John Graham – The Health Care Blog

Crowdsourcing, Price Formation, and Health IT

Jul 20, 2012• 49

By JOHN R. GRAHAM

From the perspective of the average patient, going about his life unconcerned about health policy or economics, what is the most frustrating characteristic of U.S. health insurance? Surely, it is the madness of the billing cycle: Never knowing how much a medical service costs until long after you’ve received it, and sometimes only after a flurry of phone calls and paperwork that can take months to clear up.

This is surely why Michaela Dinan’s “winning entry” in a national essay contest, which invited people to submit anecdotes “illustrating the importance of cost awareness in medicine,” has struck such a chord. Ms. Dinan’s story concerned a billing error for inserting an IUD. Before the procedure, the patient learned (via “a few keystrokes”) that the cash price would have been $843.60. Insured, her out of pocket cost was to have been about $200. Instead, she received a bill for $1,100 that took months to sort out. I suspect that most readers and contributors at The Health Care Blog will use this story as further evidence of the need for a massive national investment in Health IT, along with Patient-Centered Medical Homes, Accountable Care Organizations, adherence to “meaningful use” standards, et cetera.

Preparing for the Exchanges

Sep 22, 2011• 1

By John R. Graham

What is the biggest waste of effort in American health care today?

I’d suggest it is the hustle and bustle to establish PPACA’s Health Benefits Exchanges. The health insurers’ trade association, AHIP, has an entire educational series on “preparing for exchanges.” The likelihood of exchanges being up and running by January 2014 is vanishingly close to zero. Indeed, they may not exist at all except in very few states – whether or not President Obama wins re-election.

Last January, I wrote in The Health Care Blog that states should not collaborate with the federal government in establishing exchanges. Almost all states have taken this course. Recent days have brought forward new evidence that exchanges are facing even bigger problems than previously understood. The New York Times reports that Republican state senators are blocking a bill that would allow the state to establish an exchange and claim federal handouts to get it up and running. (A few weeks previously, Kansas governor Brownback actually sent a $31.5 million federal PPACA grant back to D.C.).

If they can’t get a PPACA exchange up and running in New York, of all places, where the heck will they? Only 13 states have passed pro-exchange legislation (and some of these bills don’t do much more than establish study groups).

U.S. Health Care & U.S. Productivity: A Dissent

Dec 23, 2010• 39

By JOHN R. GRAHAM

One of the great myths about American society is that our lack of a “universal” health plan harms our competitiveness. The masters of this refrain, of course, are the American automakers. Years before driving themselves into bankruptcy and the unwelcoming arms of their new owners, the American taxpayers, they used to claim that they spent up to $1,600 per car on health care. This was more than they spent on steel, and a multiple of what they claimed their foreign competitors spent. In her well received book, Who Killed Health Care? America’s $2 Trillion Medical Problem – And the Consumer-Driven Cure (New York, NY: McGraw-Hill, 2007), Professor Regina Herzlinger of Harvard Business School claims that these complaints are inflated (pp. 104-105).

Furthermore, we don’t hear Mark Zuckerberg complaining that Facebook’s health care costs are preventing him from competing against foreign social-media businesses. Indeed, while all Americans complain about health costs, the argument that our health “system” reduces our competitiveness versus other countries with “universal” health care is actually quite weak. Indeed, the percentage of all firms offering health benefits actually increased from 66 percent in 1999 to 69 percent in 2010, and a greater number of smaller firms have begun to offer health benefits, according to the Kaiser Family Foundation.

One oft-cited metric is that the United States spends far more on health than other countries as a share of Gross Domestic Product (GDP). But this measurement can mislead. It is a ratio composed of a numerator and a denominator. The numerator – the real cost of medical care – has grown slightly slower in the U.S. than Europe. Advocates of government monopoly health care point out that Canadian and U.S. health spending as a share of GDP was about the same before the Canadian government took over health care, but diverged starting in 1970, soon after the government completed its takeover. They present this as evidence that the state can control costs better than the private sector. However, real GDP growth in Canada dramatically outpaced U.S. growth between 1969 and 1987, meaning that the denominator of the health spending per GDP ratio grew much faster in Canada, not that the numerator grew much slower, according to research by Professor Brian Ferguson.