Category Archives: Health Economics

Drug companies spend as much or more on marketing than they do on research.  In the first quarter of 2012 direct to consumer advertising approached 1 billion dollars.

The costs of marketing to doctors,  and this is admittedly old data, is reflected in this graph.

Today one would expect at least a 100% increment paralleling the increase in health care costs over the same period of time. 

Aggressive marketing has been shown to effect doctor’s decisions and increase patient expenditures, and overall costs.  Guess who pays?

Medicynical Note:  Read the links for more details.

Health care at one time was a altruistic endeavour.  Yes you earned a living and companies made profits but most providers were individuals and most institutions, non-profits.   The pharmaceutical industry at the time had the moniker, “ethical.”

Since the mid eighties there has been a unceasing inflation in costs.  Individual providers are anachronisms today and non-profits for the most part have converted into to for-profit entities.  As a matter of fact, because of a lack of concern about costs, even the non-profits that survive charge the same or more.

The report today in the Times on the rapid increase in generic dermatologic drugs re-emphasizes the point the prices in health care have nothing to do with costs of “development” or production.  It’s simply whatever drug companies choose to charge.  Since the number of suppliers and producers are few they are not inclined to compete on price.  So prices sky-rocket:

They are the staples of most dermatology practices: generic creams and ointments that treat everything from skin rashes to athlete’s foot to scabies. Many doctors prescribe the drugs without a second thought. But increasingly, some dermatologists say, patients are complaining about a recent, mysterious and rapid rise in price.

Take betamethasone dipropionate, a cream used to relieve itchy skin. In 2008, a tube cost $18.17. The medicine now costs $71.28, according to Red Book, which tracks wholesale drug prices. Permethrin cream, which kills scabies mites, cost $29.25 in 2008 but has jumped to $71.08 today.

Medicynical Note:  There’s no rational reason for this except that companies charge what insurers will pay.  Since Medicare is forbidden from negotiating prices and private insurers simply pass through the higher prices by adding to co-pays and deductibles, there is no strong countervailing force to control the gouging, particularly for these relatively inexpensive agents. 

In other countries the governments  negotiate prices and control price increases.  In our country our congress, under republican control at the time, forbade Medicare to negotiate. 

Is it any wonder that we pay more, double in some cases, for health care than anywhere else in the world….and I’d hazard a guess that we pay more for these drugs as well. 

Incidental Economist has a sobering graphic from the OECD evaluation of inequalities in health care access.  The U.S. again is an outlier. 

People like to believe that we don’t ration care in the US. We do. More than just about any other country, we ration by cost.

Medicynical Note:  The conservative right in our country would have you believe that we have the best health care in the world.  The questions I would pose is for whom?  and what alternative reality world are you talking about?

Our care is the most expensive; our insurance coverage the least available (50 million uninsured); and we lead the world in bankruptcy caused by medical expenses—a category of bankruptcy unknown in other industrialized countries. 

What we can say is that the U.S. leads the world in  dysfuntionality when it comes to health care—and self delusion. 

Interesting view here…..

The Supreme Court’s decision to uphold the Affordable Care Act, aka Obamacare, puts me in mind of the old proverb: Be careful what you wish for. Democrats on a victory lap should watch their step, because John Roberts may have given Mitt Romney a gift. The impact on the health system will be much smaller than the political fallout, because with or without Obamacare, the American health system will continue to unravel — quickly if Romney is elected, slowly if Obama is re-elected.

Medicynical Note:  The outcome will depend on the will of the public to either provide and pay for universal care one way or the other or not.  Whatever the case, I agree with Dr. Angell, the current over bloated, inefficient, ridiculously expensive non-system is finished.

Only in America would there be an article about the incomprehensible cost of health care but that’s the way our non-system works.  Bill for everything you can, then if a person or insurer questions the bill, negotiate.  We even have a new category of worker, a “medical billing advocate.”

Ask Jean Poole, a medical billing advocate, about her work helping people navigate the bewildering world of medical bills and insurance claims, and the stories pour out. There’s the client who was billed almost $11,000 for an 11-minute hand surgery.  The cancer patient who was charged $9,550.40 for a round of chemotherapy he never received.

Read the article for details.

Medicynical Note:  Our non-system of care is designed to be opaque when it comes to cost and  maximize revenue rather than care.  That’s why we spend more and get less….45-50 million uninsured at any given time.  That’s why we encounter the sad fund raisers for families, often young, who encounter catastrophic illness but have no or inadequate insurance and no savings to speak of. 

Clarifying commentary on the recent Millman index report at AcademyHealth Blog by Aaron Carroll. 

For the first time the average cost of health care for the typical American family of four has surpassed $20,000.

What accounts for this? Well, it turns out that care in America is extremely expensive. The average inpatient admission to the hospital cost $14,662 in 2010. If you were admitted to the hospital for a surgery, the average cost was $27,100. The average newborn delivery – if things went well – cost $7,371. Instruments like cost sharing and high deductible health plans that are designed to empower consumers lose much of their appeal when confronted with numbers like these. If you have a baby, or need to go to the hospital just once in a year, you’ve likely already spent as much as allowed out-of-pocket, meaning that any cost-sharing incentives to reduce spending are gone.

Moreover, it appears that prices, not utilization are the cause of increases in spending:

Read the post for details.

Medicynical Note:  Utilization is decreasing but costs increasing.  Our republican friends will say this is the marketplace—people becoming more cost conscious.  

Yes, indeed, increased costs decrease utilization, but it also decreases access—over 50 million and rising uninsured in the U.S.  In the short and long run quality of care and patient’s lives suffer.  We lead the world in uninsured citizens and costs.  That’s the American “system.”