Paul Krugman: Golden State Gamble

Paul Krugman discusses the proposal for universal health insurance in California:

Golden State Gamble, by Paul Krugman, Commentary, NY Times: A few days ago. Gov. Arnold Schwarzenegger unveiled an ambitious plan to bring universal health insurance to California. And I’m of two minds about it.

On one side, it’s very encouraging to see another Republican governor endorse the principle that all Americans are entitled to essential health care... And if California — America’s biggest state, with a higher-than-average percentage of uninsured residents — can achieve universal coverage, so can the nation as a whole.

On the other side, Mr. Schwarzenegger’s plan has serious flaws. Maybe those flaws could be fixed once the principle of universal coverage was established — but there’s also the chance that we would end up stuck with those flaws...

Furthermore, in the end health care should be a federal responsibility. State-level plans should be seen as pilot projects, not substitutes for a national system. Otherwise, some states just won’t do the right thing. Remember, almost 25 percent of Texans are uninsured.

To understand both what’s right and what’s wrong with Mr. Schwarzenegger’s plan, let’s compare what he’s proposing with ... a single-payer health insurance system for the state ... similar to Medicare...

[T]he governor ... appears to sincerely want universal coverage, but he also wants to keep insurance companies in the loop. As a result, he came up with a plan that, like the failed Clinton health care plan of the early 1990s, is best described as a Rube Goldberg device — a complicated, indirect way of achieving what a single-payer system would accomplish simply and directly.

There are three main reasons why many Americans lack health insurance. Some healthy people decide to save money and take their chances (and end up being treated in emergency rooms, at the public’s expense...); some people are too poor to afford coverage; some people can’t get coverage ... because of pre-existing conditions.

Single-payer insurance solves all three problems at a stroke. The Schwarzenegger plan, by contrast, is a series of patches. It forces everyone to buy health insurance...; it provides financial aid to low-income families...; and it ... basically [requires insurance companies] to sell insurance to everyone at the same price.

As a result, the plan requires a much more intrusive government role than a single-payer system. Instead of reducing paperwork, the plan adds three new bureaucracies: one to ... make sure they buy insurance, one to determine if they’re poor enough to receive aid, and one to police insurers...

The plan’s supporters say that it would save money all the same. Those who are currently uninsured would receive preventive care, which is often cheaper than waiting until they show up in emergency rooms. Insurers would spend less money trying to weed out high-risk clients and more money actually paying for health care...

Still, why all the complexity? The smart, well-intentioned economists who devised the plan think they’re being more politically realistic than single-payer advocates — that it’s necessary to placate the insurers. But that’s what Bill and Hillary Clinton thought, too — only to find that their plan’s complexity confused the public, while the insurance industry went all-out to defeat it anyway.

So am I for or against the Schwarzenegger plan? That’s a tough question. As a practical matter, however, I suspect that the real question is what to do after the plan founders from its own complexity. And the answer is, damn the insurers — full speed ahead.

_________________________
Previous (1/8) column: Paul Krugman: Quagmire of the Vanities
Next (1/15 column: Paul Krugman: The Texas Strategy

Comments

[JRossi]

Sure, a single-payer system makes more sense in a lot of ways, but is it politically feasible? I don't really know, but I doubt it.

[Peter Schaeffer]

It is disingenuous for Krugman to talk about “a higher-than-average percentage of uninsured residents” and not mention immigration, including illegal immigration. There is a strong correlation between immigration (legal and illegal) and the uninsured population. Low immigration states, have uninsurance rates as low as 9.8% (MN). Predictably, high immigration states have high levels of uninsurance (TX 26.5%, CA 23.5%). Check out Uninsured by State. For a different set of data see, Uninsured By State, 1999-2004. As always, Krugman may or may not know these facts, but the demons of political correctness preclude any mention of them no matter how relevant.

[Peter Schaeffer]

Why Krugman advocates a single-payer system isn’t clear to me. Other systems, such as the Singapore model are far more cost effective and yield better results. Singapore spends far less on health care than any of the major single-payer systems. One source Health Care Expenditure and Financing in Singapore gives 3% of GDP, another source Transforming Singapore Health Care: Public-Private Partnership gives 3-4% of GDP.

By contrast, European style single-payer systems typically cost around 10% of GDP. Various sources give 9.9% for Canada, 10.1% for France, and 11.1% for Germany. Clearly, the Singapore approach is drastically cheaper than any of the single-payer systems that are offered as a model for the US.

Singapore’s system readily handles the three classes of uninsured folks, Krugman identifies. No one with income gets to play the health care lottery in Singapore. Health care savings accounts are mandatory. The indigent are handled via the Medifund program. According to the accounts I have seen, they receive quality care minus the amenities (semi-private rooms) that paying patients get. Pre-existing conditions are not an issue because the system is not “insurance” based. The details are considerably more complex .

Singapore’s system also delivers superior results as traditionally measured. According to The World Factbook, Singapore life expectancy is 81.71 years and infant mortality is 2.29 per thousand. The infant mortaility rate may be the lowest in the world. HIV prevalence is 0.2%. Strangely, Singapore's successes seem to have enhanced hostility towards it.

How does Singapore deliver such excellent results at such a low cost? The key is the elimination of third-party payment systems. In other words, consumers pay for their own health care (even high cost treatments such as chemotherapy). To make sure consumers can pay for health care, a health care savings system is mandatory.

Because consumers are ultimately spending their own money, they have every incentive to stay healthy and use only the health care they need. By contrast, the American system and single-payer systems amount to “shopping with someone else’s credit card”. Studies such as the RAND Health Insurance Experiment have shown that health care consumption falls substantially if consumers retain funds that would otherwise be spent on health care.

Given that the Singapore approach yields both superior cost effectiveness and health care outcomes, why would Krugman (and others) advocate a less efficient single-payer system? Of course, Krugman may or may not be familiar with Singapore’s health care system. However, it is reasonably well known to folks who specialize in comparative medical financing schemes.

It may well be that Krugman and others simply believe that health care should be “free” even if a single-payer system is far less efficient than an HSA model. That is a legitimate opinion, as is advocacy of a consumer oriented system where people pay for health care the same way they pay for housing, cars, and vacations. However, efficiency can not be used to advocate a single-payer system given the superiority of the alternatives.

For additional information about Singapore’s system, see Medical Savings Accounts: The Singapore Experience and Compulsory Savings in Singapore: An Alternative to the Welfare State. The Singapore government web pages can be found at “Medisave, Medishield and Other Subsidy Schemes”. Also see “Medical Savings Accounts in Singapore: The Impact of Medisave and Income on Health Care Expenditure”.

[ken melvin]

Ah what the hell, try flying the Singapore Duck again, huh? Not what's needed or what's possible, but the Singapore plan that got shot down last time flown here.

[Movie Guy]

Peter,

Recommend that you check your links above. Only one link is "clean".

[Mark Thoma]

I fixed them.

[Peter Schaeffer]

Mr. Thoma,

Thank you for fixing the links. What did I do wrong? Should I redo my first post with tinyurl's?

[Peter Schaeffer]

KM,

Would you like me to respond to your specific critiques or the arguments posted for "A Healthy New Year"

MG,

Thank you for pointing this out.

[Mark Thoma]

For some reason, the links were missing the quotes and the http part - so it wasn't the length of the URLs.

[anne]

"Because consumers are ultimately spending their own money, they have every incentive to stay healthy and use only the health care they need. By contrast, the American system and single-payer systems amount to 'shopping with someone else’s credit card.'"

So, then, we have at long last the cure for breast or colin cancer, and if we happen to have either well we will all have had to save enough for "even high cost treatments such as chemotherapy."

Wonderful. I am busily practicing being healthy; watch me practice.

[SingaporeDoubter]

Peter Scheffer,
did you have a look at the demographics, especially the difference in the number of over 60 between Singapore and Europe, and the amount of costs they originate in each system?
I can't remember if it was conclusively argumented in the last thread, but my rough calculation is that it could explain most of the difference in GDP rates.

[ilsm]

Health care has no market characteristics.

Consumers have no alternatives. Even hospital beds are regionally "planned". FDA runs monopolies on drugs as does the AMA on praticers.

