Monthly Archives: February 2007

The health care debate must be getting serious. This editorial is from the Investor’s Business Daily (2/12/07).

IBD seems to imply that our health care system really isn’t as bad as it seems. We use different definitions for certain events than elsewhere and that explains the mediocrity of our health care outcomes.

“In addition, other countries have suspiciously low infant mortality rates in the first 24 hours after birth. Eberstadt found that in the U.S., Canada and Australia, more than 33% of infant deaths occurred in the first day of life. In France, just 16% died in the first day, in Luxembourg just 10%, and in Hong Kong only 4% of infant deaths occurred in the first day of life. Eberstadt concludes that these countries are artificially pushing down their infant mortality rates by counting many first-day deaths as stillbirths.”

Comparing U.S. Infant mortality OECD data from 2003 with countries using similar methodology however shows Canada with 5.4/1000 live births, Australia at 4.8/1000, UK at 5.3/1000 and the U.S. at 7/1000. Even amongst our peers we don’t measure up.

Investors Business Daily also stated:

“The claim that the U.S. fares far worse than other countries on life expectancy suffers a similar problem because it fails to take into account the multitude of factors other than health care that affect life expectancy.”

“The simple fact is the U.S. suffers from lots of problems – more drug abuse, more murders, more traffic fatalities – that cut into overall life expectancy. The murder rate, for example, is seven times higher in the U.S. than in Japan.”

Those are hardly cultural factors to be proud of.  But guess what, all countries have a different mix of issues affecting mortality. For what it’s worth the life expectancy at birth in Canada for girls is 82.1, and boys 77.3, Australia for girls is 82.8 and boys 77.8 and U.K 80.7 for girls and 76.2 for boys. While in the U.S. life expectancy at birth for girls is 79.9 and boys 74.5. As noted in the IBD article these are countries with a similar basis for their statistics. (Source OECD 2003) By the way health expenditures as % of GDP in 2006 was 9.9% for Canada, 9.2% for Australia and 7.7% for the United Kingdom versus 15.3% for the U.S. (Source OECD statistics for 2006)

In regard to infant mortality, IBD doesn’t explain why we spend close to 16% of GDP on health care, 50-100% more than many of the comparators and have worse or if you take the critique seriously, no better health results than elsewhere.

In regard to life expectancy, it is inescapable that we have mediocre life expectancy when compared with other industrial countries, especially considering the amount spent.

If the U.S. health care establishment were a private company Investor’s Business Daily would be screaming about it’s inability to compete in the global marketplace and accuse the board and managers of mismanagement, inefficiency and waste–not defending a ridiculously expensive non-system of care.

I don’t usually agree with Michael Crichton but he does have a point about patenting genes.

“Gene patents are now used to halt research, prevent medical testing and keep vital information from you and your doctor. Gene patents slow the pace of medical advance on deadly diseases. And they raise costs exorbitantly: a test for breast cancer that could be done for $1,000 now costs $3,000.”

It’s not too much of a jump to raise the issue of patents in pharmaceuticals. Drug patents have become a tool of monopolists. For a generation (20 years) one company has the franchise for the patented drug. It matters not whether the drug is a minor new agent or one that saves lives. The company can charge whatever it wishes, even exceeding the median and average incomes of U.S. citizens in cost/year. This happens quite frequently with medications developed for life threatening conditions. The cost has almost nothing to do with development and production costs, rather it’s price seems to be based on the desperation of the patient. The theory appears to be the more desperate you are, the more you’ll pay–a little like blackmail.

See our archives here and here for more information and suggestions to change this.

Technorati : Patent Drugs

This from KPMG Insider:

U.S. attorneys are examining device makers’ questionable sales and marketing practices, including travel junkets, entertainment, research grants and, perhaps most worrisome, consulting contracts with orthopedic surgeons amounting to hundreds of thousands of dollars a year.

To date, those investigations have been largely limited to device makers and doctors. But hospitals may not be immune forever, and they are either considering or totally revamping conflict-of-interest rules to stay out of trouble.

Sadly this appears to be norm rather than the exception in the medical business. Guess who pays?

