POLICY/PHARMA: “Producers” comment on how much we should spend on health care.

The casual reader who’s been following the health care system and the election–which has had a touch of health care injected into its rhetoric recently–might believe that a nation spending 15% of its GDP on health care, while having a few other “priorities” in places like Eye-Rak, perhaps ought to be wondering about how to slow down its health care spending. Other readers might have noticed that pharmaceuticals are very expensive compared to other countries, and that the odd rogue representative from that industry is starting to suggest that the industry might think about how to moderate those costs. But of course you wouldn’t get to be the CEO of a major pharma company if you thought like that.

Instead you’d think like this. First, health care spending ought to be 18% of GDP. And that spending should be funded by middle and upper-income individuals saving up to 10% of their incomes in special accounts to pay for it because, well, because you just can’t trust those government people. Second, the health care system should be rebuilt with Medicare changed to focus on integrated patient care (presumably with the government taking a lesser role). Third, people need to shape up and practice personal responsibility and pay for their own preventative care. Fourth, the environment for brave pharmaceutical companies who take such high risks should be made easier, and the politicians–instead of criticizing them–should realize that the font of all wealth and success in the modern world comes from pharmaceutical research.

If you think that this is a strategy for a more efficient cost effective health care system, delivering more of its products and services to a wider population more equitably, then you too are probably in line to be the CEO of a major pharmaceutical company, or maybe you already are.

Although he says one or two sensible things about Medicare and school meals, Fred Hassan’s Four Pillars of Wisdom Health Care Reform might look to the outside observer as being just a leetle, leetle bit self-serving. But he has his supporters on the libertarian right. At Tech Central Station, which BTW genuinely doubles as a PR agency for oil companies that for some obscure reason don’t believe in global warming, libertarian columnist Arnold Kling thinks that critics of the system hate those “producers” in the industry. Those people who hate the producers include Uwe Reinhardt, who complains about the high cost of health care and attributes it to the high cost of services. Kling feels that Uwe’s counting the wrong things (services) and that really we should be looking at those outputs–although he doesn’t explain what outputs are, and that everyone who understands health care knows that outcomes (one version of “outputs”) are poorly counted and often just plain poor in American healthcare.

But while they are loathe to criticize producers of health care services, especially producers of very expensive medical technologies which enjoy monopoly protection, those on the political right of a more fiscally-conservative ilk are starting to complain about the costs that are being dumped into new government programs–which will end up being transferred to those producers under our current system. Blogger Josh Clayborn is one such conservative who maintains that these government programs are something we can’t afford. Although the cynical amongst us might note that while we can’t “afford” to borrow money to offer drugs to Medicare recipients, apparently we seem to be able to afford to borrow money to give huge tax breaks to the super-rich.

But those of us who think that the health care system consumes too much money inefficiently have a little bit of ammunition. For the perfect Adam Smith market to appear in health care, information and expertise has to appear on the consumer side, and monopolies have to be broken on the producer side. Well anyone who knows anything about health care knows that we are far from that happy state. While Fred Hassan is unhappy about alleged government interference in the pharma business stopping his precious innovation, the real story is that he doesn’t seem to be objecting too much to the government interference in the market that allows his industry to routinely increase prices and play all sorts of games to prevent competition.

And while we’re on the subject of consumer knowledge, it’s worth taking a quick look at this table which shows that only 33% of Americans believe that we spend more on health care for the elderly than we do on health care for kids. Given that level of understanding of the health care system, its hard to imagine that the “consumer” versus the “producer” is a fair contest. And fifty years of “free market” health care shows that it hasn’t been. Which is why the single payer crowd and the managed care/managed competition crowd all believe that some specialist entity needs to at least be attempting to level the playing field.

And when a major pharma CEO is promulgating about how the rest of us should be funding his retirement fund (rather than our own), well one of my correspondents suggested that it reminded him of when the Chicago press would interview Al Capone in the 1920s and Scarface Al would opine on topics ranging from the changing status of women to juvenile delinquency and government policy for small business. The less amusing aspect of all of this is that health policy in the first and (gawd help us) second Bush term is being run by Hassan and his cohorts in big pharma, so we can expect the current level of producer versus consumer imbalance to continue. Unless of course I’m wrong and the CDHPs first become common and then work to restrain health care costs. But I’m not holding my breath.

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