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POLICY/THE INDUSTRY: Cutler used as propaganda–is that how he likes it?

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So David Cutler’s piece which I mentioned in passing because I was asked about it yesterday is now out. (Abstract is here). And although I don’t have access to the whole thing (being a mere blogger and too damn cheap to pay the NEJM’s freight), the results are what you’d expect:

From 1960 through 2000, the life expectancy for newborns increased by 6.97 years, lifetime medical spending adjusted for inflation increased by approximately $69,000, and the cost per year of life gained was $19,900. The cost increased from $7,400 per year of life gained in the 1970s to $36,300 in the 1990s. The average cost per year of life gained in 1960–2000 was approximately $31,600 at 15 years of age, $53,700 at 45 years of age, and $84,700 at 65 years of age. At 65 years of age, costs rose more rapidly than did life expectancy: the cost per year of life gained was $121,000 between 1980 and 1990 and $145,000 between 1990 and 2000.

And course so are the conclusions.

On average, the increases in medical spending since 1960 have provided reasonable value. However, the spending increases in medical care for the elderly since 1980 are associated with a high cost per year of life gained. The national focus on the rise in medical spending should be balanced by attention to the health benefits of this increased spending.

How anybody without the benefit of a tenured Harvard professorship can possibly describe spending $145,000 to gain one extra year of life expectancy from somebody who is over 65 as “reasonable value” boggles the mind. But I guess he’s not actually quite doing that. But he does say that the five fold increase in the cost of gaining an extra year of life over the period is reasonable value. But that of course is the money quote that will be picked up (see below for more).

Briefly, as I tried to explain to the Scientific American journalist, there are three main ways that economists try to ascribe value to life. (I hope I’ve got this right it was a long time ago when I looked at it!) Those are roughly what somebody spends, what somebody makes, and how much they would spend to avoid death.  In a long article about him in the New York Times Magazine last year, Cutler estimated that it cost more than $100,000 to save a life by installing airbags in cars, and therefore that is a reasonable number. (I guess we should be thankful he didn’t base it on the cost of extending Terry Schiavo’s life, including whatever it cost to fly air force one from Crawford to D.C.!)

But of course no one sat down and prospectively calculated out the value of lives that would be saved by introducing airbags.  Most safety innovations were forced on the automobile industry by people like Ralph Nader who couldn’t give a rat’s arse about cost effectiveness. And after that auto industry marketing people began to realize that safety was a feature not a bug and therefore used the power of commercials to explain to American housewives than you needed airbags and SUVs (even though it turned out that SUVs make driving less safe!).

In reality, the average American working income is just above $40,000 a year.  That would suggest that the average working American’s life is worth somewhere below $50,000 a year.  According to Cutler’s calculations, it has cost some $36,000 to gain an extra year of life.  But of course all those years of life that are being gained are at the end of life, when incomes are considerably lower, so it’s hard to tell why that $36,000 number is a reasonable value, when it exceeds the total value that the economy as a whole places on an average retired individual (ignoring of course what the health care system makes off that average retired individual!).

But then again this is just a wonky economic argument, right?  We all know that nobody sits down to figure out what the value of life is or what they’re adding to the general good when they implement a new healthcare technology.  Instead the industry tries to figure out what they can get away with charging Medicare and other payers.  No one makes the calculation about the value of a year of life, let alone whether that money would be better off being spent on something else entirely, like education, protecting the environment, handbags for Paris Hilton, or more frappuchinos.

But the industry is totally happy to use Cutler’s arguments — very much out of context — to praise ex-post all manner of technologies, procedures and services that they’ve foisted on the American patient and taxpayer. The ink was barely dry on the editions of the New England Journal, when Advamed, an umbrella group for all kinds of medical technology companies, was out with its press release. Its chief lackey, one  Stephen J. Ubi, was certainly not looking this gift horse in the mouth:

"When health care dollars go toward procedures and products that make a difference, that’s when our health care system is at its most effective," Ubl said. "Medical device and diagnostic interventions have played and will continue to play an essential role in providing this value to the health care system and society through faster recoveries, improved treatments, and more precise diagnoses."

Ubl was commenting on the August 31 article by David M. Cutler, Allison B. Rosen and Sandeep Vijan. Studying health and spending trends from 1960 to 2000, they found that despite dramatic increases in health expenses since 1960, the return on medical spending is high.