To it’s great credit the Washington State Hospital Association has made available hospital charges for various type procedures in member hospitals around the State. These figures compare our local Bellingham hospital (selected hospital) with others in the state–you can make other comparisons on the site.

The hospital association’s explanation of the variation in pricing follows:

“Payer mix – As with other businesses, hospitals cannot survive if costs exceed revenues over a long period of time. Government programs (like Medicare and Medicaid) generally reimburse facilities at rates that do not cover the costs they incur to provide care. Therefore, hospitals that have a relatively high percentage of government-program patients are forced to recover a greater percentage of their operational costs from privately insured and self-pay patients through higher charges. “

“Facility cost structures – Facilities differ in their approach to pricing based on operational costs. Some facilities try to spread the cost of all services and equipment among all patients. Others establish charges for specific services based on the cost to provide each specific service. Furthermore, some facilities may decide, or be forced, to provide certain services at a loss while other facility operations subsidize the losses. Any of these situations can result in significantly different charges among hospitals for a given type of service.”

“New technology – The equipment facilities use to provide services differs in age, sophistication, and frequency of use. Facilities with the latest technology may have higher charges than those with older, less sophisticated equipment.”

“Staffing costs – Salary scales may differ by region and are typically higher in urban than rural areas. Shortages of nurses and other medical personnel may affect different regions differently. Where shortages are more severe, staffing costs, and, therefore charges, may be higher.”

“Intensity of care – Some facilities are equipped to care for more severely ill patients than others. Patients within the same diagnosis or procedure category may need very different levels of service and staff attention, causing variation in charges.”

“Range of services provided – Facilities differ in the range of services they provide to patients. Some may provide the full range of services required for diagnosis and treatment during the stay. Others may stabilize patients and then transfer them to another facility for more specialized or rehabilitative care.”

“Service frequency – The per-patient cost of services is generally higher if the type of hospitalization occurs infrequently at the facility. Furthermore, a single case with unusually high or low charges can greatly affect a facility’s average charge if the facility reported only a few cases in a given time period.”

“Capital expenses – Facilities differ in the amount of debt and depreciation they must cover in their charge structure. A facility with a lot of debt may have higher charges than a facility not facing such expenses. Furthermore, facilities may choose to lease or purchase equipment or facilities. The choices made about financing of capital projects may affect charges in different ways”

Variations in cost of 50-100% within a region for the same procedure category reflects the system’s inefficiency and the patient’s inability and unwillingness to shop for health care based on price. It represents a failure of the market system to control costs. As a matter of fact, it appears from the Washington State data that where there are multiple hospitals available pricing actually increases.

These hospital cost numbers do not include the additional fees for doctor’s services and perhaps other costs. We are also told that these are not the amounts insurers pay. They are given a preferential rate. We can also presume that those least able to pay, i.e. the uninsured working poor, do not get a break on their bills and perhaps that explains the huge proportion of bankruptcy filings (something like 50%) attributable to medical bills and also the large amount of noncollectable accounts receivable that hospitals experience. It should further be noted that with a well functioning national health insurance plan both of these problems, as well as the Canaries in the Mine issue, disappear.

It’s unclear what these procedures cost in the past but since 1980 national health expenditures have increased over 800%. In the same period of time the proportion of total expenditures for hospital care have declined from 38% in 1980 to about 30% in 2004. In dollars however expenditures for hospitalization in this period have increased more than 600%. This “moderating” of the increase in hospital expenses has been more than offset by even higher increases in prescription drugs and professional fees accounting for increases in national health expenditures from 232 Billion in 1980 to almost 1.9 Trillion at present. There also is a marked increase in “other expenses”, perhaps reflecting the uncontrolled administrative overhead of the current system.

from Health Care Industry Report 2006 KPMG pg37
A noncompetitive marketplace, rife with patent monopoly, conflicts of interest, and less than fully informed consumers under duress, will not foster competition on price or for that matter quality. In our private health care system the primary responsibility (indeed the fiduciary responsibility) of each entity is to increase profits rather than deliver a service in the most economical fashion. This has to change.

After 9/11 there was an Anthrax scare. During it, the U.S. government threatened the Bayer Company, the patent holder for the antibiotic ciprofloxin, that they would abrogate the patent because of the risk of Anthrax to the U.S. population.

