Health care costs ...Too much GOVT is the problem.

By chanakya4773   Follow   Sun, 16 Dec 2012, 4:24am PST   9,544 views   91 comments   Watch (1)   Share   Quote   Permalink   Like (5)   Dislike (1)  

Here is my take on the root cause of Healthcare cost in USA. I am focusing on costs because focusing on redistributing the costs ( which is mainstream media focus) does not fix the problem.

Fact : Healthcare cost is rising significantly faster than inflation in USA.

Reason : Given that health care is not a new industry and such a broad industry, the only reason for this divergence can be that its not a "FREE MARKET". In any free market, a broad established industry's "long term" inflation is always inline with rest of the economy.

Analysis : My whole analysis will be to focus on why its not a "FREE MARKET"

Divergence from free market happens primarily because GOVT comes in between consumer and services/goods provider. Generally, once the GOVT gets involved, a third party will use its lobbying power to influence the industry ( through GOVT) to its own advantage .

1) Insurance (GOVT SUBSIDIES and MANDATES) :
Govt subsidizes health insurance ( In 1954 Congress codified this practice into the tax code ). This forced people to go through the insurance system because subsidies slowly destroyed cash driven non insurance based payments. NON catastrophic insurance is a flawed system because it makes everybody price insensitive. Since insurance pays the costs and is a pool system, nobody cares what the health industry is charging them.
imagine if insurance pays for your grocery store purchases.We will buy excessively things we don't need and waste everything.The grocery store charges will be excessive as well. There are some market forces at play here though. if the wastage goes up, insurance premium goes up and we chooses an insurance which has less premium.This creates motivation for insurance company to control costs.
But this cost control mechanism is not as efficient as free market though. its akin to soviet style centralized system versus free market capitalist system to control costs. insurance itself is a in-efficient system and should only be used for protection against catastrophic events where it serves an important function.In a free market , hospitals strive to have good reputation and offer services for low prices to attract consumers. The latter part is definitely not happening because the consumer is not price sensitive

Cosmetic surgery does not have insurance system and you can see the difference between regular industry versus cosmetic industry. The advancements in cosmetic surgery are at par with other areas of medical fields but at reduced cost because market forces are at work.

SAME WITH LASIK which is not covered in insurance.

2) GOVT PROTECTED Licensing of doctors and nurses and PROTECTIONISM:
Licensing Doctors means that doctors need the permission of govt to provide their services. This system was not a big issue long time back when there was no globalization. As globalization started, most of the goods and services started to get cheap. Goods got cheaper because of stuff getting manufactured in foreign countries and services got cheap due to immigrants filling lot of positions. Most of the farm jobs were taken by farm labor from mexico. Engineering jobs were primarily filled with immigrants as well. This phenomenon didn't happen in medical field but only happened in field where there is no licensing needed for services ( like farming, engineering , restaurants..etc). Licensing enables protectionism. Since most of the functions of medical field are licensed including doctors, nurses and hospitals, they are protected from globalization and competition from foreign doctors/nurses who want to practice in US. This disparity caused medical field to look more expensive RELATIVE to the other fields. In essence the US consumer is not getting the benefit of cheap international labor in medicine . This probably is not the complete story and i am guessing more components of the medical bill are protected from market forces like prescription drugs..etc.
Licensing also forces some arbitrary body to decide what kind of service providers the consumer needs.If it were a free market, the market will decide what kind of training the doctors need to satisfy the demand.The salaries will also be based on the market prices. If the society is not rich , it will decide to go for doctors who are trained cheaper ( like in India). ofcourse, the quality will be lower but that's what the society can afford and is most effective. people who can afford higher quality will choose a doctor with more training. Its a self correcting system. in car industry, some consumers buy honda civics and some consumers buy a Porsche.IF govt mandates that people only buy cars with standards of porshe, most consumers will have to take public transportation because they cannot buy civic and cannot afford Porshe. Current licensing system forces a over trained doctor down the throat of consumers. actually a third party licensing body would never be able to decide what training is most effective to consumers just like soviet style centralized planning could never decide what products are needed by citizens. Free market is the answer.
Certification is better than licensing as it informs the consumer of the choices but does not force a particular choice. Hospitals will always choose the doctors with the right certification for the right job without being dictated by a licensing body. this will drive down prices.hospitals will also vet the doctors to save hospitals reputation.

