Prompted by a couple of posts from my favorite medical bloggers Robert Centor at Medrants and Sydney Smith at Medpundit, I’ve gone back to my old files (and I mean old). When I was a grad student I spent a lot of time looking at the Japanese health care system, and by now THCB readers know that I’ve spent enough time looking at Canada’s and the UK‘s to be dangerous….

MedRants had this to say in a longer article about private medicine in the UK earlier this week:

The BMJ has run two articles to support the NHS. I would argue that these articles are far from objective. I often rant about the deficiencies in our system. We could certainly use our resources more efficiently. But our system trumps the NHS regularly. Regardless of payor status, if you are truly sick, our system responds. We could do a better job supporting primary care – but even here we trump the NHS

Meanwhile Sydney had rather more vicious things to say about Japan and John Kerry (which are connected in her mind by more than by their first initial):

Single Payer Systems: Japanese doctors are in dire straits:

Doctors in Japan have warned that there could be an exodus from the medical profession unless the of health and welfare ministry increases the fixed fees that doctors receive for treating patients. The ministry–in Tokyo–sets the sums that doctors and hospitals are reimbursed for consultations, treatment, and operations by the country’s social security system. But the Japanese Medical Association says that hundreds of hospitals and general practice clinics are now facing financial ruin because they are being forced to rely on very low, government fixed prices for their income. The situation has become critical, they say, because the cost of treating patients is soaring while the fees have continued to languish at a low level for decades.

The Kerry plan, alive and not-so-well in Japan.

Much as I respect these two bloggers for their writing, not least while they both keep up full time medical practices, sometimes they need to be called on what they say. Particularly when it’s not true.

Robert’s claim that the US trumps the UK may be true in lots of categories but ignores two vital facts.

First, in many ways the UK absolutely trumps the US on primary care. Every UK citizen has a dedicated primary care doctor who is broadly responsible for their overall care. While there are many problems with that system and it does restrict access to expensive specialists and technology, it alleviates the problems both of Americans who do not have access to primary care–especially the uninsured– and that of those patients on dangerous polypharmacy regimens who end up on those dangerous drug combinations by doctor shopping. Virtually all British GPs have computer systems that track their patients’ care. They can tell you pretty instantly which patients are on what drugs, they get reminders out for screenings and tests for things like diabetic eye exams, and since this year, they are actually getting paid for performing to accepted standards. For a variety of reasons this just doesn’t exist in more than a tiny minority of cases in the US. I find it hard to believe that we’re “trumping the UK” in primary care.

Secondly, even if we were trumping the UK, we’re doing it at three times the cost. So at a relative pay for performance level, we’re not doing well at all. But then again our doctors get paid much better.

And apparently physician pay is of great interest to Medpundit Sydney Smith, so much so that she’s upset about its apparent collapse in Japan. Syd should save her tears and perhaps brush up on her language skills and put in for a transfer from Ohio to Osaka.

Japanese private doctors are the highest paid in the world. They are the only ones that make more than Americans. Most of the salary data that’s available conflates this by usually reflecting the salaries of hospital based physicians, who tend to work for the government. The majority of Japanese doctors are independent and run their own clinics. How this works is a little complicated. They also tend to own small hospitals attached to their clinics, and in the Japanese fee-schedule, which is the equivalent of a Medicare-fee-schedule for all, there is no distinction between physician and hospital fees, because hospitals were traditionally extensions of physicians’ practices, as were pharmacies. Hence physicians also dispense (and of course prescribe) drugs. The end result of this was that average earnings for private Japanese physicians in the early 1990s were much higher than those of American physicians. Unfortunately I’m dragging this out of my memory bank (as I don’t have the OECD or Japanese publications available), but my recollection was that it averaged around $300,000 a year back then.

Now there are plenty of other little wrinkles in this, such as the fact that although for-profit hospital chains are banned, there were in fact several chains of clinics owned by wealth physician families (shades of HCA). The Japanese Medical Association, which is the organization complaining about the latest government price reductions, was for years the most powerful force in Japanese medicine, and a relatively much more powerful player in national politics there than the AMA is here. For example some of the early meetings during which the dominant Liberal Democratic party was formed were hosted by the long-time JMA president Taro Takemi. The JMA of course represents mostly these private doctors.

