Here is my response to Steve Turner’s post over at Progressive Pulse. Steve’s text is in itals:
Max is from the “consumer-directed” school of health care reform who believe that Americans consume too much health care because insurers pay the bills. In Max’s world, costs skyrocket because Americans over-consume healthcare so that our “sniffles and sore throats” can be treated, our Viagra prescriptions filled, and astronomically priced new treatments are demanded “whether or not they are necessary.”
So far Turner hasn’t really made an argument. But it’s not "Max’s world" it’s the real world. Can Turner seriously deny that colds, flus, and hay fever are being treated by MDs daily when the patient could simply hit the CVS? What about those back-cracking quacks the chiropractors whom I have to pay for in NC? What about Viagra grandpas? What about paranoiacs demanding MRIs? What about obese people with no incentive to change their lifestyles (like higher premiums)? This is the perverse effect of third-party insurance (and then deny that this is somehow low cost?). When someone else is paying the tab you can get Nexium over Prilosec. You can get Prozac over Fluoxitine generic. A CAT-scan ‘just to be sure’. Steve is being disengenious if he denies that there is rampant overconsumption in our system.
So why is Max wrong? Simple. He works for the Civitas Institute.
[This is a cheap shot, Steve. Naked fallacies? I expect better from someone as smart as you.]
But more than that, it is the “80 –20” rule. This rule applies to patients with chronic illnesses, not sore throats or erectile dysfunction. In health spending, 20% of the population (the chronically ill) account for 80% of expenses.
Not only is there considerable overconsumption in your 20 percent, as well, but overconsumption is only one in a spectrum of causes that effect our healthcare market. In fact, Turner didn’t address any of the other causes I mentioned in the piece he references — like: intra-state monopolies caused by the regulatory system and employer-based insurance (though, to be fair, he did refer readers to the piece). Ultimately, competition creates higher quality at lower prices. Price is determined by supply and demand – regardless of the good or service. When the government has such an undeniably heavy hand in distorting both supply and demand in the healthcare field – the inevitable result will be higher prices.
Add to this that Steve passes over the fact that in his 80/20 figure (which doesn’t prove much of anything), that 25 percent of all healthcare costs go towards so-called "heroic measures." That means doctors are very often trying to save people who are less functioning than Terry Schaivo; or have virtually no chance of survival. Again: To save someone at all costs is an easier decision if it comes at no costs. End of life ethics takes us too far afield, however, and I gather Turner and I would agree more than we disagree (as I part ways with my conservative friends on many of these issues).
Half of us have virtually no medical expenses at all in a given year. [Red herring: that's why insurance pools work.] In 2003, 1% of the population accounted for 22% of expenses, 5% accounted for 50% of expenses. [So?]
To be sure, health expenses are rising at an alarming rate. However, this is mostly due to the development and increasing use of new medical technology
In part, but not in total. Besides, new technologies in other fields are going down, down, down in price. The reason they’re not in medicine is due to market distortions we’ve described. So Turner is actually proving my point here. There are loads of treatments people can choose, but when the pool is paying, they will almost always opt for the state of the art, or won’t question the price. But it’s not just overconsumption that’s the problem. Turner seems to think monolithically (single cause), not holistically (multiple causes). But the healthcare issue has myriad factors, not just one.
And this is not necessarily a bad thing, either. It’s called medical progress. We have expanded our medical choices, something the John Locke boys should appreciate. [they do, but it's not choice if I have to pay for everyone else's choices -- including unhealthy lifestyles] We spend more because we can do more [in part]. And here is the take home message: unlike the usual market forces in business, technological advances in health care have generally raised costs rather than lowered them [And why do you think this is? Hint: the expense account effect].
MRI’s, drug-coated stents, PET scans, titanium joints, dialysis machines, robotic surgeries, implantable defibrillators (yes, I mean you Mr. Vice-President), bone-marrow transplants, respirators, and neo-natal nurseries…these are all things that increase medical spending.Anybody out there willing to forfeit these therapies for themselves or their families?
It’s not that they will forfeit these, it’s that they might shop around more if they had to bear more of the costs of the care. competition. Price goes down. I guarantee you under a consumer-driven model, many of these things would go down (just like with Lasik and other elective surguries not covered by third parties). You’d do better not to try to explain everything away with technology (an economist refutes you here), but to look at Baumol’s cost disease.
People with sniffles are not racking up medical expenses other than their $50 visit, $25 of which is an out-of-pocket expense for them. [Oh, I beg to differ. Reducing these costs could make a considerable difference in the cost of premiums and access to care by the uninsured.] On the other hand, chronically ill patients are not over-consuming. (“Doc, this one’s on Uncle Sam…can you indulge me in some excessive chemotherapy, unnecessary dialysis, and a needless colonoscopy?”) I don’t think so.
You may not think so, but thinking don’t make it so. There are thousands of people who accept chemotherapy based on less than a 2 percent risk that a cancer will reoccur after surgury. Seriously, Steve, I thought you were a doctor? Haven’t you known any greedy bastard colleague who knew good and well that a procedure would have little effect, and yet saw dollar signs? And by the way, doctors are OVERPAID in this country precisely because they don’t have to negotiate with consumers. The third party payer system is an indirect subsidy to them and hospitals.
Having diagnosed the patient incorrectly, Max prescribes the wrong treatment: high deductible health plans and HSA’s (health savings accounts), presumably to discourage excessive consumption of small-expense items.
Funny you should say it’s the "wrong treatment." It’s precisely this prescription that my family and I have chosen. Are you so elitist as to tell me my prescription is wrong? Indeed, millions of other Americans are choosing my prescription as an alternative to yours since the plan was created in 2003 — and those numbers are growing.
In fact, as more people adopt them, doctors are going to have to become more price competitive. People paying out of pocket are conscious consumers. I know that our behavior has changed as a family since we started with the HSA. We not only think more long-term about check ups, etc., but we eliminate unnecessary treatments. We never did that before.
While being excellent tax saving vehicles for the healthy and wealthy [Uh, actually Steve, we're healthy, but not wealthy -- in fact we would qualify for 300-percent-of-poverty SCHIP expansion; and that's just perverse], these plans will do little to curb the appropriate consumption of medical services by chronically ill patients.
True in part, but that’s precisely why there is a catastrophic portion of the plan. Turner should probably go back and do his homework on HSAs and HDHPs. But more importantly, he should pause before he presumes to choose his healthplan for me and others. I know my family and I don’t want government-run care. I won’t be able to go to Canada to get my child’s broken leg mended when we’re put on the waiting list.
That’s not to say that there is not massive waste and inefficiency in the US health care market. [my point exactly!] The most obvious one being the 15-20% administration fees in private insurance (as opposed to 2-3% in Medicare) [Thank you! for proving my point again! Consumer driven care cuts admistration costs drastically], closely followed by pharmaceutical profits [We want drugs to be created don't we?].
Let me add that while Medicaid my have lower administration costs – though 3 percent sounds dubious – Medicaid is frighteningly expensive in other departments. Admin costs for dealing with multiple insurance companies will logically be higher than dealing with one bureaucracy — particularly when that bureaucracy has very few, if any, actuarial incentives. Medicaid is a train-wreck, and there is no comparison — even if you consider that most private care are in-state monopolies propped up by government regulation.