from wikipedia "American Medical Association (AMA) has lobbied the government to highly limit physician education since 1910, currently at 100,000 doctors per year,[111] which has led to a shortage of doctors[112] and physicians' wages in the U.S. are double those in the Europe, which is a major reason for the more expensive health care.[113]"

3) Mandating Emergency services (GOVT MANDATES) :
The day Govt mandated emergency services to general public , it created a huge sink hole in the system. Mandating hospitals to perform any services to general public irrespective of their ability to pay means in essence they are forcing some people to pay for other peoples expenses. When a hospital is performing a emergency service and the consumer does not pay it, the hospital passes on the expenses to other people. Anytime you create a system where the consumer does not have to pay himself , he becomes price insensitive and this creates lots of waste. Most countries don't have this kind of mandates. Also this creates incentive for too many people coming to emergency services instead of getting care early on which could have reduced the overall medical cost for the society.
In the absence of Govt mandate, new charity based hospitals ( partially funded by govt or private) will pop up ( like pre insurance period of 1930's) and give some form of cushion to the most needy.
MANDATING ONE PERSON TO PAY FOR ANOTHER PERSON'S EXPENSES IS NEVER A GOOD IDEA. Be it through insurance mandates, court system ( malpractice litigation expenses) or hospitals ( mandating emergency services)

4)Medical Malpractice insurance costs (GOVT forcing other people to pay a litigation winner -through malpractice insurance ):
Giving Patients the option to Waive certain Rights to Sue for Medical Malpractice for certain services is important to address this issue. Since Medicine is not an exact science and involves considerable risk, GOVT cannot force everybody to pay for the costs of not being perfect. In essence the GOVT through their court system is forcing doctors to work overtime to make a service more risk free than its possible. after certain point there are diminishing returns in trying to reduce risk.I have heard stories that some doctors spend more time filling paperwork/unnecessary expensive tests than actually treating patients. There is some inherent risk in certain services and patients should have the option of allowing the doctors to take the risk so that the patient can get the service from doctor at reduced cost. of course driving a car involves risk but that does not mean we force all the car manufactures to design risk free cars. even if its designed, it will be unaffordable by many consumers. Another aspect of the medical malpractice is the money awarded by the courts.
The primary focus of the court system should be to create incentive for the hospitals to reduce recklessness and malpractice which can be accomplished by other punitive measures rather than awarding large sums of money to patients. example: you can suspend a doctor from practicing if he does some fraud/malpractice rather than award 1 million dollar to the patient ! The focus should be to reduce fraud not make the attorney's rich.ofcourse the money awarded should be reasonable so that attorneys are motivated to take the case but it should not be ridiculous amounts since we all have to bear the cost.



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Bigsby   befriend (0)   ignore (14)   Mon, 17 Dec 2012, 4:35pm PST   Share   Quote   Like   Dislike     Comment 52

chanakya4773 says

you can read my original post. lets talk once you read that. we all know its
broken but rationing is not going to fix it.

actually rationing of emergency services is already happening. how is that helping you ?

I've already read all your posts. I fundamentally disagree with what you are saying as you should quite clearly be able to understand. And it's laughable that you are complaining about rationing because your argument seems to be to leave the poorest in society to their chances. Charity hospitals for very basic care if you are lucky, seemingly.

