Suddenly it feels very like 1991 again. Imagine that the 49ers and Joe Montana has suddenly become human and the newspapers are full of stories about how the high cost of health care is the cause of all the world’s troubles.  The NYT is back with an article asking Do Some Pay Too Little for Health Care?  So managed care has run its route, gotten clobbered by Lawrence Taylor with a vicious hit in the open field, and coughed up the ball just like Roger Craig in the 1991 NFC championship. The west coast offense led by Kaiser, Pacificare and the rest has run up against the Bucs and Redskins defensive combination of medical power and government intervention, and its tactics have broken down in dis-array.

OK, enough with the hackneyed football analogy.  We all now accept that "managed care", which never really made it out of California and was killed by a combination of Wall Street greed and popular discontent, is not the secret to cost control. The old chestnut that has returned, as this week’s flavor of the month, is the issue of what used to be called "first dollar coverage".  The argument is essentially that if you charge people to use the relatively cheap services provided by physicians, it’ll prevent them from using those services and save the system money.

I had a similar conversation with another blogger, Medpundit*, last week (and have liberally repeated myself here!). Medpundit’s solution (scroll down a ways), is to make people pay for preventative (and I assume routine) care, and carry catastrophic insurance. Although I have some sympathy with this approach in three-tier drug coverage, and in helping to avoid what economists call moral hazard (i.e. unnecessary use of services because they are free) Canadian economists Bob Evans and Morris Barer have proved to my satisfaction that point of service user fees only really discourage the very poor from seeking care, and are as such discriminatory. But the real point is that although the testing of the healthy that Medpundit sees too much of may be increasing costs, the real money is spent on the care of those who are very sick. The NY Times article and even the normally sage Uwe Rheinhardt, who’s quoted in the article, miss this.  But in health care 80% of the money is spent on 20% of the people.  Even if you got the other 80% to cut half their use of medical care by charging them for it, you’d only save 10% of the costs.  It’s in the 80% of the costs you need to look if you want to save money.

Meanwhile, as Harris reported last week, apparently to the surprise of the NY Times, employees want to keep their health benefits rather than take cash in exchange.  Just when I didn’t believe that I could say any more about the tax advantages for employees of getting their benefits in health insurance rather than in cash, and the disadvantages of buying insurance in the individual "market", the self same NY Times provides this horrendous story of the complete fraud going on in that individual "market".  As if it was needed this provides one more reason for employees to stay huddled in their protective groups. Hence, trying to make employees pay more out of pocket is the only real option for employers, even if it does little to change the overall dismal cost picture.

*Incidentally, this week Medpundit has turned her attention  to the problems of Medicare, and added some comments from a rather misguided reader slamming "Hillarycare", which–not that it ever existed– was NOT a central single payer model like Medicare.

I’ve been sitting on this story about the number of doctors in the future for a week or two but have finally got around to posting it as Jeanne Scott has written about it and I don’t want to be cast into irrelevance. So the background:

Remember how we were told that under managed care we had too many doctors, and always had too many specialists?  The Council on Graduate Medical Education (COGME) has now decided that was all wrong.  We are now going to have too few doctors by around 85,000 (about 10% of what we’ll then have) in the year 2020.  COGME has now recommended increasing the number of doctors trained each year by 3,000, and also relaxing the aim (that was never close to being achieved anyway) of a 50-50 balance between generalists and specialists.  Their logic is that we will end up with an older population (the peak will be in 2020) and that there won’t be enough doctors to go around. However, there are several reasons to view this very suspiciously.

The first is based on data that comes from an IFTF report that was done by a crack team (ok, me and Marina Pascali) in 1997. The number of doctors in training doubled in the 1970s and 1980s. For roughly the past 15 years and the next 15 years we will have a net addition of roughly 12,000 doctors each year to the labor force. (That’s 16,000 new residents, plus 4,000 immigrants minus 8,000 retirees). The supply of non-federal patient care physicians (that’s post residency docs actually practicing) has gone from 480,000 in 1990 to over 600,000 today and will be around 720,000 by 2020, when the actual number retiring begins to match the number coming out of training each year. In 1994 COGME estimated that the need in the year 2000 would for between 145 and 185 doctors per 100,000 people.  At that stage there were already 210 docs per 100,000, and even with population growth that number will climb to over 230 by 2020.  In other words the physician population will increase by more than 20% over the next two decades while the population will increase by less than 15%. So unless COGME has radically changed its methodology and has decided that we need far more doctors per head, the simple answer is that–unless we are radically undersupplied now–we don’t.

The second reason is that old stand-by, international comparisons. If you want to dive into this table from the OECD, you’ll notice that the US has 280 docs per 100,000 population. (These numbers are higher than the IFTF numbers because they include all MDs including those in residency, those working for the government, those retired and those no longer in practice but doing something else). Plenty of countries have more doctors per head than us, but plenty including the UK, Canada, Japan, Australia and New Zealand have fewer.  Greece has nearly double and Italy has even more! In other words, we’re nowhere near the bottom of the pack, and several of the countries way ahead of us are not those whose systems are held up as the paragons of medical excellence. We are, though, the country that spends the most per head on health care, and has the lowest proportion of government spending as a share of all spending, while we have close to the fewest number of inpatient beds. So you could argue that the cause of our expensive health system seems to be too much private spending and too many doctors.  Perhaps we should be building more hospitals rather then pumping out more docs?