Then you throw in the insurers, cost plus, added paper and you lose all hope they skim profit on the cost, making all the rules.

What is the poor consumer to do?

Let's disengage any argument that relies on markets or competition.

[Bruce Webb]

"So am I for or against the Schwarzenegger plan? That’s a tough question. As a practical matter, however, I suspect that the real question is what to do after the plan founders from its own complexity."

Ah as the Lady Anne recognized in re Medicare Part D, once the Camel's nose is under the tent you can't keep him out.

Once you establish the principle of drug coverage under Medicare, or universal health care for kids, or mandatory health care for everyone economics will start driving the car. Republicans fondly imagined that they could establish a Medicare Part D drug coverage plan that would be Big Pharma friendly and magically avoid moves that would not only make it more cost efficient but drive the overall health system towards single-payer. Progressive people who opposed drug coverage under Medicare Part D because it was a blatant rip-off designed to fatten the coffers of Big Pharma missed the boat. A Medicare system that will pay full freight for hospitalizing you because you have been splitting your pills because otherwise you can't afford to pay the heating bills, but won't pay for that medication is missing the boat entirely. A $1000/month for medication is a crushing blow for most seniors, having them forego that expenditure and end up in a hospital bed and Medicare would be happy to avoid $1000/day.

The Economic Right and by political extenstion the Republican Party have triangulated themselves into a painted corner. They promoted Medicare Part D as presently configured and so can't exactly target Medicare outright. After all if it was just too expensive why did they push to add a multi-billion dollar expansion by adding drug coverage? And to their dawning horror they are finding out that Social Security is the only government program that has a dedicated funding source that is not only in surplus but given ordinary economic growth is on course to remain so.

So in their decades long assault on "Entitlements" the Republicans/Economic Right find themselves self-Bobbited. Unable to attack Medicare because by their measures they just made the situation worse, unable to attack Social Security because in the end numbers matter (it's not broke - details elsewhere) they are pushed back into the corner of realizing that they are not in fact paying for the stuff they support - like Star Wars, but are impotent to attack the stuff they don't like - like Medicare and Social Security. And now find they are helpless against common sense measures to reduce costs.

There are some people who imagine that opposing Medicare negotiating drug costs with Big Pharma is some sort of magical big win come the elections in 2008. Just like they imagine that blocking a minimum wage increase is a big winner because once you view it through a Chicago lens and take it to the macro-economic level it might (buy maybe not) result in a fractionally smaller economic pie will convince large majorities of Americans to forego pie because 'The Donald' looks hungry.

"So am I for or against the Schwarzenegger plan?" That's easy. Once established it is a lot more easy to fix it than abolish it. Once the rock is rolling down the hill or the camel's nose is under the tent you can adapt to circumstances but restoring the 'status quo ante' is generally impossible.

The Republican Party bought the rope that we will use to hang them from the tree of single-payer. Moving from no coverage of drugs under Medicare to full coverage of drugs under Medicare was beyond the powers of progressives. But once richocheted off a big ripoff for Big Pharma is now in place and ripe for reform.

Bush. Worst President in History in relation to foreign and military affairs. Worthy successor to FDR in relation to pushing the country towards Single Payer. Somehow I don't expect either will be engraved in granite above the entrance to the Bush II Presidential Library. More likely is: "Dad I crashed the car. But it really wasn't my fault. And Jeb and George III may pull through."

[Isabel]

Peter Schaeffer, maybe I missed your answers to previous critiques to the comparison between the Singapore health system and, say, the European ones in previous threads, like the fact that it is a much younger society than European ones, that, according to some poster experience, lots of people seem run out of money in case of serious illnesses, etc. Also, as pointed before, alternative medicines are very commonly used (which made me wonder: are alternative medicines not taken into account in your numbers?). You seem to know the system well, can you address these questions? (I am especially curious about the last one because even Germany often reimburses medical expenses in alternative medicine). I apologise if you have done it before and I missed it.

[Ken Houghton]

Not for the record, Bruce, that the Star-Ledger today reports that Bush will veto any attempt (even the weak one currently proposed) to fix Part D.

[Peter Schaeffer]

Anne,

No doubt folks in Singapore suffer from breast and colon cancer just as they do in the U.S. However, medical care prices are low enough that even chemotherapy can be paid for out-of-pocket.

Note that the U.S. system is a model of how not to handle late stage (terminal) cancer. Staggering sums are spent on drugs that will delay death by a few months at most. In some cases, a significant fraction of $1 million has been spent to enable a person to live in total misery for a short period of time.

SingaporeDoubter,

This is a valid, but small point. The government of Singapore is quite aware that as the population ages, health care spending will rise both in absolute terms and as percentage of GDP. They estimate (if my memory serves me), that health care will rise to 5% of GDP over time.

This increase is anticipated within the HSA system. HSA savings rates are set high enough so that each person will have money set aside to cover their health care outlays later in life.

However, let me try to be more quantitative about this. Pioneer10 gave statistics for the over 65 population in Singapore, the U.S., and Europe. I will use his data. Another source Seniors Spending Four Times More for Healthcare gives spending data by age in the U.S. Applying the U.S. cost ratio to a modified Singapore population does raise outlays modestly.

Assuming Singapore starts with health care at 3.7% of GDP and the over 65 group as 8.5% of the population, raising the elderly to 12.5% (as in the U.S.) increases outlays to 4.06% of GDP. Raising the elderly to 16% of the population (as Pioneer10 states for France) increases outlays to 4.4% of GDP.

Note that some projections for the U.S. go as high as 25% of GDP as our population ages.

Ilsm,

In the Singapore system, a relatively high percentage of medical care outlays are out-of-pocket with little paperwork and no insurance company involvement. This approach reduces the overall cost of the system. Note that U.S. costs were much lower before public/private insurance came to dominate outlays in our country. Everyone new that real money was involved and acted accordingly. Now its “someone else’s credit care”.

Bruce Webb,

So far the drug companies seem to have done rather well under Bush. Volumes, prices, and earnings have grown as best I can tell.

Isabel,

As I show above, demographics account for only a very small part of the spending gap between Singapore and the U.S. (or Europe). The Singapore system does address high cost cases where medical savings are insufficient. I believe that the Medishield (public) system handles them. I have no information about alternative medicine in Singapore. However, I doubt it is material fraction of GDP.

[Isabel]

"I have no information about alternative medicine in Singapore. However, I doubt it is material fraction of GDP."
I think it all depends if chinese medicine is considered "alternative" or not and is covered or not. I expect that a very high percentage of people in Singapore use it routinely instead of western medicine (as someone that has lived there seemed to say). Of course, emergencies, surgery, etc, "high cost" medicine, would probably still be western (and practiced in state-run hospitals, apparently). I would like to see the numbers, though.

[anne]

Interesting; what is important to understand then is how and why medical care "prices" are lower in Singapore. The presumption is drug prices are relatively low, as medical equipment prices, as physician prices. Hospitals are generally state run as I remember, but what would make other prices so low?

[anne]

Suppose we focus on drug prices, which are such a significant factor in modern health care costs, and especially significant here. Why should they be lower in Singapore? What I "guess" we will find is that Singapore bargains for drugs as does France. Still, we need to find why Singapore should have relatively lower health care costs and we do not really know.

[Isabel]

I found this in the Health Ministry site:

"TCM [Traditional Chinese Medicine] practice in Singapore is confined to outpatient care. About 12% of daily outpatient attendance is estimated to be seen by TCM practitioners"

12% seems a lot to me. Is it? Chinese medicine is remarkably cheap...

[Peter Schaeffer]

Isabel,

According to the Singapore sources I have located TCM (Traditional Chinese Medicine) is considered to Alternative Medicine (AM) in Singapore. One source Complementary and alternative medicine use in patients with chronic diseases in primary care is associated with perceived quality of care and cultural beliefs indicates that in the study group 22.7% used AM. Another source The use of complementary and alternative medicine by asthma patients give a 27.2% utilization ratio. Yet another source Legal Status of Traditional Medicine and Complementary/Alternative Medicine: A Worldwide Review indicates that 45% of Singapore’s population have used AM at some point in time. AM is regulated by the government of Singapore. The same source indicates that AM accounts for 12% of out-patient clinical visits.

