Wayne's World Tuesday: Thoughts on rising health care costs...

[CamB]

Wayne

I reckon there is more to it than that. Ultimately, there is little to no real incentive to control health costs. Why?

Because they are largely either funded by govt (which is notoriously bad at controlling costs), or through health insurance. New Zealand has a mixture.

I would expect that the health insurers exert little, if any, pressure on pricing for health. It isn't in their interests at all. I have come to the realisation that insurance companies are actually secretly delighted with increasing claims (which they encourage in New Zealand in healthcare, especially since most people are on a plan where they pay 20% and the insurance company 80%) - whan claims increase, the cost of insurance premiums can "justifiedly" be increased.

I reckon it is kinda corrupt - made worse by the fact that in NZ the dominant insurer (80%+ of the market) also owns hospitals and clinics offering elective surgery.

Having said that, you're right - the quality and cost of healthcare is increasing, I just don't know that the "competition" is there to control prices.

[Moses]

Most of the increase in costs have been increasing costs of hospitalization, phamaceuticals and lastly, high-tech equipment.

Healthcare insurers enjoy record profits from their HMO products. Our local HMO boasts 40% annual returns!

I'm not sure how to limit drug company profits without crippling innovation, A good first step would require health insurance benefits to be provided as a voucher. Allow employees to shop the entire market for value and service. Premiums will drop. Also, health insurers should have an "assigned risk" program for people with serious health problems. Affordable insurance is just as important for sick people as bad drivers.

[id10t]

One big cause is administrative greed. I worked for an HCA hospital when they were not-for-profit in the early 90s. We used to get good raises, etc. Then Columbia bought them out, went for profit, and it all went to crap. One year, I got a 2% raise on a salary that was barely enough to live on, and the CEO took home 150 million.

[Moses]

Originally posted by id10t
One big cause is administrative greed. I worked for an HCA hospital when they were not-for-profit in the early 90s. We used to get good raises, etc. Then Columbia bought them out, went for profit, and it all went to crap. One year, I got a 2% raise on a salary that was barely enough to live on, and the CEO took home 150 million.

I have seen that nightmare firsthand. No money to put in a badly needed breast cancer unit, but CEO gets multi-million dollar bonus.

[Halm]

Originally posted by id10t
One big cause is administrative greed. I worked for an HCA hospital when they were not-for-profit in the early 90s. We used to get good raises, etc. Then Columbia bought them out, went for profit, and it all went to crap. One year, I got a 2% raise on a salary that was barely enough to live on, and the CEO took home 150 million.

FWIW, I was in medical devices from 1974 - 1995. I can assure you that HCA has always been a For-Profit corporation. They were always great customers that realized that cost containment was more than how much they paid for each box of suture or case of underpads. How much a CEO makes is another debate entirely. What you and I pay for insurance closer to the current topic.

Wayne this is a great topic. Unfortunately there are so many parts to it that you could probably start another BB on this topic alone. I agree with all your points and would only add that you also need to look at how the government has mettled in this segment since the 1960's. For example, at that time they encouraged a "cost plus" reimbursement schedule: "Need an extra band-aid or dose of anti-biotics? Sure, just bill us at 110% of your costs." Then there was the knee jerk reaction in the '80's to the waste that created with DRG's and a fixed amount reimbursement. If you had the time and resources, I bet you could draw a graft showing the expansion and contraction of hospital beds based on those events.

Ever been to a VA hospital? It's been 10 years or more since I have, but only a State run nursing home was more depressing. The quality of health care was terrible. Can't wait for a national health care system!

Oh, did I say "quality of health care"? That term has not been used in a practice in decades. It is only how much will BCBS or Medicare reimburse if a certain product or procedure is performed. And I can list several of first hand examples. It is why I got out of that industry.

Don't mean to paint with such a broad brush in that I know that there are still many dedicated physicians and nurses out there. Unfortunately thay are now the minority. The game has changed and we the patient are on the short end.

