The Wasted Lunch

Tyler Cowen argues against single-payer health insurance:

Abolishing the Middlemen Won't Make Health Care a Free Lunch, by Tyler Cowen, Economic Scene, NY Times: Proponents of single-payer national health insurance note that private health insurance has overhead costs of 10 to 25 percent of expenditures. Medicare, by contrast, has overhead costs of about 2 to 3 percent, and socialized European health care systems generally have low overhead costs as well. That is why single-payer supporters claim that we can save money by substituting government for private insurance. But this would shift overhead costs, not reduce them.

The monitoring, marketing and overhead costs of private insurance are what allow more expensive medical treatments through the door. It is precisely because competing insurance companies spend money evaluating the appropriateness of claims that they are willing to pay for so many heart bypasses, extra tests, private hospital rooms and CT scans. ...

European systems are relatively good at providing prenatal care or mending someone hit by a car. Few people would try to get these services unless they were really needed. No one but an expectant mother, for instance, will show up for a prenatal checkup; nor would excess prenatal checkups cost a great deal. The unwillingness of European systems to spend on overhead means they will do best specializing in these kinds of services.

Health insurers cannot just offer expensive tests, technologies, hospital rooms and surgeries for older patients for the taking. Doctors will too often recommend these services and receive reimbursement, even to the point of financial abuse. Medicare has this problem to some extent.

When it comes to these discretionary benefits, European systems are more likely to make people wait for them, more likely to make the service inconvenient or uncomfortable, or simply not make the services available in the first place. All of these features discourage those who don’t really need care, and, of course, some people simply go elsewhere and pay out of their own pockets. Either way, the overhead costs have been shifted onto patients and their families.

On average, European systems are relatively good for the young, who are generally healthy and need treatment for obvious accidents and emergencies, with transparent remedies. European systems are less effective for the elderly, the primary demanders of discretionary medical benefits. ...

American citizens could, if they wanted, replicate many features of Canadian and European systems, but in the private sector. They, or their employers, could join stringent but cheap managed care plans. Health maintenance organizations were popular 15 years ago, but Americans didn’t like being told that they couldn’t have a treatment, or that they would have to wait. That experience showed that Americans are willing to pay for insurance company overhead costs, if it means they sometimes get more in return.

Private insurance also provided earlier access to prescription drugs ... for 20 years or more before Medicare did. The competition among private insurers may appear wasteful, but over time it stimulates better and more complete coverage.

Nor are Canadian and European health care systems as cheap as they look. Measuring health care expenditures as a share of national income does not count waiting costs or the lack of availability of many advanced technologies and treatments. ...

As ... populations age and the value of medical technology grows, the overhead costs of private insurance will prove an increasingly wise investment. ... In the long run, the hidden and indirect costs of single-payer systems are harder to measure and thus are ultimately harder to control.

Middlemen and marketing costs have long been viewed with suspicion by critics of commerce. But these practices are usually signs of market sophistication, not waste. The gains from abolishing private insurance and its overhead costs are an illusion. TANSTAAFL, or "There Ain’t No Such Thing as a Free Lunch."

But TISATAAWL, or "There is such a thing as a wasted lunch," a lunch someone else could have eaten had it not been tossed in the trash.

Here are a few quotes in rebuttal from Paul Krugman who has written quite a bit about this. Quite a few resources are wasted simply fighting over who pays the bills, and in marketing and underwriting policies (while some of the overhead costs would be shifted to the private sector as noted above, there are still substantial savings from eliminating waste). Here's one estimate of what could be saved by switching to a single-payer system:

McKinsey & Company ... recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half ... accounted for by marketing and underwriting - costs that don't exist in single-payer systems. ... To put these numbers in perspective: McKinsey estimates the cost of providing full medical care to all of America's uninsured at $77 billion a year.

Another consideration is the savings that come from preventive care, something single-payer insurers have an incentive to provide, but private insures do not:

Americans spend more on health care per person than anyone else... Yet we have the highest infant mortality and close to the lowest life expectancy of any wealthy nation. How do we do it?

Part of the answer is that our fragmented system has much higher administrative costs than ... the rest of the advanced world. ... In addition, insurers often refuse to pay for preventive care ... because [the] long-run savings won’t necessarily redound to their benefit.

What about cost control from spending money on overhead, one of the benefits cited above from the up to 25% spent on overhead costs?:

[T]o get health reform right, we'll have to overcome wrongheaded ideas as well as powerful special interests. For decades we've been lectured on the evils of big government and the glories of the private sector. Yet health reform is a job for the public sector, which already pays most of the bills directly or indirectly and sooner or later will have to make key decisions about medical treatment. ...

Consider what happens when a new drug or other therapy becomes available. Let's assume that the new therapy is more effective ... than existing therapies ..., but that the advantage isn't overwhelming. On the other hand, it's a lot more expensive... Who decides whether patients receive the new therapy? We've traditionally relied on doctors to make such decisions. But ..., the high-technology nature of modern medical spending has given rise to a powerful medical-industrial complex that seeks to influence doctors' decisions. ...[D]rug companies in particular spend more marketing their products to doctors than they do developing those products ... They wouldn't do that if doctors were immune to persuasion.

