Map of life expectancy at birth from Global Education Project.

Monday, August 20, 2007

We need . . .

universal, comprehensive, single payer national health care. The Democratic candidates for president, with the exception of two who have no chance to be nominated, aren't willing to say it. The -- sorry, this is an informal setting -- half-assed measures that Clinton and Obama propose focus entirely on covering people who are currently uninsured, and will do little or nothing to solve the crisis in health care costs. Edwards has what I will call a three-quarter assed proposal which may be intended to make it easier to move toward a single payer system, and there is something to be said for that, I suppose, but I'm going to tell it like it is.

In a classic article in Health Affairs, Uwe Reinhardt and colleagues explain why the U.S. spends 2 or 3 times as much per capita as other countries, and no, it has absolutely nothing to do with better health care quality or outcomes. On the contrary, the U.S., as I assume you all know by now, ranks close to the bottom among the wealthy countries, and even below some not so wealthy countries, in health status indicators and in the quality of its health care system.

The reason we spend so much, as Reinhardt explains, is "a highly complex and fragmented payment system that weakens the demand side of the health sector and entails high administrative costs." Switzerland, which has a more or less universal coverage system similar to the system Massachusetts is now trying to implement, came in second in per capita spending, at 68% of the U.S. level. The median country in the Organization for Economic Cooperation and Development spent 44% as much as the U.S. in recent years. As a percentage of GDP, the median in the other OECD countries was 8.3%, compared with 13.9% in the U.S. It is projected that we will be spending 18.4% of GDP on medical goods and services by 2013. As shown in a previous post, Medicare and Medicaid alone are projected to consume 20% by 2040, if there is no change in current policy.

Is this because we have more and better medical services? Just the opposite is true. The U.S. has lower physician to population and nurse to population ratios than most of the OECD members. We also have fewer hospital beds per capita than most. But, unlike all the rest, we don't provide affordable coverage for everybody and only a select portion of the population has access to those services. As Reinhardt et al state, "[S]some relatively low-cost medical interventions can yield additional QALY's [Quality Adjusted Life Years] at relatively low incremental costs . . . . At the other end of the spectrum, however, the health system can wrestle additional life years from nature's course only at increasingly higher incremental costs."

We don't do the former very well -- people without health care don't get those cheap, preventive services -- but we do the latter with total disregard for cost. Neither public nor private insurance providers in the U.S. use any overt considerations of cost-effectiveness in providing benefits. Drug companies develop new chemotherapies for cancer that provide an extra month or two of life at the cost of tens of thousands of dollars. They are FDA approved because they are "effective," and then we have to pay for them.

Medicare does not pay for catastrophic costs or long term care - there are lifetime limits on hospital benefits and nursing home care -- so people who need those benefits end up spending their savings and then, when they are destitute, Medicaid picks up the bill. There is no "invisible hand" that metes out justice in these situations. Some family fortunes are destroyed, some spouses are impoverished, because a person happens to have a long, expensive terminal illness. Other fortunes are preserved and people are well supported in their retirement because they happen to escape this fate. The money is spent, one way or another, but without consideration of benefit or justice.

We also pay far more for inputs, including drugs and medical devices, because the fragmented payers have little market power. The drug companies claim they need their huge profit margins to pay for research and development costs, but we know they allocate most of it to marketing, and focus their research on products with commercial potential -- which is usually based principally on how the products might be marketed -- which has little relationship to public benefit. Most of the basic research that leads to new medical technologies is carried out at public expense, by the National Institutes of Health, but drug companies, not the public, capture the resulting profits.

Finally, the administrative complexity and the perverse effects of competition among insurers add huge costs -- it is estimated that 24% of spending on "health care" in the U.S. is for administrative and marketing costs, nearly all of it for private health insurance. Much of this money is spent figuring out ways to deny people care -- not on the basis of cost-effectiveness, which would be beneficial, but on the basis of arbitrary rules intended only to save the insurers money, such as refusal to cover "pre-existing conditions" -- a phenomenon which can only exist in a fragmented system. Administrative costs for public insurance systems, including our own Medicare, are on the order of 3%.

In college economics courses, the professor first introduces a set of assumptions which are false. He (almost always he) then constructs an elaborate description of an alternate reality, one in which we do not live, based on these assumptions. Along the way, the professor and the students forget that the assumptions are false and the theory does not describe reality. This counterfactual theory is then treated as truth in economics departments, in think tanks, by politicians, by reporters and by fake reporters who just make shit up, such as John Stossel, and even by judges. The reason this phony theory is treated as the truth is because it provides a justification for inequality, privilege, and vested interest. It is a lie.

The only arguments against universal, comprehensive, single payer national health care are based on this fake theory. In a reality based world, we would do what is in all of our interest. Among other fundamental benefits, it will give us a way of solving the Medicare and Medicaid crises by:

Applying rational considerations of cost and benefit to decisions about what to pay for;
Improving the health of the population and delaying serious illness by providing appropriate preventive care and early intervention;
Spreading the cost of health care across the population in a manner which produces justice and equity;
Eliminating wasteful administrative costs.

The so-called "free market" does none of the above.

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