Category Archives: Health Economics

The following is from an Institute of Medicine Study Best Care at Lower Cost and focuses in part on the cost of waste in health care.  In changing health care, in addition to improving access we need to focus on efficiency and value, which means cutting this:

Medicynical Note:  If anything, it’s worse now.  This, in the “best” (sic) most expensive, most inefficient health care non-system in the world.  (It’s a non system  of health-care because in it’s current form it’s primary goal is increasing revenue.

The U.S. leads the world in health care costs and in the profitability of it’s health insurers, suppliers, providers, pharmaceutical companies and technology developers.  Health care is simply not a priority.  Profits are.  

More on costs today from the NY Times Nina Bernstein here.

It is no secret that medical care in the United States is overpriced. But as the tale of the humble IV bag shows all too clearly, it is secrecy that helps keep prices high: hidden in the underbrush of transactions among multiple buyers and sellers, and in the hieroglyphics of hospital bills.

At every step from manufacturer to patient, there are confidential deals among the major players, including drug companies, purchasing organizations and distributors, and insurers. These deals so obscure prices and profits that even participants cannot say what the simplest component of care actually costs, let alone what it should cost.

And that leaves taxpayers and patients alike with an inflated bottom line and little or no way to challenge it.

Patients diagnosed with cancer,  particularly young people, with go bankrupt at double the rate of controls. 

Adults diagnosed with cancer are 2.65 times more likely to declare bankruptcy than adults without cancer, according to a new study.

In addition, bankruptcy rates are 2- to 5-fold higher among younger cancer patients than among older cancer patients, report the study authors, led by Scott Ramsey, MD, PhD, an internist and health economist at the Fred Hutchinson Cancer Research Center in Seattle, Washington.

And

The authors found that bankruptcy filing rates differed “greatly” by age in the cancer patients. Younger people with cancer experienced the highest bankruptcy rates for all types of cancer. Bankruptcy filing rates were much lower for cancer patients 65 years and older than for those younger than 65 years.

There is an explanation for the age-related risk for bankruptcy, the authors note. “People age 65 or older generally have Medicare insurance and Social Security benefits…. It is likely that having stable insurance (specifically, coverage not tied to employment) plays a major role in mitigating the risk of bankruptcy,” they state.

Medicynical Note:  Anyone surprised?  A cancer diagnosis can be devastating and extremely expensive to deal with.  Most people, that is, those who live on an average income have problems paying the out of pocket expenses associated with the diagnosis, even if they are working and insured. 

Tying insurance to employment means that when a person becomes ill and can no longer work he/she loses their insurance—unless they can pay the inflated premium to continue individual coverage.

The system is designed to be a financial burden on the sick and infirm and to protect insurers.   Only in America!

Certain politicians in the U.S. actually believe we have the best health care system in the world.   Well if it’s not the best, it certainly is the most expensive.

It’s my contention that we don’t have the best system of health care but rather we have the best system of revenue generation for suppliers.  Consider drug prices:

Companies like Pfizer Inc and AstraZeneca have grown dependent on higher U.S. prices to generate profits as generic rivals to their best-selling medicines enter the world market, Europe’s government-run health plans clamp down on spending and sales growth in emerging markets stutters.

And:

The price variations become clearer when studying individual drugs. Switzerland’s Roche sells a month’s supply of cancer medication Avastin at about $8,800 in the United States, compared with 2,577 pounds ($3,978) in the U.K. and 6,800 Swiss francs ($7,177) in Switzerland.

Read the article for more.

Medicynical Note:  Why is this?  Consider that drug companies spend more on lobbying and campaign contributions per year than any other business group in the country.  It’s not even close.

In both cases, you’d be wrong. It’s actually the pharmaceutical industry that spends the most each year to influence our lawmakers, forking over a total of $2.6 billion on lobbying activities from 1998 through 2012, according to OpenSecrets.org. To get some perspective on just how big that number is, consider that oil and gas companies and their trade associations spent $1.4 billion lobbying Congress over the same time frame while the defense and aerospace industry spent $662 million, a fourth of Big Pharma’s total.

Interesting, they spend more on influencing Washington so that we can pay more.  And it works beautifully for big PHarma.  It is the best congress money can buy. 

Our non-system of healthcare is actually a well developed system of revenue production for providers, hospitals, and suppliers.  We’ve talked in the past about doctors in the U.S. doing more procedures than elsewhere, suppliers charging more, insurers only insuring their profits and hospitals overpricing their services.

This adds to data on hospitals.

A hospital in Livingston, N.J., charged $70,712 on average to implant a pacemaker, while a hospital in nearby Rahway, N.J., charged $101,945.

In Saint Augustine, Fla., one hospital typically billed nearly $40,000 to remove a gallbladder using minimally invasive surgery, while one in Orange Park, Fla., charged $91,000.

Read the article for more.

Medicynical Note:  Of course insurers and Medicare don’t pay those prices.  No, the inflated charges are for those least able to afford the bill, the uninsured.  Rather than have an up-front price for services, hospitals, like the proverbial used care salesmen (no disrespect meant) have an asking price from which patients can try to “negotiate” a settlement or as most do simply pay the inflated amount. 

It’s a little like the proverbial shell game.  What’s the price? This? or This? or This?

Hospital’s when the bill is challenged, traditionally do a review of a person’s  financial circumstances and may or may not adjust the amount due based on the hospital’s biased conclusions.  They then claim the reduction, if any, is “charity care.”  This is true for private for-profit and so-called “non-profit religious charitable” institutions as well. 

In all the world, except maybe in some third world situations,  ours is the only “system” that asks the least informed, most desperate customer to negotiate a price for a vital service, healthcare.  It’s part of the reason we pay more than any other country in the world for healthcare. 

Parenthetically, I recently had a procedure for which the hospital bill was $26,000.  The insurer paid $13,000.  What a farce. 

We’ve talked about conflict of interest in medicine and the perversion of drug companies paying providers to use and recommend their product.   Novartis appears to be the poster-child for such behavior. 

Authorities said the Basel-based company for a decade lavished healthy speaking fees and “opulent” meals, including a nearly $10,000 dinner for three at the Japanese restaurant, Nobu, to induce doctors to prescribe its drugs.

They said this led to the Medicare and Medicaid programs paying millions of dollars in reimbursements based on kickback-tainted claims for medication such as hypertension drugs Lotrel and Valturna and the diabetes drug Starlix.

Read the article for more.

Medicynical Note:  The US leads the world in drug costs, spending on health care/capita and bankruptcy due to medical expenses.  We have a highly developed sophisticated system not of health care but rather of revenue generation.  For companies like Novartis and many others health care is not really their main interest.