So if costs are to be controlled, someone has to act as a referee on doctors' medical decisions. During the 1990's it seemed, briefly, as if private H.M.O.'s could play that role. But then there was a public backlash. It turns out that even in America, with its faith in the free market, people don't trust for-profit corporations to make decisions about their health.

Despite the failure ... to control costs with H.M.O.'s, conservatives continue to believe that the magic of the private sector will provide the answer. ... [I]s giving individuals responsibility for their own health spending really the answer to rising costs? No.

For one thing, insurance will always cover the really big expenses. We're not going to have a system in which people pay for heart surgery out of their health savings accounts and save money by choosing cheaper procedures. And that's not an unfair example. The Brookings study puts it this way: "Most health costs are incurred by a small proportion of the population whose expenses greatly exceed plausible limits on out-of-pocket spending."

Moreover, it's neither fair nor realistic to expect ordinary citizens to have enough medical expertise to make life-or-death decisions about their own treatment. A well-known experiment ... carried out by the RAND Corporation... found that when individuals pay a higher share of medical costs out of pocket, they cut back on necessary as well as unnecessary health spending. ... Eventually, we'll have to accept the fact that there's no magic in the private sector, and that health care - including the decision about what treatment is provided - is a public responsibility.

Next, what about the comparison to to other countries, are waiting times, etc. as bad as implied?

...Employment-based health insurance is the only serious source of coverage for Americans too young to receive Medicare and insufficiently destitute to receive Medicaid, but it's an institution in decline. ... The funny thing is that the solution - national health insurance ... - is obvious. But to see the obvious we'll have to overcome pride - the unwarranted belief that America has nothing to learn from other countries - and prejudice - the equally unwarranted belief, driven by ideology, that private insurance is more efficient than public insurance. Let's start with the fact that America's health care system spends more, for worse results, than that of any other advanced country. In 2002 the United States spent $5,267 per person on health care. Canada spent $2,931; Germany spent $2,817; Britain spent only $2,160. Yet the United States has lower life expectancy and higher infant mortality than any of these countries.

But don't people in other countries sometimes find it hard to get medical treatment? Yes ..., but so do Americans. ... The journal Health Affairs recently published ... a survey of the medical experience of "sicker adults" in six countries, including Canada, Britain, Germany and the United States. ... It's true that Americans generally have shorter waits for elective surgery ... although German waits are even shorter. But Americans ... find it harder ... to see a doctor when we need one, and our system is more, not less, rife with medical errors. Above all, Americans are far more likely than others to forgo treatment because they can't afford it. ...

And also:

The authors of the study compared the prevalence of such diseases as diabetes and hypertension in Americans 55 to 64 years old with ... a comparable group in England. Comparing us with the English isn't a choice designed to highlight American problems: Britain spends only about 40 percent as much per person on health care..., ... Moreover, England isn't noted either for healthy eating or for a healthy lifestyle.

Nonetheless, the study concludes that "Americans are much sicker than the English."... What's ... striking is that being American seems to damage your health regardless of your race and social class. That's not to say that class is irrelevant. ... In fact, there's a strong correlation within each country between wealth and health. But Americans are so much sicker that the richest third of Americans is in worse health than the poorest third of the English. ...

Finally:

[I]nsurance companies ... devote a lot of effort and money to screening applicants... This screening process is the main reason private health insurers spend a much higher share of their revenue on administrative costs than do government insurance programs like Medicare, which doesn't try to screen anyone out. ... [P]rivate insurance companies spend large sums not on providing medical care, but on denying insurance to those who need it most. What happens to those denied coverage? Citizens of advanced countries ... don't believe that their fellow citizens should be denied essential health care because they can't afford it. And this belief in social justice gets translated into action... Some ... are covered by Medicaid. Others receive "uncompensated" treatment, ... paid for either by the government or by higher medical bills for the insured. ...

At this point some readers may object that I'm painting too dark a picture. After all, most Americans ... have private health insurance. So does the free market work better than I've suggested? No: to the extent that we do have a working system of private health insurance, it's the result of huge though hidden subsidies. ...

I'm not an opponent of markets. ... I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semi-private system supported by large government subsidies. That system is now failing. And a rigid belief that markets are always superior to government programs - a belief that ignores basic economics as well as experience - stands in the way of rational thinking about what should replace it.

For more, see the links here. Single-payer isn't perfect, but all things considered it's the better solution.

Comments

[chris]

And that's why I don't read that guy. Too ideologically committed. He's talking about hypotheticals. Other countries have better systems. We can do better than the status quo. It's really simple.

Here's a happy story: my dad was talked into getting chemo when everyone knew he was a goner. The jerkwad oncologist got collect his mammoth few, a private insurer got to eat an enormous bill, and my dad spent the last four months of his life in pure torture.

