“House Republicans Unveil Plan to Replace Health Law” (nytimes) describes a plan for a redesigned river of tax dollars directed at America’s health care industry. Let’s call the new plan “RepubliCare”.
Is there any way to look at this other than as a proposal to subsidize an industry that is demonstrably one of America’s least efficient and least competitive?
First, let’s look at whether it is fair to characterize America’s health care system as the equivalent of a 1930s steel mill.
A local family with some European connections has a relative who needed some stent work. With no insurance, the relative was quoted $125,000 for this project here in Boston, $40,000 in Switzerland, and $10,000 in Ukraine. “It was the exact same state-of-the-art Dutch stent for all of these,” explained my source. (The procedure was ultimately done in Ukraine by a top cardiologist there.)
Based on the higher cost to get the exact same thing done, I conclude that this is not one of our competitive industries and that, in a free market, it would mostly not exist (e.g., absent a health insurer willing to pay an insane local price, a typical American who needed work quoted at $125,000 would get it done by traveling to another state or another country).
Second, what about the specifics of this plan? It seems that health care for lower-income Americans would continue to be handled by 51 separate state bureaucracies:
Medicaid recipients’ open-ended entitlement to health care would be replaced by a per-person allotment to the states.
Ordinarily letting the states, some of which are much larger than the typical country, run stuff seems like a good idea. But here, a state government would have an incentive to favor local businesses even if health care could be provided with lower cost and higher quality in a neighboring state.
The health care industry, in addition to all of their profits from monopolization and collusion (helped by barriers to entry set up by state licensing boards and insurance commissions), will get direct federal tax subsidies in the form of tax credits:
Under the House Republican plan, the income-based tax credits provided under the Affordable Care Act would be replaced with credits that would rise with age as older people generally require more health care. In a late change, the plan reduces the tax credits for individuals with annual incomes over $75,000 and married couples with incomes over $150,000.
Why not just lower taxes on people who earn less than $75,000 per year and let the health care industry compete on a level laying field for their new higher purchasing power? (If the answer is that you don’t want people running up a $1 million bill from a catastrophic problem and ultimately sticking the rest of society with the invoices, roll an automatic catastrophic insurance policy (maybe with treatment done by the lowest high-quality bidder within 500 miles) into Medicaid/Medicare.)
Readers: Is there any reason for people interested in a market economy to be excited about this proposal? To my casual eye it looks like a slightly tweaked version of the same general idea: more favoritism through tax subsidies for an industry that has gotten fat off these since World War II.
Perhaps the strong resemblance between the hated old and the celebrated new is an illustration of what Tyler Cowen is saying in The Complacent Class: The Self-Defeating Quest for the American Dream:
an ever-increasing percentage of the federal budget is on autopilot, with only about 20 percent available to be freely allocated, and that number is slated to fall to 10 percent by 2022. In 1962, about two-thirds of the federal budget had not been locked in and could be allocated freely. Today, however, it is harder to have a meaningful debate about how the money should be spent because most of the money is already spoken for, and that is a big reason why problems of polarization—which have always been present—have become harder to solve.5 This change in the nature of the federal budget, and this quest for ever more guarantees, is one of many ways in which America’s pioneer spirit has been replaced by a kind of passivity. In the meantime, politics becomes shrill and symbolic rather than about solving problems or making decisions.
For the most part, American politics does not change and most voters have to be content—or not—with the delivery of symbolic goods rather than actual useful outcomes
So there will be a debate about transgender bathroom policy, but there won’t be any about the nearly 20 percent of GDP that is flushed down the health care toilet.
Related:
- my own health care reform plan from 2009 (universal coverage, but pre-budgeted, unlike Medicare and Medicaid)
- how some Americans will get a share of these new health care dollars even if they’re only slightly/briefly acquainted with the health care industry
From the above, the new plan doesn’t seem to solve much, so it seems kind of pointless from the societal point of view. Does it reduce costs or cost growth in any way?
