Given the disarray in the individual insurance market, the latest survey from the Center for Health System Change (here’s the News Release and here’s the longer issue brief) proves that economics is alive and well. There is such a thing as an income effect and a price effect–so if business income/revenue goes down and the price of insurance goes up, well funnily enough a lot less people are going to be getting health insurance from their employers. And somewhere mixed in that is the little nugget that if you don’t have a job any more, as we used to say in England, you have two chances of having an employer provide you with health insurance: No chance and (As this is a family blog. I’ll censor the rest of this remark).girlie-men or no girlie-men, and the other is more people on both sides of the patient-provider relationship discovering how inadequate Medicaid is. Furthermore most of the increase was for children rather than adults, so there was some relative shift in who within families got insurance, but even so public sector insurance rolls expanded for adults too.The Blogging of the President which explains (to my satisfaction at least) where this all will drift to: The reason that eventually we’ll get to some kind of compulsory national health care system is grounded in the fact that for the last hundred years if you (or your employer, or the government if like the elderly you had some power and could force the burden onto other taxpayers ) could not afford insurance, you went without. That meant that the medical system could keep charging as much as it liked because those who couldn’t afford it would be dumped into the safety valve known as uninsurance. In such a system two things eventually will happen.

The number of those with employer-provided insurance fell from 67% in 2001 to 63% in 2003. That fast a fall in that short a space of time is pretty significant, and of course starts to throw many more people into the individual insurance market and/or into uninsurance, which are pretty closely related if you’re sick anyway. This also confirms why health insurance is becoming a bigger and bigger deal on the campaign trail as more people are now more aware that growth in health insurance premiums actually costs them something directly (rather than depresses their incomes indirectly as it has for decades now).

The other thing that has been going on is another expansion of Medicaid, which almost mirrors the huge expansion of Medicaid during the early 1990s recession. The number of people getting insurance from public sources went up by 3%. However, that in turn means two things. One is massive pressure on state budgets,

But the big overall message is that we are moving whether we like it or not into a system where the combination of government programs (including Medicare of course) and individual insurance will eventually overtake the employer-based group insurance that has been the mainstay of the US health insurance "system" (and I use that word very loosely). How fast that transition happens depends somewhat on politics, but eventually those with good health benefits at work will be in the minority.

All of this will increase the eventual pressure that we’ll face as a nation to get to grips with this. In fact I’m going to repeat a para here that I wrote in the comments over at

First, costs which have been allowed to grow without any controls will eventually become too great for those paying the bills (esp. large employers). They will continue to push people out into un or under-insurance, which is exactly what the HSC study is finding.

Second, the number of un or under-insured will become so great and politically powerful, that it will end up creating a compulsory "national insurance" system. That system will shift the burden from employers to the taxpayer, which will coincidentally make the employers happy (and most people too, if international surveys are to be believed..)

And once everyone’s in the system and there’s a direct correlation between taxes and health spending, healthcare spending will come under much tighter control. After all we’re Americans and we hate taxes (so long as levied by government rather than the health care system which calls them premiums).

This happened in the rest of the world between 1945 and 1970. It nearly happened in America in 1993, and it will happen sometime in the next 20-40 years here. This isn’t an ideological argument, it just has to play out that way unless health care costs go downwards over that time, and I hasten to guess that not even Mark (Note: Mark was a previous poster in this thread who hated Canadians and poor people) thinks that will happen.

The Industry Veteran is back and on fine form, picking up the ball on a piece of crossed out editorial about my least favorite American politician, and running it into the realms of whether the Democrats are right (as Jones the Policy Wonk suspects) to take the milquetoast route, and whether marketing to doctors needs to be different than to other clinicians.

"Theocratic fascist?" I love it. Now those are the terms and the tone I expect to see on a blog. If I wanted neuterizing, backpedalling, vague ambiguity and maudlin sentiment ("hope," "we can do better," "a government as good as its people") I’d watch the Democratic convention.