Basically Cowen wants to make every interaction with you doctor like buying a used car. Yeesh.

[dale]

I think there is a reluctance among many who now have good health insurance to put their fates into the hands of a system that treats all people in a like manner. Priviledge and a sense of entitlement are at play. It's easier to think about how to help- or not help- those others of less status and worth than us than it is to see that we are all in this together. I'm really not pointing fingers here. I think this assumption of entitlement is common to most of us and is hard to recognize and understand for what it is.

[Lafayette]

TV : « The unwillingness of European systems to spend on overhead means they will do best specializing in these kinds of services.”

Bollocks.

The “European system” does not exist. Each country has its own and each is more or less better. The French system (as copycatted in Quebec) is the best and the UK probably the worst of the lot.

And, yes, the French system is orientated towards preventive medicine because, (lo and behold!) they found out it is cheaper than remedial medicine. This ain’t rocket science.

If people want Health Care Systems sold to them like cereal or beer commercials, that’s their business. The fundamental difference between European and American systems is that doctors must accept fees set by the state. Hospitals, clinics, doctors are not allowed to "market" medical services in Europe ... so, abracadabra, no mind-boggling marketing costs (free-for-doctors medical "seminars" in the Caribean, TV advertizing, pharmaceutical marketing and sales, etc.)

America has made of health a "business", just like any other, which is why one sixth of the working population slips through the safety net and has none whatsoever.

If America wants Generalized Basic Health Care, it is going to have to fix both the fee structure practiced and the hallucinatory malpractice suits (for which high fees must recuperate the costs).

Does anyone see American general practitioners willing to accept $25 a visit, as in France? No? I didn’t think so. Not unless they are mandated to do so by the state in special clinics that cater to a general public. And, that is not going to happen, given the present health care infrastructure in the US. The doctors will NEVER negotiate downwards their fees.

How about the juries that give hallucinatory damage judgments for medical incompetence? The malpractice insurance policy fees are hallucinatory as well. So, the public at large is paying for those megabuck damage suits, not the insurance companies – who act simply as the intermediary.

Health care is NOT a business. Just like defense of the nation is NOT a business (Haliburton aside). Or a system of justice. It is a basic right and central to the dignity of human existence.

Duhhhhhhhhh ...

[Archer Martin]

Having lived in Australia, it was striking how different the practice of medicine was. Doctors were as up on the latest research as in the US, spent more time with you, but were less inclined to do a ton of testing or recommend expensive procedures. And Australians are very happy with their medical system.

Cowan seems to think if you don't have bureaucrats, in the form of insurance companies, minding the doctors so they don't abuse the system, the government will have to do it instead. There is another way around this problem (at least for people with reasonable and higher incomes): higher copays.

I have a policy where I can see any doctor I want to, anywhere in the world (it covered me in Oz), and I pay 20% (except for "major medical" meaning operations and hospital stays, where they pick up more). 20% is enough that I don't go to doctors when I have a flu or a sprained ankle, and I make them explain why they are ordering the tests and additional procedures they want to do.

[cm]

dale: I don't think the broadly available healthcare standard creates a sense of elitism. It is simply not that exclusive.

Perhaps (insured) people realize at some gut level that with universal provision of healthcare somebody has to pay for it and it's quite likely them, but given that overall they are conditioned to the effect that healthcare insurance "comes with" employment and the full cost is not very explicit, I'm not sure to which extent concerns about financing play a role. I suspect the effect of "your tax dollars at work" and government inefficiency/incompentence/waste rhetoric is much stronger.

In Germany, employees have to pay around 14% of their gross wages for healthcare insurance (in practice it's 50/50 shared with the employer) -- up to a cap, but you have to get a fairly good salary to exceed that. While we're at it, unemployment insurance is an additional 6.5% and social security tax 19.5% -- both also shared, which combined comes to pretty much 20+20% of gross, and only part is tax deductible. But then you get better and more broadly available benefits.

[maria]

The drug companies and the medical insurance companies are probably too entrenched and powerful (given the way lobbies and their money control the Congress) in the US to permit a universal heath care system now and for a long time into the future. When Hillary tried to create one, she got her head handed to her. I doubt you will see any Democrat "leadership" on this going forward.

[Lafayette]

AM: "20% is enough that I don't go to doctors when I have a flu or a sprained ankle"

Twenty-percent is too much for some. Basic National Health Care requires NO COST for it to work.

People will avoid even the 20% when they think a pharmacy will have some pill that will accommodate their preconceived illness. By the time an illness becomes serious and they finally do see a doctor, it is no long preventive measures that are prescribed but remedial. And, the latter are expensive.

Children must have checkups that include a chat with the parents. You cannot imagine how many cases of child abuse this uncovers.

All this may seem "police statish", I admit. Requiring people to have medical checkups is not a system that anybody really likes. But, people don't like to take their car for maintenance either, and we all know what that results in.

