Speaking of Desi Docs, one of the more interesting ones out there – Dr. Bala Ambati – recently wrote up his (learned) opinions about the path forward on healthcare reform. Haven’t heard of Dr. Ambati? He’s a real life Doogie Howser, M.D. –
Balamurali Ambati graduated from New York University at the age of 13 and Mount Sinai School of Medicine at age 17, becoming the world’s youngest doctor in 1995. He completed an ophthalmology residency at Harvard University, where he developed strategies to reverse corneal angiogenesis, after becoming a winner at the Westinghouse Science Talent Search and the International Science & Engineering Fair and becoming a National Merit Scholar.
Wikipedia teases us with a couple cryptic, saucy details about his personal life –
Balamurali and his family were detained in India for over 3 months in a suit related to alleged Dowry demands by the family for his brother’s wife, which delayed Dr. Ambati’s entry to the ophthalmology program for 2 years, leaving him to begin his residency in 1998. All charges against him were dismissed in October 1996 and all his family members were acquitted in June 1999.
Heh. While Wikipedia indulges in the surly, Dr. Ambati has been publishing his own thoughts in a blog for several years and he’s tackled quite a few of the issues of the day including healthcare reform…
Despite being an Obama supporter during the election, Dr. Ambati has come out pretty firmly against the Democrat’s healthcare reform proposals. He articulates his rationale in a very approachable blog entry –
I have waited to wade into this debate for a long time, since 1992 when I was 14 and a 1st year medical student taking “Medical Care Organization” in second semester. In the last 18 years I have been in the medical community, I have been a son & a brother, a patient, student, a resident, an attending physician in academic practice, a teacher of trainees, an overseas surgeon, and a researcher managing a budget of a lab group of about 10 people…
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…Is the likely Democratic plan a good idea?
I have to say no. Expanding Medicare & Medicaid for all (which is basically what it boils down) opens the door to government price controls, which will devolve into wait-lists, poor quality personnel, salaried staff (who by definition are incentivized to give minimum effort), increasing physician refusal to see Medicare & Medicaid patients, and underinvestment in research and facilities (see Great Britain, and Canada).
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p>While Dr. Ambati’s piece is a succinct, arguably non-ideological analysis, I suppose long time mutineers won’t be surprised that I largely concur with his econ & liberty centric conclusions. For ex., when healthcare expenditures are already distributed like this –
It’s tough to imagine how an even more active government role will somehow improve efficiency rather than turn the whole system into something that further resembles the Post Office and/or the Defense-industrial complex.
Another thing Dr. Ambati’s piece does a good job of is going beyond the snapshot-in-time static analysis that plagues a lot of the current dialog. He instead explicitly recognizes dynamic, forward-looking economic evolution in medicine. Lacking that perspective, it’s easy to claim visible “progress”, for ex., by cramming down physician salaries, drug company prices & insurance co profits. It’s another thing, however, to fully appreciate the invisible role of incentives in creating the next generation of medicine & how the process walks down a cost curve as the tech matures.
I’ve heard it estimated, for ex., that if we could somehow “freeze” medicine at the circa-1990 state of the art, current US spending would be in line with many Western European countries. That 1990 level certainly ain’t bad and it’s quite possibly what one finds to be the norm in many OECD countries. As Dr. Ambati notes –
…on infant mortality, Western European societies have a lot more abortion and make much less effort to save preterm infants born under 28 or 30 weeks of gestation (such births there are often recorded as stillbirths), whereas in the US, NICUs routinely take care of preemies born at 24 weeks or even younger….NICU care was probably not cost-effective 15 or 20 years ago, but is now.”
Still, while Dr. Ambati recognizes the role of innovation in drugs, procedures and services, I don’t think his piece gives enough emphasis to the need for innovation in other aspects of the delivery systems.
While the bulk of medicine today is “B2B” (3rd party, employer insurance paying for your procedures) and worse, “G2B” (gubment doling out tax $$ to institutions), an alternative approach would put more emphasis on “B2C” (consumers paying more of their own way). By way of analogy, if current medical delivery is getting more and more “institutional”, I’d prefer to see more room for direct-to-consumer “retail”.
At the fringes of healthcare – particularly in markets that serve, ahem, undocumented and thus largely uninsured individuals, you’re starting to see emerging, entrepreneurial models where a routine checkup, for ex., literally looks more like a visit to WalMart rather than the post office. (if you’re a SWPL, then substitute “Target” for “Walmart” so as not to detract from the broader point). As I often say in SM, when it comes to capitalism & health, the Poor often have a thing or 2 to teach the Rich and many richer folks would certainly appreciate a system that has some of these attributes –
Her visit turned out to be convenient, fast, and reasonably priced — $90 for an exam and an injection of muscle-relaxant medicine. The same treatment costs up to $200 at a doctor’s office and more than $500 at a hospital emergency room.
…Simple pricing is a crucial part of the in-store healthcare formula. Visitors to the Wal-Mart clinic can study a posted list of prices and procedures that is much like the roster of services displayed at a Jiffy Lube.
It costs $65 to see a doctor, plus additional fees for tests and procedures. If patients know in advance what they need, they can select a service from an ”a la carte” menu. For instance, a cholesterol test is $30 and a child’s sports physical is $25….’It’s all about convenience,” said Dr. Grant Tarbox, medical director of Solantic, a for-profit Florida healthcare chain that leases the former video arcade space from Wal-Mart and operates the clinic.
…”Quality is defined on how fast can I get what I need. Speed and convenience and price begins to matter a lot.”