Meanwhile the Ministry of Health and Welfare like other government bureaucracies in Japan sets policy to a much, much greater extent than elected politicians. Over time MHW in Japan put in place several structures that governed the system. They limited the number of physicians in practice. They instituted a single unified fee-schedule that covered every insurer (and tends to reward high-volume but low intensity medicine such as Rx and diagnostics over surgery). That’s right, there is no single payer in Japan, it’s predominantly an employer-based system, but there is a single unified fee-schedule controlled by the Ministry. And of course the JMA and the Ministry are going to fight over that–Duh! But you’d do well not to listen to the rhetoric of just one side in that negotiation. There are some other wrinkles, such as in 1960 the municipal system for the indigent and elderly was expanded so that there are no longer uninsured in Japan, and then in the 1970s a transfer tax was introduced so that the employer groups had to subsidize the public system based on the age of their members.

This was all completed by a slow evolution over time, but the result was that most Japanese kept both the employer based insurance scheme that they were familiar with, and the physicians and providers kept the same format they knew well. So universal multi-payer insurance with free choice of doctor can exist, and can also exist at a reasonable cost. Not much of that is in the Kerry plan, but none of it is in the Bush “plan”.

If you have Health Affairs access, it’s worth reading the article by long term observers of the Japanese scene, Ikegami and Campbell, which details how costs were constrained in the system during the long recession of the 1990s, and even reduced by careful adjustments to the fee schedule and the introduction of user fees. The discussions about these changes were well under way when I was working with health ministry officials in 1991. That they weren’t introduced until 1997 shows the patience of the bureaucrats–a luxury of the Japanese political system. But there is also a sense of noblesse oblige, which the Japanese actually had beaten into them by the New Deal Democrats who ran the initial post-war occupation. One quote from Ikegami and Campbell is well worth pulling out:

Any system of universal health care coverage requires cross-subsidies from the healthier and wealthier segments of the population. Political resistance is inevitable and will intensify in a sour economy. Japan seems to be improvising piecemeal structural reforms to deal with these pressures. However, if the past is any indication of the future, these reforms are likely to be in the direction of more equality, which will be in line with reforms in Europe and stand in marked contrast to those in the United States.

Maybe that sounds like the Kerry plan, but nothing much else about the Japanese health care system does. Adopting something like the Japanese system, unlike the Canadian and British systems, wouldn’t require too much realignment of the existing US system, but it would require a redistribution from the rich and healthy to the poor and sick. That currently appears to be beyond us as a nation.

Surprise, surprise the intellectual geniuses at the Wall Street Journal editorial pages have decided that they like the HSA concept and that HSAs could help address problems in the U.S. health care system. Well they are entitled to their theoretical opinion, and they are right in that the unfair tax treament of health care insurance purchasing should be rectified. There are unfortunately two major problems with their views.

First, the way that tax break should be rectified is to remove it from everyone not extend it to those who don’t get it now. There is no reason that health care premiums should be bought with pre-tax dollars (and for that matter there’s no reason that housing loans should be too). It’s a fundamental violation of that free-market that the WSJ claims to support–not that many of its conservative fellow-travelers are very interested in it these days. It also means that we spend marginal dollars on health care when we should be spending on something else. But I guess they missed that day in micro-economics class when MR=MC was brought up. In reality it means that Americans take their marginal compensation in health care benefits rather than in taxable income–and this amounts to a direct subsidy to higher level taxpayers (the rich) from lower level ones (the poor)–but it amounts to the same effect.

Secondly, while the theory of HSAs may look all very nice, in practice they are breaking down in the only place that’s ever really used them. That place is the directed free-market dictatorship (with a human face) of Singapore. What’s happening to HSAs in Singapore? Well funnily enough according to the Health Minister Khaw Boon Wan they’ve encouraged risk-shifting and cream-skimming:

There are now 15 other providers of a similar medical insurance scheme, causing the risk pool for insurance to be fragmented. Instead of competing to provide better services at lower premiums, Mr Khaw said private providers are cherry-picking by providing coverage to certain groups only to maximize profits.