So, what to do? Perhaps there is necessary a very long-term program that must be included in the education system that inculcates the young as to how the body functions and dysfunctions. (Yes, this requires sex education.) Only then will they understand that the body, like a car, needs constant attention.

When children have a consciousness of the body, which is not wrapped in naive myths (often learned within the family), will they learn how to take care of themselves in a PREVENTIVE manner - which is indispensable to national health.

Where did this current pandemic of obesity come from? Or AIDS? Both from misconceptions learned word of mouth. I hope there is a "Health Channel" in your country, because there is one in mine. And, it opens the eyes wonderfully as regards this organic mechanism that surrounds us.

Is obesity being signalled to the parents in your country? It is in mine. Are obese parents being suggested that their young be treated for an "illness"? They are in mine. Are the public health authorities getting a handle on the obesity pandemic in your country? It is in mine. (Yes, obesity is a declared pandemic in the US.)

Or, is everybody going to complain to high heaven one day that "Once again, the civil servants in the national health department/ministry sat on their hands during a major pandemic!" when the death rates start to rise?

National heath care is "creeping socialism"? Yep, and creeping so slowly the grass grows faster.

[Isabel]

Anybody that writes "European and Canadian systems do this or do that" is not worth reading.

[reason]

When I started reading, it was obvious to me the Tyler was either missing the point or avoiding it. And the lack of statistics in his screed is telling. It is further telling that he finds the main advantage in a private system is for (rich?) older people - but older people in the US have medicare. What gives?

[anne]

Isabel:

"Anybody that writes 'European and Canadian systems do this or do that' is not worth reading."

Agreed; we have another anything for war and occupation is fine but providing for the health care of Americans is awful unless you happen to be "me." What a jerk.

[Cyrille]

I'm with Lafayette on the health education, and the health channel (well, not having cable myself I make do with health programs, and even then I am rarely at home when they are broadcast, but when we are we watch them and it is very good, even for the son of a medical doctor like me).
In "Talk to the Snail" (a book making fun of the French by an Englishman), the author gives an example of a typical daily menu over a week in a "large culinary establishment", and asks you to guess what it is. There is great diversity in the menu, and it's very healthy, you reckon it's maybe a hotel providing a daily lunch or some restaurant with a single menu (they are getting quite common).
In fact, it's the canteens from a district of Paris where they publish the menus on the internet (most do). Once in the month, there are fries. Lots of fresh fruits and vegetables, and very different things.
And the killer in that particular district (not mentioned in the book, but you can find in on the internet): the site gives suggestions for the dinner, to get something that balances the lunch.

Yes, the state is taking a bigger role there than in the USA. But then food allergies are almost unheard of here, and people get the habit to eat more diverse things.

We get compulsory visits all through our lives (first at school, then for work...), and frankly that's a good thing. Otherwise I don't see where some potential problems would get detected before it's far too late. I don't tend to spend my holidays at the MP.

As for schooling well... it seems to me that not giving some sexual education is criminal. Here there are far, far fewer teenage pregnancies than in the US or the UK. And AIDS is largely mentioned in school.

We have a lot of room for improvement, but there are fields where involving the state makes sense.

[Lafayette]

reason: "it was obvious to me the Tyler was either missing the point or avoiding it"

TC: But this would shift overhead costs, not reduce them.

Yes, he has misunderstood. Health Care, when assumed to be a for-profit business, cannot be reduced in cost. The doctors wont give up their Mercs/BMWs for a Chevy. Without lower-cost universal health care, ANY privately managed system will be more expensive.

Hilary went to Quebec in the early 1990s to look at their system - which is state funded and based upon the French system - and came back to propose a version that was similar. The AMA sunk that one, with a little help from their friends on K-street. Or, so the story goes ...

Romney learned from the Hilary experience and proposed in Massachusetts a universal coverage (for residents) based on private practice, but that was because he knew that no state funded system would fly - too damn expensive.

So, here we are, a decade later with a war using American kids as cannon fodder, coming back to military medical care that is archaic and a public one that is not much better.

But, oh yes, we have state-of-the-art "toys for the boys". The Daddy Warbucks on K-street love war. It is soooooo remunerative. Free state health care is, I guess, communism coming through the back door. Can't have that, can we.

The mind boggles ...

NB: And this is due to income inequality. How? Easy - for as long as NET high salaries are taxed at ridiculously low margins, people will want to have them. So, why should doctors, lawyers, Wall Street investment bankers, corporate directors take less? It would be stupid of them.

[priscieve]

Even with the great healthcare & trains, I still left France willingly. Even with the crap NHS, I still prefer Britain. Who needs your health when everything else in your life is treacherous?

I think the US health system would be better, overnight, if losers of lawsuits had to pay the winners' court/attorney fees.