A retailer readily understands Quality, Speed, Convenience and yes, Price in a way an institutional player can scarcely comprehend. And as consumers we readily recognize these entrepreneurial fruits in our day-to-day life and yet exhibit a strange amnesia around election-time when politicians dangle competing top-down master plans in front of us. Standing in the way of a more “retail” model throughout the medical system writ large comes from the entrenched “Sacred Temple of Medicine” establishment – including the AMA – who often prefer the implicit prestige of the “institutional” model.
I don’t think consumers are capable of deciding what tests they need, particularly when they are very sick. A physician is trained for exactly such a thing but right now their incentives are misaligned to focus on increased procedures/tests rather than focusing on patient outcomes. Finally, because consumers don’t know the costs involved they have no ability to guide their physician’s decisions.
Free market systems work well when we can increase consumer knowledge to help them keep the professionals who do the actual job in-line from a pay standpoint. However, if consumers have to decide on how much a professional should get paid for each interaction then transaction costs (tangible and intangible) start to increase and the system is painful to use.
In the medical establishment I think the problem is less of uninformed consumers but rather that physicians paid by highly variable compensation driven by # of tests/procedures. If physicians get a salary with a small amount of variable comp. for improved patient outcomes I think we will see better patient outcomes and lower costs.
The reference to the dowry case is completely unnecessary, and might lead to the comments in the thread to go off in a tangent (It was dismissed and was murky — some stuff came out in the case that showed the wife’s family in a poor light).
Regarding Bala Ambati’s opposition to the public option, Krugman probably put it best:
While doctors (obviously) need to have a large say in the heath care debate, we need to remember that their profession has contributed to the mess and that doctors have a vested interest in blocking some of the reforms needed.
ambati doesnt talk about doc rationing. surprise, surprise. oh. and ooga booga great britain canada sweden.
also, if patients can perform open heart surgery on themselves, there’s no need to order from a restaurant.
I think the hospitals (and Big Pharma, insurance companies) also contribute to the mess. Charging a patient $20 (or some ridiculous amount like that) for a small bandaid or sanitary pad while staying at the hospital smacks of greed, not to save the hospital staff and executives derrieres from liability, lawsuits, etc. I can understand charging a premium for drugs, IV’s, tests, xrays, ct scans, etc but overcharging things like bandaids, coldpacks, etc sounds crazy. Is there an explanation or can anyone provide the reasoning for a hospital charging an insane amount of money for a band aid?
his suggestions aside, has anyone noticed that he linked his blog to littlegreenfootball? His essays on Islam and Muslims are just…well,no polite word to describe it.
No one knows what the ‘likely Democratic plan’ will be. From this snippet, it seems he is arguing against a straw-man single payer health care program (‘Medicare and Medicaid for all’). So this hints at some aspect of ideological bias, given that he is misunderstanding the actual and complicated negotiation process that is going on.
How is expanding coverage going to lead to price controls? What would lead to price controls (which are ideologically anathema in the United states) are political activism and economic demadns for price controls. This has already happened – everyone talks about how expensive health care provision is in the United States compared to other OECD countries. It is simply a question of HOW these price controls happen – through market mechanisms, through limiting the size of the pool of people who have access to health care (not politically feasible really), through legislation, through policy, or some combination of these (which is more likely than not, since that’s how almost everything works). IN addition, to boot, there are already price controls on patients – they are denied necessary procedures. The problem is the ways in which those price controls are determined for the overall system – there are selection bias problems – leading to people with preexisting conditions being denied care, etc.
How will price controls devolve into ‘wait lists’ ‘poor quality personnel’ and disincentivised staff. This is a highly ideological take on both the nature of what health care is as a ‘product’. What it would do is recognise that health care, unlike, say, coffee or chocolate, is not a product that people can choose to go without and reduce the power that the suppliers have as a result of this reality – quite simply, it is even more impossible to develop a market with ‘perfect competition’ for health care than it exists now. His comparisons are also strange – I have had both private and public plans in the U.S., paid for my own private coverage in the U.S., and the NHS coverage in the UK and I have no waiting listsi n the UK. I get poorer preventative care and less routine work but I have more access to the things I need, often at a substantial price reduction to me, not even including the lack of premiums.
This is also a highly ideological take on the reasons why doctors go into health care. A fairer argument might be that you would have less monetary incentives to go into medicine and more nonmonetary incentives, though even that is arguable. You could quite easily have public provision of heatlh care without having government run clinics – you could have private clinics which the government pays to provide health care.
On to his argument against single payer health care:
On expanding coverage:
He omits the economic benefits of an effective subsidy to all industries through healthier workers and by taking health care costs off their payroll and putting them into the taxpayers’ hands. He also ignores the benefits of a rationalisation of financing for health care provision – e.g. a focus on preventive health care would greatly reduce the amount of money needed for specialists.
As someone who was once self-employed, I can tell you that health care costs are an enormous barrier to entrepreunership and actual participation in the market. We don’t need more extraordinarily specialised high tech products as much as we need willinginess to start a mom and pop shop that can employ 4 people right now. Medical debt is additionalyl a leading cause of bankruptcy and with the amount of debt that American consumers already have and the effect that has on demand in the global economy, helping to limit an increase in that would be a good idea.
He ignores the basic irrationality of the current system, in whcih people go to emergency rooms, who are legally not allowed to turn them away, and with good reason, for a cold for their children, rather than going to someplace else. He ignores that there are economies of scale in reducing the amount of paperwork from 15 different companies or whatever to one. He ignores that there is a cost reduction in removing the marketing aspect of health care provision.
There is much more to discuss, but I will leave it at that for now – I would simply say that this pesron’s claim to ‘expertise’ on this issue is belied by a very surface level take on the issue at hand, which neither reflects an understanding of the political realities of what’s to emerge, nor reflects an accurate assessment of the ways in which health care works both in itself and beyond in the wider economy and society and is ideologically biased.