Bigsby   befriend (0)   ignore (14)   Mon, 17 Dec 2012, 4:45pm PST   Share   Quote   Like   Dislike     Comment 53

chanakya4773 says

there is bigger problem here that just following what others have done.
even though other countries can brag all they want about their system, US medical field is the most advanced and is the innovation engine of the entire world. other people piggy back on our innovation.
Once you kill this system here , there will be bigger repercussions than you can imagine. sometimes the intentions are good but the results are not.The last thing you want is stagnation in medical field innovation and lose the opportunity to save thousands of lives across the globe. most countries have chosen the non-free market approach but it does not matter since US is the innovation engine anyway.

there should be every effort to keep most part of the health care system here money making industry so that people keep innovating.
once you take away the incentive to make money , innovation will die for sure.

Kill what? There's plenty of major medical innovation that comes from Europe, for example. Having comprehensive healthcare coverage isn't the death knell for medical advancement, though your plans for medical healthcare might well be the death knell for any semblance of a civilized society.

Bigsby   befriend (0)   ignore (14)   Mon, 17 Dec 2012, 5:36pm PST   Share   Quote   Like   Dislike     Comment 54

chanakya4773 says

you didn't answer on how to prevent homelessness for good...any ideas ?

It's obviously a highly complex issue, but an entirely free market has absolutely no interest in dealing with that kind of problem, and if you don't see that, then there's little point in discussing anything with you.

Bigsby   befriend (0)   ignore (14)   Mon, 17 Dec 2012, 5:42pm PST   Share   Quote   Like   Dislike     Comment 55

chanakya4773 says

I would also be interested to know why somebody ( who is already fully burdened) should be paying for your emergency room visits?
for every free emergency room visit that happens today , there is probably some already broke family paying for it.

Then perhaps you should try and understand a system such as the one the French have. Most people aren't that desperate to pick up a gun and kill a few taliban, but they understand the need for some of their dollars to go towards defense expenditure. Why can't their dollars also go towards universal healthcare? You do understand that most people wouldn't be making the choice to pay twice, and based on current US per capita expenditure, it would be highly likely that LESS of an individual's money would be going towards funding their healthcare than is the case now whilst simultaneously enabling universal coverage. That's a win-win in my book, but apparently it means something else to you.

Bigsby   befriend (0)   ignore (14)   Mon, 17 Dec 2012, 5:50pm PST   Share   Quote   Like   Dislike     Comment 56

chanakya4773 says

Bigsby says

Having comprehensive healthcare coverage isn't the death knell for medical advancement,

read this :

What's your point? That has nothing to do with the impact that universal healthcare might have on research. The UK has more nobel laureates per capita than the US as have a number of other countries with universal healthcare. Does that mean I can argue that universal healthcare actually advances scientific research... or could there possibly be other factors at play?

Dan8267   befriend (18)   ignore (16)   Mon, 17 Dec 2012, 11:59pm PST   Share   Quote   Like   Dislike (1)     Comment 57

chanakya4773 says

Health care costs ...Too much GOVT is the problem.

I would argue that the problem is bad government rather than too much.

If we completely got government out of health care and let the transnational corporations run everything how they see fit, knowing that profits, not lives, are what motivates the executives of these corporations, do you honestly believe that health care prices will go down?

Don't just answer that question right away. Think about it. Think about what corporations, particularly large and powerful ones, actually do when unrestricted by law.

monkframe   befriend (0)   ignore (0)   Tue, 18 Dec 2012, 12:31am PST   Share   Quote   Like (1)   Dislike (1)     Comment 58

A very flawed analysis by the OP. No mention of high-tech medical toys, oops, I mean DEVICES, that are one of the main drivers of insane inflation of medical care costs.

That's good ol' capitalism, complete with patents that protect the inventor. How does government get in the way of that sort of private market activity? They don't, and it doesn't work. 46 million uninsured people will tell you that.

I also detect more than a sniff of class-based contempt for the less fortunate in the OP's analysis. Does your employer provide you with health care coverage? I hope so, as it's killing the rest of us barely making the monthly premiums with their double-digit yearly increases. That's good ol' capitalism as well, juice it to the captive consumer whenever possible.