I have found no source indicating whether AM is included in overall health care outlays as a percentage of GDP.

[yartrebo]

What bothers me about California's (and Massachusetts's) plan is that you are required to have health insurance AND it isn't provided for free to every human.

SUNY Binghamton forced me to have insurance, and it cost me about $1,500 over 2 years. It didn't cover hospitalization or drugs and I never used a single service from them, so please forgive me if I'm leery at state controlled mandatory health insurance plans.

[anne]

No; beyond alternative medicine, there has to be a reason we are skirting in understanding why Sinapore spends so much less on health care than Europeans or Australians. What is missing? Drugs cannot be cheaper in Singapore than in France. Medical equipment cannot be cheaper than in Sweden. Possibly physicians earn less, but why? We are not close to answers.

[Bruce Webb]

Peter: "Bruce Webb,
So far the drug companies seem to have done rather well under Bush. Volumes, prices, and earnings have grown as best I can tell."

Yes they have. That is a feature and not a bug of Medicare Part D. What part of the miracle of Singapore results from Big Pharma being able to charge above market rates here in the US? The logical result of Medicare being able to bargain for drug price reductions is either a reduction in overall profit margins for Big Pharma or an increase in charges for overseas customers. Including the Lucky Duckies in Singapore.

Poke around in the Singapore health care financing system and it starts looking like the "miraculous" Chilean Retirement Security system. Because as it turns out the French don't even have a term for "caveat".

[Peter Schaeffer]

Anne,

The issue of doctor compensation is well known in Singapore. Doctors insist that their earnings are not diminished by the system. Essentially they argue that the absence of paperwork and bureaucracy offsets lower prices.

[Peter Schaeffer]

Bruce Webb,

If Singapore is able to avoid the "above market rates here" wouldn't that be an advantage of the Singapore system? Wouldn't it be an advantage if a similar system was adopted here?

If you have specific critiques, please post them.

[Isabel]

"No; beyond alternative medicine, there has to be a reason we are skirting in understanding why Sinapore spends so much less on health care than Europeans or Australians."

You are probably right. Still, it makes the comparison quite difficult. We might as well be studying Cuba.

[Peter Schaeffer]

Isabel,

Singapore has a per-capita GDP of $27,800 (2004) versus Australia at $30,700. By contrast, Cuba has as estimated per-capita GDP of $3000. It would appear that Singapore is more comparable to Australia than Cuba. Cuba spends 6.7% of GDP on health care with results worse than Singapore. Of course, Cuba is much, much poorer.

[ilsm]

Peter,

MRI's and other 'innovations' like $1000 a month individual perscription did not exist before the on set of medicare.

Monopsony/monopolies may be run better by the government.

[Isabel]

Point taken.
I'm not saying at all that it is not interesting to have a close look at Singapore. But I'm afraid that are very important differences, apart from GDP, that might make the comparison with western countries (almost) as useless than a comparison with Cuba.

[anne]

Agreed, administrative costs are of prime importance and Singapore lessens such costs. What more? I will do some asking and include Hong Kong.

The lesson China gave after the revolution and Cuba followed after, was that if you can offer good infant care health from then is likely to be remarkably robust. Cuba has taken pride in medical training, and interestingly there have been and are a fair number of American sudents who attend medical school in Cuba free of tuition.

[anne]

Isabel, I would like to know a lot more about health care in Cuba, and physician and nurse training. The sense I have is we would be impressed, even with a limitation of technology. Recent commentary on medical training in Cuba, however, has lacked depth.

When you find significant articles on Portugal, please post them for us. Spain, as well. The more comparison, the better.

[maracucho]

The Schwarzenegger Health Plan is a house of cards. Let’s hear no more about Singapore. As a California physician I can tell you that none of our not for profit hospitals can pay the 4% tax on gross revenue glibly mentioned by the Terminator. Hospitals face increasing paperwork and ill conceived restrictions every year. Electronic medical records would help reduce errors and problems, but the transition from paper to electronic records is brutally expensive. Pols say you must make this multimillion dollar changeover but won’t pay for it. You can’t have minimum wage people scanning paper charts. The only reason to keep hospitals is that they sometimes do good.

Now, consider tuberculosis- California has a disproportionate amount of both TB and immigrants, legal and illegal. TB can spread from your gardener to you. Markets have little to do with TB except their indirect effect of stimulating illegal immigration to keep labor costs down. We use the same drugs today for TB that we did 35 years ago- markets aren’t interested in TB research. We have Lance Armstrong whining about insufficient federal support for cancer research and the Terminator stupidly thinking that his plan will increase hospital net revenues which can then be recycled to the state. No way. Hospitals have too few nurses now. The system can’t be fixed with propaganda and taxes on doctors and hospitals. I say tax the governor, Lance Armstrong and the Bush family fortune.

[Isabel]

I was playing with the WHO site (numbers of 2003 and 2004 mostly, as far as I can tell)

http://www.who.int/countries/en/

and got very intrigued with the "Key health expenditures indicators", especially with the "Out-of-pocket expenditure as percentage of private expenditure on health", defined as "Out-of-pocket Spending is the direct outlays of households including gratuities and payments in-kind made to health practitioners and suppliers of pharmaceuticals, therapeutic appliances, and other goods and services whose primary intent is to contribute to the restoration or to the enhancement of the health status of individuals or population groups. Includes household payments to public services, non-profit institutions or non-governmental organisations, excludes payments made by enterprises which deliver medical and paramedical benefits, mandated by law or not, to their employees."

It's fairly high in Singapore, China and a lot of developing countries, around half in France, Germany, etc, still half of that in the US. I can't understand why, and I don't know if it represents anything meaningful. Any thoughts?

[Isabel]

I stumbled upon a blog of a philipino doctor where a commenter said that his starting salary in the Emergency dept in Singapore was (in 2003) around 1600 dollars (my conversion), and with overtime it would easily reach 2500 dollars. Does this bring anything to this discussion?

[anne]

http://www.nytimes.com/2006/12/08/world/americas/08havana.html?ex=1323234000&en=4f0950b0e6ba65ae&ei=5090&partner=rssuserland&emc=rss

December 8, 2006

Hippocrates Meets Fidel, and Even U.S. Students Enroll
By MARC LACEY

HAVANA — Anatomy is a part of medical education everywhere. Biochemistry, too. But a course in Cuban history?

The Latin American School of Medical Sciences, on a sprawling former naval base on the outskirts of this capital, teaches its students medicine Cuban style. That means poking at cadavers, peering into aging microscopes and discussing the revolution that brought Fidel Castro to power 48 years ago.

Cuban-trained doctors must be able not only to diagnose an ulcer and treat hypertension but also to expound on the principles put forward by "el comandante."

It was President Castro himself who in the late 1990s came up with the idea for this place, which gives potential doctors from throughout the Americas and Africa not just the A B C's of medicine but also the basic philosophy behind offering good health care to the struggling masses.

The Cuban government offers full scholarships to poor students from abroad, and many, including 90 or so Americans, have jumped at the chance of a free medical education, even with a bit of Communist theory thrown in....

[Isabel]

All I know about Cuba is either the WHO statistics (which are very honourable) or anecdotes, some more telling than others (like doctors evacuating with their neighbourhood and their "patients" in case of hurricane, which says both that people's health will be more protected in case of a disaster and that they probably don't have any choice about their doctors).
I know a few people that went there for a program of rehabilitation, after a stroke, for example, with great satisfation. They seem to be very good in that area.

[callahan]

An apple a day.