This leads directly to my opening rant. The Democrats apparently believe that aggressive Bush bashing will repel the "persuadable" 20% of the electorate and, for that reason, most of their carefully orchiectomized speeches have been as energizing as 20mg of Valium. Two reasons make me think they’re making a bad mistake.

Let me start by recalling two, well established facts of voting behavior in this country: (1) voting participation varies directly with socio-economic status and; (2) only half of eligible voters go to the polls. This means that non-voting prevails among the lower two-thirds of the economic ladder that constitutes the Democrats’ social base. Election victories by Democrats, therefore, owe more to mobilizing voting among this base than to persuading the half-assed/undecideds. Democratic non-voters need a reason or reasons to vote. Platitudes about a shining city on a hill, restoring opportunity to America or giving us security with peace don’t cut it. A candidate who lacks personal magnetism, together with the lachrymose sentimentality that Democrats have been shoveling out all week, produce responses ranging from indifference to cynicism and distrust, none of which provides lapsed Democrats with an incentive to vote.

My second argument for sharper, more abusive language contradicts the pollsters’ assertion that negative campaigning and personal attacks merely turn off voters. Pharmaceutical research that I have conducted over many years with physicians and consumers leads me to suspect that the Democrats are receiving some bad advice. When asked how they feel about ads and other promotions that slam a competitor’s product, physicians and consumers typically give the socially correct response by saying that they disdain it. Further probing beneath this response indicates a different, more complicated process at work. Both physicians and laymen disparage negative or critical promotions that lack specificity because the course of action suggested by such communication (i.e., buy our product rather than the competitor’s) does not follow logically. As a result, test audiences believe that promotions full of "empty abuse" insult their intelligence. Physicians, for example, want to see the results of published studies, together with tables, charts and a condensed version of the supporting data. Consumers seek their own forms of corroborating evidence, and this varies according to the product, the market segment and several other factors. Given a rationale that effectively informs their selection process, physicians and consumers actually welcome a sharply stated conclusion: the other guy’s product is less effective and more poorly tolerated than ours. In short, go ahead and call John Ashcroft a theocratic fascist after first discussing the draconian features of the Patriot Act. Call George Bush an arrogant dope, a plutocrat and a lying scumbag after first discussing, well, any of his policies. Hey, if a longtime Republican operative such as David Gergen thinks the Democrats wasted a big opportunity by going soft on Bush, I think he may know something.

Second rant. I mentioned in a previous posting that I completed a study earlier this year involving the policies and practices of Big Pharma companies relative to the OIG/PhRMA guidelines for promoting to healthcare professionals. (OIG is the Office of the Inspector General at the Department of Health and Human Services; PhRMA is the Pharmaceutical Research and Manufacturers Association, Big Pharma’s trade lobby.) In response to exposes over the past few years that featured "dine-n-dash" and paid vacations in Aruba, these two organizations each issued guidelines to specify acceptable and prohibited practices for pharmaceutical companies promoting their products to physicians and other professionals. We first assessed the policies and monitoring processes used by the largest pharmaceutical companies for assuring compliance with these guidelines. Then we analyzed their actual promotional practices out in the field. Suffice it to say that while the overall level of bribery and bribery-in-kind has diminished slightly or has become less overt, the levels of compliance vary among the companies and nearly all reflect major disparities between policy and practice.

More recently a client asked us to make a similar assessment among diagnostic device companies. We found that while compliance differences also exist among these competitors, such differences are smaller than among the pharma companies and, more importantly, the general level of bribery and bribery-in-kind is also far lower. This reduced level of baksheesh became evident early in the study, so we spent a good deal of time and effort trying to account for it. While any complex social behavior usually results from multiple factors, there is a principal reason why fewer payoffs, involving lesser amounts, occur in the diagnostics business. Stripped to its essentials, the promotion of diagnostics involves a far smaller number and proportion of office-based physicians who would demand such gratuities. Very often the decision-makers who select/recommend diagnostic products are clinical chemists, diabetes nurse educators, microbiologists and other non-physicians. Some decision-makers are purchasing agents for hospital and other buying groups. Their product selections must provide strict cost justifications that leave little room for the subjective preferences subject to gratuities. Once again, our princes with stethoscopes, these Mafiosi doctori and purveyors of the Hippocratic myth, have dipped their beaks into the underground economy of healthcare to raise the costs and lower the ethical standards.

