Exploding Myths About The Costs of Healthcare

I caught this the other day from Ezra Klein at TPM Cafe and thought it was worth discussing here. You know all of those stories Republicans tell us about why American healthcare is so expensive? You know, malpractice awards are too high, that we don't ration our healthcare, that our healthcare infrastructure is just better, etc, etc. Well, according to an extensive study published last year in the journal Health Affairs, those stories are (surprise, surprise) not true.

Average malpractice awards domestically are lower than in Canada, the UK, or Australia (has it occurred to anyone else that if there is indeed an epidemic of defensive medicine -- which I don't believe, but nevertheless -- that the fault probably lies on conservative- created hysteria about malpractice awards and American litigiousness?), and the whole malpractice "industry" amounts to less than one half of one percent of spending (for a very comprehensive takedown of all aspects of the medical malpractice myth, go here). That's just not the stuff our health spending is made of.

As for supply constraints, the researchers checked out the 15 procedures that account for the bulk of wait times in foreign lands. They make up 3 percent of our total spending. In addition, health spending in the twelve countries with waiting lists was $2,366 per capita. In the seven without, it was $2,696 per capita. In America, it was $5,267 per capita. So sorry, no answers there, either.

And to burst another bubble, we don't get more resources than folks in other countries. Indeed, our per capita hospital beds, CT scanners, physicians and nurses were lower than the OECD average. Ouch.

Long story short, not one of the "market based" ideas Republicans have been peddling for so long now are actually meant to do anything to lower the cost of healthcare in America. They'll just line the pockets of the wealthy at the expense of those who can least afford it.

Tags: Healthcare (all tags)



Re: Exploding Myths About The Costs of Healthcare

the health care crisis is a classic case of 'market failure.'  It's what you get when you try to use markets to provide goods and services that they can't handle efficiently.  Market based ideas have failed in health care because health care is a 'public good' which no market system can provide efficiently.  I am a capitalist.  I believe in private property, free enterprise and the use of markets to generate economic efficiency.  But I'm a rational capitalist and as such I recognize that markets are only a tool, efficiency is the goal and markets don't always provide it.  The Conservative Republican obsession with using markets to solve every problem is what caused the health care crisis and their refusal to admit the failure of their market based plans is needlessly perpetuating it.

by Theo929 2006-02-25 09:29PM | 0 recs
Re: Exploding Myths About The Costs of Healthcare

You make a good point, but it isn't just that free markets aren't well-equipped to provide an inherently public good. The problem in this country is that we actually have a hybrid system, profit motive coupled with quasi-institutional control/mandates, which has established the worst of both worlds.

First off, if through some miracle we could reverse course and have all medical care paid exclusively out-of-pocket, theoretically we would see prices fall on most things immediately - particularly those products and services that are used the most. The way I see it, the only reason we have hospitals charging prices for individual Tylenol tablets that equal the cost of whole bottles of the stuff you can buy in a CVS out in the real world, is because the patient isn't aware that they are actually paying for anything once he/she gets in the hospital (or doctor's office or what have you). Faceless bureaucrats take care of that for you, using the near limitless funds available to them via everyone's premiums. Don't underestimate the power of true consumer choice, and the hell that's raised by the disgruntled customer when confronted with an outrageous bill. And don't for one second think the absence of the same doesn't allow for an inexorable upward pressure on healthcare prices.

With the consumer's 'cost/benefit' sense thus short-circuited, there's no real force at work to keep costs low, or to prevent insurance companies from continually raising premiums to compensate. In an industry like this, how else would you keep profit margins increasing, which is what makes the shareholders happy, after all? Most people on the receiving end (or their employers) simply see no alternative but to pay the premiums, no matter what the price, as long as they're able. And so the whole profit-driven industry can't help itelf but to keep squeezing the Golden Goose. If the Goose wasn't (in a sense) 'anesthesized' to what was happening to it, the stranglers wouldn't be so cavalier, or so successful.

Which leads to the second point - that the Geese/Goose has no real alternatives to the above situation. Ironically, thanks to government NOT getting involved, the insurance companies have carved out sub-national (but usually state-sized or larger) fiefdoms, for the purposes of locking in their premium payers as well as their contracted providers. So not only is their no choice TO the system, but there's no real choice once you're IN the system either. And has any red-blooded free marketeer will attest - in fact the reason they always give for government control being bad - consumer choice is absolutely crucial for markets to work efficiently, no matter what your selling.

The problem is we're not talking about refrigerators or cars here - where you DO have a choice among brands, vendors, technologies, price points, etc ... as well as the choice to forgo the whole thing. In other words, if DVD players are priced too high across the board, the mass market can just decide not to buy one, and the electronics manufacturers - if they want to stay in business - have to adjust accordingly. That's not true of health care - or any other number of recognized public goods; I have NO choice if I'm sick & want to be healthy again. I'm a captive buyer. And a captive buyer, trapped in a system affording no real choice at any level, is a recipe for rising prices.