Does this sound in the least familiar? Could you possibly imagine that kind of behavior amongst American insurers, which might, just might, not be quite as well-behaved or as subservient to the government as their Singaporean brethren? I suspect so, and that’s why Kaiser Permanente is getting aggressively (for it) involved in the campaign against HSAs, partly by advertising loudly this press release about a study its researchers did using Humana’s data. The study, which was published a few months back in the journal Health Services Research and has been featured before in THCB, concludes that a CDHP offered to Humana employees attracted enrollees 25% to 50% healthier than those in traditional plans. Kaiser of course can’t just create another insurance product without taking money out if its own risk-pool. So CDHP/HSAs, and the prospect of the adverse selection death spiral they bring with them, terrify Kaiser–as they should.

Graham Walker (of Gross Anatomy fame) has created an excellent Flash animation to explain single payer to the masses. Go take a look and if you don’t agree, how about creating your own about HSAs, innovation, managed competition or whatever. Getting more Americans to understand all this health policy stuff is not a bad idea at all!

Following my article about reimportation on Friday I’ve been having some email chats with some “Canada doubters” (for want of a better word). So I was most amused to get the latest Harris Poll on the topic. The poll isn’t up online yet, but here’s Humphrey Taylor’s take:

With one exception, more Americans feel very positively about their own country than about the other countries. They rate the U.S. Constitution and system of government much more highly than those of other countries. Americans also rate the quality of life, the present government, the economy and the environment in the U.S. more highly than those in other countries – or to be literally accurate, more Americans feel “very positive” about these things than they do about them in Canada or the major European countries. The one exception to their generally more positive views of things in this country is the U.S. health care system.

On five of the six criteria, majorities of adults feel very positively about the U.S., from the 77 percent who feel very positively about the U.S. Constitution and system of government and about the quality of life in the United States to the 51 percent who feel very positively about the environment in this country. Again there is one exception; only 34 percent of adults in America feel very positively about the U.S. health care system. The most striking finding, however, is that substantially more Americans feel very positively about the Canadian health care system (49%) than about the U.S. health care system (34%).

Now to poke a few holes in this (which Humphrey would agree with), it’s fair to say that American’s aren’t exactly too well educated about virtually anything that happens outside the 48 contiguous, and that doubles down when you think about European countries and healthcare systems. For instance, 45% said they felt positive about the quality of life in the UK as compared to only 31% for France and 25% for Spain. I guess good food, great wine and wonderful weather don’t count for much to Americans but while you don’t see too many Spaniards heading to the UK for vacation, there’s a lot of Brits going the other way!

Meanwhile, the WHO has always rated the French and German systems very highly, but only 16% and 12% of the American public do so, while 28% think well of that evil socialized medicine in the UK. Of course the key point of the whole survey is that only 34% of Americans feel very positively about their health care system, while 49% feel very good about Canada’s.

This is important for two reasons. First, it’s probably the only comparative question about health care that Americans can answer from some knowledge base. The word is indeed out that Canada at the least has cheaper drug prices, and the the word is probably getting out that everyone gets “free” coverage there. Second and more importantly, as is framed on the wall in the reception area of the Harris office, W.I. Thomas said, “If men define situations as real, they are real in their consequences.” And the consequence of this perception means more ructions in the American health policy debate, which is gathering speed at a rapid clip.

Paul Krugman focused on health care in his regular op-ed on Friday in the NY Times. Krugman is what passes for a lefty in this country (i.e. he’s a moderate social democrat) but in this op-ed he points out that in single payer nations like Canada, it’s the business community that is keen to maintain the system because it costs less than a “market”-based system. As he says:

The U.S. system does have very high overhead: private insurers and H.M.O.’s spend much more on administrative expenses, as opposed to actual medical treatment, than public agencies at home or abroad.

Does this mean that the American way is wrong, and that we should switch to a Canadian-style single-payer system? Well, yes. Put it this way: in Canada, respectable business executives are ardent defenders of “socialized medicine.” Two years ago the Conference Board of Canada – a who’s who of the nation’s corporate elite – issued a report urging fellow Canadians to bear in mind not just the “symbolic value” of universal health care, but its “economic contribution to the competitiveness of Canadian businesses.”

Of course, Krugman is told by his economist friends that it’s unrealistic to expect single payer, but he leaves with a barb:

But let’s not ignore the growing evidence that our dysfunctional medical system is bad not just for our health, but for our economy.

