This Sean P. Murphy/Boston Globe article details how local government-subsidized health insulation ìinsuranceî plans are crippling municipal budgets throughout Massachusetts.
On the other hand, this WSJ op-ed by Indiana Governor Mitch Daniels explains how the state is saving $20 million of health care expenses in 2010 through the introduction of a highly-popular state employee health finance plan based upon Heath Savings Accounts.
This is not surprising. The most efficient way to spend less on health care is to consume less of it. As a result, someone ñ be it the consumer, an insurer or the government ñ at some point has to say no to the consumption of more health care. As Steve Lansburg recently pointed out, that eating more cake diet just doesnít work. The WSJ’s Holman Jenkins agrees.
Unfortunately, the present U.S. employer and government-based, third-party payor health care finance system provides powerful incentives to consume more health care. And, as Milton Friedman was fond of saying, consumers will consume as much health care as they can so long as someone else is paying for it.
Until we change the reliance on such consumer insulation from health care decisions, the dynamic of rising costs is unlikely to cease.
Tom, I’m more inclined to trust the opinions of the Mayo Clinic and others in the field who say the real problem with our health system is that we use our very expensive toys far too inefficiently. They believe we can cut 30% of our health care costs with true coordinated care. There was a wonderful article in the New Yorker last summer: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande (for those of you who might question the liberal source, you’ll find similar opinions on the Mayo or Kaiser websites and at the centrist blog below).
HSA’s are a fine tool for some but not the answer to our problem. As Mr. Daniels says, “Differences in health status between the groups account for part of this disparity.” They are popular with the young and healthy…big surprise. Health care experts say the biggest problem with HSA’s is that they do not promote preventative care, something we already don’t do well in this country. Out of pocket expense is not going to greatly alter lifestyle choices, but it will keep someone from visiting the doctor. Avoidance is not prevention.
And, of course, none of this does a bit of good for the sick and the poor. Take my wife…she has MS. The current treatments cost a mere $3500 a month (up from $1500 just a few short years ago). Perhaps you can see why I’m less than thrilled with HSAs than Gov. Daniels is.
–Interestingly enough, she has been having some success taking a very low dose of Naltrexone for $1 a day–a drug developed in the 80’s for heroin addicts that now shows promise in auto-immune patients without the significant side effects found in the current MS treatments. It’s an under the radar thing, she found out about it through a friend who suffers with Lupus, not her doctor. Why? Because Naltrexone’s patent has expired and no drug company is interested in obtaining approval for the new usage. So much for the holy marketplace… (Sorry for my sarcasm, but I’ve had it with the notion that the market can solve all ills).
I suggest to all here to spend a bit of time at http://healthpolicyandmarket.blogspot.com for what I consider a balanced overview of the health care mess. I’d also suggest that you look into the Wyden-Bennett plan–it sounds like a compromise that could actually work well.
Happy belated birthday–
I disagree with the premise that the ‘most’ efficient way to cut costs is to consume less of it.
One, increasing the amount of supply should bring costs down. Increase the number of doctors and medical facilities, let nurses and physician assistants provide more care.
Two, for every expenditure, there is a core cost component and what I call a excess cost component. Examples of the latter include the malpractice premium and the high costs of getting approval for new drugs and medical devices. Stripping this component would reduce costs without denying anybody care they (profess to) need.
Three, cutting usage is net efficient only if the health care no longer being consumed has less value than the corresponding reduction in costs. If, as I believe, cutting usage will lead to people forgoing needed medical care (because they don’t have/want to spend the money), society ends up losing. what’s the benefit of saving a few bucks in medical expenses if the result is a less healthy, less productive workforce? (for example, I can go to the doctor and get a prescription for my sinus infection or I can sit around and mope for however many days it takes to clear up – is it better to spend the $100 for the office visit and the prescription? Or to waste potentially more in lost productivity?)
Rick, I agree with you that a government-subsidized component to the health-care finance system is essential to deal with catastrophic illness, injury and pre-existing conditions. I’m largely agnostic as to whether that’s better administered through the government or private insurers.
But that’s different problem than how to pay for routine medical care and in no way contradictory to deploying market forces to make delivery of such care more efficient. That — along with end-of-life care — are just two examples of areas in which substantial health care cost savings are undermined by largely removing the consumer from the decision-making process.
I have no problem with “top-down,” coordinated approaches to health costs savings so long as the consumer has a choice on whether to engage in that type of approach.
Finally, don’t be too quick to condemn market forces in the development and production of new drugs. Excessive FDA restrictions and malpractice lawsuits are just two of the costly regulatory burdens that deter market forces from the development and production of drugs that save and extend lives. David Agus provides a funny anecdote along those lines in his recent TED talk here.
Steve, the empirical evidence relating to elective health care products and dental care that is not covered by current health plans undermines your argument that costs would increase if consumers are allowed to make their routine health care choices with their own pocketbook.
One point to make about preventative care that often goes unrecognized – while most agree that early detection and intervention of chronic diseases is a good thing because it leads to a healthier society, it is incorrect to say that this saves health care costs. From a purely actuarial viewpoint, it is much less expensive to treat a 40 year old as they die from uncontrolled hypertension than it would be to diagnose that person with hypertension at age 30, treat them for 50 years, so they can die from this or another illness at age 80. Keep in mind that, on average, an individual consumes 90% of the health care dollars used in a lifetime within the last 6 months of his/her life. Callous, but true.
Second point in response to Steve – suggesting to “increase the number of doctors” is a lot easier to say than to do. Current estimates are that the cost to educate one physician (4 years of medical school in Texas) exceeds $400K, split roughly in half between the state and the medical student. The total enrollment for all of the medical schools in the US presently is approx 20K students accepted into each academic year. This number of entering medical students is losing ground when compared to the current average of 25K physicians retiring in the US each year. Added to this, a recent study found that those physicians who still are working have reduced the average number of hours worked per week from 55 to 51 – this is the equivalent of having lost another 36K physicians from the medical workforce. And, this does not even begin to address the problem of a disproportionate shortage of primary care physicians – young docs coming out of med school, often $200K+ in debt, look to higher paying specialties, rather than Fam Med, Internal Med, or Pediatrics. So, it appears that we’re gonna have a problem of too few docs for at least a couple of decades – well within the time frame when I’ll be in Depends….
jrb
Tom: I wasn’t arguing that costs would go up if people paid for care from what is referred to as their own pocket, I agree that shifting payment is likely to reduce demand and with it, the price. My argument was that the cost savings from decreased usage has to be offset against the costs incurred by someone not seeking care they otherwise would.
And I wouldn’t use elective and dental care as good predictors, it’s one thing to go without botox, another thing entirely to go without getting your kid’s ear checked out.
I know training doctors doesn’t come easy, I was only citing it as one alternative for lowering costs.
Finally, all of the advocates pushing direct pay care ignore the reality that the public isn’t going to be happy getting less care than they are now. The real crux of the problem isn’t that employers pay the bills (which they really don’t), but rather that people want all of the health care they feel appropriate… but they don’t want to pay for it.