[the paine]

there is such a think as free garbage

in fact useually you have to pay some one to take it away....

this is garbage

and its entirely bacause
tyler cowan is an egregious hack

check the slippery language here

the vague swurving from one "might mean more "
curve
to the next " might mean less" curve

this goes on thru out his dismal presentation

why ??

he can't even cook up numbers for this garbage pile

for fear the opposition

(the honest policy wonks
not the corporate hound dog hacks like ty here)

will cut such tripe
into fools ribbons

call the disposal unit please

[Bill Jefferys]

Isn't his main point, that single payer systems would fail to cover the kinds of services and procedures that poor and in particular elderly patients need, rather undercut by his admission that Medicare, which does in fact supply these services and procedures, already does it with an overhead of a few percent? What am I missing here?

[paine]

bj
"What am I missing here?"

what your missing
perhaps only this
ty is not only a hack

he's also
not to bright a hack

[Lafayette]

priscieve: "Even with the great healthcare & trains, I still left France willingly. ... Who needs your health when everything else in your life is treacherous?"

"Treacherous"? Now that's a word laden with connotation.

So, your remark bears further explanation - given that over 300,000 Brits live/work in France.

Anyway, your comment got the gray cells to budge and I looked up an index called the UN Human Development Index, employed to create a list titled "Most and Least Livable Countries (2006)": France is 16th and the UK 18th.

(http://www.infoplease.com/ipa/A0778562.html)

[anne]

Bill Jefferys:

"Isn't his main point, that single payer systems would fail to cover the kinds of services and procedures that poor and in particular elderly patients need, rather undercut by his admission that Medicare, which does in fact supply these services and procedures, already does it with an overhead of a few percent?"

Yes; and similarly for Medicaid despite the lack of uniform support and proper general oversight. But, even with a mixed private-public system, the question is where is the intent to insure 47 million Americans who lack health insurance?

[real person from the real world]

ADD: costs are marketing based. A friend who is a nurse told me that the medical assoc set prices in a geogrphic area based on incomes, and doctors are free to charge more, if they want. A lot of doctors want their money upfront, BEFORE you deal with medicare or co-payers, and MARKETING determines cost of drugs now, NOT the cost of research, MARKETING and figuring out what the market will bear. So, if you leave in an area near a large and wealthy big city with lots of big incomes your prices are higher, even if you are paid shit.

I am sorry about people with cancer who suffer, but every life is different. Some people are willing to fight, even for a few more months. Who has the right to say they are wrong? Only the people with the purse strings?

$$$$$$$$
On Tuesday, the Food and Drug Administration approved GlaxoSmithKline's Tykerb, a once-a-day pill for late-stage breast cancer patients that costs nearly $35,000 a year. It's the latest of half a dozen new cancer therapies with names such as Avastin and Tarceva that can run as much as $100,000 for an annual supply.

Although the medications work much longer in some patients, they help extend the lives of most for only a few months.

The drugs' sky-high costs compared with their relatively small health benefits have sparked arguments among policymakers and medical professionals about what to do with the growing number of people who are depleting their life savings on the drugs or, worse, who can't get them at all.

More broadly, they ask, is this the best way for society to spend its increasingly limited healthcare dollars?

Drug companies and many patients insist even incremental gains are worthwhile. Small clinical advances are likely to turn into larger ones over time, and patients who can afford the treatments say they deserve them.

Traditionally, drug companies have said the prices of their drugs are based on the costs to develop them. Now, they say, drugs are priced according to what the market will bear.

[real person from the real world]

I ened up in emergency a few years back. I had been sick, and finally went to a local hospital. I told them up front, my income was low, and I limited tests myself dispite their arguements. I was still screwed. My income at the time was slightly over their "charitible" limit, mainly because I had a roth IRA that I had convert a couple years previously to make payments over the next few years. Well, I also have a LOT of equity in my home, on the fringe of a wealthy area. THE "NON PROFIT" HOSPITAL padded the bill BIG TIME, and sued. I put the money on a credit card and paid and paid.... I am still not healthy, and need reqular medical care which I do without, while I help my immigrant employer build his struggling IT empire on my back.

During the clinton era, I too, listened to all the arguments against single payer, and was against it, but I have seen so much since. I now say different, I have seen the lousy side of the current system and I now say, SINGLE PAYER!

[Cyrille]

I suppose that, treacherously, we speak French.

Other than that, I fail to fully understand the point.

[save_the-rustbelt]

Be careful what you wish for, when you get it you might not like it.

[Isabel]

Cocorico! ;-)

[TJM]

Two other comments:
From Krugman above: "Consider what happens when a new drug or other therapy becomes available. Let's assume that the new therapy is more effective....." Doctors could be/should be free to choose which drug therapy to prescribe from an array of products to match the array of patient responses to the drugs. Each drug interacts differently with each patient. Single payer eliminates the patient having to forego the more expensive drug because of income.
OTOH, at least a part of the excess cost in the US is that of equipment whether overbedding in urban markets or the over presence (and the concomitant over usage) of diagnostic equipment.
Who and how would a single payer decide which hospitals in which markets should close?

[Lafayette]

anne: "the question is where is the intent to insure 47 million Americans who lack health insurance?"

It's in the next Republican candidate's election promises basket, titled: "No sickly person left behind!"