Of course, there are plenty of their corporate compatriots on this side of the border who would love to push their obligations for their employee and retirees health care onto the taxpayer too.

It’s taken a long while but the Census bureau yesterday confirmed that in 2003 45 million Americans lacked health insurance. Of course that’s actually a wrong number, it’s a snapshot which actually means that 45 million lacked health insurance at any one time. Some 25 million are uninsured more or less permanently and some 70-75m go through some period of uninsurance in each year. Last year a study showed that 84m are uninsured for a period of 3 months or more in a 4 year period.

This is a real problem and the US Chamber of Commerce has the gall to say that there are real market based solutions to cure this:

The U.S. Chamber of Commerce said the solution to the health insurance problem already is in the pipeline: “Today’s news that the number of uninsured Americans totaled 45 million in 2003 is a tragedy in that real solutions already exist,” said Kate Sullivan Hare, the Chamber’s executive director of health policy, in a press release.“More can — and should be — done to make health coverage affordable for employers and workers,” Sullivan Hare said. The Chamber said the best way to make health coverage more available and affordable is to allow pooled-purchasing for small businesses – what President Bush recommends — along with “equitable tax treatment” for individuals who purchase their own health coverage; and tax credits targeted to people with modest incomes. The Chamber said it opposes efforts to add new mandates and expand employers’ liability for the health coverage they voluntarily provide to their workforce.

I’m not sure this needs to be dignified with a response, but let me just say that there is no such thing as voluntary universal insurance.

There is an excellent series on the current crisis in health insurance in the San Diego Union-Tribune written by Leslie Berestein. The really avid TCHB wonk reader may know all this, but it’s not often the three rings of the circus are put together in the popular press. The first article Insurance ills put squeeze on consumers explains the background to the current cost explosion. The second, employers benefits in critical shape, looks at the problem small and medium business are having providing insurance, while all employers are cutting back on health care and increasing employee contributions. Finally the third article, the individual insurance market sucks (Ok it’s not called that but it should be) has some harrowing stories about the collapse of the individual market for the 20% of those in it who really need it.

Go read the articles, and kudos to Leslie and her editors for running this series. I have two quick observations. One, this type of article started appearing in the early 1990s. We didn’t fix the problem then and now it’s back much worse. Second, there is no solution without compulsory insurance and compulsory risk pooling. Anything else is an illusion.

Finally, Jeff Lemiuex at Centrists.org has an interesting, long and thorough review of what in the Kerry plan (and also in the Frist plan) both conservatives and liberals can live with. I don’t share his optimism about the likelihood of a non-universal insurance system being able to contain long-term costs, but it’s a very thoughtful analysis of a possible legislative response to the developing crisis reported in the Union-Tribune.

UPDATE: The NY Times has a very similar article on the problems of small businesses buying health insurance.

The devil is in the details and all politics are local. Cliches, but in the implementation of health care policy and payment in the US, true cliches. Two articles over the weekend bear this out. The AP reports that insurers and pharma companies are fighting over the details of whether therapeutic categories are broadly defined in the details of the the MMA’s new Part D drug benefit (as the insurers want) or more narrowly (as the pharmas want). What’s at stake here is the ability of the insurer or PBM to switch a patient from an expensive branded product to a generic or a cheaper older brand. If they are in the same category, it’ll probably be OK, but if it’s in a different category, it probably won’t be. So should Cox-2 inhibitors be in the same category as ibuprofen? In fact a trial underway is looking at that precise question, and if there’s no real difference perhaps Vioxx and Celebrex will only be available under some kind of step therapy within Medicare Part D. Well you see where this is going.

For those of you really interested, here’s the first draft of the US pharmacopoeia guidelines, which includes a series of steps for meetings and comments. Those of us who prefer to gloss over the details and look at the big picture just need to realize that over the next decade lots of lobbying dollars will be spent to change tiny line items in the resulting final document.