To reduce costs, I can see two main paths: Euro-style universal medicaid (single payer with a budget and co-pay on every visit to reduce abuse as well as other cost controls) plus private insurance on top, or Singapore style health savings accounts with price controls and transparency. Judging from current results, Euro medicaid can keep costs at about half the current US level or less, while Singapore would cut them to about 1/10th.
Obviously there would be some resistance to implementing either.
I’m surprised medical tourism has not taken off in a big way. Perhaps because of liability laws benefiting another group of parasites, the lawyers, well-represented in Congress.
@Tom
The costs are not caused by abuse of service, but by cartels (physicians, Big Pharma, hospitals). Copays have been tried and failed to make a dent. As long as the doctors’ trade union gets to control supply via licensing, health care will stay expensive in this country.
RE: the $125,000 procedure quote: That’s probably the hospital/surgeon’s “sticker price”. The insurance company will negotiate this down to a much smaller number. This is another reason it’s critical to have insurance in the US: simply to have access to these “negotiated rates”.
Example: A relative was “charged” over $60,000 for a procedure and a night’s hospital stay. But the final bill paid by the insurance company was about $7,000.
Fazal: Why no medical tourism? Why bother under the standard insurance structure? If I need a stent, my insurance company will pay the Boston-area rate ($125,000? See above for the retail rate). They don’t offer me the option of driving up to Manchester, New Hampshire (an hour away) where the cost of everything is much lower and having it done by a doctor whose outcomes are similar but at half the price. Even if I wanted to save my insurer money I have no way of comparing prices at various providers. If a cardiologist in Connecticut is having a sale on stents, would I care? We will drive to Foxwoods to gamble and party, but I don’t know anyone who has driven down to Connecticut to save $100,000 on a medical procedure.
>absent a health insurer willing to
>pay an insane local price
No health insurer pays $125K; they pay 10K-60K, so U.S. health care is expensive but not quite as outrageously so as the anecdote suggests.
http://www.modernhealthcare.com/article/20150720/NEWS/150729983
>Why not just lower taxes on people who earn less than
>$75,000 per year and let the health care industry compete
>on a level laying field for their new higher purchasing power?
>(If the answer is that you don’t want people running up a
>$1 million bill from a catastrophic problem and ultimately
>sticking the rest of society with the invoices, roll
>an automatic catastrophic insurance policy
Even at European costs, a stent would wipe out the wealth of a typical American. Primary care, the expected and predictable portion of health care spending which could conceivably operate in a free market, accounts for less than 10% of health care costs. The reality is that modern health care requires risk pooling by big institutional payers.
Neal: Why does risk-pooling help? If nearly every American will eventually need some procedure that wipes out all of the wealth that they have created, aren’t the insurers functioning more like savings banks? http://www.usatoday.com/story/news/politics/2013/08/06/bush-stent-heart-surgery/2623111/ says that approximately 1 million Americans get stents every year. Given the population size and life expectancy, it looks as though there is at least a 25 percent chance of getting a stent. If we consider the probability of comparably expensive procedures (joint replacement?), it would seem that there is nearly a 100-percent probability of a stent-like cost.
If the probability is close to 100 percent insurance wouldn’t seem to have any role, whereas going to Europe for stents and joint replacements would cut costs considerably.
> This is another reason it’s critical to have insurance in the US: simply to have access to these “negotiated rates”.
It’s not nearly as hard to “negotiate rates” as most people think. You just don’t pay the bill for five months. Then you call them up and say “I lost my job. I can pay you one third that or nothing.”
>If the probability is close to 100 percent
>insurance wouldn’t seem to have any role
If we exclude our insane end of life care practices, I doubt that lifetime risk is close to 100%. Even if it is, annual risk is much lower so there is still a need for risk pooling.
Why exclude American end-of-life care practices? Is there some evidence that these are going to change?