[SingaporeDoubter]

Peter,
thanks for your response.
I had in memory that the over 60 made more than 50% of the costs in France.
Searching the internet, I found:
A detailed graphic of the costs in France per age (interesting...). http://www.senat.fr/rap/r06-089/r06-08959.html
I would say, Over 35 is maybe appropriate as fine grained separation. Base 1 for a french 20 years old.
< 34 ans------- 1
35 à 39 ans-----1,2
40 à 44 ans-----1,5
45 à 49 ans-----1,75
50 à 54 ans-----2
55 à 59 ans-----2,5
60 à 64 ans-----3
65 à 69 ans-----3,5
70 à 74 ans-----4,5
75 à 79 ans-----5,5
80 à 84 ans-----7
> 85 ans--------8,5

So let see the demographics now
France, http://www.recensement.insee.fr/FR/ST_ANA/F2/POPALLPOP1APOP1A1F2FR.html
Singapore (only data for >80 and over):
http://www.singstat.gov.sg/keystats/c2000/r1/t1-7.pdf

France with his present age Pyramid spends about 11% of GDP in 2005.
With a singapoure-like pyramide, it would become immediately 8,5%
A advantage of 25%, or a burden of 30%, depending from where you look at it.
Or 40% of the difference are explained by the age distribution.

You came to 20% advantage, so basically you weren't far off the mark.

I will look back at the thread for the missing 60% of the difference. If we take England (NIH is more cost effective) instead of France, we could maybe find a chunk more of the difference in GDP, by the way.

Such a demographic factor does not make the US look any better vs. single payer healthcare in Europe, as an aside.

PS 1: over-60 ARE originating quite exactly half of the costs in France, but it plays out less strongly than I had roughly estimated in comparing Singapore and France.
PS 2: in Europe, drugs are not so significant, about 20-25% of the whole costs. Hospital costs > 50% are the deal.

[SingaporeDoubter]

Other Factors.
If we say that difference between F and Singapore is 6,5% of GDP, we have:
2,5%, or 40% of the difference due to the age distribution
So the other factors:
Administrative costs in F:
http://www.irdes.fr/En_ligne/Chiffres/Cadrage/Depense/DCS.htm
6,9% of 11% --> 0,75 % of GDP
If Singapore is twice as efficient, it would explain 0,4% of GdP, less than 10% of the difference.
We are still missing the 2nd biggest factor.

I'd love to see a similar curve for costs/age in Singapore.

[SingaporeDoubter]

Isabel, re Out of Pocket.
In Europe, those expenses are building up. It is the component for responsabilizing the patient (the incentive Peter like in the singaporian system).
You have a decomposition of it for various treatment in France in my above link for administrative cost.
As far as I understand, it is included in the 11% in France, and it is already quite significative for the smaller expenses you may control (some caveat about complementary insurance should be made here). So I am not sure it can explain so much of the restrain in Singapore.
Unless they restrain the big expenses in singapore too, like long hospitalization in the terminal phases or for the ederly (who will have consumed the most of their HSA, I presume).

[anne]

Thank you, SD.
This is all helpful.

[Movie Guy]

I can't say that I have much confidence in the California approach based on what I have read thus far. But there more to read.

Let me ask a few basic questions on the broader subject of healthcare support in the USA.

What would it be like for elders to not have Medicare in place (let's assume that it doesn't exist right now)?

Absent Medicare, what percentage of elders would likely be covered under available commercial healthcare insurance plans?

Absent Medicare, what percentage of elders would be receiving operations (by type) necessary to sustain their lives?

Absent Medicare, what percentage of elders would still be alive?

If the USA had a national healthcare system that provided for its citizens limited support in the form of life-sustaining operations, recovery rehabilitation, and discount drug support, what cost would the nation incur?

If the USA offered limited healthcare "coverage" to the above considerations, who other than the health insurance industry and some Republicans, would be the principal opponents to such a system?

If the USA had such a system, absent the huge paperwork and authorization trail demanded by health insurance companies, what could be the cost savings over the present mess that Americans use?

Why is it so hard to provide the minimum life-sustaining healthcare for this nation's citizens without assuming that we need a monster-sized health insurance industry that is sucking considerable profits out of the desire a nation's citizens to stay alive?

When I visit a state or national park, I frequently pay a fee but I don't assume that the fee is designed to generate profits but rather to maintain the park. Relating this concept to healthcare, this is my vision of minimum healthcare coverage by a state or the nation. I envision no role for profit sucking health insurance companies. Frankly, I am sick of health insurance organizations determining whether we live or die. Screw them. We don't need them under an alternate approach to providing minimum healthcare medical coverage. We operated without them previously.

[Isabel]

Thank you, SingaporeDoubter, but I still can't make much sense of it, at least not as an indicator of a cost effective system.

[SingaporeDoubter]

Movie Guy,

"health insurance organizations determining whether we live or die. Screw them"

Are you the author of that one?
http://petcalls.typepad.com/pet_calls/2006/12/total_loss.html

[Holly W.]

I live in MA, where Mitt Romney's plan, which appears to be the model for Arnold Schwarzenegger's plan, is in the process of being being implemented. I see two major problems with the "let's just force everyone to buy health insurance" solution.

The first is that the insurance that's being offered through the state's connector plan is extremely bare bones, since very high deductible plans are the only ones that are easily affordable. I don't see these plans encouraging anyone to get preventive or early care for problems. If you still have to pay the first $2,500 to $5,000 out of pocket for doctors' visits and medicine, where's your incentive to schedule a physical? People might still end up in the emergency room, costing more than they would have if they'd gotten treated sooner.

Second, businesses which don't want to provide health insurance to their employees will be dunned only $300 a year per uninsured person -- much, much less than the cost of insurance. But employers who stop insuring their employees now have the comfort of knowing that the employees cannot be uninsured as long as they live in the state ... I worry that an unintended consequence of this law will be for even more employers to stop providing insurance.

And there's always the possibility that even more MA workers will migrate to New Hampshire to escape having to purchase health insurance. Sure, they become someone else's problem then, but it won't look good if the state starts losing even more population.

[anne]

Holly is right to express considerable caution with the Massachusetts general health insurance effort, I agree with the reservations, but I am hopeful that as problems are recognized through implementation the progam can be re-structured somewhat readily. I have been similarly hopeful about the Medicare drug coverage program, and seemingly the program is being smoothed while I am hopeful Democrats will be able to add to the legislative mandate to allow Medicare negotiation of drug prices.

[anne]

http://www.nytimes.com/2007/01/10/us/10mass.html?ex=1326085200&en=da2f9458c3e02a2b&ei=5090&partner=rssuserland&emc=rss

January 10, 2007

Massachusetts Could Serve as a Guide in California's Health Insurance Bid
By PAM BELLUCK

BOSTON — In its drive to provide health insurance to nearly all its residents, Massachusetts has already signed up more than half of the poorest people who are eligible.

But experts and politicians agree that the bigger challenge will be the next 150,000 people: the working poor who will get a state-subsidized rate but will still have to pay for insurance, typically $18 to $170 a month depending on their income.

"This group is going to be much more challenging," said Paul Ginsburg, an economist who leads the Center for Studying Health System Change. "They're dealing with people who don't even think about having health insurance."

As California maps out its path to near-universal health insurance, Massachusetts could offer some guideposts.

"We're really changing the culture of providing heath care," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a nonpartisan group that studies state spending. "For some people, it's changing the mind-set from one of showing up at the emergency room or at the local health center with a problem to understanding that they can be insured. Nobody's expecting that would happen overnight."

Devising a plan that all of the state's political stakeholders could accept took hard work and time. It dates back to at least 2004, when Gov. Mitt Romney, a Republican and former venture capitalist, proposed requiring an "individual mandate" that everyone get insurance, a feature of the plan now being proposed in California....

[ljm]

The governor of KS said in her state of the state address that she wants to work on a state health insurance plan for KS.

Glad congress passed the medicare drug negotiations bill. The government needs to identify to real cost of all the generics out there and expand the list Wal-Mart started and other pharmacies have adopted in their $4 a month scheme. Many of these generics cost pennies a pill and if people had a list of all of them and knew the prices, they might be willing to work on it with their doctors, rather than relying on name brand recognition from advertising. Plenty of older drugs are very good, even if it requires swallowing more pills in a day to get a daily dose. Make that the first thing and available to everyone, not just people on Medicare. For the high end name brand drugs, make doctors required to get prior authorization. That's a hassle and would keep doctors from automatically writing a script for those if something cheaper that worked well was available. If that list was based on cost, the drug companies might think about that when they do pricing to keep off that list. This way, there is no formulary. All drugs are still available. HMOs and PPOs already do this with their tiered system. It's not fabulous to deal with, but it makes sense from a cost perspective.