He didn’t say anything about pre-existing conditions. How is it okay that the people who need health insurance the most are the most likely to be denied? (And not all health issues are preventable, such as cancer or autoimmune diseases)
And I think doctors and pharmaceuticals have contributed to the mess; unfortunately, healthcare is a business and many providers seem to look out for their own benefits rather than their patients’/consumers’.
Vinod,
You have a short memory. After the last fisking on healthcare when I took your arguments apart and had you scampering away for safety, you have chosen to return with yet more twaddle.
–REMAINDER DELETED–
Jyotsana – it’s ok to disagree w/ the blogger but your comments should demonstrate a little civility rather than ad hominen insults. You’ve been warned.
It’s okay in the same sense that people who say they love the market and worship it somehow find it in their hearts to accept trillions of dollars of government money to bail out particular companies when it protects their investmetns and the politcal and economic regime that created it. Intellectual hypocrisy, while not restricted to people who endorse crass, dogmatic, neoclassical economics, seems to have found a very comfortable home there.
Then you should leave the data standing and delete the “ad hominem insults”. Especially when the data is from an earlier post that slipped by you.
If I replied to Vinod’s claims by attacking his beliefs etc., without in any way analysing his claims you could say I am making an ad hominem argument. Although a penchant of a person for cherry picking or ignoring data entirely does discredit his argument. The rest of my post about irrelevant and even flawed comparisons of government run healthcare with the USPS or quoting from a US News article rather than from a WHO report, is in no way uncivil. You should demonstrate some…
OK I won’t go there. I have been warned you see!As a Canadian living with universal healthcare access for the last 12 years and having used almost the full range of health services I often find myself confused (and a little amused) hearing the predictable chain-of-doom scenario from south of the border regardign public healthcare: price controls mean waiting lists mean bad healthcare etc etc etc. Ok we have different systems – Medicare/aid is different from Canada’s universal healthcare model. But for what it’s worht, here are a Canuck’s answers to Dr. Ambati
for some high volume non-essential services for which support services (regular dr’s visits, visits by public health nurses etc) are provided while waiting. So no, the health system here doesn’t chuck people out into the street with an 18-month raincheck – they are absorbed into the health system and are given constant care until their condition is properly addressed – regardless of whether they have the money to pay for it or not. And if they need an emergency procedure, or immediate attention they’re given that right away. NO WAITING. The point is, it’s a doctor and not an insurance bureaucrat who gets to make that decision in Canada.
Sorry to dissapoint Dr. Ambati, but the standard and quality of personnel at Canadian hospitals is exemplary! My only criticism is that many immigrant doctors are not absorbed into the system as easily as immigrant nurses – but as far as I kno that has nothign to do with the universla healthcare model.
Not really – the doctors and nurses here are incentivized by their ethics and professionalism (much like good doctors in the US) and they do a pretty darn good job! Plus they make good pay and have great lifestyles.
… I’ve never heard of a doctor refusing to see a patient in Canada Dr. A. I think given our universal system of healthcare, doctors can’t turn a patient away. Does that kind of thing happen in the US?
Compared to what? The US is the world leader in most areas of R&D anyway (more tax dollars mean more funding), so I don’t think this is a reflection of how much better the free market approach to healthcare is. On the other hand, Canada’s expertise in many areas (cancer research, genomics etc) is world renowned, as is the work coming out of the universities and industry in the UK, Germany and France. Look no matter what Sanjay Gupta and Dr. Ambati say, in my experience universal healthcare rocks! Service is excellent, and absolutely free. Yes we have our problems, just like EVERY system has its problems, but we think the answer is running the healthcare system in a more efficient way. Given the free market experiement in healthcare in the US over the last 50 or so years (and reading our Kenneth Arrow), I think most Canadians understand that the free market simply can’t provide a moe efficient model.
i stopped reading lgf after they fooled poor little andrew sullivan into printing some fake anti-semitic hate crime allegedly perpetrated by Palestinians (i forget the details), and i noticed sully stopped linking to them as well, but since then the site has evolved in a very interesting way.
at some point during the obama campaign they decided to take on anti-black racism, xenophobia, and the extreme right (milita movements, kkk, etc) and how these extremists infiltrate, and are enabled by, the mainstream right…like sarah palin and ron paul. basically they’re doing to republicans and white evangelicals what they’ve been doing to CAIR and mainstream muslims for awhile now. given that this intellectual honesty is rarely practiced it makes for a really interesting read. its acttually one of the best sites to keep up with emerging fascist movements, both christian and muslim.
check it out.
Those countries are advanced but the US is far and away the leader here. The question is what happens to drug development when the US govt uses its near monopoly status to squeeze pharmaceutical companies, like the Canadians do. odds are, they won’t put as much money at risk if the rewards are no longer there. i heard michael Milken say on tv that r&d declined 40-50% when clinton tried to reform healthcare last time around.
the US system is mixed. govt finances research at the univeristy level and NIH along with private institutions like howard hughes. then start-up biotechs often licenses the tech and, ususlly financed by angels and VC money, develop it towards commercializtion, a very expensive process that can eat up like 70 million for a cancer drug for example. its high risk, millions have gone into trying to trreat chronic wounds like diabetic foot ulcers for example but nothing has proved efficacious. these investor are willing to take the risk b/c if they can pull it off the market and returns are huge. if the start up has good early-stage data in clinic they usually sell themselves to large pharma or IPO. there are about 500 such companies around the US.
So the canadian system benefits from this process. American drug companies are willing to sell their drugs to canada b/c something is better than nothing and they always have the US as their main market. its a parasitic relationship with the US taxpayer and investors footing the bill for R&D. so its unclear how the effectiveness of the Canadian system should inform us, at least in regards to access to advanced therapies. in other words, if we go to the candian system, we have to find a more free-market country than us to develop miracle drugs that we’ll buy at a discount.