The sad thing is, this was all settled economics  for a hundred years or so. The reason we have public utilities at all is due to the legacy of thoughtful people in government long ago realizing that electricity and water are non-negotiable items insofar as the consumer is concerned - they gotta have em. So a profit driven method of provision is like giving some companies a license for extortion. Enron's antics in California a few years ago, made possible only after that state totally privatized & deregulated it's power infrastructure, is a perfect example of the havok that will be wrought, and the billions that are lost to consumers as a result.  

Back to health care - it wouldn't be possible to go back to pay-as-you-go, in my opinion; the costs have just become to great. To make things affordable on that scale again, the whole industry would have to undergo unprecedented deflationary pressure to accommodate the lower purchasing power of the average individual, and I just don't see how it could be applied without decimating the entire healthcare infrastructure. Plus, assuming it could happen, it still wouldn't solve the problem of the rich becoming healthier than the poor (to an even greater degree than they already are), simply by dint of their being able to afford more comprehensive care - sort of like the better service you get from a Mercedes dealership, as opposed to Chevy, just on a morally unacceptable scale. Again, we price public water low enough so that everyone can afford it for a similar reason; in that it's just not ethical to purposefully make value judgements regarding who is 'worth' being allowed to stay hydrated. Why should the process be any different for who can get a broken bone set, or a heart transplant? Which child are we going to 'leave behind', to die from a preventable illness, when in fact ANY could be the next Einstein, or Spielburg, or Rockwell, or Lincoln? Economically AND morally speaking, it makes more sense to treat everyone the same.

Which leads to the conclusion - the one the rest of the advanced industrialized world has already come to - that government oversight, regulation, or outright control are the only feasible ways of solving this problem. Until the day comes when I can buy my own Robo-Doc at BestBuy for $999.99, that is ...

THEN we'll be back in Milton Friedman's territory, but not before ;)

by Odyssey67 2006-02-26 04:37AM | 0 recs
Medical Malpractice

For those interested in Medical Malpractice, read "The Medical Malpractice Myth" by Tom Baker. It's not horrendously difficult although as Kevin Drum (who I learned of the book from) says, it's a bit "wonky." Still an important read for any attorneys out there especially.

by MNPundit 2006-02-25 09:51PM | 0 recs
Re: Exploding Myths About The Costs of Healthcare

The whole "lawsuit abuse" argument advanced by the "tort reform" lobby is one of the biggest myths that has exited out there for years. Most cases rarely result in those multi-million dollar punitive damage awards that the right complains about.

For example the infamous McDonalds lawsuit is often used to talk about "runaway juries". However, the court reduced the punitive damage award singificantly--see this link:(http://www.citizen.org/congress/civjus/t ort/myths/articles.cfm?ID=785). The whole "tort reform" argument is overexagerrated.

What normally happens is that most cases are settled way before they ever go to trial. And if they go to trial, and even if the plantiff wins, either the judge or an appeals court usually reduces the award. Or, most likely, both parties settle for a different amount to prevent more litigation and appeals.

The multi-milliion dollar verdicts that the right whines about are a myth by and large. The whole "frivilous lawsuit" argument is overplayed.

by jiacinto 2006-02-25 10:08PM | 0 recs
Re: Exploding Myths About The Costs of Healthcare

Thanks for this, I'll be using it in my arguments and articles.

by goplies 2006-02-26 02:30AM | 0 recs
The McDonalds Suit

Thanks for the link, it made the point I would have made. People laugh but if any guy bought a cup of coffee and spilled it and as a consequence had to have his penis cut off I don't think he would quite be grinning. McDonalds served coffee at 190 degrees because it saved a few pennies a cup. Third degree burns equate to charred flesh:

"By its own corporate standards, McDonald's sells coffee at 180 to 190 degrees Fahrenheit. A scientist testifying for McDonald's argued that any coffee hotter than 130 degrees could produce third degree burns. However, a doctor testifying on behalf of Ms. Liebeck noted that it takes less than three seconds to produce a third degree burn at 190 degrees.[4]
During trial, McDonald's admitted that it had known about the risk of serious burns from its coffee for more than 10 years. From 1982 to 1992, McDonald's received more than 700 reports of burns from scalding coffee; some of the injured were children and infants. Many customers received severe burns to the genital area, perineum, inner thighs and buttocks.[5]In addition, many of these claims were settled, amounting to more than $500,000.[6]
Witnesses for McDonald's testified that consumers were not aware of the extent of danger from coffee spills served at the company's required temperature. McDonald's admitted it did not warn customers and could offer no explanation as to why it did not.[7]
As a result of her injuries, Ms. Liebeck spent eight days in a hospital. In that time she underwent expensive treatments for third-degree burns including debridement (removal of dead tissue) and skin grafting. The burns left her scarred and disabled for more than two years.[8]Before a suit was ever filed, Liebeck informed McDonald's about her injuries and asked for compensation for her medical bills, which totaled almost $11,000.[9]McDonald's countered with a ludicrously low $800 offer."