[Holly W.]

I'm glad to see your optimism about Massachusetts, Anne! I have hopes that the problems I've noted will be smoothed out successfully, as well. I just find it funny to seeing everyone crowing about how great the legislation is when we've barely gotten started figuring out how to implement it. I'm waiting to see how it all looks after July 1, when everyone is supposed to be covered.

[Peter Schaeffer]

Ilsm,

The technological basis for MRI’s dates from around 1970. See Magnetic Resonance Imaging MRI. Of course, Singapore has MRI machines like every other advanced country.

$1000 per month prescriptions are more of a product of Medicare or at least third-party payment schemes. Given than some medicines are now running over $10,000 per month for nil benefits, the system is in dire need of reform.

Overall, the Singapore experience shows that a medical system based (mostly) on individual responsibility yields the best results.

Isabel,

The people of Singapore may not be “western”. However, the economy and life of Singapore are organized along very “western” lines. Indeed, Singapore is more “western” than say the nations of Latin America. Many years ago, Lee Kuan Yew and his wife traveled to China and found the place hopelessly foreign. A quick check of web sites like SPG indicates a very “western” orientation.

If you can identify important differences that might account a 4X health care spending delta versus the U.S., please do.

Anne, Isabel,

You can get some basic information about Cuba’s health care situation at Cuba. Health care outcomes in Cuba are inferior compared to Singapore. However, Singapore is almost 10X richer.

Maracucho,

Thank you for pointing out the ill consequences of Open Borders.

Isabel,

Good find of the Core Health Indicators. For Singapore the public/private ratio is 36.1/63.9. Out-of-pocket is 97.1% of total private spending. Spending per person is $1156.

The U.S. public/private ratio is 44.6/55.4. Out-of-pocket is 24.3% of total private spending. Spending per person is $5711.

Note that amazingly high out-of-pocket percentage in Singapore. 62% of the total. For the U.S. out-of-pocket is 13.46% of the total. Any wonder we have no cost control?

Isabel,

A few notes on doctor compensation from Medical Savings Accounts: The Singapore Experience

“Even with these low expenditures, the income of Singapore doctors is about the same in relation to average wages as physician income in the United States, and patients have easy access to such technology as CAT scans, organ transplants and bypass surgery.”

“How do Singapore doctors generate their high personal incomes while being compensated at the low reimbursement rates shown in Table III? The answer uniformly given by those who have practiced in both the U.S. and Singapore is: relative freedom from administrative encumbrances.”

The paper has a section on Physician compensation that I have omitted for purposes of brevity.

SingaporeDoubter,

I am having some difficulty interpreting your numbers. What is the over 65% population fraction in France? What is the per-person cost ratio for the over 65 versus under 65 group? For the U.S. I used 4.049 (11,089/2,739).

[anne]

The mandated deadline, by the way, is another source of hope for unlike the Maine initiative in which problems that appear fatal emerged slowly, I wish for fairly quickly realized problems with a push for modifying. Little question, though, the significant deductibles will be a problem. There will be problems, but we are beginning.

[anne]

Darn, there is no such thing other than prejudicial nuttiness to open borders (notice the missing capitals). Use of the term is offensive and meant to be offensive. America does not have open borders or Open Borders or OPEN BORDERS. Enough.

[Holly W.]

There are two articles on The Economist's web site this week about the California and Massachusetts initiatives -- oh, Mark! You might want to share them with folks who can't access them on-line.

[Holly W.]

It is a beginning. I don't disagree with the mandate to buy insurance, really, since I've always argued that one of the most important aspects of single-payer health insurance is that it pulls everybody into the system. I may have my trepidations noted above, but I do think it's exciting legislation. I meanly don't want to see Mitt Romney getting too much credit for it before any problems appear, though -- nobody's perfect, after all! ;-)

[Peter Schaeffer]

SingaporeDoubter,

Currently, Singapore spends 3.7% of GDP on health care, France 11%. This is a gap of 7.3%. Based on my calculations, Singapore would spend 4.4% of GDP if it had the age distribution of France for a gap of 6.6%. This implies that only 9.6% of the delta can be explained by relative age distributions.

[Movie Guy]

SingaporeDoubter,

Well done! My personal thanks for providing the link.

I am not the author, but James Hosek of Chicago did a fine job explaining the problem with health insurance providers.

I wish that everyone here would read Hosek's excellent piece.

TOTAL LOSS
December 13, 2006
by James Hosek
Pet Calls - Tales of a City House Call Vet - The James Herriot of Chicago blog

Worthy of a main post. On every decent blog in the USA.

[Movie Guy]

Hosek may not be from Chicago, but that is the source of the blog. Got confused on that point...

[ken melvin]

Singapore healthcare

http://kaixin1.blogspot.com/2006/11/leong-sze-hian-on-healthcare.html

[evagrius]

ken melvin;

Seems logical to me. Can't afford it? Go without. Save the gov. some money while doing so.

The per capita figure seems roughly equal to other countries with single-payer plans.

says...

Peter Schaeffer,

With the link
http://www.senat.fr/rap/r06-089/r06-08959.html
you have a graphic distribution of health care costs from 0 to 100 years, in relation to a standardised cost of 1.00 for a 20 years old.
between 0 and 35 years, it stays almost constant, let´s say it is the base 1.00. After that, you can take from the curve an approximation of the costs for every quintile of ages, relative to that base 1.00, which I have done and layed out in my comment above.

If you apply this decomposition to the actual age-distribution for Singapore and for France along the same quintiles, you can calculate that the average cost for the whole population with the Singapore distribution is about 1.50 time the base cost for a 20 year old, and in France it is 2.00 time. If we consider that the Singapore curve is similar to the french one (a big if*), the second distribution increases the national costs with a factor 2/1.5 in comparison to the first one.

So a Singapore systeme with the French age-distribution would cost them 2.00/1.50 * 3.7% =4.93% of GDP (not yours 4.4%, because my data is for France not the US, and my repartition starting at 35 years and not at over-65 is more realistic. It is still less than the projection of the singaporian governement you had, probably because Singapore will have a bust after the boom of active people, and the situation will be less favorable than in France after having been more convenient; France is much more stable)
The french system with a Singapore-like age-distribution would cost 1.5/2 * 11= 8.25 % of GDP

Now we play the game of the big percentages, where you start from Singapore, and state that with a France-like age-pyramide, Singapore would spend 4.9%. France still spending 11%, the new gap is 6%, the difference with the original gap of 7.3% being 1.3% of GDP --> 1.3/7.3= 18% of the gap are explained.
I start from France, and say that with a Singapore-like pyramide, France would spare 2.75% GDP, out of an original gap of 7.3% --->38% of the gap (aka 40%) are explained.
Or 2.75% out of a new gap of 4.55 --> 60% of the gap is explained.
Can we settle for 40% of the gap explained by the demographic structure?

The big if* is how the costs/age curve for Singapore looks like; for instance if old people there cost much less (i.e. the curve is flatter), the age-distribution would explaining less of the gap.

The crazy thing:
if you take out all the other costs, drugs, day-to day care, dentist, drugs, France
http://www.irdes.fr/En_ligne/Chiffres/Cadrage/Hopital/Depenses.htm
still spends more for the treatments in hospital than Singapore spends for his whole health system (I take your 3.7% for granted)
Hypothesis:
- Their Hospitals (the big cost factor in France) are a bargain.
The funny thing is that hospitals in Singapore are 100% public and not for profit ( 60% public in France).
So the State being more efficient and a not-for profit healthcare industry is the explanation? Should we start in the US?

Others explanations may contribute but are unlikely the next big factor in my opinion:
- preventive medicine being waaay better in Singapore, so they need muuuch less hospitalization, alternatively no day-to day health care at all. I would like it if true, we could just copy them and reduce for instance french hospital needs to a quarter of the actual ones, but I doubt it without some strong evidences. And I would be interested to know ow preventive medecine would work in the US with US-libertarians with HSA without the soft coercion of the Singaporian government.
- Incentives for the people to spare their money once in the hospitals and to reduce the consumption of surgery or cancer treatment and the likes (the big expenses again) is a doubtful explanation as well. France already reduced the hospital consumption after introducing some incentives as out of pocket, see the link above. I hazard a guess that the easy gains are already made, and don´t justify the missing gap.

