Some of this is due to more regulation in
some of the other countries. Drug costs
are higher in the US than in any other country.
Most other countries negotiate directly with pharmaceutical companies
for reduced prices. The Medicare Part D
act of 2003, in a clause championed by our own Senator Grassley, specifically
forbids our federal government from negotiating directly with pharmaceutical
companies. As a result, the US
subsidizes drug prices in other countries.
It should be noted that the VA has negotiated drug prices directly for
years.
Another factor that leads to increased cost is
mal-distribution of physicians. As noted
above the physicians tend to be concentrated in urban areas and “desirable”
placed to live. Medicare reimbursement
rates in such high density areas as New York, Florida, Texas and California
tend to be 1.4 times as high as those in Iowa, which is 49th in
Medicare reimbursement rates among the states.
Despite low reimbursement, Iowa physicians and hospitals have consistently
been in the top 5 in terms of quality of care to Medicare recipients. The other states that rank low in
reimbursement rates also rank low in quality.
Ironically, Louisiana, which has the highest Medicare costs per recipient
ranks 47th in quality.
One reason cited for high medical costs in the United
States is medical malpractice. However,
the trend in malpractice premiums in most specialties has been downward for a
decade. There are some high risk
specialties such as obstetrics and neurosurgery that continue to have high
premiums, but for primary care providers malpractice premiums are low. My own malpractice premium this year is 1% of
total revenues.
The medical legal climate is blamed in another way for
high costs. It is impossible to know how
much of our healthcare expenditures are devoted to defensive medicine. This is defined as procedures that might not
otherwise be indicated but which are ordered because of fear of malpractice. There is no definitive data on how much is
spent this way, but some estimates are in the range of 10-20% of healthcare
expenditures. Efforts at tort reform in some states have not led to significant
drops in premium and many states that have enacted tort reform still have
higher premiums than Iowa.. The total
number of malpractice suits has been dropping in most states for about 10
years.
Healthcare administrative costs are roughly 3 times
higher in the US than in other OECD countries.
On average, $900.00 per year is spent on every resident of the United
States in health care administration versus $300.00 in the OECD countries. If you take the $600.00 difference between
the two figures and multiple it by 315,000,000 Americans, the savings from lowering
administrative costs to OECD levels would equal $180 billion a year. Our administrative costs are high because
of the complex system that we have for delivering healthcare and private
insurers who must spend on marketing and return to investors.
End of life care is often cited as a reason for the
accelerating cost of medical care. Six
percent of Medicare patients die each year and 27% of Medicare expenditures
occur in the last year of life. However,
that figure has not changed in decades and hence cannot be blamed for
healthcare inflation. One percent of all
Americans die each year and in that final year consume 10-12% of healthcare
resources, but again that figure is constant.
Another reason for the high cost of healthcare is that
most users of healthcare are not purchasing that care directly but through
third parties such as Medicare or private insurance companies. There is little incentive for people to
avoid consuming care. Also people do not
know the price of services that they are purchasing. Insurance plans have introduced high copay
and high deductible plans and health savings accounts (HSAs) in an effort to
make people more aware of costs. Some
experts feel that these changes are one reason for the recent slowing in
healthcare inflation.
The final reason for high cost is simply demographics. We have an aging population which consumes
more resources as it ages. Part of this
is attributable to the fact that we have much better treatment of heart disease
and cancer than we did even 10-20 years ago.
In the case of heart disease, life style changes and more effective risk
factor management have contributed to this.
Smaller numbers of smokers have contributed to
longer lifespans but that
increases costs. It might seem
counterintuitive, but smokers actually consume fewer healthcare resources than
nonsmokers. While they tend to have more
chronic illnesses, they also die 10 years sooner than nonsmokers and therefore
have 10 years where they are not utilizing health resources at all.
One of the consequences of aging is the increased numbers
of people with dementia. Currently, there are 4.7 million people in the
US with dementia. This is estimated to
rise to 13.8 million by 2050 if effective treatment is not found for this
vexing problem. People with dementia
consume a very high proportion of healthcare resources since they can require
decades of institutional care.
The debate that is going on now is what we can do to slow
the rate of healthcare inflation. Free
Marketeers believe that getting government out of healthcare will release the
invisible hand to weave its market magic and help us control our healthcare
costs. This is despite evidence to the
contrary. Despite having the most Free
Market Healthcare system in the world we also have the highest cost, and still,
50 million people are without healthcare coverage. In the 2012 World Health Organization
rankings of national health systems the United States ranks 37th, just
behind Costa Rica and just ahead of Slovenia and Cuba. Number 1 was France and number 2 was Italy
with Spain ranked 7th and Austria ranked 9th. Japan was ranked 10th. One other point that should be made is that
despite being the most free market healthcare system in the world, 50% of our
healthcare expenditures are through federal and state governments through
Medicare, Medicaid and the Veterans Administration.