No, you have backwards, we need to get the private market bloodsuckers OUT of the healthcare industry and get the administrative costs down from 15 -30 % to more like the Social Security Administration, which manages just fine with a 3% overhead.

bob2356   befriend (0)   ignore (4)   Tue, 18 Dec 2012, 2:49am PST   Share   Quote   Like   Dislike (1)     Comment 59

chanakya4773 says

Are you f** crazy. you are googling all over the place to get some crappy data. talk to someone who has lived in india and you will know how indian health care works

Are you the person who has lived in India? If you are then you should have no trouble at all refuting my numbers. Sorry I don't do anecdotal. Please feel free to provide some official numbers that dispute my crappy data. Until then I will stand on my hand.

bob2356   befriend (0)   ignore (4)   Tue, 18 Dec 2012, 8:27am PST   Share   Quote   Like (1)   Dislike (1)     Comment 60

chanakya4773 says

yes , i was born and raised in India and i know the system in and out.

I know how much it costs for medical care in india. even normalizing it to US per capita income, the costs here are "ridiculous".
don't you all agree that the costs are just absolutely insane in US ?
does anybody have an answer why ? I have put four points which are possible reasons with different degrees of effect.

Well then you should have no trouble at all providing correct numbers since mine are incorrect, when can I expect to see them?

Yes the costs are ridiculous. I'm waiting to see your theoretical free market in action. India isn't anywhere close. It's cheap because it's so poor a large number of people simply don't have health care at all. Show me a comparable to the US health care system operating as a free market, I'll be glad to look.

The rest of the first world uses government public health care with better results and half the cost. So simply saying government is the problem doesn't make much sense. Corporate ownership of the political system of the US is the problem. Not just in health care either.

There are 3 very simple reasons why health care in the US is expensive. Fee for service, insurance billings for fee for service, and drug patents. If the US used capitation for general medicine and salary for specialists like everyone else then the costs would be the same as everyone else. That would also mean the enormous cost of insurance and insurance billings were eliminated. If drug companies weren't able to continually repatent existing medications, keeping generics off the market, then the cost for drugs would be a fraction of what it is now.

Government involvement magnifies these problems but is not the cause. If you actually bothered to read some of what was posted you would discover that health insurance and fee for service were common before insurance was tax deductable and well before medicare existed. You have your causation backwards. The problems were there, then government got involved and made it worse.

Your blood can boil as much as you want it's never going to change. Doing so would also mean the huge bribes, whoops sorry expressions of free speech, going to politicians from insurance companies, pharma, and the AMA would go away. Never, never ever going to happen. So everyone is just plain old screwed. I think I'll just continue to be an expat.

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 9:50am PST   Share   Quote   Like   Dislike (1)     Comment 61

chanakya4773 says

Hi Bob,

I agree with some of your statements. But both you and me are not right on the free market concept since we both don't know "exactly" how it will work.

but we could definitely start with small steps in the right direction and fix things which we all agree are broken. getting as close as possible to the free market without messing it up is one such step. there is no perfect answer here.

So you have no basis for thinking a free market would work, you just want to give it a go. Why not give a go to a system that we do know works and that we also know supplies better results at less cost? How about that for an idea?

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 10:32am PST   Share   Quote   Like   Dislike (1)     Comment 62

I noticed you tossed in that old chestnut of supply constraint. I take it that waiting a little while longer is unacceptable but having 50m lacking coverage isn't. Everything has constraints. It's how you manage them for the good of the whole. If you want to go the private route and get faster care, then you aren't prevented from doing that under the universal healthcare systems.

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 10:47am PST   Share   Quote   Like   Dislike (1)     Comment 63

chanakya4773 says

Bigsby says

If you want to go the private route and get faster care, then you aren't prevented from doing that under the universal healthcare systems.

The current private route will still have all the issues i highlighted in my OP.

That's the private route in the US not in the other healthcare systems. And there's nothing wrong with the universal healthcare systems as demonstrated by the WHO report.