Here’s Jones the Policy Wonk in reply to my post on healthcare at the convention where I had written. . . . (and yes I am applauding!)

Maybe if the Democrats repeat their fuzzy message enough times, they’ll seize this issue. My question is, why did they decide this is the big issue? And why are they talking about the cost of health insurance which is somewhat alien to most people and not just focusing on the cost of drugs? I guess it just means that if they talk about it and the Republicans don’t, they own the issue.

The Wonk writes: If I’m interpreting your post correctly, you were asking why Dems are talking about healthcare and why, having decided to talk about it, are they all over the map with it?

You’ll be pleased to know I have an answer for you. Hold your applause until the end.

Short answer is that Democrats have a really clear and simple message on healthcare: "We’re paying attention, we know things are getting worse and remember, we’re the guys you’d rather have fixing this." So, although they’re not coherent from a policy standpoint, the speeches clearly express this political message.

Long answer is that convention speeches are not showcases for policy debate, especially for a challenger. For a challenger, the convention should be a carefully choreographed message event, designed to tell voters who the presidential candidate (and the party) is and why the voters should choose this candidate. Conventions are about winning the presidency and generating long enough coattails to win Congress.

((ASIDE: For a challenger, the convention is especially important because it’s one of the few opportunities he has to speak to the American people and have full control his message. Unlike a sitting president, a challenger can’t demand an hour of prime time for a speech. Most of his media coverage is "earned" media–stories in newspapers and sound bites on TV. The problem is, to get on TV, the challenger has to be "newsworthy." Newsworthyness (if this is, in fact, a word) is determined ex post facto–you get in the papers if, after hearing what you’ve said, the media decides it’s newsworthy. So, it’s a sound bite here, a picture there, and at no point is it a full presentation of the case the challenger is trying to make.   Conventional wisdom in the media is that conventions aren’t newsworthy, because, um, there’s no news (seriously, the logic is that circular)–if conventions didn’t exist in the past and someone had one today, nobody would cover it. This is because conventions are just candidates and party leaders bloviating on what they believe and what they would do if elected to office. I think it’s pretty clear that I disagree on the need for coverage–although it’s not exciting most of the time, it is important for both sides to be able to present their case directly to the American people in the manner of their choosing. Clearly, it’s not going to give the voters the whole story, but it is an important part of the decision-making process–when they can talk about anything in the world, what do they choose to talk about? How do they talk about it? What promises do they make?   Candidates, especially challengers, seldom have the opportunity to present their case directly to the people in a manner of their own choosing. It’s important to see what they say when they do have this change. Personally, I want to at some point see what they say when they know people are going to listen and no one is going to interrupt them. END ASIDE))

So, the reason the convention speakers are talking about healthcare so bizarrely is because though it’s an issue Democrats win on, it’s not an issue they can win with. In my humble opinion, that’s because American voters are still divided ideologically over the appropriate role of government in healthcare, and beyond that they are uncertain that even if this is a problem that government should solve, whether it’s a problem that government intervention can solve.

I’m digressing, but this ties into the comments that Abby made in the blog entry you linked. This threshold of whether this is government’s problem to solve still hasn’t been crossed with voters. I agree with you that the tipping point will probably come soon, as the economic problems brought about by out of control healthcare spending make ideological blindness an unaffordable luxury. But there does have to be an ideological shift or, at the very least, a realization that government=bad, private sector=good isn’t conventional wisdom but is in fact an ideology that serves special interests. There are a lot of reasons this hasn’t happened yet, not the least of which is that one major political party has thrown its full weight behind supporting this privatization ideology. But no small part of the problem is that people in favor of real healthcare reform haven’t gotten a 3 sentence argument together, and haven’t gotten it on the lips of every healthcare expert who favors healthcare reform. There’s a lot of muscle behind the current message, and the alternative has not been coherently articulated.