“given that this intellectual honesty is rarely practiced it makes for a really interesting read. its actually one of the best sites to keep up with emerging fascist movements, both christian and muslim.
check it out.”
Thanks Manju for the suggestion. I do visit the site sometimes,just to get a laugh from the loons and the lunatics posting there.I hope you are not one of them.Again,thanks for the tip.
An interesting discussion pertaining to this at the Marginal Revolution and the Atlantic.
An argument I’ve raised before is that if one looks at the UN’s human development index which balances out several factors, the United States compared to the heavy hitters in the European Union does ok (Great Britain, France, Germany, et. al, Scandinavian countries are not an apples-apples comparison). Any top down system at the federal level, trying to manage this for a large population of 300 million (not everyone will be part of a govt.sponsored plan, if one is enacted) is not a lean and efficient system. While the current discussions aren’t for a single payer system, at least what’s being discussed seems complicated and fairly large (with the associated costs) If anything, it needs to be broken down into smaller and more manageble pieces (at worst state level, better off at city or county levels). There is something to be said for retail systems filling some gaps in process by bringing the provider and consumer in closer contact. Or maybe the government (since it seems inevitable it will be more involved) can focus on providing coverage for those not covered, for a handful of issues based upon what most Americans are suffering and dying from.
Ultimately, any complicated system that requires nuance from the federal govt. won’t be very efficient. The federal government is a sledge hammer, not a fine tuned instrument. Comparing Canada trying to manage 30 million to the United States 300 million isn’t a good comparison, either.
An interesting post on Overcoming Bias with regards to Municipalizing medicine
Perhaps it’s because when you start a comment with a lame insult, it dissuades people from engaging with the rest. Funny how things work that way….. (muchos gracias SM-I!)
I know it’s sorta lazy to answer a blog post + questions w/ a pointer to another person’s blogpost BUT, I do think Megan McArdle’s commentary hits many of the points raised in comments –
http://meganmcardle.theatlantic.com/archives/2009/07/a_long_long_post_about_my_reas.php
For ex – why not have the govt be a monopsony rather than directly do price controls? (in effect, they ultimately become one and the same)
As far as the adverse economics on entrepreneurs from health benefit plans, I totally concur! Health insurance should be purchased by individuals (e.g. a B2C market like car insurance) rather than purchased by businesses (a B2B market… which means if you lose your job, you lose your coverage or have to pay for a fringe market solution). This, of course, is a key plank of the various competing health insurance proposals that attempt to counter the House Democrat’s plan.
Are you serious??? Let’s not go down that road.
My point about the US being the leader was simple mathematics – we have a population of some 30 million, the US is close to 300 million. More tax money means more R&D dollars. I understand the point that you’re tyring to make – however, I don’t think that it’s valid until you can show me a country with a free-market-healthcare system with a R&D budget like Canada’s which is nevertheless ahead in terms of medical/pharmaceutical research.
No one doubts that the profit motive can produce some kind of result in healthcare. The point is does it produce the best results? Based on my experience (I’ve lived in both kinds of countries) I don’t believe so.
Skimmed through it, but there were too many WTF moments for it it be credible. For Example
Does anyone really believe that government regulations will threaten benefits for the elderly? If insurance companies had their way, without regulations, would they really cover the elderly? (Personally, I feel that government regulation in this matter is wrong, and the elderly get too many subsidies, and are preying on the current earners)
I think she’s making a (semi-humorous) example of a broader point –
In other words, there are basically 2 ways that humans allocate scarce resources – politics and markets. With markets, resources follow the Green which individuals ultimately control. With politics, they follow the ‘pull’ which bureaucrats ultimately control (and yes, ration, according to some formula).
Interestingly, Rahm Emmanuel’s MD brother Ezekiel is Obama’s “Special Advisor for Health Policyâ€. He recently published a proposed formula for rationing based on a variety of criteria and provides a handy-dandy graph for the likelihood of receiving intervention based on patient’s age.
Calculations like this are quite intrinsic & inevitable within top down, govt plans.
Having the government use economic leverage rather than legislating prices by fiat (which is what is invoked by the term ‘price controls) is not identical. What this would do is redress an imbalance in an extraordinarily imperfect market. However, this argument holds regardless of whether there is a monsopnistic single payer option (which is, again, not politically feasible in the short term and very few are proposing it) or there are many (which is what is endorsed in nearly all the plans right now). If you want to debate future plans 10 years from now, that’s worth doing, but we should be claer that the point raised above is abstract and not applicable to any of the plans that are being discussed right now.
The main question at hand is do you want to allow a government offered plan or a quasi-governmental non profit agency to compete with the private plans or not? I see absolutely no reason why, given what the insurance industry has generated on its own, that you woudl not want to introduce this measure. However, if you support single payer health insurance, I do see a conflict, because a ‘bad’ government plan (i.e.a means tested one that bears an inordinate share of costs of people who can’t otherwise afford health care) is less sustainable and will appear less efficient because it will take on the illnesses that the rest of the industry does not want to do.
The argument about innovation is absurd. Is the suggestion that research grants are going to be cut because the federal government will devote that money to providing care to people? Yes, there is a problem with demand politics, but then, given the amount of power that solutions that emphasise government provision have (little) comapred to solutions that argue that the market will take care of things, including solutions that involve government competition with the private sector (much), I find this kind of slippery slope argument alarmist and misreading the realities of the politics. If you have a Democratic controlled Senate and House and single payer is not even on the table and whether or not there will be a government funded expansion of Medicare / Medicaid / VA for other people has become a difficult battle to win and the President who campaigned on change refuses to weigh in strongly on this, well, I think the fears of government dominance and inefficiencies thereby produced are misplaced. Right now, you already have the situation that is described above in terms of costs going up – and it is because of the nature of health care in a wealthy society, an aging society, the stupid prescription drug benefit that Bush added, the clout of the insurance companies, resistance of some/many doctors and moreso their professional agencies like the AMA to loss of status (though not necessarily wealth), and a fragmented political process that is incapable of creating a statist solution to this problem – however nuanced – as virtually every other wealthy country on the planet has done. It is a massive subsidy for business to create government funded universal health care, and it is good for both fiscal ecnoomics and the economy as a whole if administratoin costs per capita are reduced, it is good for political stability and for mental health, stresss, and ordinary people’s lives if health care can be guaranteed. These are all very conservative arguments, which Wal-Mart, if it has policymakers, probably understands.
On a final note – there is a multitude of reasons why the government does not control defense spending or produce efficient solutions – a major one is political, that the party during the cold war that most forcefully articulated the idea that government spending should be cut to a bare minimum is also a party that supports militarism and expansion of weaponry. This is not to say that supporting militarism is not a bipartisan cause, but I would guess that the emergence of the Blue Dog democrats would have a significant effect on restraining government costs, as would the general fiscal and economic situation of the government and the transformation of Democratic party ideology to be less attentive to care provision in general and more to cutting costs and inefficiencies (e.g. see Reagan-Bush, Clinton, and Bush records on surplus/deficit).
There is a third way, which is having a mix of both. This is the approach that’s broadly been adopted by most of the plans being discussed.
The description above though is a fairly unnuanced description btw in terms of describing how things work – the government works as a buyer and seller in the market as much as companies and individuals and companies and individuals operate as political actors in the government. These things happen in the real world, not in the abstract – as looking at things like rent-seeking behavior in the U.S. or India or anywhere else shows.
i agree. better to let 60 year old poor people and blacks die die, and the rich spend millions to extend care of coma-stricken 90 year olds. it’s equitable. after all, that’s what the market would want.
(as in, let’s not wave around the scary prospect of socialized medicine without context)
Vinod, thank you for this post and thank you for bringing Dr. Ambati into out dialogue. I remember hearing about him in the past, but can’t remember when/where and totally forgot about him. I particularly give him credibility because, as you point out, he voted for Obama.
A couple of points I wanted to raise that haven’t been touched on on this page –
http://online.wsj.com/article/SB124329282377252471.html
I know that there’s quite a difference between folks who move from Maryland to a bordering state versus moving out of America, but the highest earners will find ways to keep money off-shore or in tax havens. There is some question in my mind whether this strategy would work; at the very least, you have to concede that it won’t bring in as much money as the plan’s architects are projecting.
I actually have to disagree with tort reform. I don’t like gov’t setting price controls, and tort reform (to me) seems like an underhanded way of saying “lawyers make too much money” or “your arm/ability to walk/spouse’s life isn’t worth it.” How about a loser pays system to help reducing frivolous lawsuits? In civil cases, the plaintiff is responsible for legal costs of the defendant, court costs, and reimbursing the defendant for lost wages?
I think meddling with the incomes of doctors will lead to a drop in the number of medical school grads entering primary care fields (peds, internal medicine, family medicine). The proportion of folks headed to these fields has already trended downward over the last several years, but will drop even further.
“In the medical establishment I think the problem is less of uninformed consumers but rather that physicians paid by highly variable compensation driven by # of tests/procedures. If physicians get a salary with a small amount of variable comp. for improved patient outcomes I think we will see better patient outcomes and lower costs.”
This little factoid is often repeated by people who know little but not much about healthcare. A good friend of mine who’s a construction worker argued this point with me before the 2004 election.
A doctor who orders an MRI doesn’t see a dime of it assuming he or she doesn’t own the MRI scanner. If he or she did own the scanner, there are strict regulations regarding appropriateness of said MRI (these are called Stark laws). Similary, a doctor who orders a blood test doesn’t see a dime for the test, assuming it’s not done in his or her own office. Where this comes into play is procedure-based testing – cardiac catheterization, endoscopy, bronchoscopy, etc. There is a clear financial incentive for these tests. However, removing payment from these tests may cut down on the total number of tests performed, but a physician is much less likely to perform them in an emergent situation if they aren’t getting paid. It’s a lot less painful to get up at 3 am if you’re getting paid to do so, and it’s a lot easier to rationalize not doing so when you aren’t. Sad, but true…
With all this talk about how one system didn’t work in Maryland, or how the System doesn’t work in Canada, Sweden, Massachusetts, etc. – please tell me this: Where exactly DOES the healthcare system work?
I think the main question is “what systemic ‘advantages’ would a govt plan have over private plans?” for ex.,
will it draw upon by taxpayer $$’s rather than be funded by payments? If so, it automatically has market distortive / setting effects not unlike the role Fannie/Freddie had with mortgages. The latest CBO studies, for ex., put this bill at $1T.
will its payouts be influenced by politics & national budget? If so, all the issues around public choice economics come back into play — such as cramming down incentives for future medical innovation & the stuff Megan McArdle’s post goes into. In a field like medicine, “seen vs. unseen” problem is particularly acute – and politics is far worse than economics at optimizing the seen at the expense of the unseen.
will folks “dump” individuals on it and/or will it crowd out other options? By definition, it if is taxpayer supported, it has a cost advantage over other plans. By definition, if you need it to have monopsony power, it will crowd out other providers – particularly new, entrepreneural startups.
will it mimic other countries? If so, the problem is that all other countries free ride on US healthcare markets & innovation. By analogy – for ex., Canada knows that if a Maple-leaf flagged cruise ship gets hijacked on the high seas, the US Navy is ultimately there to help and/or prevent it in the first place. As a result, Canada doesn’t need a large, blue-water navy because of the US’s expenditures. Medicine has arguably evolved in a similar direction where the promise of the US market is responsible for a disproportionate share of the justification for R&D funds. This is perhaps the largest of the “unseen” forces in med. Blindly benchmarking against top-down measures in other nations becomes a bit of a blind leading the blind.