Why would we need risk-pooling to deal with annual risk? Wouldn’t it make more sense to treat that like a mortgage? You don’t buy a house every year and you don’t typically pay off the house in full in the year that you buy it. So people who need that stent at age 25 can borrow from a bank to pay back the cost (let’s hope that they were smart enough to travel somewhere inexpensive to get the work done!) and people who need the stent, or a joint replacement, or a couple of rounds of cancer treatment, can save up during their disease-free years the same as they would if they were renters and saving up to buy a house. Why funnel every medical bill through a medical billing service (provider-side) and then claims experts (insurance-side) when financial services (saving or borrowing, as appropriate) are much more efficient than health insurance services?
There are admittedly many contributors to costs, also including bureaucracy, law suits, pharmaceutical costs, generous salaries and plain overconsumption of services. And presumably more, much more.
Yesterday I had my first encounter with healthcare in Thailand, due to an infection coming back that wasn’t adequately treated in the States three weeks ago. It only took five minutes in the Dentist’s chair, which included a brief examination, some discussion of what was going on, a prescription for some antibiotics and pain/imflammation pills (ibuprofen). The total cost — paid in cash on the spot — was 100 THB (a bit less than $3 USD), which included the medication. How many people in the U.S. can say they’ve ever gotten out of a Dentist office for less than $3? Every one of the four or five patients ahead of me settled their bill on the spot too, in cash.
>Why funnel every medical bill through a medical billing service
>(provider-side) and then claims experts (insurance-side) when
>financial services (saving or borrowing, as appropriate) are
>much more efficient than health insurance services?
Because if someone is turned down for a mortgage they continue to rent, but if they are turned down for a stent loan they die.
Tyler Cowen’s remarks about the federal budget are bizarre. Sure, the federal budget pie chart looks very different from what it looked like in 1962. On the other hand, Americans are significantly more prosperous and also live longer, healthier lives than they did 55 years ago. However, it’s unclear what any of that has to do with America’s “pioneer spirit” or “shrill and symbolic” politics. He sounds like another conservative who would like to cut Social Security and Medicare, but doesn’t want to just come out and say that directly and give actual justifications.
Neal: Why wouldn’t that be an argument for government loan guarantees like student loans that are, in theory, hard to get out of via bankruptcy and easy to collect through the IRS?
College education is expensive (and, like a lot of American medicine, may often be harmful or worthless). We didn’t create insurance to deal with the high lifetime cost, but a loan system instead.
@philg: Loan guarantees are an interesting idea, but some of the potential problems I see are:
1) Government loan guarantees create their own market distortions (those adverse effects are visible with the student loan system).
2) As Russil has mentioned in previous posts, if everyone needs to save for their “worst case” scenario then society as whole over saves because society as whole only experiences the “average” scenario (times n).
3) The need for risk pooling isn’t the only way in which health care departs from a classical free market and these limit the advantages of replacing institutional payers with individual consumers. With health care: There is typically extreme asymmetry of information between buyer and seller. Negotiations are undertaken during a period of extreme stress, weakness, and neediness for the buyer. The seller is in a position of unusual personal trust with the buyer.
4) We already have an insurance based system so transforming to a financial based system would incur larger transition costs.
It is hard for me to see that a system of government loan guarantees would work better than insurance but it is worth thinking about more. Regardless, neither would qualify as anything resembling a “free market”.
The “insane” EOL care practices is just a regular extortion. One doesn’t want their favorite granny to die, especially not if that would mean suffering.
If you don’t quite agree, please think of the following hypotheticals (no need to respond, just think of an answer)
1) how much is for cancer? and if that’s for your spouse? and if that’s stage IV and it does hurt them quite a bit (fwiw, there is no stage V, and I am sorry for being so insensitive that I’m even talking about that: just watch a Bergman movie)
2) how much is for your children lives? would you pay 50% of everything you have (mortgage including) for them to survive? how about 80% for them to survive and not to suffer? how about 99.9 for them to survive and to be cured? What if you are offered a deal: 85% of everything you have for a cure? will you pay? would you trust them?
>Why funnel every medical bill through a medical billing service
>(provider-side) and then claims experts (insurance-side)
Just because our existing insurance system does it this way doesn’t mean that the insurance system must do it this way. I agree (with the implication) that this aspect of the system is a key cost driver which must be eliminated (or at least reduced) and that neither Obamacare or Republicare took/take that on.
