Healthcare in the USA is wildly expensive and is growing more so at a rate that exceeds inflation. This is well known. The battle for healthcare reform in DC is bogging down under the weight of private interests and infighting. Soaring rhetoric from both left and right is mistaken for intellection and reason. It is evident that the fix to the problem was started before there was a clear understanding of the variables.
If you look at healthcare as a manufacturing activity with labor, capital equipment, and materials as input and some sort of health benefit as the output, you can start to see what cost inputs may begin to dominate. Of course this is very simplistic, but hang with me.
A round of health care involves attention by highly trained and expensive labor. A health care worker can only attend to one person at a time, though that worker may have many patients under his/her supervision. If a patient is stabilized, the care worker can also attend to other patients and achieve some sort of parallel production for better cost containment. In the heirarchy of medicine, the docs are managers who provide oversight to nurses who manage the patients. Docs also do consultations, examinations, and perform surgery, so they are not pure people managers- they get their hands dirty. Docs are a unique class of management all by themselves.
To exaggerate the effects of labor costs, imagine if you had a doc or a nurse picking strawberries, how expensive would the strawberries be? Even if Dr. Picker was very fast, the berries would be expensive. To have reasonably priced berries you have to find workers who will do the work at a lower wage. Lower wages derive from an abundance of willing labor.
In the end, medical schools control the scarcity of physicians by controlling enrollment. And the enrollment is defined by the curriculum, faculty size, and the particulars of the coursework- availability of clinical experiences, lab space, equipment, etc. But, you have to wonder what would happen to medical costs if there was less labor scarcity.
The most important resource a medical school has, other than faculty, might be the university hospital. What if more hospitals had medical schools rather than the other way around? I don’t think that the existing medical schools have absorbed all of the bright candidates out there.
Health care is a kind of economic chimera. The recipient of medical treatment is not the person in control of the costs. Physicians prescribe the type and extent of resources and the insurance companies release the funds. The medical establishment receives payment for services irrespective of outcome. Insurance companies profit by denial of services. The patient is left to sort out how to get the best value from available treatment.
American medicine is very much influenced by technological triumphalism. New and expensive materials and devices hit the market all of the time. The question every potential marketer of medically related items must ask is- will the docs use or prescribe it? The most powerful instrument in medicine is the physician’s pen. The question for drug and equipment makers is, how do you get the docs to use their pens to your advantage?
The view that a disease or an injury is a sales opportunity is what drives for-profit clinics and hospitals. Without chronic disease, accidents, and sporadic outbreaks of mayhem, growth and profit in the healthcare industry might be more static.
So in the end, who do you trust? Do you put your faith in the private sector whose avowed goal is to profit on your illness? Or do you trust the government which, though accountable to its citizens, is prone to profound organizational inertia and a lackluster draw to talented staff? This is the balance of opposing forces the fools in Washington are trying to sort out. Howard help us all.
Lamentations on Chemistry 
60 million retiring Baby Boomers (quit at 62 or never see a penny of SS come back at you) will demand an unlimited flow of medical value that exponentiates as they transtion to elderly and then to the elderly living dead – less 60 million paychecks being plundred with each issue. 35 million Officially Sad on the dole are already hard vacuum suckling the publick teat. Add an obscene number of permanently injured young soldiers being produced in Muslim Asia for Veterans benefits.
If you think healthcare is expensive now, just wait until government provides it for free. When price and cost are decoupled there is no limit to expense. Consider price tags for human dentistry and animal veterinary care after dental and pet insurances arrived.
Insurance companies profit by denial of services. Bingo! One can exactly predict future centralized heathcare: full throttle for those who do not contribute, full brake for those who do. 45 years of US social policy starting with Johnson’s “Great Society” have not deviated from that a whit.
Compare the cost of an aspirin administered in a hospital to one from a Wal-Mart shelf. FEMA for the masses, every day in every way! Yeah, that’s a good idea. You won’t be able to afford suicide.
i hope you can afford suicide.
“In the end, medical schools control the scarcity of physicians by controlling enrollment. ”
Yes, that’s good. EVERY technical discipline should limit enrollment as a reward to those who fork over massive amounts of cash and time (you only have so much of that.)
The number of chemists in this country should be controlled, but unlike physicians, the static controlling class are the tenured academics (TA). When we do away with tenure (and that day is coming soon!), we’ll have the necessary unionization that allows for a stable existence for the rest of us.
The TA’s sole goal is to use cheap foreign students to subsidize their existence in the same way Walmart uses Cheap Chinese products.
As far as the increases in health costs I don’t think Physicians wages are growing at a rate which is the major factor in the staggering rise in health care premiums. The rising take of Drug +medical device companies/ insurance companies is a primary issue. Insurance companies claim it’s all due to litigation costs (I doubt this- they do it because they can!). It’s also the case that we have an epidemic of obese folks in this country that exert a major strain on the system (how’s the cycling going?) .
Peripheral issues also exist. Can states negotiate for lower drug prices in the same way Canada can? The answer is no, and Obama plans to keep it that way.
What you really need is a basic socialized system with some options if you want to pay more for premium options (bionic arms and legs???).
I think the following is obvious from healthcare costs to the financial melt-down:
the mindset of short term profits is not conducive to building a just, stable social system of any kind.
And in large part that’s all the private sector means to me today. Getting as much money from the plebes as fast as you can, anyway you can, then bolt off to Switzerland. Our country has moved to a winner-take all mentality that corrupts any attempts to correct it. The fact Obama is appointing a whole new crew of former Goldman Sachs executives to his admin is testimony to this.
My guess – All healthcare reform is doomed to failure. Our politicians are Jackals fighting over a shriveling corpse. No money to fix it anyway.
Hmm,
This sounds to me a bit like people yelling at each other from different ends of the same sinking ship.
Why are costs spiraling out of control? We need to see the numbers – divide up the health care pie and see what is increasing in cost.
My guess – it is not routine care. Most likely it is time in the ICU – be sure that you have a DNR (do not resusitate) statement before you go into that coma when you get hit by that teen driving and texting down the street.
And also, it is the number of people surviving longer years. The actuaries missed it – we are all living longer. I had a friend reach retirement and now he spends his time (he is 65) taking care of his Mom. Who would have thought that would happen?
I say tell people there is no free lunch. Offer 25% return on unspent health care dollars – then see what happens to numbers. Too many people see no benefit to wisely using health care $$.
Hi Bill, I think the people in Washington are trying to patch a faulty business model into something more sustainable. I also think that some basic assumptions should be reconsidered. Namely, what does insurance really mean? And, do we need another category of healthcare worker between physician and nurse? Maybe we need more nuns to run hospitals. Maybe the problem is a nun shortage?
Hey Gauss:
There is a healthcare worker between Doc and nurse: (two kinds) nurse practitioner and physicians assistants. The numbers of both of these are rising quickly and it is a very good thing – you don’t need a doc to treat many routine illnesses. These people are very cost effective.
Some NP’s/PA’s are better than docs in their ability to treat illness and interact with patients-even though they have less training…
Just as the chem industry uses more BS/MS chemists supervised by a PhD (who also seems to get his hands dirty) the medical industry is using these NP’s and PA’s. Just as an experienced lab tech can save a young PhD, an experienced NP will help provide perspective to the starting MD.
The medical industry has the billing done by the NP’s and PA’s tightly regulated. (I guess this is a good thing…)
Hi- You’re right, of course, but I’m wondering if these professionals penetrate deeply enough into the field of medicine? That is, does the system allow the NP/PA’s enough latitude to make a difference in the cost structure of the industry? Or, are the savings simply swallowed up by MD/MBA layer of management?
The crazy thing is that while the health care establishment enjoys the rewards of capitalism, they are not subject to consumer pushback in the same manner as other industries. GM finally went bankrupt because they had bloated labor costs and were unresponsive to the needs of the market. With healthcare, we simply keep paying more.
You are so right –
“And in large part that’s all the private sector means to me today. Getting as much money from the plebes as fast as you can, anyway you can, then bolt off to Switzerland. Our country has moved to a winner-take all mentality that corrupts any attempts to correct it”
Does this mean our universities are failing us by graduating people without a developing any sense of social responsibility?
I know – blame it all on the IVY league schools and claim their endowments for the people!
“The question every potential marketer of medically related items must ask is- will the docs use or prescribe it?”
Having worked for a medical start-up company, the question the marketers were asking was actually: “Will Medicare cover it?”
If the 44 million uninsured are suddenly insured and enter the system to a far greater degree than they currently do, the system would obviously become overwhelmed until more doctors/nurses/hospitals are obtained.
Lastly, as to Public Enemy’s comments on controlling the number of chemists, that is fine, but more importantly, the state needs to license them and restrict the practice of chemistry to only those licensees as it does with medicine.
Governments are not automatically incompetent administrators.
“Administrative costs per capita were $1,059 in the U.S. and $307 in Canada; these costs accounted for 31 percent of health care spending in the U.S. versus 16.7 percent in Canada.”
“Canada’s national health insurance program had overhead of 1.3 percent. Canada’s private insurers had higher overhead (13.2 percent) than U.S. insurers (11.7 percent) did. Overhead of U.S. insurers was higher than that of Medicare (3.6 percent) and Medicaid (6.8 percent). Overall, public (Medicare and Medicaid) and private insurance overhead in the United States totaled $72 billion, 5.9 percent of total U.S. health spending, $259 per capita. Insurance overhead in Canada was 1.9 percent of health spending, $47 per capita.:”
Source: http://www.rwjf.org/reports/grr/036617.htm
Wikipedia says the number of people covered by Medicare in the USA is 47M, while the total population of Canada is 33M. So in a sense, you guys already do have a single-payer health insurance system that exceeds Canada’s system in size (if not scope).
In Canada, physician shortages are usually blamed not on the med schools, but on the College of Physicians and Surgeons (accrediting body) that dictates enrollment levels to the med schools. I don’t know if a similar body exists in the USA.
The health-care debate can go around in circles. The system here in Canada needs a lot of work but it has a lot of plusses to it. From the perspective of a patient, and having lived in the USA for six years before returning to Canada, I found the care pretty much identical on either side of the border, but the bureaucracy in the US system was pretty thick, and sometimes stifling.