[Erakad]

Many reasons for high health costs, but number one on my list is the cost of drugs. I work for a large "HMO-like" healthcare organizations. In our region are 13 facilities ranging from small clinics seeing around 20K patients a year to medical centers seeing hundreds of thousands. Universally, they can control facility, maintenance, payroll, etc, but across the board each facility is over executing their pharmacy budget, or barely hanging on. The home office bails them out, but this is becoming increasingly difficult. The question is why does the pharmaceutical industry demand these prices...the reason they get away with it is obvious (cure, physician marketing, etc). But as just "another" consumer looking in, I'm mystified how they REALLY get away with it. I understand research....ok, they deserve to make a profit based on the risk bringing the product to market, and I understand that some of that profit is making up for lost time while the FDA holds your drug in approval pergatory....but come on, every other industry can make a profit without overtly gouging the consumer. Case in point. Name brand retroviral drugs (HIV) can cost a consumer $5K or more every year, but poor nations are making their unlicensed versions for their citizens for cents on the dollar (ref todays paper). If you want our presidential candidates to start controlling health costs, how about controlling this industry......instead of offering retirees discounts.

[Halm]

Three issues here as I best remember. First, it does cost a ton of money to bring a drug to market. The FDA PMA (pre Market Approval) process can take years and with each passing day more data is demanded. Data means a PhD or MD doing more research and more documentation. And we're talking dozens and dozens of these guys. Second, they never know when the government is going to allow your patent to be voided in the name of public health. Better make your $$$ while you can. Finally, no matter how much a drug is tested, you will be sued by someone some time. Better have a boat load of insurance.

And those third world nations you mention just copy our patents, blantenly ripping off our research. Producing the drugs is usually cheap. Their govenments protect these oulaw companies so that they can sell the meds cheap in their countries.

As Moses said, how do you balance the need for innovation that produces these wonder drugs with the need for reasonable pricing? Tough question, no?

[campbellcj]

Honestly I don't think health care costs are rising all that quickly.

DRUG and INSURANCE costs are rising at astronomical rates, however. This month I was forced to cut back on the health coverage our company offers for our handful of employees, which was really a painful thing to do. Our medical insurance now costs more than our office rent and is our 2nd largest expense line item, after salaries/wages!

Meanwhile most of the physicians I know have been working their tails off to make ends meet and have seen little or no income gains in several years.

Even the "non-profit" (cough cough) insurers like Blue Cross/Blue Shield are currently sitting on $BILLIONS in "reserves" (can't call 'em profits, remember, cuz that would invite the tax man to the party), which are being fueled by the 15-20% annual premium hikes.

I don't have the answers by any means, but I'm really sick of this crap as a small businessperson, and my wife is so disgusted she plans to abandon her job (pediatrics) for a different field in Aug/Sept.

[Moses]

Originally posted by campbellcj
I don't have the answers by any means, but I'm really sick of this crap as a small businessperson, and my wife is so disgusted she plans to abandon her job (pediatrics) for a different field in Aug/Sept.

What a shame. In our community, pediatricians work hard, accept enormous responsibilty and typically make less than the hospital nurses.

[vash]

so does a hospital/doctor make more $ when they order test, or do they lose it? maybe it is both answers depending on if it is an HMO? i have to admit, unless i get a family, i dont really pay much attention to health care coverage and cost. my head is stuck in the sand.

[Moses]

Originally posted by vash
so does a hospital/doctor make more $ when they order test, or do they lose it? maybe it is both answers depending on if it is an HMO? i have to admit, unless i get a family, i dont really pay much attention to health care coverage and cost. my head is stuck in the sand.

If you are an HMO doc and you order a lot of tests, you may earn less. Some HMOs push this so hard that there is a very real conflict of interest for the doc.

My advice? Find a doctor and healthplan whose only motivation is to keep you healthy, not the CEOs bonus.

[Moneyguy1]

Can I ask a question here?

I have observed, over the years, friends going to the doctor and demanding treatment for perceived ills, taking up the doctor's time. This is no lie. One friend of mine went to his HMO Doctor because he was afraid he was getting an infected hangnail. Doesn't this overuse of the system have an effect on cost and limited resources that could be better used on those who really need the help? What ever happened to common sense?

I worry about the ads for "cures" now for "diseases" people never knew they had, many of which urge the viewer to "See your doctor". How much of the crisis is generated by the fear of folks who are getting older and do not understand that some changes in durability, strength and so on are to be expected? (read "Boomers") And the number of "cures" with the disclaimer for side efects that seem to be worse than the original condition!!
There is an ad for Zoloft. Side effects are staggering, makes me depressed to even think about them!!

[turbo6bar]

I've heard it takes tons of money to keep some old people alive. Can you put a price cap on maintaining life? Is there an equation where you say "If quality of life <= cost of care Then pull the plug." I have no direct experience, but it seems to be very difficult to let a person die, and that cannot be cheap. When do we say when?

What good is living until 102, when the quality of life is horrible?

[304065]

Of course, there are all of those thorny moral issues in there to cloud the argument as well.

Wayne, perhaps a re-read of Atlas Shrugged is in order.

There is absolutely nothing "moral" about other countries stealing our technology. If the patent holders wish to give free licenses away, that's their prerogative, but it has to be their choice. Jonas Salk said it best, "Could you patent the Sun?"

Once you start conscripting the R&D efforts of pharma and biotech companies to suit your moral judgments, the rate of innovation dries up pretty quickly. The same applies to the imposition of price controls either directly in the U.S., or indirectly by allowing reimportation from abroad.

The AIDS crisis is arguably the single biggest factor affecting political stability in Africa. Why doesn't our beloved United Nations purchase all the rights to the "triple therapy" drugs for several hundred billion dollars and distribute the pills for free?

Why is the US pharmaceutical consumer expected to subsidize the development of such drugs with higher prices on the other blockbusters? Are you prepared to pay more for your statin, knowing that the manufacturer is pursuing a humanitarian agenda?

[Moses]

Originally posted by john_cramer

The AIDS crisis is arguably the single biggest factor affecting political stability in Africa. Why doesn't our beloved United Nations purchase all the rights to the "triple therapy" drugs for several hundred billion dollars and distribute the pills for free?

Fascinating thought. Didn't Ted Turner donate a billion or so to the UN? I wonder what the UN budget is?

Sometimes I wonder if some African nations have any motivation at all to slow the AIDS epidemic.

[Moses]

Originally posted by john_cramer
Are you prepared to pay more for your statin?

Separate but related point. Have you noticed that the CDC just dramatically lowered the accepable LDL levels? Instantly the number of patients who "need" statins has more than doubled.

This announcement is coincidentally timed with the release of the second-generation statins.

[304065]

Have you noticed that the CDC just dramatically lowered the accepable LDL levels? Instantly the number of patients who "need" statins has more than doubled.

Figures. Folks are shoveling fast food into their mouths so fast they can't get their statins in edgewise.

I find it incredible that rest-of-life "maintenance" drugs are being prescribed-- why not diet modification instead?

I wonder what percentage of folks with high LDL have it due to genetics vs. lifestyle choices? That would seem to be the addressable market.

[gr8fl4porsche]

My beautiful baby girl was just born 5 months ago.

My very experienced, extremely qualified, and competent doctor no longer delivers babies - too high of malpractice premiums. She is still in the GYN game but not the OB side. My wife hires doctors for a living and is witnessing this type of event almost daily. Experienced doctors are being replaced with relatively inexperienced ones or are not being replaced at all. Doctors are leaving areas with high $ jury awards by the bus loads.

Hopefully the American public will pull their heads out of the sand (no Iraq pun intended) and demand changes. What those changes will be
should be interesting.

[Mike Bonkalski]

Originally posted by john_cramer


I find it incredible that rest-of-life "maintenance" drugs are being prescribed-- why not diet modification instead?

Modifying how one leads their life is difficult and require a great deal of will and determination.

Why do that when you can just pop a pill and head out to McD's for your daily BigMac? Carb blockers, Xenedrine, the ephedra-base diet pills of a couple years ago, and to some extent statins make it too easy for people to maintain their lifestyle.

It's almost lunch time, I can't wait for my whole pizza with a carb blocker chaser - mmmm.

[JavaBrewer]

Originally posted by Wayne at Pelican Parts
I read an article last year about a guy who was determined to lower his cholesterol naturally. He ate nothing but flax seed (exaggeration) for six months. His "luxury" was a turkey sandwich (my health food). His cholesterol went from 240 to 220 after all this effort. Somethings are just biological...

-Wayne

That's were I fall too. I'll indulge with a Carne Asada burrito from local Mexican takeout place about once every 10 days or so. Have not been to a MCDs (and the like) in years. Wife and I eat the same meals though I substitute oatmeal (yuck) for her cream cheese bagel with bacon side in the mornings. We eat loads of veggies and minimal meat. Her count remains 140 something, mine was 360 before going on a steady 40mg Liptor regime. Since then I've also started exercising more and supplement with fish oil. My level has dropped to the 180 range. Diet and exercise alone won't do it for me, but now that I'm on Liptor I keep the diet thing going and am increasing the exercise.