Do we really want an efficient medical system? What are our kids going to do when they grow up? Tech and law are already ruined, if medicine got efficient too, what’s left?!
Neal: Look at Figures 4 and 5 in https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2645209/ . As one would expect, there isn’t much variation in lifetime costs from person to person (except that women are 40% more expensive than men; Obamacare makes it illegal for insurance companies to charge accordingly, so any insurance company that ends up with mostly women is going to be in trouble).
There is some variation, of course, but not enough to justify an insurance industry. Compare to the lifetime costs from other things that are insured, such as automobile liability and house fires. Most people will go their entire life without having a house burn down.
Separately, the paper also shows the insanity of getting health care in the U.S. The farthest outliers among males burn through $240,000 over their lifetimes. That’s about what a man in Massachusetts would pay for 25 years of a silver Obamacare plan… if he never gets sick. If he is actually in poor health he would also have to pay $250,000 in deductibles ($10,000 per year under my $8,500/year plan, but maybe emergency room visits are additional?). And he would also have to pay Medicare taxes for coverage that would start at age 65.
So the healthiest guy in Massachusetts runs up the same bill in 25 years as the sickest Canadian guy runs up over his lifetime. Only in an insanely distorted world does he fail to take a ride up to Montreal when he needs more than a flu shot.
Its only redeeming factor is the elimination of the penalty for not paying the insurance bosses. Guys who never married are already predisposed to never need insurance, so a future fee increase for not having continuous coverage means nothing. There was a vague mention about allowing competition between the pharma bosses. Not sure how far that’s going to get. Just hope you never become bald & fat enough to attract women.
>Only in an insanely distorted world does
>he fail to take a ride up to Montreal when
>he needs more than a flu shot.
The system you are looking at so longingly is based on risk pooling not personal savings or establishing a “free market”.
>There is some variation, of course,
>but not enough to justify an insurance industry.
Using the numbers in Figure 5 a man would need to save 1500 a year to save for 90th percentile expenses and then 200 per year to insure for the remaining risk. This compares to 900 per year to insure the entire risk. Savings instead of insurance just creates a bonanza for people lucky enough to be the heirs of healthy people.
I suppose it might be worth it if this would magically drive down costs but there is no reason to think it would. The existing student loan system does not suggest that people are as careful with money borrowed using government guarantee as they are with their own money. It seems unlikely that cancer patients are going to be as effective at negotiating prices as insurance professionals. International experience suggests just the opposite: The cheapest systems are centrally administered and funded primarily with taxes.
I am not arguing that employer provided insurance supplemented by Obamacare/Republicare is a particularly good way to go about funding health care. I’m just arguing that while consumer market oriented solutions may have a place, they are not by themselves going to solve the problem.
You all miss one crucial thing. Without the huge profits from the US healthcare system, there would be no healthcare innovation. No new drugs or devices. The rest of the world is able to cut expenses while benefiting from American largesse.
What is needed is a Trumpian response. A most favored nation clause that a drug’s US price cannot be more expensive than the median price worldwide, and an uninsured person should get the cheapest insurance negotiated rate. A national insurance market will help as will tort reform.
“Savings instead of insurance just creates a bonanza for people lucky enough to be the heirs of healthy people.”
I think that’s a fantastic advantage of savings over insurance, actually.
“If you don’t quite agree, please think of the following hypotheticals (no need to respond, just think of an answer)”
As long as it’s covered by insurance, for all I care sell off California and its inhabitants to the Chinese so that someone can try to make my granny live forever.
“The rest of the world is able to cut expenses while benefiting from American largesse.”
To some extent, but as far as I can tell this is more of technology diffusion over time. It’s still quite expensive for national health care to buy all the machinery and pills. So maybe you have one MRI machine per region rather than one per hospital(?), as a doctor you can’t prescribe the latest and most interesting treatments, and so on. I think most of the benefits still accrue to those who are willing to pay for these innovations.