Finally as Jeanne Scott notes in her newsletter (and if you haven’t signed up by now….), do we really need doctors for all this "needed" care?

Yesterday’s reports that a deal has been reached in the Medicare Drug negotiations do not necessarily mean that we’re actually going to get a finished bill.  There are only 2 Democrats on the negotiating team, and several Senators, led by the old liberal war-horse Ted Kennedy, have previously threatened a filibuster if either a) the bill imposes a means-test on recipients or b) Medicare is forced to compete directly for members with private plans. This philosophical opposition to  heading down what Kennedy and others believe is a slippery slope towards Medicare becoming a two-tiered welfare benefit rather than a global entitlement, dovetails nicely with the desire of Democrats to prevent Republicans from being able to campaign as the "party that brought you drug coverage" in 2004.

Yikes–too much to report today! Two confirmations today about employer health insurance confirm much of what I’ve posted about before. First, the Commonwealth Fund reports that a growing share of uninsured workers are employed by large firms. More noticeably, low-income workers (those under 200% of poverty) at big companies are much, much more likely to be uninsured than higher income workers in big companies–46% of those in all. Yup, this means those folks who work at McDonalds, cleaning companies, supermarket chains, home health aides, etc, etc, and the people who are the targets of California SB2.

Meanwhile, Harris Interactive’s latest poll for the WSJ Online (not online yet but you can get on the email list here) confirms the deep emotional connection between employees and health benefits.  56% of employees say that they would rather have no pay increase but a maintenance of current health benefits as opposed to a decent pay increase but a significant reduction in their health benefits.

In other words not enough people are getting insurance at work, fewer are getting it each year (especially the working poor), but employees are loathe to lose that coverage.

And in news from San Francisco, UCSF the biggest teaching hospital in the Bay Area was threatened with release of some of its patients’ data on to the Internet.  The wrinkle is that the threat came from a transcriptionist who is a sub-contractor to a sub-contractor to a  sub-contractor to a sub-contractor…… and the individual lives in Pakistan. The transcriptionist in Pakistan had been stiffed on her bill by the subcontractor she was working for to the tune of $500.  That’s a huge sum–above the average annual income in Pakistan, so you can understand that the transcriptionist was pretty desperate, given that her employer had disappeared and that she had nowhere to turn other than UCSF (as she didn’t know who had hired the person she was working for). In the end no patient data was release, and the threat was rescinded apologetically.

How this works out under HIPAA’s privacy standards is anyone’s guest, but it could lead to a major revisiting of the whole concept of outsourcing transcription.

Update: There was a NPR talk-show on this in San Francisco yesterday, (audio available about halfway down this page).  The journalist who wrote the original story claimed that as many as 50% of all transcriptions are being typed up abroad.

Medpundit has responded to my queries about her stance on MSAs, coverage and all that. Go read her piece here, then come back. Medpundit’s very concerned that many of the patients she’s seeing are coming in for expensive diagnostic tests that are supposed to prevent illness way down the road and often end up on very expensive drugs. And as Medpundit also points out, there is no cost-benefit rationale to many of these tests and immunizations.  These are all covered by insurance under managed care’s "preventative" ethos, yet in the end these people will get sick and need costly care for something else anyway.  New treatments do tend to keep people alive longer, but they are still going to die eventually and cost more money down the line. This is indeed the conundrum, as represented by the rather amusing "debate" a few years back started when Philip Morris "demonstrated" that smoking saved the Czech Republic money as it killed off people who would otherwise be collecting pensions and using health care benefits.

Medpundit’s solution is to make people pay for preventative (and I assume routine) care, and carry catastrophic insurance. Although I have some sympathy with this approach in avoiding what economists call moral hazard (i.e. unnecessary use of services because they are free) Canadian economists Bob Evans and Morris Barer have proved to my satisfaction that point of service user fees only really discourage the very poor from seeking care, and are as such discriminatory. But the real point is that although the testing of the healthy that Medpundit sees too much of may be increasing costs, the real money is spent on the care of those who are very sick. So if everyone bought a "catastrophic" only insurance policy, eventually the cost of those policies would increase to more or less the cost of a regular policy–because, whether it’s done via insurance or taxation, the 80 % of people who are healthy need to pay for the care of the 20% who are sick. Controlling the cost of care of the sick means doing what most Americans view as something very unpalatable–limiting care.  I personally believe that limiting excessive care of those who are going to die soon anyway is totally humane.  However any doctor who remembers the horrendous state persecution of Dr. Robert Weitzel in Utah is going to be highly suspicious of taking such an approach. Of course we are getting nowhere near having the kind of debate about this "rationing" that we need to have. So the status quo of more and more services being available to patients at greater and greater cost to all us will remain.

Finally Medpundit sums up both of our feelings about getting away from employment-based insurance coverage: