Tuesday, June 16, 2009

The Cost of Health Care

Critics of our health care system point to the ever-rising cost of providing health care in the United States, in comparison to other industrialized nations. In 2007, the Kaiser Family Foundation reported that the cost of providing health care in the United States has grown from 7.2% of the nation’s economy in 1970 (or $356 per person per year), to about 16% in 2005 (or $6,500 per person). This is nearly twice the cost of providing care in Canada ($3,161), France ($3,191.), Australia ($3,128.), Japan ($2,358), and the United Kingdom ($2,560.). (Kaiser 4). But there are hidden complexities here as well. How much health care spending is too much for an individual patient, family, city, state, or a nation? Is it economically and/or politically undesirable to have so many Americans employed in the health care sector of the economy? What exactly is the quality of the health care that we purchase at this cost? So what does it really mean when we say that our health care system costs too much? Let’s take a look at that!

In the real world, the access and quality of a health care system cannot be separated from its cost, at least not for very long. How do we decide whether the “price is right?” In the Real World, that depends on how much we, as individuals, value health care products and services at the quality and price that they are being offered. For any other product or service other than health care (and perhaps education), when a product or service is priced too high, buyers simply refuse the offer and gravitate toward other sellers. Although I am a pro football fan, I have never attended a Bengals game. Frankly, the product being offered is not worth the ticket price. So I spend that money on other leisure activities that are “worth it,” mostly concerts. Even if the Bengals were great, I still wouldn’t attend a game at the prices offered today. I prefer to watch them for free on T.V. I might attend those games if they were free, or $10. But probably not. I hate the other "opportunity costs" such as traffic and parking problems. The Bengals will stay in business as long as at least a few fans continue to show up at Paul Brown Stadium on Sundays, and as long as the T.V. networks are willing to carry the games. In short, the Bengals must compete for our money. As individual buyers, we make purchasing decisions based on our beliefs about both quality and price. If I say that a new automobile is too expensive for me, what I’m really saying is that, the quality of the new vehicle does not justify the price that I’d have to pay for it. Hence, I’d prefer to keep my old car, or buy a less expensive used vehicle and spend those savings on the fulfillment of other wants and needs; perhaps a family vacation.

So what is the “value” of health care and or “health?” Our assessment of the value of health care has been shaped by a four-party party payment system that fosters both quality-insensitivity and price-insensitivity. In today’s economic environment, many young, healthy, middle class Americans, that do not get less expensive health insurance through a fourth party (employer) value other goods more than they do health insurance. Therefore, they spend their paychecks on new vehicles, spacious homes, higher education, high-quality food, alcohol, tobacco, or extended summer vacations. Therefore, when we say that our health care system is too expensive, what we are really saying is that many Americans value health insurance (of unknown comprehensiveness) less than other things. If I choose to spend my money on a vacation at Disney World, I at least have a good idea the quality and price of my purchase.

So the fact of the matter is that all Americans have “access” to health care, they just are not willing to buy it at the quality and price that it is being offered. And of course, many young, healthy Americans will never buy health insurance, no matter how much it costs because they would rather spend their money on those other things. This underlying reality has inspired a movement to offer “free universal health care,” through a government program like Medicare or Medicaid. However, the fact of the matter is that these programs are neither free nor high quality. Indeed, libertarians argue that the best way to insure universal access to low quality health care (or education) at an unreasonable cost is to force all Americans to pay for it through taxation. Here's another blog entry on health care reform: http://freedomsphilosopher.blogspot.com/2008/10/health-care-reform.html

Monday, June 15, 2009

The Quality of Health Care

The most idealistic health care reformers tend to focus upon expanding access to products and services without reference to the quality, or costs associated with providing that access. In the real world, when we make a purchase we do so based on quality and cost and providers are forced to compete based on the basis of either quality or cost. Unfortunately, this mechanism has been disabled by the U.S. government and the health care industry.

Let’s agree that no one wants universal access to low quality health care. While this sounds reasonable enough, the quality of health care is notoriously difficult to measure. The word “quality” raises the question of value and is expressed as “good” or “bad.” A necessary condition for the determination of quality is the capacity of the buyer to judge between good and bad: call it quality- sensitivity. Access to reliable qualitative information is a necessary condition for quality-sensitivity. In health care the quality-sensitivity of individual buyers is shaped by many factors. However, patients actually have notoriously imperfect information about the quality of their insurance, products, services, and providers.

As stated in my previous blog, the quality of health insurance is usually measured in terms of comprehensiveness, and most Americans have very little reliable information at their disposal in respect to the quality of their health insurance policies. In other words, you usually become quality-sensitive to the comprehensiveness of your insurance AFTER your providers file a claim, it’s rejected by your insurance company, and you get a bill from a provider. Although in recent years insurance language has become a bit more penetrable, it is still notoriously difficult for buyers to make informed decisions about the quality of the insurance products they purchase. The ability of the insurance industry to disguise the quality of its products behind a wall of impenetrable jargon has produced an epidemic of quality insensitivity within that industry. Unfortunately, we do eventually become quality- sensitive after we discover that out health insurance lacks comprehensiveness.