In other respects, like pharma, it’s possible that US regulations are too demanding. To many, it might be acceptable to have medications with more and worse side effects that could be developed at a lower cost and faster rate. As I’ve heard mentioned, aspirin wouldn’t get FDA approval today.
>I think that’s a fantastic advantage
>of savings over insurance, actually.
At a cost of forcing everyone to set aside almost twice as much as needed for their health care. I think most people would rather spend that money or save it for some other purpose.
Fee for service reimbursement IS a primary cost driver in the existing system. The way to control it is to get rid of fee for service reimbursement. Making sick people the payers isn’t going to help.
I’m surprised you didn’t use the official name as the title of your post: World’s Greatest Health Care Plan of 2017.
“There is some variation, of course, but not enough to justify an insurance industry. Compare to the lifetime costs from other things that are insured, such as automobile liability and house fires. Most people will go their entire life without having a house burn down.”
Not sure why you think this doesn’t justify risk-pooling. We do have insurance for events that can be expected to happen in your lifetime, like life insurance, or collision coverage for automobiles. I would suggest that the unusually high cost of US medical services greatly increases the efficiency gains from risk-pooling: if costs were low, the advantages over fee-for-service would not be nearly as great.
I think the core problem here, as you’ve said many times, is the unusually high cost of US health care. How do other countries provide cost control? And why are private US insurance companies doing a poor job of cost control?
Joseph Heath discusses this in The Efficient Society (1997). Chapter 7, Big Business:
And in Chapter 8, “Big Brother”:
A less smug look at Canadian cost control: Too Much Health Care. Basically, we need to take a close look at the costs and benefits of individual services, and only cover services where the benefits actually outweigh the costs. Same applies to expensive new pharmaceuticals.
I am assuming that the surgeons doing the procedure in Boston got paid a lot more than the surgeons in Switzerland and Ukraine. If this is in fact the case, then what is preventing the similarly qualified surgeons in Switzerland and Ukraine from immigrating to the United States(to Boston specifically), doing their work there, and making more money? What’s to prevent a “medical brain drain” from happening? Or maybe it is already happening…
Bob: brain drain is definitely an issue in Canada. In this way, the high cost of US health care puts upward pressure on health-care costs in Canada and other countries: if the differential between salaries in Canada and the US gets too high, we start to lose people.
Oops, the World’s Greatest Health Care Plan of 2017 has nothing to do with RepubliCare. My apologies for the misinformation!
Russil, et al: I don’t see how single-payer can cut costs here in the U.S. We already have single-payer for a subset of the population (Medicare+Medicaid beneficiaries) and we spend a larger percentage of our GDP to cover that subset (less than half the population) than other countries spend to cover their entire population. As noted in http://www.newyorker.com/magazine/2017/01/23/where-the-second-avenue-subway-went-wrong we already have a “single-payer” system for public transit projects and it costs us at least 5X as much as other developed countries to do the same things.
Bob: What prevents foreign doctors from coming to the U.S. and soaking up all of the delicious taxpayer cash? U.S. doctors! The world’s greatest surgeon, if she happened to have been trained in France, would need to do years of retraining in order to practice in the U.S.
W: “No new drugs or devices [unless a river of tax dollars keeps flowing]” See https://philip.greenspun.com/blog/2014/07/08/book-review-bad-pharma/ for how most new drugs aren’t better than (or really even any different from) old drugs.
Neal: You don’t want American males to have to put aside $1,700 per year because they might have some leftover for their kids to inherit. Instead you will have them pay $5,000 to $12,000 per year to an insurance company and become indifferent to the cost of services consumed so that eventually nearly 20 percent of our GDP gets spent on health care (compare to about 4.5 percent in Singapore, which means they have another roughly 14 percent of their GDP to consume, invest in productive assets, etc.). And if they are low-income you will have other taxpayers work longer hours to subsidize them so that their final bill for insurance is $1,700 per year? (but don’t forget that they will pay far more than that in deductibles if they ever need care!)