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 10:54am PST   Share   Quote   Like   Dislike (1)     Comment 64

chanakya4773 says

Bigsby says

That's the private route in the US not in the other healthcare systems.

how do you fix the private route in US ?

looks like we are looking for bandages not solutions to the real problem.

Good grief. You minimize its role and influence by adopting an effective universal healthcare system, many of which have demonstrably better results than the current US system. That leaves a minimal role for private healthcare for those who wish to take that route. How that is implemented is unimportant because EVERYONE will still be able to get good healthcare.

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 11:15am PST   Share   Quote   Like   Dislike (1)     Comment 65

chanakya4773 says

Bigsby says

Good grief. You minimize its role and influence by adopting an effective universal healthcare system, many of which have demonstrably better results than the current US system. That leaves a minimal role for private healthcare for those who wish to take that route. How that is implemented is unimportant because EVERYONE will still be able to get good healthcare.

So you don't give a damn about people who might lose their life because the line is too long and the private route is unaffordable.

universal health care will only move us from worse to slightly less worse but it still won't fix the fundamental problems.

What bullshit. You are the one who doesn't give a damn about 50m uninsured people in the US. The healthcare systems of many countries are considerably better than the US system and for considerably less cost. Your suggestion of a completely free market route is utterly laughable and yet here you are talking to me about not caring about someone losing their life because the line might be too long. How many people will lose their lives under your ridiculous free market approach because they simply can't get into the line in the first place?

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 11:26am PST   Share   Quote   Like   Dislike (1)     Comment 66

chanakya4773 says

When did i say that i am ok with 50m uninsured ? and when did i say the current system is free market ?
You are assuming that i am justifying the current system which i am not.
Did you even read my original post ? the whole post is about why the current system is so broke

Oh right, charities are going to come in and build a completely new healthcare system for those 50m people. Ha, ha, ha.
And no, I don't think you are justifying the current system. You have been arguing for a completely free market for healthcare, which would be even worse.

Bigsby   befriend (0)   ignore (14)   Tue, 18 Dec 2012, 12:54pm PST   Share   Quote   Like   Dislike (1)     Comment 67

chanakya4773 says

50 million people are uninsured because they cannot "AFFORD" it.
the goal should be to reduce the cost of healthcare so that it becomes affordable to almost all of the 50 million people. There will still be small % of people who will never be able to afford healthcare..thats where the govt or charity hospitals come.

That is one of the most ridiculous things I've ever heard. On what planet do you think you are going to be able to reduce healthcare costs in the US to the point where people who can't currently afford monthly insurance premiums will suddenly be able to find the cash for even minor medical treatment let alone common invasive procedures? And what about major surgery? This isn't a small percentage of people. This will be the 50m people that currently can't afford it + the huge number of people who also don't have access to a vast pile of cash that would be needed to pay for any procedure under your bizarro free market idea. It's just a nonsense. And which is it, charity or government? And if it is government, why is it good enough for this large number of people but not good enough for everyone else? As for the idea that charitable organisations would step in, you can only shake your head in disbelief at that idea.

bob2356   befriend (0)   ignore (4)   Thu, 20 Dec 2012, 2:07am PST   Share   Quote   Like   Dislike (1)     Comment 68

chanakya4773 says

The only place you will see that is in laser eye treatments. The lasik treatment prices dropped significantly over time due to this reason. its not covered in insurance and people shop for cheapest and best option.You see companies advertising the "PRICE" of the lasik in media. How many times have you seen that for regular test/scans..etc ?

But Lasik is a perfect example of ADDING to health care inflation. You didn't do the math. You don't seem to grasp the cost PER lasik has gone down, the cost OF lasik has skyrocketed. Some insurance does cover lasik.

First there was no lasik so it cost nothing, then lasik was new and expensive and few people got it so cost almost nothing, now lasik is very popular and there are something like a million a year at 4k a pop. So lasik is adding 4 billion a year of pure inflation to health care spending that didn't exist in 1991 (actually about 2000). Multiply that out by all the new procedures and treatments in the last 40 years and I would think you have answered a big part of your own question about medical inflation.