One final argument that should be made regarding private versus
public spending on healthcare is that Medicare has been better at controlling
the rate of rise of healthcare costs than private insurance for the last 20
years. Over the last decade, Medicare
expenditures have risen at a rate of 8% a year, while private insurance expenditures
have risen at a rate of 10%. This is
despite the fact that the Medicare population is obviously older and
sicker. Administrative costs for
Medicare are 3%. Administrative cost for
private insurance plans can range as high as 20-30% due to marketing and return
on investment needs. One of the provisions
of Affordable Care Act requires private insurance companies to spend at least
80% of premiums on providing healthcare rather than administrative costs. Private insurers are shareholder owned and
must return a dividend to the shareholders.
Medicare has no profit motive.
The reason the free market has not been successful in
holding down healthcare costs is that healthcare is unlike other sectors of the
economy. It is arguably the biggest
sector of the economy now but behaves in ways that are different from other
sectors.
These differences were first elaborated by Nobel Prize
Winning Economist Kenneth Arrow in 1963 in the American Economic Review. The title of his article is “Uncertainty in
the Welfare Economics of Medical Care”.
In this paper he outlines how healthcare purchases differ from other
purchases.
The first difference is the nature of demand for
healthcare, which its unpredictability.
Illness or accident frequently arrives unexpectedly and is not only
unpredictable but very irregular, unlike demands for things such as food,
clothing and shelter. Also, medical
services afford satisfaction only in the event of an illness, which is the
departure from the normal state of affairs.
The only other economic transaction which could be said to be undertaken
unwillingly at times would be the demand for legal services. Arrow also points out that demand for
medical services is associated with an assault on personal integrity, risk of
death, and risk of impairment. It is
often accompanied by potential for loss or reduction of earning ability. So there are not only financial, but
potentially personal costs associated with the purchase of healthcare.
A second difference between healthcare and other economic
sectors is the expected behavior of the providers of healthcare. In an acute illness the purchaser of the
healthcare often does not have a chance to comparison shop and decide on the
cheapest or best physician or hospital.
Therefore, the element of trust is extremely important. Arrow points out that healthcare is unique in
terms of commodities in that the product and activity of production are identical. He also points out that the ethically
understood restrictions on activities of a physician and hospitals are more
severe than other licensed professionals.
He uses the example of a barber who is also a licensed
professional. However, Arrow points out
that when a barber gives a consumer a bad haircut, the hair will always grow
out again. The expectations of doctors
and hospitals are that they will behave ethically with the primary concern
being the welfare of the consumer or patient.
Another difference that Arrow points out is product uncertainty. While diagnosis and treatment have improved
significantly since 1963, there is still an element of uncertainty in any acute
illness that does not guarantee a desired outcome. With other commodities it is
possible to learn from experience. A
good example would be buying a car. A car purchaser may buy a particular brand
which proves unsatisfactory. The next time
the purchaser buys a car the buyer would be likely to get a different brand,
whereas a good experience generally fosters brand loyalty. In the case of severe illness, there is
usually no previous experience with this illness and no way to know how it will
turn out or to apply previous experience.
In addition to uncertainty there is asymmetrical
knowledge. The medical professional knows
much more about the situation than the patient and therefore the patient must
rely on the physician’s knowledge to guide therapy. Critics of Arrow point out that asymmetrical
knowledge occurs in most professional and licensed occupations. A local example of the ultimate in
asymmetrical knowledge would be the case of Russell Wassendorf, whose clients
were unaware of the fact that he was robbing them blind for 2 decades. Nonetheless, the stakes in healthcare are
much higher than in most situations, resulting in reliance upon the physician
in situations where the patient may not be as informed as possible.
The fourth area where Arrow points out that healthcare differs
is in supply conditions. All professions
and many skilled trades require licensure and demonstration of competence, but
the supply of physicians is significantly limited by length of training. Obtaining a medical license is among the more
difficult professional endeavors, requiring more years of training than virtually
any other profession as well as a demonstration of competence at several steps
on the way to completion of that training.
The final area where Arrow points out the difference
between healthcare and other sectors of the economy is in what he terms idiosyncrasies
of payment. There are many. Care is paid for after and not before
provision of the service and that service is nonrefundable. Patients are given little or no information
on price or costs. The costs are paid
by third parties, either the government or insurance. The payers and providers negotiate the
payments on behalf of the patients. In
acute situations patients do not have the power to say no if the price is too
high. Finally, unlike other areas of
the economy, competition drives up costs rather than lowering them. One traditional theory of currency inflation
is that inflation is caused when there is too much money chasing too few
goods. You could say that medical
inflation occurs when there are too many doctors chasing too few patients. This
is why costs and utilization rates are higher in areas with higher
concentrations of physicians. In order
to maintain their incomes, physicians in over served areas frequently find
creative ways to extract maximum revenue from the insurance companies of their
patients.
