Sunday, January 27, 2008


Follow-up to Will's important comment on Big Pharma post in which he points out that health care is a failure of free-market capitalism and that instead, it should be treated as a public good, just as national defense, lighthouses, roads, etc.

I wholeheartedly agree with Will. The Republicans and the American Medical Association squashed "Hillary Care" in 1994 because they argued on the fundamental premise that free markets and competition will drive down the costs of health care. What has happened since then? The rate of increase in health care expenditures has been about 8-9%, greatly outpacing the rate of inflation (approx 2-3% per year). Health care expenditures are out of control, and account for 15% of GDP (and by 2020 will account for 20% of DGP).

The huge problem, is that too many parties are interested in making a profit in health care. There are at least 4 parties...hospitals, physicians, insurance companies, and the pharmaceutical companies who are all trying to make a buck. Who ends up getting the shaft? That's right...the patients. It is impossible for our health care system, regarding effectiveness and efficiency, to improve, with so many competing interests. This is not even theoretical. We already have empirical evidence from the last 15 years!!! It has been a failure. Our health care system consistently ranks near the bottom in actual quality of health care delievered when compared to other OECD countries, despite the US spending twice as much per capita than any other country in the world.

Several economic analyses reveal that universal health care would actually be less costly, both for the government, and net for the taxpayers (taxes would increase, but individuals would no longer have to pay for insurance premiums, deductibles, co-pays, and prescriptions).

Few other points:

1. Many don't want "goverment-run insurance". With Medicare, Medicaid and the VA Health Care System, 52% of the population in the US is receiving "government-run" insurance. That system seems to work pretty well.

2. The overhead costs on Medicare and Medicaid are about 3%. The overhead for private insurance companies is about 30% (they spend lots of money trying to deny claims).

3. Our current system places FAR too much dependency on one's employment situation. Some people get "Rolls-Royce" type health care policies, and other employers provide bare-bones coverage. Heck, my Yale Health Plan insurance policy is a complete joke. People should not have health care coverage be an important variable when choosing a place of employment.

4. The current "fee for service" system encourages overuse of diagnostic tests and procedures. Multiple studies have demonstrated that increased utilization does not improve outcomes, thus, money is wasted and patients are exposed to unnecessary risk for iatrogenic complications.

Here are some publications that support the assertion that increased rate of procedures does not improve outcomes:

Bottom line....Will said it. Health care is a public good, and should NOT be a part of the free markets. Imagine if the fire department or police department provided different levels of protection or service based on where one lives in town? The situation is analogous to having different levels of health insurance based on one's employer-sponsored policy.

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