If they do for Health Care what they've done for Education, we're in for another 8 years of Compassionate Republicanism.

Oh'ma gahd ...

[Lafayette]

cyrille: "I suppose that, treacherously, we speak French."

That and the fact that Britannia waives the rules.

[Lafayette]

(Isabel says ... Cocorico! ;-)

Isabel has such a way with words that leaves one speechless ...

[Don]

I'm fascinated by your claim that private insurers have no incentive to provide preventive care. In fact, my HMO subsidizes health club memberships. Why?

[Stormy]

Tyler does not advance the discussion at all. At best, he does some rear-guard action defending the present system, which everyone, including himself, has to admit is a joke. His defense, of course, is to mischaracterize and attack other systems.

What we need is a dispassionate outline of how other specific systems work. One approach might be to accompany such an outline with a comparison of its costs vs the American costs, together with some health comparisons: infant mortality, etc.

says...

Lafayette, speechless????

[robertdfeinman]

What is interesting is why the NY Times continues to publish people like this on a regular basis?

Tyler presents no data and gives no citations. If this were a school paper he would get an D on it. Perhaps they feel they need for right wing ideologues to balance Krugman, but you don't balance data with invective.

What makes it even more curious is that several of the regular business section reporters like Floyd Norris and Gretchen Morgenson are pretty clear eyed about the mischief present in our current financial community.

Columnists don't get picked out of the blue, so who is paying back who and why?

[reason]

Tyler also shows an ignorance of European medical systems. The rich can opt out (at a cost) - so the choice is not between purely private and purely public systems, it is between comprehensive public systems and partial public systems. The poorer will always face some triage, medical resources are not unlimited. The ultra rich can always use private Swiss clinics if they wish.

But the main mistake is of course to ignore the adverse selection problem, and treat everything as just marketing and administration costs (seen as merely the cost of competition). In my view, adverse selection is an issue for all private insurance, and with more sophisticated information sources (genetics) will get worse and worse. The economics of insurance, (I remember the Economist asking why it exists at all), will haunt us all in the future.

[Isabel]

Ooops, stupid computer that makes me kid with Lafayette undercover!

[vadim]

Another consideration is the savings that come from preventive care, something single-payer insurers have an incentive to provide, but private insures do no

Umm... Your insurer doesn't cover preventive care? No routine checkups? No annual vision exams? No dental cleaning? Really?

But I have a technical economics question: in the cited passage, what exactly does the term incentive mean, as applied to an organization that has no competition, no risk of going bankrupt, and whose employees have not risk of being laid off or fired?

[Keith]

"Another consideration is the savings that come from preventive care, something single-payer insurers have an incentive to provide"

Yes, the government does a great job thinking about long-term savings.

I recall back in the 1970s and 1980s when the Louisiana congressional delegation got together and said "screw these sugar subsidies, we'll give them up if you'll build better levees for New Orleans, because distant benefits to some undefined future group of people will generate a whole lot more election contributions than definite benefits to a well-defined group of people who know exactly who gave them the benefits." So the levees got built and Hurricane Katrina didn't cause very many problems in 2004.

Look, if you want a single-payer system to think about long-term savings, it won't happen unless you do it through some corporate arrangement, akin to a Ma Bell of health care. That's the only sort of entity that will have incentives to make investments that will save money later.

[Keith]

"But then there was a public backlash. It turns out that even in America, with its faith in the free market, people don't trust for-profit corporations to make decisions about their health."

And that's why we won't have cost control in the public system, either. Americans won't put up with somebody limiting their entitlement.

I mean, it's not like we currently plow billions into a Medicare system that produces marginal health benefits instead of funding prenatal care. We totally optimize now with regard to our public health care spending.

[reason]

Vadim...
who said the single payers employees have no risk of being fired? And also, single payer does not mean single provider.

But is competition really the only motivation for any business? There are incentives that come just from acchieving a good outcome for the business (that is how any cost-centre executive operates anyway). How good are you at solitaire?

[Christopher Prottas]

Wow. well, I got half way through this wonderful thread and thought about engaging the healthcare discussion, but jesus, does every discussion have to become about the war?

I oppose the war (and did before it began), so please don't attempt to hit me with the neocon name-calling.

But seriously, the inability of liberals to have a discussion without resorting to talking about 'the man' on k-street, yadayadayada makes all sound as crazy as those on the right who speak of the liberal conspiracies.

Healthcare is a complex issue and there are sound reasons to advocate single payer and private payer models. Unfortunately, the reasons many of you are espousing (as genius as they may be) are just lost amidst your whiny bitching.

Have a good one.

[Holly W.]

STR, didn't you promise us that you're working on some alternate ideas to help improve the affordable health care crisis in the US? How's that paper coming?

[ig]

I dont buy any of these administrative costs arguments or big govt healthcare systems dont work.

The reason we dont have a National Healthcare policy is that first physicians back when the concept of medicare and medicaid were introduced, they didnt want it. Then the insurance and healthcare lobbies, who contrary to their claims, are making a hell of alot of money didnt want it. And now wall street doesnt want it.