Some people might say “So what if we spend this much
money on healthcare? We have to spend
it on something.” But the high costs of
healthcare have deleterious effects on other parts of the economy.
The current employer base system is flawed in many
respects. Employer based health
insurance discourages job mobility. With
job changes many people have waiting periods before insurance coverage starts
and may be excluded for preexisting conditions. This discourages job mobility and also
discourages people from leaving an employer based system to start up their own
businesses, thus discouraging entrepreneurship. The employer based system also discourages
retirement before age 65. In many
professions such as nursing and teaching, this means that new graduates have
difficulties finding jobs in their chosen fields because of older workers who
continue working only to retain their health insurance until reaching Medicare
eligibility. In the last 10 years the number of people covered by employer
based insurance has dropped from 69% to 61% and those healthcare plans that
remain are generally imposing higher deductibles and copays upon the employees
to control premium costs. Also, because
of rising healthcare cost employees have often opted to retain health insurance
at the expense of raises in salary.
Another problem with the ever rising cost of healthcare
is the effects on Medicaid costs for the states. As Medicaid costs rise, state budgets are
stressed and cuts come elsewhere.
Education and public safety are the usual areas which are cut.
The consequences of being uninsured are well known. By some estimates anywhere from 18 to 40
thousand people die each year from preventable illnesses due to lack of health
insurance. Rather than getting needed
preventative care the uninsured usually seek care in expensive emergency room
settings. They are often treated
sub-optimally because of the cost of medications and procedures. The uninsured often end up in the hospital
and unable to pay their bills. The
hospital costs are then spread to paying customers, resulting in increased charges to everyone
else and decreased staffing for the hospitals.
The Affordable Care Act attempts to deal with this through its Medicaid
Expansion Program. As you are no doubt
aware, Governor Brandstad has refused to sign onto the Medicaid Expansion so
far. In negotiating the Affordable Care
Act with hospital associations, the hospitals took lower rates of pay for
Medicare patients in exchange for the expansion of Medicaid that would mean
they would have fewer nonpaying patients in the future. Medical societies and hospital associations
within the state are attempting to persuade the Governor to change his mind. If he does not, then the hospitals will be
forced into staff cutbacks and higher charges for everyone else.
So what does any health care system need? It needs 5 things. The first is
finance. The finance can be either
private or government supplied or a combination of both, but ultimately it must
come from individuals and households through either taxes or payroll deductions. The healthcare system also needs risk pooling
to protect individuals from high costs. This is the same as in any insurance
plan. The health system needs purchasing
of healthcare, namely physician services, hospital services, pharmaceuticals,
and medical devices. It also needs
production of healthcare from the same physicians, hospitals, pharmaceutical
and device companies. Finally, any
healthcare system needs some form of regulation to produce socially desirable
ends. The question is who should provide
financing and regulation?
There are many barriers to controlling costs while
providing universal coverage. Some
barriers are political and others are cultural.
The political barriers are obvious;
deficit reduction, free market vs. public financing, and divisive issues
such as abortion and contraception. The
cultural barriers are equally difficult.
Canada, Japan, Taiwan, and the EU countries provide universal coverage
based on the principle of social solidarity, which says that healthcare should
be financed by individuals on the basis of ability to pay and provided
according to need. This concept is
widely accepted in these countries. As
Princeton economist Uwe Reinhardt points out, a large segment of the US
population rejects this idea. You may
remember during a Republican presidential debate that Ron Paul, a physician,
was asked what to do about a critically ill person who came to an emergency
room lacking insurance. While Rep Paul
attempted to dodge the question, members of the audience shouted “Let him die!” The individual mandate in the ACA, an idea
that originated 20 years ago at the conservative Heritage institution, is
widely disparaged now by conservatives who object to the infringement on
freedom that they see in the mandate, but who would still undoubtedly expect to
be cared for if they should show up in an ER uninsured.
While it may sound like heresy to some, I think it would
be useful to look at what is being done in other countries to see what might
work for us. There are roughly 200
countries in the world. Forty of them
have an established healthcare system.
However, there are only 4 basic types of healthcare systems.
The first is the Beveridge Model. This is named after William Beveridge, the
social reformer who designed Britain’s National Health System after World War
II. In this system healthcare is
provided and financed by the government through tax payments. It is just like any other public utility such
as the police force or public library.
