Controlling rising health care costs

[Fishteacher73]

I do not know where the " lower quality" issue has come from. I lived in Sweden with a host family whose father was a doctor. He was exceptionally trained and able in his job. He spoke across Europe as well as the states about his specialty (Laser skin therapy).

 

I know there are certain problems with socialized medicine but they are minor in comparison to the quagmire now here in the states.

[Biochemist]

I do not know where the " lower quality" issue has come from. I lived in Sweden with a host family whose father was a doctor. He was exceptionally trained and able in his job. He spoke across Europe as well as the states about his specialty (Laser skin therapy).

 

I know there are certain problems with socialized medicine but they are minor in comparison to the quagmire now here in the states.

The healthcare cost growth rate in all western countries is about the same. The US has some unique problems in it, but the cost control problem is ubiquitous.

[bumab]

Now we are getting somewhere. Do you have a choice not to have a car? You still shop for them, and they are reasonably complicated products.

 

I do have a choice- I don't have a car ;) I ride a bike.

 

 

Let me suggest a novel notion. Health consumers are looking for one of two things: a diagnosis and/or a treatment. They do NOT buy a drug. They hope it is a treatment. If a phycisian gave you a fixed price for a treatment, they would get a)better and ;) less expensive.

 

It is a novel notion, and a good one. What about the cost of devloping new treatments? Also, treatments are often incorrect at the time, and must be refined. If the doctor always knew exactly what was wrong, this system would be great. It would be like ordering parts for a bike- it's not shifting, get a new derailuer. But it's not that simple, and doctors would not want to pin themselves down with an "estimate" since they can, and often are, wrong at first.

 

That is becasue the current state of the market is for consumers to assemble their own care. It would be like asking you to select the correct brake line or fuel injection for your car. That is not what you should be buying. You are buying a car.

 

Good analogy, however you could arrive at the same point with universal health care. I know you are argueing for efficiency, which is another matter, but the argument that people should be buying treatments, not individual pieces of care, is an argument from the socialized medicine standpoint as well. One monthly fee, you get anything you need.

[Fishteacher73]

Perhaps it is as simple is that the technology has out grown our economy. Health care at todays level is simply just not fiscally viable for many.

[Biochemist]

This is a great point, although as someone who must pay for their own insurance (and it's pricey), I'm still strugglin' ;)

Insurance costs are irrelevant in the global sense. Insurers make 1-2% of the premium as margin. That 2% is not the cost problem. It is the 98% that is the issue. Of that 98%, about 85% is provider care costs (including some provider administraiton) The other 13% (ish) is administration at the health plan.

 

Costs are high for individuals becasue health plans rate you. It is not because their margin is higher. Individuals are rated higher because they are usually riskier.

 

We could easily solve this problem by requiring all health plans to community rate. That means that all insurance in a particular geography (county or state) would be priced the same for any individual. Probably you would allow insurers to rate based on age and gender, but nothing else.

 

(This would be a regulatory change, but it is not required to get conusmers to move the provider market.)

This would mean that there would be no reason for employers to provide insurance anymore (because there would be no group rate differential) and consumers could pick any insurer in the geography, not just the ones at their employer.

 

Imagine that.

[bumab]

We could easily solve this problem by requiring all health plans to community rate. That means that all insurance in a particular geography (county or state) would be priced the same for any individual. Probably you would allow insurers to rate based on age and gender, but nothing else.

 

Doesn't this eliminate your "invisible hand" controlling the pricing? I suppose competition would control the benefits, but what about people who want more benefits, and could afford to pay more? If that was allowed, we'd be right where we are now. If it wasn't, there would be screams of socialism.

 

You're presenting (what seems to me as) some sort of quasi-socialized capitalistic scheme. I am very interested...

[Biochemist]

Me either, although the message that "it's lower quality, thus you will all suffer" has been drummed into the collective conciousness pretty hard.