((FARTHER ASIDE: There’s reason to hope that this is changing. I think Abby is right again, that the key to this is to take a page from Lee Iacocca and point out the competitive burden placed on businesses. And on a personal level, we should talk more about the loss of freedom people suffer when they’re stuck in a job to keep their benefits, and how it crushes the spirit of American enterprise—people are scared of getting sick, so they won’t start a small business and follow their dreams. I think the business argument will go over well. For example, in NY State, 1199 floated a pay to play proposal. I was listening in on a conversation between a leading NY State senator (Republican) and 1199’s head lobbyist, and the Senator commented he was shocked that when he floated this proposal to business interests, they were willing to engage on the issue. Now, the bill still didn’t pass, but the fact that it wasn’t met with scorched earth tactics by business interests is a change whose importance cannot be overstated. Policy wonks need to start asking employers if they want to be in the business of providing healthcare or in the business of selling widgets. Because more and more, they’re in the business of running America’s healthcare system. Hmmm, maybe we can win big business by framing this as: "outsource your employee health costs to the feds!"END FARTHER ASIDE))

In the face of this political reality, Kerry has decided that he can’t win with healthcare, but he can score a few points with it. So his strategy on healthcare is not to go deep into it but to bring it up occasionally to remind voters what they already believe–that the situation is getting worse, that George Bush has no solutions to the healthcare crisis and that voters would rather have a Democrat working on this problem than a Republican.

So they’re bringing up health insurance because it’s a current healthcare problem–it’s tricking down to voters as an explanation their company gives for lower raises this year, as a stumbling block for union negotiations, as increased cost-shifting with higher co-pays, and for the recently unemployed as one of the biggest financial burdens they suddenly faced. They’re bringing up HMOs because it was the last healthcare crisis voters faced, and a crisis that Dems were on the right side of. They’re bringing up drug costs to remind seniors that they believe Bush sold out to pharma interests and pushed through a deceitful Medicare drug benefit.

But fundamentally, healthcare at this convention is an "and also"–as in: "John Kerry is a strong and decisive war hero, leading a party unified by true American values, who will unite the world behind a strong America. Oh, and also, he’s better on healthcare." This is why the speakers sound so bizarre to the wonks. It’s pure politics, and policy is way on the back burner.

Intersting report from Abby Vigenon on Uwe Rheinhardt’s new theory on why we haven’t got universal health insurance. You may notice that I show my colors (while keeping my cool I might add!) in the comments section.

I’ve taken my time in responding to guest poster Andy Ribner, MD whose piece published in THCB last week was aggressively in favor of one free market approach to health insurance (Medical Savings Accounts) and highly opposed to another (Managed Competition) while putting almost all the blame for the system’s current failures on the alleged oligopsony of the large insurers. Although the concentration of market share among the top 10 insurers continues to increase nationally, I’m pretty sure that Andy is wrong when he calls this an oligopsony.  In the last 5 or so years, insurers have moved away from their aggressive tactics versus providers (although in fairness Andy is right to point out that hospitals have legally and practically found it easier than physicians to fight back). Instead insurers have turned to one old trick, more accurate risk selection (as in Atena’s recovery), and are developing a new wrinkle on a second–new product creation.   The new product is the Consumer Directed Health Plan (CDHP), which is really another way of wrapping some extra services around a Health Reimbursement Account, or alternatively a Health Savings Account (HSA). There’s been lots of noise about these CDHPs and of course the HSA was opened to everyone in the Medicare Modernization Act (MMA).  The problem with the HSA that no one has successfully explained away to me is how does an employer/insurer go about putting much of the risk pool in the hands of the healthy 80% who aren’t going to use much of the money for care, without at the same time reducing the amount available to the 20% who are going to need it.  HSA advocates just go on about buying catastrophic insurance as though there’s a separate pot of money–but it’s all health care spending. This continues to baffle me.