If we lack sufficient information in regard to the quality of our health insurance, we are equally ignorant of the quality of the products and services offered by its providers. The quality of the products and services is based on “safety and effectiveness,” which are determined by scientific investigations supervised by an understaffed and under-funded Food and Drug Administration. We also lack reliable qualitative information in regard to the providers of health care; especially the quality of physicians, allied health professionals, and hospitals. Information in regard to malpractice lawsuits and infection rates of hospitals are systemically well hidden. Given the elusive nature of the quality of health insurance, products and services, providers, and institutions the quality of our national health care system is ultimately inscrutable.

National reformers typically cite statistical data indicating that the U.S. system lags behind other industrialized nations in certain qualitative measures such as: infant mortality and life expectancy. But the basic problem is that national statistics mask local and regional variation: especially in large populous nations. Obviously, the United States has a much larger and has a more diverse population than Canada and European countries, and therefore, we would naturally expect to find a lot more local and regional variation in terms of infant mortality and life expectancy.

As stated in my earlier blog, national statistics also mask variation in access to health care between rural and urban areas. Based on commonly cited statistics, the United States (as a whole) ranks 32nd in infant mortality: with rate of about 6.3 per thousand births. Iceland ranks first with a rate of 2.9, followed by Japan at 3.2. However, this less than flattering statistic masks local and regional variation. For example, despite having one of the best neonatal intensive care units in the world (Children’s Hospital) Hamilton County, Ohio has an infant mortality rate of 13.9, or about twice the national average. Another problem with these rankings is the reliability of the reporting. In Cincinnati, the infant mortality rate says more about the lifestyles of mothers than it does about access to high quality of health care products and services.

As for life expectancy, the U.S. ranks 38th with Japan and Hong Kong ranked first at 82.6. Again, life expectancy in the United States is almost certainly influenced more by culture than the quality of health care. Highly variable infant mortality rates, murder rates, and cancer rates also tend to drag down life expectancy rates in the United States.

Certainly one indication of quality in any national health care system is its comprehensiveness; that is, the sheer number of products and services can be accessed in any geographical location. If sheer comprehensiveness were the only measure of quality, the United States would lead the world. However, comprehensiveness alone may not be the most enlightening measure of quality. Much of the comprehensiveness of the U.S. health care system includes both medical therapies that cure diseases (cancer drugs), but also medical enhancements that improve the quality of our lives (erectile dysfunction drugs, motorized wheel chairs, in vitro fertilization). Although this distinction between therapy and enhancement seems to be fairly objective, it is far from crystal-clear.

Another often-cited indication of low quality of health care is the incidence of medical mistakes, malpractice lawsuits, and the corresponding rise in the cost of malpractice insurance. However, the incidence of medical mistakes is highly variable. It is certainly true that some medical specialties are more susceptible to catastrophic error than others. Obstetrics, for example is especially prone to error, not because of professional incompetence, but because of cultural forces that encourage high risk pregnancies such as: postponed parenthood, poor prenatal care, and religious beliefs that expound the infinite value of fetuses. Our perception of medical mistakes also has a lot to do our overly idealistic expectations, coupled with a staggering number of predatory lawyers that stalk the deep pockets of health care providers. While it is certainly true that many medical mistakes are avoidable to the extent that practitioners can be better trained and facilities can be more fully staffed, these reforms are not costless. Not every mid-sized city can afford high quality neonatal intensive care units, cardiac units, or state-of-the- art trauma centers served by a fleet of helicopters.

Finally, there has been very little discourse concerning the relationship between the quality of health care products and services and the scientific research and development that generates those products and services. Characteristically, most qualitative appraisals of the health care system in the United States discount what we do best. To the extent that it makes sense to talk about nation states in a global scientific and economic environment, research laboratories in the United States still account for most of the comprehensiveness of health care worldwide. For better or worse, governmental agencies such as the National Science Foundation and the National Institutes of Health provide funding for most of that research. Moreover, many of the best medical schools and research universities laboratories are located in the United States. In short, if we bracket issues of “access” and “cost,” the U.S. has the most comprehensive health care system in the world. Indeed, that’s why desperate patients from all over the come to the United States for “state-of-the-art” medical treatment.

Much of the comprehensiveness of the “medical model” of health care in the United States is rooted in “heroic medicine.” But the quality of state-of-the-art heroic therapies is difficult to measure, especially in light of the variable quality of the Food and Drug Administration’s efforts to regulate the research and development of new drugs. As health care in the United States becomes increasingly “heroic,” we can expect a higher research and development costs and a higher incidence of treatment failure and more malpractice lawsuits.

In the United States, quality sensitivity has also been undermined by cultural forces that allow low quality providers (physicians, hospitals, pharmaceutical corporations, insurance companies etc.) to control the flow of qualitative information. Although, much of this machinery has been undermined by mass media, especially Internet sites (WebMd.com), it is still very difficult to access useful qualitative information on physicians, hospitals, and pharmaceutical products.