“If this is in fact the case, then what is preventing the similarly qualified surgeons in Switzerland and Ukraine from immigrating to the United States”
Not easy Bob… Imagine you are a fully qualified specialist in another country earning good money in local currency. To work in the US, you need to pass USMLE (nobody disgrees with the need for this exam). In addition to the residency you have done already to get your medical degree, you again go thru 3 shitty years of US residency earning 45k/year IF you get matched via the RMP and then be eligible to write the board exam. This is a cartel that restricts supply of qualified doctors by restricting residency seats, instead of doing it based on a meritocratic exam and maybe a 1 year practical program.
>I don’t see how single-payer can cut costs here
>in the U.S. We already have single-payer for a
>subset of the population (Medicare+Medicaid
>beneficiaries) and we spend a larger percentage
>of our GDP to cover that subset (less than half
>the population) than other countries spend to
>cover their entire population.
Your health care plan explains it: Single payer with capitated reimbursement. Then adjust the reimbursement only for inflation for a few decades and let the economy grow around health care.
I agree that the U.S. experience with fee for service Medicare/Medicaid suggests that U.S. fee for service single payer would be a disaster.
>and become indifferent to the
>cost of services consumed so that
>eventually nearly 20 percent of our
>GDP gets spent on health care
Parents looking at a premie in the NICU are not going to carefully manage costs when those costs are going on to the child’s government guaranteed health care debt.
Neal: If NICU care will bankrupt an American family then the solution is not “let’s all go bankrupt together through a complex tax subsidy scheme.” The solution is that pregnant Americans who have an elevated risk of premature delivery fly to a country (or maybe drive to an adjacent state where a hospital is offering aggressive pricing) where NICU care can be delivered at a reasonable price. Even if the baby comes out at full term, the savings on hospital and ob fees should cover the cost of air travel and a couple of months in a comfortable apartment.
>If NICU care will bankrupt an American family then
>the solution is not “let’s all go bankrupt together
>through a complex tax subsidy scheme.”
Agreed (as stated in comment 38).
>Even if the baby comes out at full term, the
>savings on hospital and ob fees should cover
>the cost of air travel and a couple of months
>in a comfortable apartment.
Not after also covering lost income for both parents.
Some real-world cost comparisons for Boston, MA. These are the negotiated costs paid by our insurance company for a CT Scan of the Abdomen/Pelvis/Chest with Contrast (includes reading). I bet locals can guess the two highest cost hospitals. 🙂
$257
$651
$1068
$1350
$1375
$1688
$2013
$2780
$3100
$3144
$4071
“I don’t see how single-payer can cut costs here in the U.S.”
More to the point, single-payer is politically infeasible in the US. Even the RepubliCare plan seems like it’ll have great difficulty in getting past both the House and the Senate, as it’s being attacked from both the conservative side (who, like yourself, are attacking it as “Obamacare lite”) and moderate Republican senators (who don’t want to see a lot of people kicked off insurance).
That said, the numbers in the example cited by Heath show that the government is already able to pay lower prices than private insurers, even if they’re way above Canadian levels.
My neighbor, who was a dentist in Russia, is currently retaking /all/ of her dental training, in order to work in the US. The coursework is extremely expensive, and it requires a very long commute, while she also has two children to care for, as well. I am not clear on why a test of some sort would not suffice, for people who have already gotten specific training outside the US. The supply of medical personnel in the US seems artificially limited, as others have pointed out.
@GC
During the part of my life trajectory I was destined to spend in the former Soviet Union, I met some well qualified physicians, cardiologists and other specialists.
Never dentists, though.
I dreaded every trip to a dental office for the simple reason that they did not use any local anesthetic drugs during the majority of procedures except for major work like tooth extraction. Root canals, drilling, low speed at that, and all, was done without any painkillers since Novocaine was in short supply. Dustin Hoffman being operated on by Lawrence Olivier in the Marathon Man is pretty close to what a patient had to experience in a typical Soviet time dental office. And that’s only the tip of the Soviet dentistry iceberg: they used arsenic to kill the root canal nerve, too by placing the substance for about a week inside the drilled tooth, too.