And I don’t appear to be alone.  HSC is out with another of its prescient studies of 12 major metro areas, and this one looks at the attitudes of employers.  Here’s the quick news release while the actual details are in this issue brief. Essentially the study finds that employers are pretty skeptical of the whole HSA/CDHP movement for two major reasons.  The first is that they don’t see how their overall risk pools are going to save money by doling out actual cash to everyone–in particular they are concerned that giving healthy people $1000 will make them spend it on unnecessary stuff, (or presumably in the case of the HSA rather than the employer controlled HRA, keep it). via Don Mccanes’s PNHP quote of the day, comes word that the journal Health Services Research (Yes I’ve got a degree in that subject but barely ever read the mag anymore!) has an entire August issue on CDHPs. And in that issue are two studies from representatives of two of the guilty parties who’ve been pushing the hype.  One is a benefits consulting group while the other is a health plan. Arnie Milstein from Mercer shows that from their studies of their client base "While enrollment in consumer-directed health plans continues to grow steadily, it remains a tiny fraction of all employer-sponsored coverage".  Mercer seems to believe that tiered coverage (which is akin to the old managed care IPA model of creating exclusionary networks) is doing better.  But they are skeptical of the ability of consumers to choose between different services with the current lack of easily available information.

One key concern was that by providing a spending account to all employees, employer payments might increase for their healthy workers. One employer noted that 70 percent of the firm’s covered employees had health care costs of less than $1,000 a year. Concerned that a spending account would encourage healthy workers to use more services despite being able to rollover unused funds to the next year, this employer expected that a $1,000 spending account would raise costs, not lower them.

  Similarly the employers don’t seem to think that there are any real controls on how the money is spent on the 20% who blow through their deductibles–and of course that’s the group on whom 80% of the money is spent 

Now this is not objective data, it’s a report back on the likelihood of the success of CDHP’s based on the reaction of employers who are opining from their very limited data and guess work.  But the news can’t be good for advocates of the "HSAing" of the system. And the conclusions of the HSC researchers are that CDHPs will struggle to get much traction.  Like many health care "innovations", the hype on the powerpoint exceeds the reality on the ground.

However, it’s worth really pushing this one a little further because

None of that is nearly as damning as a study from Humana of its own employees in a new CDHP it offers. They looked at the claims experience of those who chose to go into the CDHP versus those who didn’t. While demographically the two groups appeared to be the same, the "risk experience" (that’s care utilization in English) of the people who chose the CDHP, in the year prior to their switch, was around 60% of the other groups. In other words the healthier people went into the CDHP. The authors conclusions are that:

The offering of high-deductible or consumer-directed health plan options alongside more traditional options caused risk segmentation within an employer group….Further research is needed to determine whether risk segmentation will worsen in future years for this employer and if so, whether it will cause premiums for more traditional health plans to increase.

In other words the fears of the employers whom the HSC researchers met were justified. If you have a CDHP, too many of your healthy employees will leave the overall pool and take the money, while the sicker ones will stay in the traditional plan. And that means that overall the whole pool will cost more.

So it appears that my skepticism in the face of the HSA and the CDHP seemingly taking over the whole market looks to be correct. Perhaps Andy Ribner should get out the old articles about managed competition?

THCB has a new contributor today; Dr Andrew Ribner, a cosmetic surgeon who wrote to me originally in praise of my opinions about a piece I wrote about Regina Herzlinger a while back. After a bit of back and forth, Andrew figured out that despite my call for an intellectually honest backer of health care consumerism, I wasn’t a true believer in the power of the market. Cosmetic surgeons know something about the role of the free market in health care, so Andy sent me this:   Free markets are the most efficient mechanism for exchange of goods and services because they promote the features and price at which willing sellers and buyers agree to exchange.  When free markets are present, the price and features of goods or services offered respond to the desires of the aggregate of buyers.  Knowledge on the part of buyers as to what sellers are offering and on the part of sellers concerning what buyers want is necessary.  Perfect knowledge is desirable but rarely present.   Completely free markets are difficult to achieve, and perhaps not necessarily desirable or practical under all conditions.  Government controls and laws often limit the complete freedom of the market place.  We have laws against fraud, age requirements to purchase certain products and certain guarantees concerning product quality which protect consumers.  We even intervene with the evolution of markets to keep them from being under the excessive control of a single seller in a market monopoly.  Rarely, we do protect sellers when the purchase in a market is dominated by one buyer, as in monopsony.   At the present time there is not a free market in the purchase of health care.  This is the consequence of several factors.  First of all, the user of the service in most cases is not the purchaser of the service.  During the period of wage-price controls in World War II, companies devised a new way to compete for scarce labor by introducing employer purchased health insurance as a benefit of employment.  This continues to the present day.   When the buyer of a product or service is not the end user, this creates non-alignment of incentives between buyer and user.  The market cannot respond to the preferences of a user who is not a payer.  Only the flow of dollars will modify the features of goods or services offered.   On the other side of the coin, a buyer not pressured by the constraints of price or budget will have an unlimited demand for goods or services.  This was the fatal defect of a third party payment system.  This was further exacerbated by years of labor union demand for "first dollar" coverage of medical care.   The health insurance industry response to rising costs was first to increase premiums.  However, payers preferred reduction in coverage to increasing costs, and thus managed care (read reduced care) was born.  Health care users predictably resented gatekeepers and denial of care which has become a mainstay of insurance company strategy.  Although HMOs have begun to disappear, insurance companies are still active participants in treatment decisions through their approval process.   Free markets also cannot exist in the presence of a single dominant seller or small group of sellers who have so much leverage that they can control market price and features offered.  "Trust busting" was the solution to that problem when it was identified under President Theodore Roosevelt.  Monopoly may be more common, but monopsony, the situation of a single powerful buyer distorting a free market, is equally as destructive to free market function.   Today, huge health insurance companies have become monopolies (more accurately oligopolies) as sellers of health insurance.  With competition so diminished it is no wonder buyers can no longer get the features and price they seek.  In addition, these same insurance carriers exercise monopsony power in the purchase of health care services, controlling price paid and scope and nature of services covered.   Hospitals have joined together in ever larger groups in order to maintain market power in negotiation with insurance companies.  Physicians, on the other hand, have not been permitted to negotiate as large groups with few exceptions.  Consequently, during this time of double digit health care cost increases, physician reimbursements have been flat or gone down.  Medical practice has become a high volume exercise just to keep up with overhead.  Adam Smith would predict that as you pay less and less for a service, the motivation to be available at all hours to provide that service disappears.   What to do? Some have suggested "managed competition" to create agreement between insurers, doctors and government would control costs and improve quality.  "Managed competition" is an oxymoron right up there with jumbo shrimp and would more likely result in the insurance industry using its considerable political clout to influence government decisions to the detriment of both patients and physicians.   The best prescription for a responsive and responsible health care system is a free market.  Medical Savings Accounts (MSAs) are a good first step toward market discipline.  MSAs would be funded by pre-tax earnings and would be used to pay the high deductible of a catastrophic or stop loss type of health insurance policy.   Money placed in MSAs could be used to pay any health expense and would be a less painful way to meet a high insurance deductible.  By allowing the individual to roll over money in the plan from one year to the next, it would provide a motivation to spend the money carefully and shop for price as well as features of service.   Tax treatment of health insurance premiums would change. Health insurance premiums would no longer by tax deductible to employers, but would be either a tax deduction or tax credit to individual purchasers.  An employer could pay its employees in salary what it had spent on health insurance.   Overnight, employers would stop providing insurance to its employees, and the purchasers of health insurance would be the end users.  Portability of insurance coverage would no longer be an issue because health insurance would be individually purchased.   In the scenario of individually purchased health insurance would force insurance companies to at least respond to buyer preferences for features.  Change in tax treatment to individuals would certainly maintain price responsiveness on the part of buyers, but it would allow the working uninsured to purchase insurance as individuals. We can encourage healthy lifestyle and reduce overall health care costs if we permit underwriting of risk factors as is done in automobile insurance.  The current argument against this practice is that it would make insurance unaffordable for those who are chronically ill and likely to incur high expenses on an ongoing basis.  That group of patients would be eligible to receive federal subsidies for their insurance premiums.   This is by no means a perfect solution to our health care problems.  But, it is a step in the right direction to encourage the free market to find the solutions to our current dilemmas in the provision of health care.    Those of you looking for an alternate view of MSAs/HSA’s may be interested in Paul Krugman’s views in his NY Times op-ed last week. I’ll reply to Andrew later this week, but my concerns about the consumer directed health plan movement have been voiced in THCB before.