Tuesday, June 9, 2009

Access to Health Care

In the United States, the stated goal of health care reform debate has been to provide universal access to high quality health care at a reasonable cost. However, most of the rhetoric has focused myopically of universal access. Unfortunately, in the real world proponents of universal access must also take into account the quality and cost of that health care. After all, no one aspires to provide universal access to low quality health care or universal access to high quality health care that no one can afford. Unfortunately, any reasonable account of access, quality, and cost of health care generates mind-boggling complexity. Let’s start with access.

Today, about 55% of all Americans gain access to health care via private health insurance purchased through their employers, while 45% gain access to public insurance via Medicaid, Medicare, Veterans Medicine, and SCHIP. (poor, elderly, veterans, and children). In 2005, the Census Bureau reported that at least 44.8 million Americans were without either private or public health insurance coverage. By 2006, that number rose to 47 million: a 15% increase. Since, 2000 the number of uninsured Americans has grown by 8.6 million: an increase of about 22 percent. The largest segments of uninsured are employed young adults 19-29 and older adults 45-64. The uninsured rate among young adults, signals a corresponding rise in the number of uninsured young children; which has led to the recent reauthorization of SCHIP. Due to the ongoing economic recession the number of privately-insured Americans has decreased and the number of publically insured has increased. Although the public policy goal has been to increase the ranks of the insured, what is the precise relationship between “access to health insurance” and “access to health care? That answer is hardly straightforward.

When reformers call for universal access to health insurance, presumably they mean “good health insurance.” In an ideal world, “good insurance” is “comprehensive insurance” that covers every possible health care need (or want). Conversely, “bad insurance” covers nothing. So in the real world, the mere fact that you have health insurance does not necessarily guarantee that you have access to the health care products and services that you may need or want. Therefore, what most of us really want is universal access to comprehensive health insurance. But in the context of health care what does “comprehensive” mean? Does it include “all health care” or just “basic health care?”

Well, what precisely is this alleged distinction between “comprehensive” and “basic” health care and who decides? Does “basic” include access to all known preventive care, including: annual physicals, vitamins, and all known tests, imaging technologies (eye exams, hearing exams, MRIs, mammograms etc.), and vaccines? Does it include access to all known treatments, including: laser surgery, stem cell therapy, and genetic therapy? How about doctor’s office visits for minor illnesses such as colds and flu? Should everyone have equal access to: state-of-the-art trauma centers, organ transplants, hip replacement surgery, physical therapy, fertility treatment, psychiatric treatment, eye glasses, vision correction surgery and cosmetic surgery? Should all Americans have access to both new and old drugs, including: AIDS drugs, and diabetic drugs? How about access to weight loss therapy (including surgery), smoking cessation programs, and mental health treatment? Does basic insurance cover Tommy John’s surgery for 53 year old beer-league baseball pitchers, motorized scooters for the morbidly obese, or psychiatric drugs for children diagnosed with Attention Deficit Disorder or depression, erectile dysfunction drugs for old men, or chemo and radiation therapy for all cancer patients (including for ninety year-olds)? In Vitro Fertilization, abortions, or birth control pills for the poor? Does basic health insurance include unimpeded access to experimental, futile, and/or low-quality treatments (that are less-than safe, or less-than effective)?

Therefore, it seems obvious that the distinction between “basic” and “comprehensive” insurance is far from clear. Even if you are a member of congress that has the most comprehensive health insurance coverage in the world, there is still wide variability in access to specialists and state-of-the-art technology. That’s because access to health care products and services depends largely upon where you live. Our current health care system has evolved to serve major urban populations. Therefore, even insured congressmen from rural districts may not have access to the health care they need or want. Other rural patients have “access” to specialists and state-of-the-art technology, but only to the extent that they are willing (and/or able) to wait for an appointment and/or travel to a distant urban area. And, of course, rural patients that are uninsured (or under-insured) have access to health care to the extent that they are willing or able to pay for both the trip and the treatment. So one might argue that rural patients in the United States have “access” to a vast market of health care products and services, but only to the extent that they are willing (and/or able) to overcome geographical and financial barriers. Now is that really “universal access to health care?” If not, how would congress go about addressing this alleged injustice?

Although most patients with health insurance believe that they have access to health care, most policies cover much less than they think. That’s because, “good insurance,” which is comprehensive is very expensive and difficult to sell employers, especially to small businesses. Therefore insurance companies adapted by devising innovative marketing strategies that help them sell that “bad health insurance.” Their solution: disguise the quality of their insurance policies behind a veil of complex, obscure jargon that only insurance adjusters can decipher. Systemic obscurantism has no doubt contributed to the growing number of uninsured and under-insured patients. Why buy expensive health insurance, if you don’t know what it will cover? Therefore, one area more than ripe for reform is the restoration of transparency in health insurance.

In conclusion the single-minded pursuit of universal access to health insurance is really an overly-simplistic basis for health care reform. We must also take into account quality and cost of that insurance and the actual health care covered by those policies.