There were rumors that party “nomenklatura” had access to non-medieval time dentistry, but I am not sure how good that was even for the “elite”. Perhaps, situation is better there now, but I have very little sympathy for your Russian dentist neighbor needing to go through a rigorous training because I experienced their skills and equipment first-hand, with different dentists, in different parts of the country.
Not that I am too excited about the local ones, but that’s a different story.
@Ivan. Quite an anecdote. Thanks for sharing. I wouldn’t suggest the US accept just anyone with training from anywhere, of course.
I think the situation would be the same if the person trained in Western Europe or Japan, where I expect the training is on par with the US. They’d have to repeat all of their training in the US, before practicing in the US.
While my original example may not be a good one, I think the general principle still applies. Doctors and dentists in the US unnecessarily restrain the supply of medical suppliers, to the detriment of consumers.
Capitation (every patient pays the same, possibly adjusted according to fairness) basically means your physician takes on the financial risk of having to pay for too many expensive treatments rather than patients or government or insurers. I don’t think it would work well in practice.
@Russil and @Philip
We don’t have true single payer at all. Each state has multiple plans and each plans negotiates completely independently of the other. So you have thousands of plans negotiating separately. For example in MA quick google search found me 19 Medicare Part D plans and each had a different cost for a generic antibiotic:
https://q1medicare.com/PartD-2017-SearchPDPMedicareDrugFinder.php?stateReg=02MA&form=adv&ndc=00093226301&drug=AMOXICILLIN%20500MG%20TABLET%20(100%20CT)
Less than 2 months the Senate defeated the Klobuchar-Sanders measure to allow importing drugs from Canada. Surprisingly the senators backed heavily by Pharma companies voted against.
@Tom: We know that physician groups like Kaiser can provide decent care at lower cost with capitated reimbursement. I’ve been on Kaiser most of my life but did try traditional fee for service insurance for a few years. My family ended up back at Kaiser because fee for service was good but not better and was more expensive.
It is true that capitated reimbursement reverses (relative to fee for service) rather than eliminates the physician’s conflict of interest. It is easy to see the mechanisms which lower costs, but we don’t know the quality of service such a system would produce without competition from fee for service providers. There are ways of addressing this but considering where we are now it is a secondary issue which can be left as a challenge to future heros.
This system puts total spending under political control through congress. The government’s primary role becomes distributing large sums of money using a relatively simple formula. We know from the Social Security program that the government is capable of doing that efficiently. Cost control is achieved using mechanisms proven effective in today’s system.
@Tekumse: Medicare is prevented by Congress from negotiating drug prices (Medicare part D). Only Tricare and VA are allowed to negotiate, and they pay about 50% less (source: http://consumersunion.org/pub/pdf/no-bargain.pdf).
@W: I don’t know what is more troubling: you believing that the high profits of the healthcare industry are in any way proportional to the investment in research, or believing that the rest of the world goes for a free ride on the US innovation. Other countries, even really poor countries like Cuba are world-leaders in some fields of healthcare and in no way going for a free ride.
@W. I work with people who do drug pricing in the US. Innovation, R&D, expenses do not enter in the equation at all. Most of the recent increases have actually been on already existing meds and many pass patent. The easiest thing any administration can do is hire a few more people and improve their technology at the FDA to clear the 4 year generics backlog.
A more complicated work is to limit the crazy extend patent thing that pharma does for each indication. You multiply the stages x the deseases and you get a fuckton of extensions without nay innovation.
And if you don’t belive me the infamous ex-Pharma CEO Martin Shkreli made his own dirty laundry list:
http://www.pharmaskeletons.com/
>in the US. Innovation, R&D,
>expenses do not enter in the
>equation at all
High profits fund high valuations for successful start-ups which induce investors to take on the significant risk of a start-up.
You know how Gilead priced Harvoni? 90% of a liver transplant. That’s pretty much it.