It is by no means the first time the Advamed has come out with similar tosh — in cooperation with some other healthcare industry front groups they published something like this back in 2004. That was mostly remarkable for the fact that the instant video fake news clip that was distributed with it included “reporting” from one Karen Ryan who’s voice also showed up in a instant use fake news clip about the Medicare bill distributed by the Bush administration,much  to the amusement of the leftie blogosphere. While rational academics like the Wennberg crowd, Enthoven, Fuchs, Steffi and David, et al will tell you that we are wasting huge amounts of money in the way we finance and deliver healthcare, as noted at length on THCB last week the loonies out in left or is it right field seem to have grabbed hold of the megaphone. Cutler is doubtlessly doing good work in terms of calculations of cost per increased year of life expectancy. But given that he won’t call a spade a spade, on the “value” issue, the overall ramification of the work he is doing — and the crazy statements made by a row Robert Fogel the noble laureate from Chicago which Gina Kolata wrote about last week — is that the real debate about how to fix our financing system and deliver some type of cost-effective medical care in this country is getting pushed to the sidelines. That of course is just how the industry wants it.Which of course makes me very suspicious about why the not exactly purer than pure New England Journal is one publishing this somewhat obscure economic analysis in its limited policy section, as opposed to some real debate about how to fix the healthcare system’s problems. Is it possible that they too are bending before their advertisers? Perhaps Roy Poses will find out for me!

THCB/HOSPITALS: Google plus THCB makes for some interesting stuff!

So a little over a year ago, I wrote a piece following a WSJ article about a surgeon in S. Dakota, who’d opened a specialty hospital and done very well out of it. Today I was futzing around on my blog and looked at it again.  What amazed me was that there were seven long comments that were posted more than a week after the article was written, and three of them were posted more than 6 months after it was written…and pretty interesting they were too. All mostly from people who know the situation very personally…

This is yet more power to the testament of Google, which has swept up the THCB piece in with the other stuff about the surgeon Larry Teuber. Yup, in the Google search on Teuber the WSJ article is the first two filings, a very critical review on a site called Rate My Prof of a poor agriculture prof at UC Davis is third, and the original THCB article is fourth.

So I guess that as more and more blogs get written, more and more people will be recording information of all kinds. And more and more opinions of people who know what’s happening directly will come out.

And let’s not get started on Yelp and its reviews of doctors. Let’s just hope that health care consultants are not their next target!

INDUSTRY: Who’s making money off the health care crisis?

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IN an article called Who’s making money off the health care crisis? Amy Fletcher at the Denver Business Journal reminds us that “health care costs = health care incomes.”

Meanwhile I was called by a journalist from Scientific American , no less, early this morning who wanted a commentary on David Cutler’s soon to be published piece in the NEJM (apparently out this week) in which he confirms his findings that American health care is worthwhile and cost-effective if you value the life of every American — including those over 65 — at over $100,000 a year. How he squares that with an average national income per capita in the $20Ks is a mystery that you have to be a tenured Harvard economics professor to understand. Surely more on that to come. But you might want to check the letters page of the NY Times for more people calling bullshit on that shocking Gina Kolata article from last week which said that we can keep wasting money on health care because, well, we’re rich, bitch!

POLICY/POLITICS: California’s single payer bill, by Eric Novack

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I don’t know why a bill that’s destined for a veto in a state he doesn’t  live in gets Eric Novack so worked up, but it does. So here’s his take on Sheila Kuehl’s single payer bill getting past the state Senate. And I won’t even mention that a Lewin study (all hail the mighty and authoratitive Lewin) showed that single payer would save California $353 billion over ten years (oops I just did!). So guess what’s Eric’s verdict is.

Many of you are aware that the California State Senate has just passed ‘universal health insurance’ for California.  The bill creates a single payer system with the details of funding to be worked out over time.  But it requires that all current Medicaid dollars and Medicare dollars (that’s all Part A and Part B) go into the pool.
 
It also creates an unbelievable bureaucracy—all unelected.  The new unelected health czar would be given control (along with an remarkably specific number of various board members—all appointed by the way) over nearly every aspect of healthcare delivery in the state.
 
The main beneficiaries – illegal immigrants, since the bill expressly states than anyone who resides in California is covered.  American citizens traveling in California—who will actually be footing the bill through federal tax revenues – would of course be billed for the cost of services provided in the state.
 