This last one should be discarded:
- Capping the big expenses (hospital again) according to their HSA "bad luck, 3 strikes, sorry you are out" can´t be the explanation, can it? And it doesn´t look doable for the US either. As soon as the population ages with their HSA, I dare to say that too many cases of people with an empty HSA will be there for the society to bear such a solution, and you come back again to your feared moral hazard.

Pick your explanation. Are you still sure it is mainly incentives through HSA, and that you want that system, proved once, and not the single universal payer, proved 30 times??

It was fun. However the datas and the tools of analisys necessary for giving you a conclusion are beyond my reach of amatorial commenter. Probably one could find some professional study on the subject somewhere, hopefully not from AMA or AEI.

[anne]

http://kaixin1.blogspot.com/2006/11/leong-sze-hian-on-healthcare.html

November 22, 2006

Healthcare Expenditure in Singapore
By Leong Sze Hian

I refer to the Channel NewsAsia programme "Get Real: Falling through the cracks" aired in the week starting 30 October, about the plight of Singaporeans who cannot afford healthcare, and media reports that good and affordable health care, is still the key concern of Singaporeans after four months and 15 dialogue sessions with Singaporeans.

According to media reports, a study of eleven Asian countries reported in the Lancet medical journal on October 13, found that medical costs add to the poverty burden with 78 million more Asians slipping below the poverty line after paying for health care. Overall the study showed the prevalence of poverty was 14 per cent higher than other estimates that do not include out-of-pocket health-care costs, and the head of the research team expressed surprise to see that such a large share of healthcare is paid for out-of-pocket.

According to the Department of Statistics’ "Singapore, 1965 - 1995 Statistical Highlights : A Review of 30 Years’ Development", Government Operating Expenditure on Health as a Per Cent of Total Government Operating Expenditure, declined from 9.5 per cent in 1970 to 7.8 in 1980, and 6.5 in 1990.

Now, in 2005, Government Health Expenditure as a Per Cent of Total Government Expenditure is 6.3 per cent....

[anne]

Ken Melvin has solved the puzzle for us; thank you.

The solution to the astonishingly low public health care spending in Singapore would seem to be a significant absence of health care coverage, and corresponding reliance on family resources which is what health care insurance needs to be designed to control and lessen.

[Isabel]

I still think Singapore is a riddle because of their good health indicators (namely, an excellent infant mortality rate).

But, Peter Schaeefer, I don't think this
"Note that amazingly high out-of-pocket percentage in Singapore. 62% of the total. For the U.S. out-of-pocket is 13.46% of the total. Any wonder we have no cost control?"
is a valid argument. Portugal has also a OP in the 90% and can't really be shown as an example of an efficient system with particularly good outcomes (and funny enough, Cuba has a much higher OP than France). I've compared various countries (US, Switzerland, France, Singapore, Portugal, Mozambique, Cuba) and couldn't see any pattern.

And this
"$1000 per month prescriptions are more of a product of Medicare or at least third-party payment schemes."
isn't true, either. I've startd comparing the prices of a couple of drugs in Belgium (third party payment system) and the US and I'm getting to numbers that vary between 2x (a drug for asthma) and 10x (cash cows like Lipitor, for cholesterol, and Estrogel, for menopause symptoms).

Back to Singapore, I think this is very telling: "The Public Assistance Scheme is meant for needy Singapore citizens who by reason of age,illness, disability or unfavourable family circumstances are unable to work as well as no one to depend on...". Singapore might be as western as you like, but my guess is that if your third cousin can't afford his chemotherapy, you will step in along with the rest of the family.

Which takes me to my general theory: the opposition is not really between state responsability and individual responsability. It's between state responsability and family (clan, tribe, whatever) responsability. It takes a village to care for a sick or disabled person, both in money and manpower...

[anne]

Isabel, there is no longer a mystery. Simply having proper and fine infant care is a prime indicator of health and longetivity. Education, yes, education is another prime indicator of health and longetivity. Education is more important for longetivity than having health insurance. Diet, relative level of smoking, and on.

Singapore does avoid administrative costs in health care, which is important. But, Singapore simply does not insure many citizens or residents and therein is the dramatic cost difference with, say, Portugal. Now we can learn from comparing health systems and health characteristics in many countries, but Singapore is not a magic cost saver.

[Isabel]

"Education is more important for longetivity than having health insurance."

WITH good infant care, proper immunization, etc. All things usually taken care by the state.

[anne]

http://www.nytimes.com/2007/01/03/health/03aging.html?ex=1325480400&en=5f1ffcf23f1b1463&ei=5090&partner=rssuserland&emc=rss

January 3, 2007

A Surprising Secret to a Long Life: Stay in School
By GINA KOLATA

James Smith, a health economist at the RAND Corporation, has heard a variety of hypotheses about what it takes to live a long life — money, lack of stress, a loving family, lots of friends. But he has been a skeptic.

Yes, he says, it is clear that on average some groups in every society live longer than others. The rich live longer than the poor, whites live longer than blacks in the United States. Longevity, in general, is not evenly distributed in the population. But what, he asks, is cause and what is effect? And how can they be disentangled?

He is venturing, of course, into one of the prevailing mysteries of aging, the persistent differences seen in the life spans of large groups. In every country, there is an average life span for the nation as a whole and there are average life spans for different subsets, based on race, geography, education and even churchgoing.

But the questions for researchers like Dr. Smith are why? And what really matters?

The answers, he and others say, have been a surprise. The one social factor that researchers agree is consistently linked to longer lives in every country where it has been studied is education. It is more important than race; it obliterates any effects of income.

Year after year, in study after study, says Richard Hodes, director of the National Institute on Aging, education "keeps coming up."

And, health economists say, those factors that are popularly believed to be crucial — money and health insurance, for example, pale in comparison.

Dr. Smith explains: "Giving people more Social Security income, or less for that matter, will not really affect people's health. It is a good thing to do for other reasons but not for health."

Health insurance, too, he says, "is vastly overrated in the policy debate."

Instead, Dr. Smith and others say, what may make the biggest difference is keeping young people in school. A few extra years of school is associated with extra years of life and vastly improved health decades later, in old age.

It is not the only factor, of course.

There is smoking, which sharply curtails life span. There is a connection between having a network of friends and family and living a long and healthy life. And there is evidence that people with more powerful jobs and, presumably, with more control over their work lives, are healthier and longer lived.

But there is little dispute about the primacy of education....

[anne]

What is an important implication about proper infant care, especially for developing countries, is that in addition to the long term individual beneifts it is or should be relatively inexpensive.

[anne]

http://www.nytimes.com/2007/01/03/science/03ageside.html

January 3, 2007

Data on Hispanic Immigrants Presents Puzzle on Aging
By GINA KOLATA

If medical researchers were to pick someone who might defy national life expectancy statistics, few would pick Irma Lara.

She came to this country illegally from a small town in Mexico to work as a baby sitter. She was 26, had only a first-grade education and was desperately poor.

She married a Mexican-American and had seven children. Her husband's meager salary at a cotton compress company was never enough. The family had no health insurance, never saw a dentist. Now, widowed at 75, Mrs. Lara is still poor; her monthly income is less than $600. She spends her days at a community center near her tidy subsidized apartment in Hitchcock, Tex., playing bingo, learning English, working out with exercise bands and with weights.

"I am happy," Mrs. Lara said.

And, if statistics are any guide, Mrs. Lara has a long life ahead of her, longer than would be expected if she were black or a native-born white woman. It is called the Hispanic paradox, and it is one of the most puzzling discoveries in research on aging.

For example, a recent analysis by Irma T. Elo, a demographer at the University of Pennsylvania, indicates that a 65-year-old white woman will live, on average, an additional 18.9 years. But a 65-year-old Hispanic woman who immigrated to the United States will live an additional 19.8 years, a significant difference.