For me, the prima facie arg for me is basically “govt is already ~50% of health expenditure, is increasing its role likely to increase or decrease systemic efficiency & effectiveness?” For all the reasons you’d rather fly Kingfisher instead of Indian Airlines or EasyJet instead of BritishAir, I just don’t see how even more govt makes for happier consumers.
I go further – I blame most of healthcare’s ills today on the large footprint possessed by govt, quasi-govt agents like the AMA, and distortions like employer-based health insurance. Rather than ratcheting up institutional medicine, I’d instead like to see medicine look more like this.
Why not figure out how to help Target move “upmarket” & give ’em more of a chance before spending $1T in taxpayer $$’s & creating a new permanent bureaucracy? The seed kernel of a newer, cheaper, more transparent, and more consumer friendly medicine are quite literally staring at us in this sign.
The ‘Canada-is-a-free-rider’ argument again? I’ve heard another version that stated that Canadian drugs are actually subsidized by the American consumer who pays higher prices for the same drugs. So my question is – why do the US drug manufacturers keep sellign to Canada if they’re doing so at a loss? And if the American army/navy etc is omnipotent then why is there a need for a Canadian presence in Afghanistan and off the coast of Somalia? The answer to both is that things are a little more complicated than the brute fact of size and strength – the same applies to the medical industry. Just because the industry in the US is ten times the size of its nearest competitor doesn’t mean that the relationship between the two is parasitic. Is the American demand for freshwater, oil, autoparts etc from Canada ‘parasitic’?
Ok I don’t know if you’ve already answered this, but how does private investment into R&D stack up against investment from tax dollars? Or are they both indespensible at different ends of the chain? My observation is that private industry won’t touch a technology that has not already been proven by tax funded research – i.e. private investors will look to minimize their risk after ‘free-riding’ on tax dollar funded research that proves that the technology works. Then the investors swoop in, set up production distribution marketing etc and the technology reaches the consumer. So both are indespensible. I don’t believe that tax dollar funded research is going to be adversely affected by a public healthcare system – my understanding is that they will be funded quite differently. As for the private investors who won’t be motivated to invest anymore if drugs have price controls etc – I think they will find numerous ways to adapt, the way healthy companies do in a healthy free market economy. After all, there are drug companies in Canada that make lots of money.
the equation is this – for most med, the fixed cost (the R&D cost up front to develop – say, $800M) dwarfs the marginal cost (the cost of pumping out an additional pill once you’ve got the formula nailed – $5 / pill).
In the US, the drug co charges for the pill in a way that makes a profit off of the Fixed + Marginal cost ($100 / pill?).
In Canada, the UK, etc. have national health buyers that say “In Canada, you will charge $10 / pill – take it or leave it”. For the drug co, it’s a devil’s bargain – there’s still marginal cash per pill (e.g. there’s 5 new dollars they didn’t have before) but it’s not profitable overall. So, they jack up the charge to the US consumer to offset the fixed cost that’s not being covered by the Canadian. (this is part of the underlying reason for the brouhaha a few years back around drug reimportation)
Canada et. al. free ride on the R&D but not the marginal cost of production.
But Canadian drug companies still somehow seem to be able to develop ‘high R&D cost drugs’, sell them at lower prices and still make a profit. There’s something else at play here. Drug prices include a markup for marketing, admin profits, etc that together constitute a higher portion of the price than R&D costs. Also drug companies don’t always have to reinvent the wheel when developing a new drug – many leverage reseach that has already been done (through government and private funding) to develop drugs at low costs.
old lumbago, here’s an article detailing the province of ontario’s public statement on the lawsuit it faces from the woman who was asked to wait 6 months for surgery on her brain tumor. this is the woman who is currently appearing in the ads denouncing obama’s universal healthcare plan.
and then…
that would be the US market 😉 Just like historically, Swiss (Roche) & German (Bayer) pharma co’s are powerhouses but make their $$$ from US sales, not home market
1) drug development costs have been INCREASING faster than inflation over the last 10-20 yrs (ask anyone who’s invested in biotech / drug stocks 😉
2) public funding helps with basic science… private funding is what creates the drugs / procedures (the expensive part)
i was looking over the comments on the article linked above and remembered something. one time in the states i had an accident and got thirteen stitches. i healed and when it was time to get them removed i got lazy and removed the stitches myself using nail clippers. i think i saved some us insurance company like $600. Somebody owes me some moola. LOL. armed with that experience. I’m opening up khoofi-mart for stitching up. i’ve taped, shaved, peeled, bandaged, physio’ed my sorry ass carcass through a few decades. we nose what ve do. no vate times, $15 flat fee for consultation but samosa and kulfi will do too.
There both indispensable and operate at different ends of the chain.
No. The tech is usually discovered and patented at the university, hospital, NIH, Howard Hughes level, often funded by the US taxpayer but not always. Then private invesotrs–angels, professional venture capital firms, big pharama–license or buy the tech, so they’re not freeriding.