In Florida, the state Supreme Court has decided in its wisdom that its should put competing initiatives on the November ballot about medical errors and malpractice. Both of these are mutual nitpicky tit for tat assaults by the trial lawyers on the doctors and vice versa. Believe it or not these will get to change the state Constitution!

And we still let this state stay in the Union, despite the screw-up that they made of it in 2000. As Charlie Brown said, "Good Grief!"

So the hopes that the Administration had of the Medicare Bill being a political plus have looked pretty grim for a while. But they really didn’t need their own government agencies putting the metaphorical boot in. The NY Times leads its front page with a DHHS estimate that 3.8 million retirees will see their employer provided-drug benefits evaporate in the first years of the new Medicare Law. Let’s not ignore the fact that these retirees are more likely to vote and more likely to vote about health care than any other demographic group, including the smaller number of much poorer seniors who will benefit from the Medicare bill.

Just a week ago the Administration announced that it was basically OK to lie to Congress about what it knew about the likely cost of the Medicare bill, and then hide that information for over 6 months. You’d have thought that they might have lost this latest report behind a filing cabinet until after November.

Last week I wrote about the nursing shortage, and I took the mainstream view that it really was a big problem, while suggesting that technology may help solve that problem; (in an update to that post, the Industry Veteran somewhat dissented!). Last year following the COGME recommendations my THCB article on physician supply suggested that we may not have the future shortage of doctors that current mainstream thinking suggests is coming around 2020.

Following an article by David Blumenthal in the NEJM, Mike Magee, the Pfizer-backed doc who does the weekly Health Politics web-column, had a pretty interesting recent summary of the whole topic of physician supply. Magee’s article included a very valuable discussion of the different contributions of different medical schools (MD, DO and Foreign) to the supply of residents, and the changes over time for funding of resident positions.

The three major sources of physician numbers in the U.S. remain deeply segregated from and in partial denial of one another. They include 126 MD-granting allopathic medical schools, 20 DO-granting osteopathic medical schools, and a wide array of non-U.S. medical schools. Together they create our supply of men and women graduates who fill hospital residency positions. The residents, in turn, provide our ongoing supply of licensed physicians. In 2001-2002, there were approximately 100,958 persons in approved residency training programs. Approximately 65 percent of our supply of licensed, practicing resident physicians in training were MD-educated, nine percent were DO-educated, and 26 percent were non-U.S. educated.

Magee basically rewrites the question underlying the debate into this format: Is more health care and more physicians better for the nations health or worse for its economy? In other words is health care spending a drain on limited resources or an acceptable use of resources in an era of discretionary spending on "luxury" services? While you could argue over which, there’s no real argument that the more physicians we have, the more we’ll spend on health care. Vic Fuchs proved that with his research on supplier induced demand for physician services more than 25 years ago. That’s why every other country limits the amount of physicians going into residency positions. But being as economic analysis never got anything done in this country we’re instead hearing rumblings about the "demand" that we’ll be facing from aging baby boomers, without thinking much about whether more physicians per se is the answer to that "demand" and ignoring the fact that we know from Fuch’s work that more physicians will indeed "create" more "demand". Magee starts to pose some of the right questions in his last paragraph:

What are the 21st century environmental factors that should shape this debate? First, physicians remain highly respected worldwide, and consumers expect physicians to be partners and team leaders. Second, globalization, the Internet, aging populations, population mobility, and disease migration demand that we see physician-supply planning in global terms rather than national terms. Third, new technologies allow the development of virtual medical education and virtual medical schools, which could affect the speed and efficiency of medical training worldwide. The U.S. should be actively involved in this environment. Fourth, the Internet and overnight delivery are making geographic borders obsolete. What are the new boundaries for licensing and credentialing? And finally, with borders evaporating, regulatory bodies that provide oversight for medicine and patient care need to better harmonize their approaches.

What he doesn’t say but what needs saying is, does this new world of technology make the use of physicians for much care obsolete and replaceable by clinicians with lesser training, and where does that show up in the projected numbers? Of course that eventually leads to nasty questions about whether the physician role needs to be so venerated, and of course, so highly rewarded. But we wouldn’t want to start that conversation when the AMA and its fellow travellers have been so prominent in spreading universal cost-effective health care throughout the US over the last 90 years.

Back in 1991 in a very, very brief moment of (reflected) non-stardom, which I rediscovered on an old photocopy when I was unpacking some boxes during my recent move, my name (and those of my co-authors on a piece about Japanese health care) was in an article about other countries health care systems on the front of The New York Times. At that time the health care debate was about to warm up, and the NYT was trying to educate the public–or at least the small fraction of it that reads or cares about the "paper of record"–about a few basic facts.

Those included the fact that the amount spent on healthcare as a share of GDP vastly exceeded that of other industrialized countries, that American outcomes in terms of infant mortality rates and life expectancy were only in the middle of the pack, and that some 14% of the population had no health insurance–a situation unique to the US. A series of articles about other health care systems (Canada, Germany and Japan’s among them) hinted at the fact that there may be alternative models that we possibly should just consider here. And additionally another article showed that you could, if you wanted to, cover all Americans without spending more on health care–(another article in which I glommed onto the much superior intellects of Evans, Barer and Morrison).

Well, surprise, surprise, 13 years later all those facts are still true. We have made some progress in improving overall health, we are spending a boat load more money (roughly double in nominal dollar terms, from about $800bn to $1.6 trillion), and there has been a little more research suggesting that in some specific health areas we are in fact doing a little better. But overall, despite a bunch of industry propaganda, we’re spending a lot more on what can be claimed is more or less a luxury good, and we’re still doing that equally inefficiently as we were 15 years ago.

And as in 1991, the New York Times has published an article explaining that all those problems are still here. We have made some improvements in some areas, the Commonwealth Fund and Harris have discovered that there are some areas where the US does alot better than other countries (and worse in some other areas), and we are of course spending more while covering a lower percentage of its population with insurance. The reason that we spend more is mostly because of higher unit prices, rather than more services. While this may be news to NY Times readers, it’s not to either Health Affairs readers who know about the "It’s the Prices" article from Anderson, Rheinhardt et al, or to Americans who understand that drug prices are a whole lot higher here than elsewhere. It’s also true that prices in hospital and physician services are higher here. For example when I was researching the comparison between Stanford and Tokyo hospitals back in 1990-1, it was apparent that after everything worked out, prices were about double here. In another example I had an office visit and a blood test in new Zealand in early 1993 and exactly the same visit and blood test here 7 months later. The total in New Zealand was about $65 US. In San Francisco, even with the PPO discount, the total was over $200. Funnily enough real incomes of physicians in New Zealand have gone down by about 20% over the last 20 years. Here their experience has been the opposite.

But so what? We’ve known about these disparities for at least 15 years. We’ve known about the problems of uninsurance in the US for over 90. The reasons that the system hasn’t changed are wrapped up in American domestic politics, and will stay wrapped up in American domestic politics. Those politics may change over the next few years–and I think they will change and that universal health security will be a bigger issue in 4-8 years–but no one will care about these international comparisons when that time comes around.