BTW, your 1991 number isn't valid anyway. From 1991 to 1998 lasik was limited clinical trials with experimental lasers. I know this because my girl friend at the time had lasik and they made a really big deal about it being experimental. The first production laser for lasik was 1999 so you really need to compare price points after that. Makes for a more dramatic chart, but try to stick with apples vs apples. As Mark Twain said "There are three kinds of lies. Lies, damn lies, and statistics".

So how many tests/scans did you research the cost history of that you know the price hasn't gone down on any of them?

HEY YOU   befriend (3)   ignore (4)   Thu, 20 Dec 2012, 5:22am PST   Share   Quote   Like (1)   Dislike     Comment 69

If the govt. was completely out of health care any medical procedure cost would not be more than a dozen eggs & the quality of care would surpass perfection. Go Free Enterprise!

David Losh   befriend (2)   ignore (1)   Thu, 20 Dec 2012, 10:53am PST   Share   Quote   Like   Dislike (1)     Comment 70

bob2356 says

the first world uses government public health care

OK, yes we need expanded public health, because government provides most of the high risk care already. Government provide MediCare, MedicAid, and VA health services. So the government takes the highest risk patients, and leaves the cream for private health insurance.

Health care in United States is run by, and for the very rich.

The break down in our system starts with education. To be a doctor is extremely expensive here. The cost of education is in the area of $500K to start. In India there are more, and better educated doctors. Do all of the doctors in India pay for that education?

Last, but not least we look at being a doctor, or the medical industry as a path to wealth. Drug companies, medical devices, patents, procedures, and copyright are all sure fired ways to make a million. Isn't that a little sick when you think about it?

All those innovations for profit rather than a greater good is the root of the problem we have here.

bob2356   befriend (0)   ignore (4)   Fri, 21 Dec 2012, 5:13am PST   Share   Quote   Like (1)   Dislike     Comment 71

chanakya4773 says

You don't seem to grasp that inflation = cost PER LASIK (not of all the money we are spending on all the LASIK's)

I am surprised that you have been debating about medical inflation on this board for so many months and you don't even know the concept of inflation

You are correct, I meant to talk about costs, not inflation. Mental error.

Yes I know how medical inflation is calculated by BLS. I don't agree with it, even BLS admits it's inaccurate. They only track out of pocket expenses net of reimbursements but not employee provided health care. Out of pocket is far higher than what insurance companies pay and very few people pay out of pocket. I do agree with the BLS that coming up with a true number would be impossible. It's more than ordinary inflation (which doesn't include housing and energy) but no one knows how much.

So where is the money going? Doctors real net income has been falling for 20 years. Insurance profits are way up, Drug company profits are way up. Hospital profits are way, way up.

So what is your actual solution other than saying we need a free market? Very nice, it's like saying we need world peace. Should we make insurance illegal? Nationalize the drug companies and hospitals? What would be an actual plan to create this utopia? I'm still waiting for you to point out a working example of free market health care to emulate. India certainly ain't it.

bob2356   befriend (0)   ignore (4)   Fri, 21 Dec 2012, 5:21am PST   Share   Quote   Like (1)   Dislike     Comment 72

David Losh says

In India there are more, and better educated doctors. Do all of the doctors in India pay for that education?

Could you provide proof doctors are better educated in India? That should be interesting to read.

I don't know much about medical education in India, but I do know that eastern european medical schools have been flooded with students from india the last 10-15 years, so it can't be all be sweetness and light.

David Losh   befriend (2)   ignore (1)   Sat, 22 Dec 2012, 2:15am PST   Share   Quote   Like   Dislike (1)     Comment 73

bob2356 says

I do know that eastern european medical schools have been flooded with students from india the last 10-15 years, so it can't be all be sweetness and light.

Transferrable credits might be a reason.

David Losh   befriend (2)   ignore (1)   Sat, 22 Dec 2012, 2:17am PST   Share   Quote &