Patent issues bedevil AIDS treatment programs with drug companies after many years of legal maneuvering finally lowering prices of AIDS drugs for the developing world. Their best price, however, remains twice to several times that of generics. Meanwhile the AIDS epidemic continues with millions already dead and over 20 million currently infected. Only a small fraction of these people are under treatment, in part because of the expense and unavailability of medications to treat the disease.

The U.S. government treatment program limits medications to patented ones and controls the education program–requiring emphasis on abstinence rather than a more broad education program.

The Clinton Foundation has tried to help by raising funds and contracting with generic drug manufacturers and distributing medications to countries with the greatest need.

Meanwhile the Gates Foundation and Bill and Melissa, the generous ones, are missing in action and not at all or minimally involved in the effort to provide medications to AIDS victims. As they put it:

“We support efforts to stop HIV transmission, including development of:

• A safe, effective, and affordable HIV vaccine
• Microbicides-gels or creams that women could apply to protect themselves from sexually acquired HIV infection (medicynical note: recently shown to increase the risk and the study stopped)
• Large-scale initiatives to expand access to existing HIV prevention tools, both in countries with emerging epidemics and those already with high HIV infection rates
• Advocacy to build commitment for a science-based approach to stemming the epidemic”

Medicynical note: I tried without success to find a treatment program on the Gates site

Meanwhile Gate is doing this.

Do you think the issue of intellectual property rights keeps the Gate Foundation from providing generics for HIV treatment?

Technorati : Patent Drugs

What’s wrong with this picture?

The Bush administration maintains that we can wage war—the financial costs of this war already exceed those of Vietnam–and cut taxes to the wealthy at the same time. 

But now the writing on the wall (Animal Farm revisited) has changed.   We are told we need to charge more and cut costs of social programs in order to balance the budget and in this way help pay for the war.  

“Bush is proposing $95.9 billion in savings in mandatory spending, the part of the budget that includes the big benefit programs of Social Security and health care.

Medicare, which provides health insurance for 43 million older and disabled Americans, would see the bulk of those savings _ reductions of $66 billion over five years. That would come about primarily by slowing the growth of payments to health care providers.”

Now I’m not an economist but additional premiums and cost cutting (which inevitably result in decreased benefits) sound something like a tax increase that hits mainly the poor, the working poor, the middle class and the elderly.  Not a particularly progressive solution.

I encourage cost cutting in health care but believe we need to address this by attacking monopolistic pricing, lack of interest in efficiency (the pass costs through mentality), and the conflicts of interest that drive health care expenditures.   Perish the thought but one place to begin would be to negotiate prices with pharmaceutical companies to assure the best price for our citizens.

Some myths about U.S. Health Care from Paul Campos:

• “The government doesn’t pay for health care.  In fact, in America the government pays more for health care, per person, than any other government in the world, including the governments of countries that provide comprehensive cradle to grave health care for all their citizens. Yet despite this very high level of government spending, nearly one out of six Americans has no health care coverage of any kind.”

• “Unlike in nations with “socialized medicine,” Americans have the freedom to choose their own doctors.  It’s a tribute to the power of ideology that people who haven’t had the freedom to choose their own doctor in decades don’t notice that this claim is flatly untrue. The vast majority of Americans under the age of 65 who have health insurance at all are enrolled in group health plans that severely restrict their health care choices at every turn.”

• “American health care is expensive because it’s of such high quality.  Well it’s certainly expensive: the U.S. spends about twice as much, per person, on health care, as other developed nations. Indeed, despite being the richest nation in the world, we spend a higher percentage of our GDP on health care than anybody else.  And what do we get in return for having what is by far the world’s most expensive system? Lower life expectancy, higher infant mortality rates, and fewer physicians and nurses per capita than the average developed nation.”

Conservatives point out  that there are also disparities in health care in countries with various national health approaches. But this doesn’t fully explain our mediocrity given our expenditures.

 What is not in dispute  is that the disparity in health care  is greater in the U.S. and that our costs almost double that of other industrialized countries.  Moreover, uncontrolled health care costs will bankrupt us (GM and Ford are the canaries in the mine),  or result in excessive mortality from lack of access to expensive care unless something is done.