That would have been $11,000 well spent. Next time you have a friend chortle about this case ask him what his reaction would be to having his penis burnt to a crisp. And then undergo "debridgement" on his groin. This was not funny. Not at all.

by Bruce Webb 2006-02-26 03:34AM | 0 recs
All true...

...but you can't refute a theology -- and that's what belief in the all-powerful Free Market has become.

We are far, far from the level of desperation that would be required to cause a mass rejection of the theology.

The Church of Ireland preached Protestantism in Ireland for two centuries with no detectable success -- until an Gota Mór.

Then the 'soupers' started to make progress....

by Davis X Machina 2006-02-26 07:03AM | 0 recs
Shields hits the mark again

Shields is my favorite read on this site.

Let me add a personal perspective. Not long ago, I was at the hospital with a dear friend. She was just short of dying, she had no health coverage whatsoever.

The bill was astronomical. And after she got out of the hospital, she would be likely to declare bankruptcy.

That in turn, was met with new bankruptcy laws that allowed her to work harder than the corporations that get off for free, and never escape the bills.

Want to guess why she was in the hospital? Give up? She had essential hypertension, and there was no low cost clinic that could look at her, and decide if she needed to be on high blood pressure medication.

A 30.00 prescription of anti-hypertensives would have saved her.  Clearly, the billing that is going on at hospitals - with different markups for different insurance corporations, amounting to different prices all around - is a form of  mischief that is harming patients all around america.

Doesn't this break the hippocratic oath?
Would Galen, or Hippocrates, hoodwink their patients? What if this form of completely obfuscated billing, actually harms people in and of itself.

Speaking from dire experience, I can say that indeed it does. It is a small investment, national healthcare - but the payoff is huge.

My wish list.

1. Affordable, low cost national healthcare

  1. Preventative medicine, covered
  2. Multi Vitamins for school kids
  3. Regulate the supplements industry (with a special division made specifically for that purpose)

Do this, and we avert a national health care disaster. The bankruptcy element completely removed all billing for the hospital, and doctors - and the corrupt pricing and payoffs were to blame.

by turnerbroadcasting 2006-02-26 08:06AM | 0 recs
Re: Exploding Myths About The Costs of Healthcare

I talked about this with my doctor, who is basically politically independent.  But he buys the line on litigation driving up costs.

He says it's not the direct malpractice costs, but all the clinically unnecessary testing done to avoid litigation exposure that drives up costs through the roof.

Does the report get into that?

by Pachacutec 2006-02-26 01:38PM | 0 recs
Re: Exploding Myths About The Costs of Healthcare

There have been, it seems to me, no end of well-researched and convincing studies on the US health care system over the years indicating its enormous diseconomies in admin costs, perverse treatment decisions, an absurdly high proportion of costs in the last 30 days of life, pathetic provision of preventive medicine, etc, etc.

And that's for the people who are actually covered by health insurance.

Of course, the lack of cost control is not a flaw, it's a feature: part of the obscene leviathan of corporate welfare which, on an objective reading, is the real purpose of the health care system in America.

Any sensible scheme to deal with the system would combine a drastic reining of costs with extension of cover to all Americans. It should not only be capable of self-financing, but should actually throw off cash which could be used for genuine investment in US health (as opposed to US health billing systems!).

Standing in the way of sanity are our old pals Harry and Louise.

These titans have the strength of the Red Army (c1943) - only they do their job without even scuffing their loafers.

Prominent Dems take refuge in their funk-holes at the slightest suggestion that they might be planning on a confrontation with that nice old couple. Dem candidates in 04 sedulously strove in their health care proposals to avoid any suggestion of universal health care - there was always a wedge of unfortunates who had to be left out in the cold for fear of H&L. Nothing universal about my health care proposals...

I've seen no promising proposal for how the Dems might get round this impasse.

Of course, with the current Congressional leadership, one doesn't expect too much of lead being given there.

Though we have that Contract with America - This Time It's Democratic! threatened for the next month or two. Perhaps coastal elitists Pelosi and Dean (does he get a say?) will suprise us all by flipping H&L the bird.

Wait a minute, was that Elvis just walked by?

by skeptic06 2006-02-26 02:38PM | 0 recs
Re: Exploding Myths About The Costs of Healthcare

Please, please, please why won't any Democrat talk about the huge corporate welfare by way of antitrust exemption courtesy of the McCarran Ferguson Act of 1945 that allows insurers to avoid federal oversight, leaving it to states with part-time legislators to keep behemoth conglomerates, with their army of lawyers and lobbyists, honest?!?

by notime4lies 2006-02-26 09:20PM | 0 recs


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