And talking of tiny details in new regulations it appears that the Bush administration is running into trouble by trying to create regional Medicare managed care plans when the nation’s health plans (especially the Blues of course) are actually 51 different plans, all operating under different local statutes, and are not too keen to develop the alliances or infrastructure required to compete regionally when they’re mostly happy with their monopolies infrastructure at home. Now if you want competition, you have to make the market big enough so that you can have a few plans with some scale compete in a region. But of course it makes no sense for any plan to go into, say, a North Dakota and take on the local Blues plan with its 80% market share. How this gets squared away I don’t know, but I suspect that you’ll see an exemption for the share of the population living outside the top 100 metro areas, which after all are the real units that matter in the business of America (think TV markets!).

Frankly the state-based health insurance system is an anachronism. But then the state-based system of electing Senators (and Presidents!) is an anachronism too. (Note that a senator from California represents 15 million people where one from Alaska represents 200,000, but as far as the law’s concerned their votes are equal). It might actually be easier and faster for HHS to abolish the states and come up with 10 regions! On second thoughts, maybe not. But what a great idea.

The NY Times has an article on the shocking fact that increasing health care costs actually cost actual money. Apparently it costs businesses so much in additional health care costs to hire new (especially older) workers that they are hiring fewer than they would if health care costs were lower. And of course instead they’re hiring contract workers and sending jobs overseas.

Well it’s good to find out that the laws of economics are reported in the paper, so they must be true. In this case they are. Real wages in this country have barely budged upwards in the past 30 years. So what has gone up and been responsible for our increase in “wealth” over that time?

a) Working hours. Not only has the work year increased by about 10% over that time, but more importantly millions of women have entered the labor force and most families now need two incomes to keep going.

b) Productivity and technology: Which now means that you can buy a throwaway digital cameraphone that somehow you managed to get by without in 1973. It also means that a whole stack of stuff costs less (consumer goods) meaning that overall those real wages buy slightly more than they did, even though some things like education, housing and healthcare cost more.

c) Profits. Corporate profits have gone up faster than wages (especially in the last few years). The Marxists amongst us would note that this means that the share going to capital is rising faster than the share going to labor, particularly as stock ownership is still dramatically concentrated in the upper income groups.

d) Health care costs. Years ago I had a chart showing that the level of real wages was flat over 20 years while the increase in the healthcare cost part of total compensation went up over 200%. For a brief while in the mid-late 1990s the health care part of that equation settled down and real wages even went up a little. But now we are back in the old pattern. I don’t have the chart anymore, but if someone clamors hard enough I’ll figure out the numbers. Suffice it for now to say that health care costs are really eating into total compensation, and as HSC showed the other day, this is leading directly to fewer people getting health benefits at work.

So what to do about it? Kerry seems to care about the fact that health care costs are now getting through to consumers. Given that he barely mentioned this issue in years in the Senate, and now as the NYTimes says he’s raising it on every porch in middle America, methinks that his pollsters have told him that swing voters are feeling the pain. Bush doesn’t care and has no answers other than laughably and disingneuously saying that malpractice reform will solve the health care cost explosion, and promoting HSAs. Kerry’s solution is to basically make the government the insurer of last resort for catastrophic cases and force a pay-or-play solution on employers. Even if he wins (which I think now looks likely) and the Democrats retake the Senate (unlikely) the plan has little more than zero chance of becoming law this time around. It will however linger for the next time we have this serious national debate, which in my guess will be in the 2008-2012 time period.

Meanwhile, Karen Davis, radical commie and President of the Commonwealth Fund has made available the entire issue of Health Services Research that focused on CDHPs. THCB readers may remember that it had some surprising articles in it, not the least of which was health plan Humana’s research on its own internal CDHP which showed that it cost the employer (itself!) more than keeping its members in its standard plan. Davis has an excellent discussion of the research behind what the Canadians call user-fees (long version – short version) in which she points out that the RAND experiment back 25 years ago showed that increasing the actual cost of going to the doctor at point of service reduced services delivered to those patients. Of course you can read that two ways depending on whether or not you believe people use too few medical services or too many. But the key point that Davis makes is that the best way to improve quality (i.e. get the correct amount of services to patients) is to increase incentives to providers to do the right thing. She’s arguing for pay-for-performance, better use of IT, public reporting of cost and quality data, national EBM standards and a whole lot more spent on researching these issues at AHQR. And of course while she’s preaching to the choir as far as I’m concerned, it’s interesting to note that a version of these things appears in the Kerry plan too.