The longevity difference persists even though Hispanic immigrants tend to be like Mrs. Lara, poor and poorly educated and lacking health care....

[anne]

Notice Hispanic longetivity, before there is any more stereotypical nonsense about relative health care characteristics, costs and outcomes for different ethnic groups.

[Holly W.]

Peter Schaeffer, I have a friend in Singapore who made me aware of the Central Provident Fund when Bush was promoting his Social Security reform plan two years ago. While I admire the way the Fund provides people with the ability to afford their own lives, I'm not sure I see any way to shift a country like the US onto such a scheme.

Singaporeans have 20% of their pay automatically deducted from their checks, and their employers contribute another 20%. Can you see this going over at all well in the US? In addition, how do you make the transition from the healthcare system we have now to one where everyone is expected to pay for their own medical costs out of pocket? I'd be just as happy as Movie Guy to see profit-sucking insurance companies removed from the mix, but along with Isabel, I think Westerners, with our tendency to move alot and our dependence on a nuclear rather than extended family structure, do better when we share our risks among strangers across society.

Anyway, I'm not trying to pick a fight; I'm really just interested in seeing how you would get the US from here to there, if we were to adopt the Singaporean system.

[Peter Schaeffer]

Holly W.,

The 20% numbers (worker and employer) you cite are for all social programs, not just health care. Of course, a much lower number would cover medicine. However, the concept of automatic savings, so that each person has resources to pay for their own health care is reasonable (in my opinion).

What would I recommend for the U.S.? The U.S. needs a great many changes in its health care system, not just Medical Savings Accounts (MSAs). I suggest all of the following to cut the cost of the system.

1. Restrictions on/elimination of futile care – Terri Schiavo provides one example. However, there are countless others. An amazingly high fraction of total health care dollars are spent in the last few months, weeks, and days of life. Much of this money is spent, when the outcome is no longer in doubt. Don’t do it, and don’t require government agencies and/or insurance companies to cover it.

One related note. The true ImClone scandal wasn’t insider trading. The real scandal is that such an ineffective drug, that costs so much, could have ever been contemplated for clinical use. We can’t afford drugs that cost hundreds of thousands of dollars, and add a few months of misery to the lives of the terminally ill.

2. Restrictions on/elimination of ineffective care – Some number of years ago the State of Oregon rated hundreds of procedures based on cost effectiveness. A large fraction didn’t reach break even. The concept was to cut off funding for the ineffective procedures and use the savings to provide health care for the uninsured. Not a completely crazy idea. ADA (American with Disabilities Act) lawsuits blocked the Oregon plan. Notably, drug and alcohol treatment failed the cost effectiveness test. Ineffective care should not be covered by government programs and/or insurance companies.

3. Free trade in pharmaceuticals. I have argued this point elsewhere. Allowing drugs from other countries into the U.S. would materially reduce drug prices here.

4. A ban on medical advertising. It is absurd to allow drug companies to advertise proprietary medicines on TV and then have the government and insurance companies pick up the bill. Nexium versus Prilosec is the classic example of this type of abuse. For almost all patients, Prilosec (now a generic) is quite adequate and Nexium is not needed. However, doctors routinely prescribe Nexium even though they know better. Why? Because patients saw an add on TV and ask for it. In a sane system doctors would explain the relative merits of the two drugs and let the patient decide if the additional cost of Nexium was warranted. In a really sane system, they would just proscribe Prilosec and switch to Nexium in the very few cases where a therapeutic difference arises.

5. Medical Malpractice reform. The actual premiums paid by doctors are only a small part of our nation’s total health care bill (3% I think). However, the cost of defensive medicine is huge, by some estimates 10% of the total. Let me provide one example. John Edwards made much of his fortune suing over Cerebral Palsy (CP) cases. However, the international medical community regards these cases as mostly fraudulent. Note that the cesarean rate has risen from 5% to 25% over the last few decades with no apparent reduction in CP.

6. Discounts for cash. Right now, many hospitals have several price lists. The relatively low prices they negotiate with insurers and a nominal (very high) price list for anyone who doesn’t have insurance. Of course, they know that most of the uninsured will never pay at all. However, they figure some will pay 100% and even pennies on the dollar from the rest is something. Requiring uniform prices and/or discounts for cash would be a positive step. Notably a few doctors encourage patients to pay in cash and offer large discounts to attract them. The magnitude of these discounts provide some insight into how much the U.S. might save using Singapore’s system.

7. Apply our antitrust laws. In many parts of the country, hospitals have deliberately merged to eliminate competition. Some were sued by insurers on antitrust grounds. The courts adopted a “insurers are the devil” policy and allowed these mergers in spite of blatant antitrust issues. We need the highest degree of competition within the health care system.

A related issue is that doctors shouldn’t be allowed to own testing labs. The conflict of interest problems are simply too great.

8. Eliminate or reduce insurance mandates. Many states require health insurance to cover almost everything. That sounds nice, but makes insurance prohibitively expensive. Of course, it also encourages maximum consumption of health care services, because they are “free”.

9. Promote high deductible health care plans. Try to encourage insurance plans that cover catastrophic illnesses, but not routine health care. Let consumers benefit from lower premiums and make their own choices about how much health care they wish to consume.

10. Employer mandates should be encouraged under state law. Companies that don’t provide health care must be required to pay a tax equal to the estimated health care costs of their employees. This won’t cut the overall cost of the system. However, it will shift the burden from taxpayers to employers.

A related note is that the U.S. needs to stop importing (legally and illegally) unskilled workers who can’t possibly pay for their own health care and the health care needs of their families. Providing corporations with cheap immigrant labor, while the taxpayer gets the bill, is just a corporate welfare program.

Overall, the U.S. needs to move towards a cheaper medical system, both in terms of real cost and list prices. We also need to move towards out-of-pocket payment for reasons of efficiency (lower utilization and lower overhead). To make this possible, some type of MSA system is required so consumers will have the savings needed to cover health care costs.

[Peter Schaeffer]

Holly W.,

The Singapore system does not appear to be notably dependent on extended families. Clearly, the various government programs and MSAs are the key factors.

SD,

OK. I think I understand your numbers. You are asserting that Singapore’s system would cost 33% more with France’s age distribution. As you point out, Singapore’s official projections are in line with this estimate.

Using the U.S. over 65 / under 65 cost ($11,089 / $2,793 = 3.97) ratio applied to Singapore and France, I derived a cost ratio of 1.178. In other words, Singapore’s health care outlays would rise 17.8% if Singapore had France’s age structure. Perhaps health care for the elderly is more expensive in France versus the U.S. (in relative terms).

However, since I am advocating Singapore’s system, it only seems reasonable to calculate how much France could save even with its current age distribution. As you point out, only 18% of the delta is attributable to different population pyramids assuming Singapore’s system.

Singapore has 8 public and 13 private hospitals. However, 80% of the beds are in the public sector.

I gained one anecdotal minor insight as to why Singapore spends so much less on health care. In Singapore if you die outside of a hospital, your body goes to the morgue, not a hospital. Clearly this is too small an issue to make any overall difference. However, it clearly shows a different mindset.

Anne,

A quick check of Transforming Singapore Health Care: Public-Private Partnership shows a 85% public satisfaction rate. A useful quote

“Patient responsiveness today is a far cry from the overcrowded wards and specialist outpatient clinics of yesteryear. Patient satisfaction is reportedly high (85%); average waiting time for elective surgery is apparently a mere 2 weeks; and the average length of stay in a public hospital is 5 days. With first-world standards of health attainment (an average life expectancy of 78.4 years and an infant mortality rate of 2.2 per 10007) at an affordable 3% to 4% of GDP for the last 3 decades, Singaporeans appear to be getting good value for their money.”

Isabel,

No. In Portugal, out-of-pocket outlays are 30% of the total. You were looking at out-of-pocket as a percentage of private health care spending. For Cuba, out-of-pocket outlays are 9.9% of the total health care spending.

I am not sure what your point about drug prices is. U.S. drug prices are much higher than other countries. I have seen claims of 2X. However, the delta is clearly quite large.