Those organizations drive policy decisions.

So lets have an honest discussion about it. Open any Insurance company balance sheet and have a look at Short and Long term investments. What we will do when these dollars come out of the equity markets

http://finance.yahoo.com/q/bs?s=UNH&annual

http://finance.yahoo.com/q/bs?s=WLP&annual

http://finance.yahoo.com/q/pr?s=aet

Now have a look at the 2 parties in power and who donates to those parties.

http://www.opensecrets.org/industries/indus.asp?Ind=H

http://www.opensecrets.org/industries/indus.asp?Ind=F

Thats it.

[priscieve]

Vivez...le poulet. Pardon, Le coq.;)

My point is entangled with the reason why it's silly to name a "European system" of health care. These policies are outcomes of ideas about fairness, which are clearly different in Britain than France. I don't agree that applying the French system outside francophone countries will have the same outcomes. And I don't agree that the health system in France has not had negative outcomes in other areas of French life.

Lafayette- eh bah voila, everything is even then because roughly 300,000 French live just in Britain. http://www.telegraph.co.uk/property/main.jhtml?xml=/property/2007/02/22/lpfrench122.xml

Isabel- Starting a business, working & not getting fired at 3months because the employer had to start paying benefits, being a minority & getting housing, let's just say generally having an Arabic sounding last name, getting my kitchen finished in less than a year, reducing wages or firing people when your business is dying, going to university where the professors show up & there's room to sit...

[reason]

Keith...
you are cynical. I know cynicism makes you feel clever, but it is self-fulfilling. Be part of the solution not part of the problem.

[reason]

Keith...
none the less you are correct on both counts - the poor quality of the political process is a problem, and there are public policy issues with long term incentives for public bodies.

[cm]

reason: Regarding opting-out and adverse selection, in Germany people who opt out of the "public" system (which is actually regulated-private rather than public), mostly by above-cap income, are barred from reentering the public system unless qualified by their income falling below the cap (and possibly other provisions). This is to combat the variety of adverse selection where you benefit from lower private rates, or better value-for-money (private hospital rooms, premium material), when young & healthy, and then coming back to the public coffer when the arithmetic does no longer work, e.g. you have your rates raised because of age, or actually or allegedly existing conditions.

[cm]

priscieve: Honestly, all other things being equal I would prefer paying no taxes, getting super benefits, and being unconstrained in my lifestyle choices. Until that is possible at scale for everybody, we have to live with compromise and trade off different things based on perceived need.

[Isabel]

Oh, Priscieve, I'll take no sides in this eternal war accross the Channel! I like both places for different reasons and both peoples make me laugh in different ways about their national egos. I know France better, and I have a lot of respect for its health care system, but you make a good point: being of the vanilla european persuasion, I have no idea which country does a better job towards more exotic flavours (I certainly don't trust what I read in the French and the English media). And that is a very important question. Apart from that, home is where I live... ;-)

[reason]

Christopher Prottas
????
Are you part of the solution or part of the problem?

[reason]

cm...
I was aware of that but didn't want to complicate things too much. There are private options in other countries with single-payer systems as well. (Mostly complementary insurance for extra services not part of the standard package, or for preferencial treatment).

[Keith]

Reason, cynical? Eh, not so much.

But it does seem like people are making a basic mistake here. They think you can take a system from another country, apply it here, and get the same results.

But if Americans wouldn't accept controls on their care from an HMO, would they from their government?

If our public system currently directs health money to politically powerful seniors even when that health money would be more effective elsewhere, why do you think that wouldn't happen under national health care?

And are we willing to put the same limits on attorneys suing about health care that they do in Canada?

In short, I'd like to see why people think single-payer wouldn't be subject to the same problems that drive American health care costs already. Medicare is our biggest fiscal nightmare, so we want an even bigger version of that?

[Lafayette]

stormy: "What we need is a dispassionate outline of how other specific systems work."

Correct. I am no expert, but here goes.