Most non-US systems are cheaper because they force folks (somehow) to queue for service. This decreases utilization for lot of services. US consumers don't like this solution. Since a significant fraction of utilization has no effect on outcomes, decreased elective utilization does not decrease objective quality. Ergo, many foreign health systems are as "good" as the US, but their queueing at the provider is worse.

 

There are more MRI scanners in metropolitian Pittsburg than there are in Canada (the whole country). Guess who gets an MRI faster. And the capital cost per MRI in Pittsburg is far higher than Canada, since the machines are newer on average.

[C1ay]

I think there is another significant factor, our litigated society. In some areas malpractice insurance premiums threaten to put doctor's out of business. Unfortunately the insurance company has to do something to cover the cost of the awards juries have been giving. The drives up health costs which in turn drive up individual health care insurance rates to keep up. It's a vicious cycle.

 

One thing I would propose is annuitized awards. If a claimant wins a $5 million malpractice award let the insurance company set up an annuity that will pay it out over a reasonable amount of time. The payout realized by the insurance company would be a fraction of the award. The claimant probably doesn't need or deserve a lump sum and it's us that are going to end up paying it anyhow through higher insurance premiums. As long as we're the one's strapped with the burden I think we should be able control how it's paid.

[Biochemist]

What about the cost of devloping new treatments?

Providers would price (in advance) the service they give. They might offer more than one. Most car dealers sell more than one car, too. New treatments would be delivered to compete with older ones on cost and quality. Like new cars. Imagine that.

If the doctor always knew exactly what was wrong, this system would be great.

Some examples do not work as well as others, but most work pretty well. Pricing a diagnosis would often be reasonable (think of the stereo repair guy that will diagnose your stereo for a fixed price).

Good analogy, however you could arrive at the same point with universal health care.

Universal health care does nothing to drive down price. All western countires have the same price inflator that we do. They are just running at 1/2 to 3/4 the total cost. I have nothing against socialized medicine. It just does not address the core problem. It saves some administration costs, but that ain't the issue.

[bumab]

Providers would price (in advance) the service they give. They might offer more than one. Most car dealers sell more than one car, too. New treatments would be delivered to compete with older ones on cost and quality. Like new cars.

 

I fail to see how this does not reflect, at heart, the fundamental problem- unequal access to care because of economic issues. People don't think unequal access to Bentley's is a problem, however unequal access to both preventative and life saving care is usually perceived as a problem. There's nothing stopping the health care providers from providing lesser coverage to those less able to pay, which is basically what's going on now.

 

I agree- it's a good step. I just don't think it goes far enough, unless I'm missing a point.

[Biochemist]

Doesn't this eliminate your "invisible hand" controlling the pricing? I suppose competition would control the benefits, but what about people who want more benefits, and could afford to pay more? If that was allowed, we'd be right where we are now.

No. Insurers could still compete with insurers. They just could not adverse select agianst patients with pre-existing conditions.

 

Patients could buy whatever package they think makes sense. Any two insurers would have different packages and different prices, but the any single insurer would have the same price for a given gender and age.

[Biochemist]

Perhaps it is as simple is that the technology has out grown our economy. Health care at todays level is simply just not fiscally viable for many.

Maybe. But high-deductible packages are really inexpensive, and are designed to reward non-utilizers, and yet still provide catastrophic coverage. My family premium (me and 3 kids) is $177 per month.

[Biochemist]

I think there is another significant factor, our litigated society. In some areas malpractice insurance premiums threaten to put doctor's out of business.

This is a real cost, but it is not a major driver. I think in the US, malpractice is about 4% of the total health expenditures. Frankly, this is a HUGE dollar amount, but it is not a significant overall driver. The larger issue is that it makes providers do more work to cover themselves. Some have estimated that the incremental cost for self protection is another 4-8% of care costs. Legislation to standardize awards does a lot to minimize the lottery-oriented behavior of contingency fee attorneys.