Just as importantly, from discovery to commercialization, the risk is MASSIVE, with the vast majority of drugs never getting to market. Thats because the tech at the university level is far from proven. often there’s some data on animals but by the time you test on humans it turns out the drug doesn’t work. humans react differently from animals. other times the human data is too small so when you do a real trial to prove human efficacy in clinic it turns out the drug doesn’t have much of an effect.
so, take dendreon (DNDN) for example, a publicly traded company so you can look it up. they have a highly advanced dendritic cell therapy for cancer (i forget which type). the tech came out of stanford and i guess its safe to assume stanford got some govt grant. dndn purchased the tech more than 15 years ago ( i think stanford got shares in the company). but the technology, while hightly advanced, is controversial as it usually is at that level. Well, to make a long story short, 15+ years later DNDN has burned thru more than $100million (i’m approximating, it may be more) of VC money including an IPO just to fund the clinical trials and display enough some human efficacy in clinic to get approved by the fda.. During that time there were a lot of skeptics and frankly there still are. but these guys believed in the tech so they took the risk not knowing for certain whether they’d come out on the other end and eventually get to market.
well, the fda gave them the go ahead a few months back and now they raised another $221+ million in a secondary offering in order to set up production. That’s more than 300 million bucks over 15+ yrs and they haven’t made a red cent yet. and even if they do start making money there are some competitors with better tech that may put them out of biz.
its this system, with similar dynamics to the IT industry (but with more govt), that has produced the bulk of miracle drugs that the whole world benefits from. i’m actually somewhat agnostic whether the Obama plan, whatever it may be, will help or hurt this industry, and frankly I’ve seen evidence that it might help, but i think its safe to say this process must be taken into consideration since its produced so much.
Vinod. Thank you for bringing attention to this topic. The posts have been interesting and informative.
One of the main problems i see in the current system is the incentive HMO’s have to deny patients care/coverage. This translates into nightmares trying to get a hold of your insurance company.
My question is… If free markets are the solution to the health care crisis, why has the current private, free-market system failed to provide an insurance option to the chronically sick, or “uninsurable”? Where is the free market solution for this demographic? Where are the more “patient friendly” insurance options that should prevail in a true free market system?
but free markets do the right thing. hence the situation today is wonderful. hence free markets work. it’s a simple self-contained argument.
in actuality, our current system is dominated by govt…. and some folks decry what a disaster it is… and those same folks brilliantly call for more government.
this is intrinsic to the fact that today, your employer pays for your premium but the insurance co pays for services to you. You can bitch and moan at the insurance co but you’re mostly captive to it b/c it’s unlikely you’ll change your employer just because you hate that insurance co.
By contrast, if you look at auto insurance, the level of “customer service” is far far far higher precisely because the person demanding service is the same person paying the premium… (Progressive, for ex., literally sends a friggin ‘concierge’ SUV to your accident scene to help w/ your claim)
This is only a primary question if you assume that it is policywise worse for there to be public provision of goods in all cases. This is an assumption, and one that can’t be refuted with argument. I am asking you to consider the possibility that a health care system based primarily on multiple private companies serving as intermediaries between health care service providers and patients that results in enormously expensive and low quality or absent care for tens of millions of people is not economically rational either for the health care system or for the economy as a whole. Every health insurance company currently has an incentive to deny care as long as people pay their premiums – a government plan as a backstop against this is the bare minimum that one might do to fix this in the interests of patients.
What seems to me more likely than the crowding out scenario you are worried about is that insurance companies will continue to make enormous profits by dumping sick patients onto the government plan, seeking reinsurance, and using other means at their disposal – while the political demands for health care solutions might be reduced and leave them to their profits – which is one of the reasons why most radicals think the current plans are bullshit, because they don’t go nearly far enough in ensuring that social democratic values are invoked and involved in the policymaking for health care provision. but I digress – even setting aside ideology, solely in the intersts of generating a functioning society in a global capitalist economies, insurance providers should have a far more minimal role in ensuring personal and societal health, as in the UK., than they currently do in the U.S. for all kinds of reasons, some of which I specified above.
There are undoubtedly objections that can be raised against a state capitalist or mixed economy model of health care provision. Every system – whether primarily public or primarily private or a fairly even mix – is going to have flaws. However, what is beyond empirical question is that the overreliance on the private provision of health care costs in the U.S. has complet4ely and totally failed on virtually every count except for the ones that people like Bill O reilly bring up – intensely specialist care for really wealthy people. That is not a model for social health, which presumably we all agree is important – – the basic model has to be there in order to address the concerns that are at the edges and right now it’s just starting to be developed (way too slowly in my opinion).
And that’s setting aside far more important questions (to me) like whether increased faith in government in the U.S. through things like universal health care will bolster middle class and working class support for u.s. imperialism and acceptance of glaring inequalities.
umm.. those are some of the parts that are acknowledged to work well.
does it occur to you that there are intelligent people / arguments who do NOT acknowledge this?
Instead of a tautology, perhaps the problem is your presumption.
Thanks Vinod for this educational post. Health care is a complex issue and one cant just use overall stats in a diverse country such as the USA (we need to statistically control for various sub-populations). As an aside, many years ago, in the mid 1990s, Ambati and family did a public appearance in Singapore (where he was presented as the world’s youngest doctor; if I recall his sibling was a doctor as well).
otherwise intelligent people, maybe. don’t see very intelligent arguments, to be honest. nobody sensible seems to argue the va system. the biggest complaint about medicare is that its overheads are high. but that requires you to use a per patient base than total dollar amount base, when the dollar amount is possibly more reflective of the extent of care that older people will need. i’d like to see a comparison based on number of patient visits. if you use a per dollar base, medicare is significantly signifcantly better than private plans. arrow’s seminal paper has an excellent elucidation of the problems with a fully private healthcare market. the incentive structure is to deny coverage, and i don’t see how competition will change things in a way that is beneficial to customers. auto insurance works because there is a mandate.
this is not to say that the cost cutting arguments in the current dem plan do the job, but there are many things that can yet be done. trying to kill the current plan and kill taxes is an argument for a bad status quo.
no.
