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POLICY: How dumb is this, part 34

Ricardo2_1Study Says Medicare, Health Insurance May Be Major Cause of Hospital Spending Growth. The Galen crowd are all over this study from an Asst Professor at MIT because it tells apparently a new tale which is that the spread of insurance, especially Medicare, has had the effect of increasing health care spending—rather than the BS foisted by the health care industry which explains that their costs have gone up because of the new medical technology that people want.

Brilliant and totally new, other than the minor fact that it is a concept called derived demand first coined by David Ricardo in the 1820s.

"It is not really true that the price of corn is high because the price of corn land is high. Actually the reverse is more nearly the truth; the price of corn land is high because the price of corn is high!"

Substitute the words health care for “corn” and medical technology for corn land and you have exactly the same thing. (If anyone’s got the brilliant poem about the corn and the hogs from the original text book, please add it to the comments)

So we added a huge amount of fuel to the fire by extending Medicare and private insurance, we left a mechanism where the providers made more money by doing more, and faced no restrictions on what they did, and we developed a medical and social culture where doing more was always regarded as better than doing less (or doing something was regarded as better than doing nothing). Exactly what did we think would happen, given those incentives? Providers would do more, get more medical technology and blame it all on patient demand for more technology. And we agreed to keep paying more. And that has never stopped in the last 75 years.

And of course the HSA crowd think that they have the solution. I’d be a damn site more impressed with this new discovery if Alain Enthoven hadn’t been ascribing the blame for increased health care expenditures to “cost unconscious” demand since the mid-1980s. He had a solution then and one that is much more comprehensive than the “let consumers spend their own money up to the deductible” mantra being quoted now. He just couldn’t get it past the health care industry…and there’s not much reason to think that the HSA backers will have much of a better experience. But at least Enthoven didn’t claim to have introduced the concept of derived demand.

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pgbMD
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pgbMD

The ICU stats I found in those comments that I cut and pasted above, but I don’t know the source. Maybe some of the difference, if the numbers are accurate, are due to the French system allowing terminal patients to expire. I don’t know. Would have to know the source of the stats and do some investigating, but of course time is a factor.

Barry Carol
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Barry Carol

pgbMD and JD – The ICU mortality stats were toward the end of the comment section of Ezra’s piece on the French healthcare system.

pgbMD
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pgbMD

I got the stat from the ezra website, but I don’t know its source. I will do some investigating and get back to you on this string.

jd
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jd

pgbMD:
I haven’t looked into the different mortality rates of US vs. French ICUs, so I really can’t answer that. So far, most of my research into French and European systems has been at a more macro level. I have as a long-term goal to learn more about institutional details like this one. Where did you get this statistic, by the way? Was it in something I linked to?

pgbMD
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pgbMD

“1. Many highly ambitious people would go into other professions, and those whose ambitions focus around money would go into whatever is reliably more lucrative.” True. Unfortunately, almost all of the great advances in medicine/surgery (discounting pharma/devices) in last 40 years and earlier have come from those ambitious and highly intelligent individuals. “The average IQ may go down a little, but I’m not worried about it threatening competency in part because we’re talking more about a personality difference than an intelligence difference. This is why I said I thought you would get more women in medicine if the salary (and… Read more »

jd
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jd

pgbMD: I can’t address everything in your last two posts. A few observations: you’re right that if average physician/provider incomes go down that a different sort of person will tend to be attracted to medicine. If the average physician salary were in the 70th percentile rather than the 95th percentile, I think we would see a number of changes: 1. Many highly ambitious people would go into other professions, and those whose ambitions focus around money would go into whatever is reliably more lucrative. 2. Many intelligent people who want to care for the ill but are currently put off… Read more »

pgbMD
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pgbMD

Great site! Still working the pages of info. Have many concerns and found 2 interesting posts by Joel Anderson that pointed out horrific ICU mortality data for French hospitals. Maybe not so rosy on the other side, but I will keep an open mind and keep reading… Um, have you used a French facility lately? I used St. Roch Hospital(Allegedly one of the best in France), and I found it to be a dump. The ED was unclean, and even telling the incompetent attempt at a doctor that i have asthma and I needed nebulized albuterol. It took the moron… Read more »

pgbMD
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pgbMD

JD: Did not see your link above. Will look at it at get back with you on my thoughts.

Barry Carol
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Barry Carol

JD – Thanks for the detailed response to my questions. The more I learn and read, the more optimistic I am that we can find enough savings within our current system to cover the uninsured while holding overall healthcare spending to the current 16% of GDP. While most of the potential changes will encounter significant opposition, I think the oppsisiton will dissipate over time, especially if the interest groups are more aggressively challenged to come up with viable alternatives besides raising taxes ever higher, especially on high income people. Possible sources of savings include: 1. End of life care. I… Read more »

pgbMD
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pgbMD

JD:Actually the French system does seem appealling. From what I understand, doctors can have private contracts with patients and still be in the national healthcare system. Increadibly, their system does appear to have more freedom when compared to Medicare. I would like to see unbiased data on how much their system costs the taxpayers. I am sure it is not cheap. Do you have any summaries on the French system? Thank you.

jd
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jd

pgbMD: “To say that all doctors must become salaried is intellectually lazy.” I didn’t say that. I said that I thought it would be better if they were. It would also be better if most were, and some remained outside in a private system–sort of like regular teachers (salaried) and special tutors that the rich or slow use (fee for service). “Fortunately in this country (unlike our idealist friends in western Europe) we do have many protected freedoms.” This is absurd. I don’t even know where to start with such a statement, except to enumerate all the rights that Europeans… Read more »

jd
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jd

Barry, Thanks for the response and questions. I’ll answer each as best I can. 1: Regarding the cost and potential savings of end of life care, I can give some rough guidelines from memory (with some searching you could find it using google). Close to 50% of all health spending is for care in the last 2 years of people’s lives. I think David Cutler said it was 50%, but I’ve read that it’s around 35-40% elsewhere. If our system were half as expensive as it is (more like European nations), we could save perhaps 15% of all healthcare spending… Read more »

pgbMD
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pgbMD

JD: A salaried position works well in many venues (academic, government/military, etc), but to say that all doctors must become salaried is intellectually lazy. Fortunately in this country (unlike our idealist friends in western Europe) we do have many protected freedoms. If you want to see a salaried doctor go to Kaiser, the UC medical system, etc. There are many good doctors working in salaried positions. Maybe all lawyers should be salaried as well? That would certainly cut down on all the frivolous lawsuits! This attempt by the socialists in this country to further capture a huge chunk of the… Read more »

Barry Carol
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Barry Carol

JD – That was a very interesting and informative post. I would be interested in your insight into the following issues and questions: 1. If we approached end of life care the same way that European countries do (with or without UK style QALY metrics), how much of the current 16% of GDP that we currently spend on healthcare could be saved? Could it be as much as 1% or $100 billion? 2. With respect to doctor compensation, I don’t have any data on this, but I get the general sense that most doctors could have earned considerably more in… Read more »

jd
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jd

To pgbMD, Barry Carol and jason d: First, jason: I am aware that end of life care is much lower in Europe than here. However, you have a selective portrayal of why it exists and you overplay its significance. There is less end of life care there in large part because of cultural differences. People don’t insist on it there like they do here. Not everyone believes intensive chemo for stage IV cancer when the prognosis for survival is very low is a good idea. Different cultural attitudes get expressed in what people are willing to pay for in the… Read more »