Fortunately, the Governor will likely veto this bill. For those of you who have a very strong stomach—read the bill yourself and marvel at the wishful thinking and special interest appeasement of a majority of California’s State Senate members.
But I do have to give you one gem of a quote from the KFF coverage: Chris Ohman, president and CEO of the California Association of Health Plans, said insurance companies can more effectively manage costs than the government.   My Mr Ohman’s nose is getting very, very long!

POLICY: Health care and profits take a hack out of wages

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The New York Times picks up on a story that’s been going on for a long time in America health care.  What’s happening is that the increase in real wages has all been sucked up by the added cost of health care benefits.  Back at at IFTF were used to have a chart which showed that real wages have gone up something around 2% from the late 70s to the mid-90s whereas health-care benefits had gone up something like 100%.The major difference now is that because the costs of health care are so much higher, the impact on wages particularly at the low end of the spectrum is much greater.  Funnily enough last week I got a notice in the mail from my health insurance company telling me that my rates would increase 20%. While I had the rep on the phone I asked when the other big rate increases would come based on my getting older.  She told me that essentially every five years, so when I turned 45, 50, 55 and 60, I would see a big bump.  My new rate is $120 a month for a $2500 deductible. If I was aged over 55, it would be something like $350, and if I was 60 and waiting for Medicare it would be nearer $500.  So even with a high deductible plan, we talking $6,000 in premiums annually for an individual policy.  When you consider that the average household income is less than $60,000, it goes to show that even at today’s rates the poorer half of the leading edge of the baby boom is going to have real trouble paying for a high deductible policy — and of course by the time you run the clock forward at the increases we’re seen, it will be even worse in five years time.

The Times story also picks up on the fact that productivity has increased but wages have not. Even when you count total compensation including health-care benefits they still haven’t kept up and more of the share of revenues is going to  profit. I cannot exactly claim to be a big fan of Tom Friedman.  After all he is the guy who justified the war in Iraq on the grounds that we were bringing democracy to the Middle East and frankly he reminds me of as a 19th century colonialist justifying the British Empire by saying that we are civilizing the native.  However, for better or for worse, he is the guy who’s popularized the notion of the earth being flat, and it is the downward pressure on wages and brought by the introduction of the Indian and Chinese labor force to the American economy that is causing the inability of American workers to grab their fair share of the increase in profitability.

But while health care benefits are keenly sought by employees, at some point they’ll realize that they don’t get the benefit of them directly, and that the ever upward spiral in health care costs is harmful to them. Of course the same issue is going on with the employers, and both sides have problems understanding what’s going on, or at least in coming to the obvious solution. Malcolm Gladwell has a New Yorker article looking a little at the history of this. It’s not particularly stellar, but it does have one great paragraph which explains why American business will fight every supplier to the last nickel but will let itself get raped year after year by health care, and not do the politically obvious thing need to stop it:

Under the circumstances, one of the great mysteries of
contemporary American politics is why Wagoner isn’t the nation’s
leading proponent of universal health care and expanded social welfare.
That’s the only way out of G.M.’s dilemma. But, from Wagoner’s
reticence on the issue, you’d think that it was still 1950, or that
Wagoner believes he’s the Prime Minister of Ireland. “One thing I’ve
learned is that corporate America has got much more class solidarity
than we do—meaning union people,” the U.S.W.’s Ron Bloom says. “They
really are afraid of getting thrown out of their country clubs, even
though their objective ought to be maximizing value for their
shareholders.”

CODA: The cynic in me sees the export of health care services to India and China as freeing up more of the total revenue available for wages and profits. I wonder which one for those will get the lion’s share

POLICY/THE INDUSTRY/QUALITY: Why health care costs so much, reason #498

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Two angioplasty procedures on a 93 year old in one week.

Former President Ford underwent his second heart procedure in a week at the Mayo Clinic when stents were placed into two of his coronary arteries to increase blood flow, his spokeswoman said Friday. The angioplasty procedure on the 93-year-old Ford was successful and he was resting comfortably in his room at the hospital in Rochester, spokeswoman Penny Circle said in a statement.

Oh, and this was at Mayo, the bastion of low cost conservative medicine. So if you’re keeping score using the Dartmouth stats that means that if he’d have gone to New York University Hospital, he’d have had EIGHT procedures this week!

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