The reference to “unfavorable family circumstances” appears to mean widows, orphans, and dependents, not extended families. I can find no evidence that Singapore relies on extended families to pay for health care to a large or substantial extent. Note that the detailed descriptions of the Singapore system are written by Singaporeans who would be in a position to know this kind of thing.

Anne,

Singapore’s health indicators (life expectancy, infant mortality) are considerably superior to Portugal.

This means one of several things.

1. Portugal is wasting 6% of GDP on health care of no value.
2. Singapore is saving 6% of GDP and delivering better care as well
3. Single-payer systems deliver inferior results and cost more than MSA based systems.
4. Single-payer insurance causes the people of Portugal to consume more than twice as much health care versus Singaporeans and that too much health care is making them sick.

Which is it?

Anne,

The “Hispanic Paradox” has already been discussed here. See Neoclassical Indoctrination. A quote from one of my posts

“The web page also mentions something in the medical community so well known it is called the “Hispanic paradox”. Stated simply, the Hispanic paradox is the fact that first generation Mexican women (born in Mexico, not the US) have birth outcomes equal to (or slightly superior to) the white population, in spite of low incomes and low access to health care. Conversely second generation Mexican women (properly stated Mexican-American) have birth outcomes well below the white population, in spite of higher incomes and better access to health care. The medical community is too polite to be blunt about it, but the reasons are typically alluded to. They include (between the first and second generations) higher levels of alcohol, drug, and cigarette consumption, inferior diets, adverse lifestyles, etc.”

[anne]

http://www.nytimes.com/2007/01/03/science/03ageside.html

January 3, 2007

Data on Hispanic Immigrants Presents Puzzle on Aging
By GINA KOLATA

If medical researchers were to pick someone who might defy national life expectancy statistics, few would pick Irma Lara.

She came to this country illegally from a small town in Mexico to work as a baby sitter. She was 26, had only a first-grade education and was desperately poor.

She married a Mexican-American and had seven children. Her husband's meager salary at a cotton compress company was never enough. The family had no health insurance, never saw a dentist. Now, widowed at 75, Mrs. Lara is still poor; her monthly income is less than $600. She spends her days at a community center near her tidy subsidized apartment in Hitchcock, Tex., playing bingo, learning English, working out with exercise bands and with weights.

"I am happy," Mrs. Lara said.

And, if statistics are any guide, Mrs. Lara has a long life ahead of her, longer than would be expected if she were black or a native-born white woman. It is called the Hispanic paradox, and it is one of the most puzzling discoveries in research on aging.

For example, a recent analysis by Irma T. Elo, a demographer at the University of Pennsylvania, indicates that a 65-year-old white woman will live, on average, an additional 18.9 years. But a 65-year-old Hispanic woman who immigrated to the United States will live an additional 19.8 years, a significant difference.

The longevity difference persists even though Hispanic immigrants tend to be like Mrs. Lara, poor and poorly educated and lacking health care. It persists even though, like Mrs. Lara, they get chronic diseases like arthritis and high blood pressure and are often overweight.

"Everyone," said Kyriakos S. Markides, who directs the Division of Sociomedical Sciences at the University of Texas in Galveston, "is trying to figure out what the hell is going on."

Two popular hypotheses have not held up in recent studies. One said that immigrants returned home to die, leaving healthier people in the United States. The other said that healthier people were more likely to immigrate.

So the mystery remains....

[anne]

http://www.washingtonpost.com/ac2/wp-dyn/A9472-2004Dec17?language=printer

December 19, 2004

The Salmon Effect
By Richard Morin

For years, demographers have asked themselves this question: Why do adult Hispanics living in the United States live so long and never seem to get sick? Demographers call it the "Hispanic Paradox": Hispanics, who tend to be poorer and have fewer advantages than non-Latino whites, nonetheless seem to live longer and have healthier lives, on average, than their Anglo counterparts.

The disparity in life expectancy is large, report demographers Alberto Palloni of the University of Wisconsin and Elizabeth Arias of the National Center for Health Statistics. They found the overall adult mortality rate was a whopping 30 to 50 percent lower for Hispanics than for whites. Those differences "translate into five to eight years of additional life expectancy at age 45" for Hispanics living in the United States, Arias and Palloni reported in a recent issue of the journal Demography.

Moreover, "these large differences persist even after we controlled for factors associated with longevity," Palloni said. The gap is large enough to prompt researchers to wonder, "Is this true? Is this real?" he said.

To find out, Arias and Palloni examined health and demographic data collected annually by the federal government on approximately 130,000 individuals between 1985 and 1994.

They used a data file that contained matched records from the survey and death records. The file allowed them to determine who subsequently died and from what causes during the study period.

The first thing they found is that not all Hispanics in the United States live longer, healthier lives than Anglos. There was no difference between the mortality rates of non-Hispanic whites and Latinos born in Puerto Rico or Cuba. But among foreign-born Hispanics other than Cubans or Puerto Ricans, the paradox held. "They died later, and didn't get sick as often," Palloni said.

But why? ...

[anne]

But why, indeed?

http://www.washingtonpost.com/ac2/wp-dyn/A9472-2004Dec17?language=printer

One clue came when they saw that the mortality gap was particularly large among men and women born in Mexico who lived in states closest to the Mexican border. Digging deeper into the data, they found the answer: The ill and infirm apparently returned home to die and thus didn't appear in U.S. vital statistics data, while healthy Mexican immigrants remained in the United States. It's called the "salmon effect," Palloni laughed.

But the puzzle wasn't completely solved. Hispanics living in the United States who were born in foreign countries other than Mexico also lived longer and healthier lives, despite the absence of a salmon effect....

[Interesting, the paradox is a paradox of a healthier population but healthier for reasons we do not understand but wish to.]

[anne]

"Two popular hypotheses have not held up in recent studies. One said that immigrants returned home to die, leaving healthier people in the United States. The other said that healthier people were more likely to immigrate."

The paradox is a pleasing paradox of relative health and longetivity, and suggestion otherwise is of course rubbish. Phooey, phooey, phooey.

[Tapsearch Com Editor]

Free Trade has taken tariffs off products and put it them on workers. Workers are the main commodities of Free Trade. Due to this, employers find it difficult to pay any share of health costs in order to compete in a global arena. Universal Health care is in essence an extended tariff for these services and perhaps there is no way out now with Globalization and Free Trade limiting the public services that are affordable. These services have become an overhead that is too much to absorb by employers. There is still a way to afford needed social services like health care but the whole tax system would have to be changed to fill the voids due to tarriffs put on workers and not products. ( see http://tapsearch.com/tapartnews/id33.html - Taps instead of Taxes - or Transaction Fees... )
It is nonsensical but workers as shoppers have shop their way out of their entitlements with the money spent at retail fanning out to the places where the products are made. The money does not stay her to recyle a value added economy. The private sector no longer can afford to pay for health care.
For more information, visit the following..
Hillary is Coming - The second coming of the Clintons is here. It is time to revisit the Land of is at http://tapsearch.com/tapartnews/id17.html http://tapsearch.com/globalization - view the Pearl Harbor Attack on Workers with Clinton leading the way and President Bush joining the ride as Dr Strangelove.
http://tapsearch.com/tapartnews

[piglet]

"The Schwarzenegger plan, by contrast, is a series of patches. It forces everyone to buy health insurance...; it provides financial aid to low-income families...; and it ... basically [requires insurance companies] to sell insurance to everyone at the same price."

This is *exactly* the Swiss model. Exactly. And the Swiss introduced this system, in 1996, for the very reason that any more wide-ranging reform would have been wrecked by the powerful health insurance industry. The main, and widely known, problems with this system are:
- Insurane premiums are still regressive, contrary to all other European countries;
- There are still too many insurance companies generating immense cost for administration, advertisement etc. Also there is a complicated risk compensation fund.
- Financial aid to low-income families is left to the states and often insufficient.

Still, it *is* better than the old system. Especially the fact that all insurers are forced to offer the same minimum coverage to everybody at the same price and cannot discriminate by age or health (they do, however, discriminate by geography). At the same time, this welcome improvement highlights the absurdity of a multitude of private insurance companies.
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