There is a mix of both publically and privately owned hospitals. Many physicians are government employees but
there are also private doctors. The
costs tend to be low and in fact Britain spends about 8% of its GDP on healthcare. Roughly 10% of Britons have private health
insurance, either individually purchased or sometimes provided by
employers. Countries other than Britain
that have the Beveridge Model include Spain, most of Scandinavia and New
Zealand. Hong Kong has a Beveridge Model,
which it retained when it was incorporated back into China. The ultimate in the
Beveridge style approach is Cuba, where government control is complete.
The next model is the Bismarck Model. This is named after the 19th
Century Prussian Chancellor, Otto Von Bismarck, who invented the modern welfare
state. Not only did Bismarck create a
healthcare system, but he also invented social security and chose the age 65 as
the age when social security benefits would be available. In the Bismarck Model, health insurance is
financed jointly by employers and employees through payroll deductions. In the current German system, retirees are
covered by their retirement funds.
Premiums for children are paid out of general government revenues on the
theory that children are an important and valuable resource. In Germany today there are over 200
independent nonprofit “sickness funds” from which Germans can choose. However, these companies are highly regulated
by the federal government. The premiums
that individuals pay for this insurance are based largely upon income and
ability to pay. Other countries that
follow the Bismark Model include France, Belgium, Netherlands, Japan,
Switzerland and some countries in Latin America.
The third model is the National Health Insurance Model,
which is a kind of cross between the Beveridge and Bismark Model. It uses private sector hospitals and doctors
but payment comes from a government run insurance program, financed by
taxes. The classic example of this is
Canada. Each Province administers its
own program and there are individual variations among provinces. Costs are controlled by limiting the fees
charged by doctors and hospitals and also by limiting the expansion of
technology. Taiwan and South Korea have
adopted a similar approach.
The fourth and final model for health care is the Out of
Pocket Model. This is what we see in
most third world countries and in rural areas of China and India. The only healthcare that is provided in
these countries is what can be paid for out of pocket. The costs tend to be far cheaper than they
are in the US, but access is extremely limited for most of the population. There are up to date medical facilities in
urban areas, where those who can afford it receive high quality care, but which
is denied to the majority of the population.
How do those systems apply to the United States? We have elements of all four systems in this
country. The Veterans Administration
follows the Beveridge Model. Care is
provided by government employed physicians and government owned hospitals
through the Veterans Administration.
Medicare very much resembles the Canadian system or National Health
Insurance Model. For Americans who have
employer related insurance, we have the Bismark Model and for the uninsured we
have the Out Of Pocket Model. The
consequences of this fractured system are higher administrative costs,
non-uniformity of care and quality, and 50 million people without health
insurance.
It is my belief that we will not get health care costs under
control and deliver quality with the current fractured system that we
have. Although the models differ from
country to country, all those countries who have managed to control their
healthcare costs and provided universal coveragehave required increased
government involvement in the financing and regulation of the healthcare
system.
In moving forward, I think we will probably eventually
end up with a two pronged system. The
Veterans Administration currently follows the Beveridge Model. Veteran’s Organizations rightly argue that
the needs of veterans are unique and I believe that the VA system should remain
intact and be adequately funded through general tax revenues. This is the least we can do for our veterans
who come back from war bearing the scars of battle.
For the rest of us, we need to decide on one of the other
three models. The Beveridge Model is
probably unacceptable to Americans. It
would require most physicians to become government employees and most hospitals
to become government owned. That is not likely to happen. However, I think we can eventually evolve
into something more approaching the National Health Insurance Model in Canada
utilizing private hospitals and physicians with government financing it. This concept is often called “Medicare for
all.” This will obviously require
additional sources of revenue, and the political will to do it. I believe we will eventually end up with a
system like this, but it will likely take a decade or more.
We have other needs that can be instituted sooner rather
than later, and should not fall victim to the deficit reduction mania currently
prevalent in Washington. There is a need
for increased funding for basic and clinical research. As an example, finding a cure for Alzheimer’s
Disease would result in significant savings to the healthcare system but can
only happen through increased funding for research. We also need better means of evaluating new
and old therapies for their cost effectiveness. The Independent Payment Advisory Board, labeled
“The Death Panel” by conservative critics like Senator Grassley,
established by the Affordable Care Act needs to be reinforced, not abolished.
We need to start paying only for what works.
We have to be able to say no to some treatments. As an example,the FDA recently denied
approval for a drug for prostate cancer that cost $90,000.00 for a course of
treatment and resulted on average in 2 more months of survival. We need to educate the public and the medical
community about what works and what does not.
The attitude that more is always better needs to be overcome as well. As has been shown in a number of studies
recently, aggressive treatment of entities such as prostate cancer and some
types of breast cancer often results in more harm than good.
There are three ways to save money in the healthcare
system. One, we can do less. Two, we can pay less for what we do, or
three, a combination of one and two. How to achieve the twin goals of lower
cost and higher quality will be the topic of debate for years to come.