…and that is a far more constructive comment than all your previous ones combined….
well, i got tired of rehashing these well known facts – none of what i am saying is remotely new. i’d have thought that somebody who has a strong opinion against govt medical spending and posts against it should actually be aware of these details, and if so, address them. sorry, i just get exasperated by mankiw like behavior, although in your defence, i think there is greater reason to believe that he is clueful and therefore dissimulating on purpose.
We need more MDs. This would bring down the cost of health.
In a 2003 study Dean Baker, who is co-director of the Center for Economic and Policy Research, estimates that by adding roughly 100,000 physicians to our current pool of about 760,000, we could pull doctors’ salaries down from an average of $203,000 to somewhere between $74,000 and $126,000. For the average middle-class American family of four he reckons that would lead to savings of $2,200 to $3,700 per year
Also, the biotech companies are one of the most profitable sectors of the S&P 500. Do a query using some stock screener based on net profit margins, and you’ll be surprised that IT companies, like MSFT and GOOG, as well as biotech companies like AMGEN are at the top. However. these companies spend more of their money on marketing than they do on R&D! They award these jobs as pharma sales rep to hot blonde chicks who can’t even spell “Tylenol” or “birth control.” These blondes then play golf and seduce MDs to buy their products.
The insurance companies are managed by predatory capitalists who are corrupt.
Finally, medical schooling needs to be revamped/modernized/updated to deal with today’s challenges. For example: 1. Instead of a 8 year program to get the MD (and most folks take years after their BS to earn their MD), why not a 6-7 program? This could be more beneficial for females, who could be 28 by the time they finish their residency and they’d be ready to start a nice family life. 2. Lower/Limit the amount of time in residency. 3. Currently, we should allow medical schools to accept ANY American students, and not just students from within their states. For example, there are MD schools that ONLY accept students from within their states. However, if we allowed more free-market capitalism in this, than some marginalized californians, where MD schools is VERY tough to get into, can easily gain admission to Univ. of Mississippi, let’s say. 4. Allow MD students to transfer to different schools.
44 B.Mahesh. Thanks for saying what I always wanted to say but too timid to say in public.
This is so true. Girls in India finish their medical degree at a relatively young age and come here and practice medicine with no problems. They normally have family before thely come here. People do not understand. I told a friend once that if I were to enroll my daughter here for an M.D. in an U.S. med school, I might as well join her in a nunnery/convent. America the beautiful! [The ignomy of it all, I was on the staff of a couple famous med schools in the U.S.]
Have you ever heard of barefoot doctors?
let me respond to all that was said above, obviously said by someone not in the medical field and doesn’t know the way medical education works in the states:
there are 6 and 7 year programs (penn state, boston u, michigans flex program), there are different way of approaching this. some people want to explore their options, learn sociology/art/etc, and major in something other than science and then go to medical school, rather than cram 3-4 yrs of undergrad into 2 years, or like in india, make it non existent. as for those who go to india for medical school, by the time they come back and take all the USMLE exams (most people fail them once or twice), it turns out that people end up the same ‘age’. and as for the ‘start the nice family life‘, it’s pretty offensive, and people can start their family life whenever they want. women did it in college, graduate school, residency, whenever. just like BOYS can start their families when they want. (just angers me at how sexist b-mahesh sounds)
limit time in residency? my residency took 5 years, could it have been shortened? i don’t think so. technology, techniques, and knowledge takes time. i don’t think you want someone to operate on you when they’ve only had 2 years of experience rather than the usual 6-7. i’d rather have someone who was supervised and did the procedure 1000 times rather than 10. maybe it could’ve been shortened in 1900 when pharmacology was simpler, and we didn’t know as much as we do now. things are in constant flux in medicine.
us students can get into any medical schools, the private ones accept those from any state at a higher rate, the public state schools are the exception. why? because the instate residents PAY THE TAXES for the school. my medical school was a state school and ultra competitive, we had out of state students, and these were the cream of the crop from the bunch. it’s fair. so getting into NYU would be ‘easier’ than getting into SUNY-Brooklyn for a kid from Illinois (just a relative example)
You CAN transfer medical schools, I know tons of people who did, since their spouse or significant other were in jobs that made them move. They tranfered across states.
Whew. I hope this clears up some of the ignorance spewed above.
estimates that by adding roughly 100,000 physicians to our current pool of about 760,000, we could pull doctors’ salaries down from an average of $203,000 to somewhere between $74,000 and $126,000.
Yes, but you won’t have nearly as many people who want to be a doctor after this drop in income. Think about why the hardest residencies to obtain are dermatology and plastic surgery.
1. Instead of a 8 year program to get the MD (and most folks take years after their BS to earn their MD), why not a 6-7 program?
Already have plenty of these programs, went through one myself.
2. Lower/Limit the amount of time in residency.
I don’t think this is a very good idea. The quality of grads coming out of residency will drop without sufficient case loads.
3. Currently, we should allow medical schools to accept ANY American students, and not just students from within their states. For example, there are MD schools that ONLY accept students from within their states. However, if we allowed more free-market capitalism in this, than some marginalized californians, where MD schools is VERY tough to get into, can easily gain admission to Univ. of Mississippi, let’s say.
As far as I know, already have this. Please post a link to a medical school that only accepts in-state students if you know of one.
4. Allow MD students to transfer to different schools.
Already have this. And, you can even transfer to Carribean med schools if you get kicked out of a US school. I fail to see how this can bring down costs.
whoah nelly – looks like I was typing my response the same time you were
jacob–totally 🙂
28? That’s waay too late, boston. Better to let women be nurses and leave the real doctoring to men.