 

Individual malpractice premiums are a different and more pressing problem. I suspect for most specialties, the fixed-compensation schedule solution would work to resolve this as well.

[Buffy]

Insurance costs are irrelevant in the global sense. Insurers make 1-2% of the premium as margin.

Costs are high for individuals becasue health plans rate you. It is not because their margin is higher. Individuals are rated higher because they are usually riskier.

This is insurance company propaganda. No business survives on margins of 1-2%. Oh I feel soooooo sorry for them. Any actuary will tell you that each incremental customer is the same whether they're in an individual or group plan. Group plans get MUCH better rates because they are "volume purchases" its no more complicated than that. Thus, yes, they are making *much* larger margins off the individuals, and its silly to claim anything else.

We could easily solve this problem by requiring all health plans to community rate. That means that all insurance in a particular geography (county or state) would be priced the same for any individual. Probably you would allow insurers to rate based on age and gender, but nothing else.

I *definitely* agree with this, but the Insurance industry would *never* let it happen because they *do* get significantly higher margins from the individuals, and due to the general trend in the economy to have people move out of salaried jobs and into independent contractor status, this is one of the fastest rising sources of income to them. Without this change, though, you will have *very* strong pressure from employees to insist on keeping employer supported programs.

 

Cheers,

Buffy

[Biochemist]

I fail to see how this does not reflect, at heart, the fundamental problem- unequal access to care because of economic issues. People don't think unequal access to Bentley's is a problem, however unequal access to both preventative and life saving care is usually perceived as a problem.

There will probably always be some inequality based on economics. Most countries with socialized medicine allow those who can to pay for extra services of some sort. The well to do get better food too.

 

But the core problems is that all care products are sold on a cost-plus basis.

 

If we were to imagine buying a car the way we buy healthcare, we would go to an automobile consultant who would order a set of parts. We would commit to purchase a set of parts that might end up as a functional vehicle, but there would be no guarantee that it would actually run. We would not know which parts were ordered, whether the parts were good or bad, and we would not know the price of any individual part. We would not know the price of the automobile consultant either. We might know what it would cost to see him/her once, but we would not know how many times we would have to see him/her to get a completed vehicle. The auto consultant would hire a mechanic to assemble the vehicle. We would have no idea of the total cost of the car, but it would not matter much because the consultant, the mechanic and the parts suppliers all would bill our auto insurance directly. The cost of the car after the first several thousand dollars would be covered by our auto insurance. If the car failed, we would go back to the auto consultant and see if we need more parts, more service or both. In this imaginary scenario,

 

1)A $50,000 existing luxury car would probably cost between $100,000 and $150,000

 

2)Everyone would own a luxury car, because they are “better” than economy cars and the driver did not pay for the vehicle

 

3)Automobile insurance would cost well over $3,000 per month

 

4)The cars would have an incredibly high failure rate, and

 

5)Warranties would be unavailable for any vehicle.

 

Does this sound familiar? Is the problem the inefficiency in the insurer?

[Fishteacher73]

That is a very good program...The one offered through my school district is abhorant. For me to cover myself and two children (No pre-existing issues) costs about 700 bucks a month. That is with moderate co-pays (I think the avg. co-pay on office visits is about 50 dollars and 35 each for persriptions). The pay is low enough also that I can qualify for the CHIP program (essentially medicaid that I pay about 300 bucks a kid a year for w/ no co-pays). That was a tough decsion for me to make....

[Buffy]

Maybe. But high-deductible packages are really inexpensive, and are designed to reward non-utilizers, and yet still provide catastrophic coverage. My family premium (me and 3 kids) is $177 per month.

That's an amazing rate. What's your deductable? The insurance companies do "coercive marketing" on this, because they would LOVE to have people go to these higher deductable plans, so to a certain extent, you're being subsidized by the people who have a problem with high-deductables! ;)

 

Cheers,

Buffy