The French "System":
1) Doctors declare whether they wish, or not, to observe services fees set by the state (which are supposedly negotiated with professional organizations, which have little sway). People can go to those who declare that they do not apply state-agreed pricing, but then the patient pays the difference.
2) All people are covered from birth. Workers pay a contribution to costs as a function of their salary level, but the range from the least to the most is not all that great. It is a percentage of salary, but capped. (The principal is that health insurance is a social benefit that all have a right to access.)
3) The state provides basic health care, but top-up insurance can complement the amount for services that are not covered (for instance contact lenses, dental crowns, a single room at the hospital).
4) The state set medical fees are electronically reported by the practitioner and the patient is reimbursed, but at a percentage of the total amount, typically around 70%.
5) Individuals must select a general practitioner. The general practitioner will complete a "medical history" (which can be accessed by practitioners in order to avoid roaming from doctor to doctor for treatment.) The general practitioner will forward the patient to specialists, but the patient can chose their own, should they wish. Regardless, the price of the specialist is also set by the state.
6) General practitioners (and dentists) get a visit fee of (about) 23/24 Euros, most of which is reimbursed. Subsequent specialist fees cost obviously more, but they too are reimbursed - even up to an including serious diseases. (I know of no one bankrupted by a disease.)
7) Dental care and eye glasses are reimbursed at minimum values, about a third of "designer" frames. Ordinary dental work, like cavities, cost between 30/40 dollars and are reimbursed. Dentists make up for a loss on ordinary care by charging excessively for crowns, which are about the same price as stateside.
8) Abnormally long wait times are unheard of - to a point where Brits are taking the ferry across the Channel to be operated upon in France. Whilst the French go to Morocco for plastic surgery, which, of course, is not reimbursed. (Unless of course it results from an accident. The recent case of a woman whose lower face was torn apart by her dog had groundbreaking surgery done to recuperate her appearance.)
9) People afflicted with AIDS receive medication and then intensive care, the cost of which is totally assumed by the state. The state does not pay for their burial unless they are indigent.
10) An ambulance service is provided by the community and typically staffed by a doctor equipped to give first-aid immediately. It is free, gratis and for nothing.

Isabel/Cyrille/Whoever - have I forgot or misrepresented anything?

[Lafayette]

Forgot one: The cost of medicines is also regulated by the state, which is now pushing generic drugs to reduce costs. All pharmacists are licensed by the state and most drugs, meaning far, far more than those found at the drug store in the states are by prescription only.

The drugs are reimbursed (I think totally).

The French medical system induces people to see a doctor rather than treating themselves.

[Keith]

First, the French system sounds kinda swell. It's far less generous than our Medicare, which is good, and the taxes to fund it are regressive, which is also good, since the regressive taxes at least partly undo distortionary effects of a progressive benefit structure.

Of course, if we adopted the French price-control approach to prescription drugs, that would end a lot of R&D, which would mean we and the rest of the world lose out on a lot of cost savings in the future... I thought people liked those future cost savings...

And we'd better change our legal system, at least wrt health care...I believe that there isn't much latitude for discovery when you sue under the French legal system, which makes lawsuits pretty difficult...maybe we could ape the Canadians and go loser-pays instead, eh?

And let's not forget about less generous medical benefits for the elderly, also part of adopting the French system, which is less generous than Medicare.

I'm actually for a lot of this, but is the Democratic Party?

Really, the biggest obstacle to effective national health care would be the political efforts of those who claim to like national health care.

[priscieve]

Isabel- I didn't mean to start a dialogue about which country is better...just wanted to answer Lafayette's question about why move to Britain. think I wrote it to you by mistake.

More importantly, I do think those reasons are part of how the healthcare is funded. And I'd rather avoid those aspects of life & live with the NHS.

[Lafayette]

Keith: "Medicare is our biggest fiscal nightmare, so we want an even bigger version of that?"

What is the price of good health? Once you've lost it ...

Of course it is worth it. As well, why should one American out of six go without? Are we that cheap a nation? Is ours a civilized country or one where survival of the fittest prevails?

Is it worth a month in Iraq? Two? Three? Four? America can EASILY afford decent health care.

[Keith]

Hey, Lafayette, as long as you're all for cutting the health care spending on the eldery and making it a lot more difficult to sue, which is what we'd do if we adopted the French system, we have some common ground.

[anne]

"Medicare is our biggest fiscal nightmare, so we want an even bigger version of that?"

Rubbish, complete and utter rubbish as always. Simply make something up and repeat it enough and it becomes so. Yuch.

[Lafayette]

Keith: “if we adopted the French price-control approach to prescription drugs, that would end a lot of R&D, which would mean we and the rest of the world lose out on a lot of cost savings in the future. »

In fact, drugs are fairly expensive. I know of no pharmaceutical company NOT making a profit in France.

What Europe is trying to do is to negotiate aggregate EU discounts - that can be done only by nations, far better than numerous HMOs. Same thing for America.

Why do pharmaceutical companies price differently from America to Canada? Because they can.

[Keith]

Oh, yeah, Anne will really sign on for a national health care system that is less generous to the elderly than Medicare.

Your coalition is already coming apart!:)

[billy]

What is interesting is why the NY Times continues to publish people like this on a regular basis?

Tyler and his minions are just hacks, and the best thing to do is to ignore him.

Discussing the bilge he churns out only gives him legitimacy. Its like asking Fox News to cover the Nevada Democratic debate.

[Keith]

"Why do pharmaceutical companies price differently from America to Canada? Because they can."

And that ability to price more in America is what keeps that R&D running, which benefits America and the national health care systems in the world.

Really, allowing pharma pricing is the best long-term investment in health care in the world, and that's the one thing you want to undo. This makes me doubtful that national health care will yield lower future costs than we'd have absent national health care, at least if drug price controls are part of that bargain.

[bernard Yomtov]

The comment by reason at 1:51 hits the nail on the head. Cowan offers no evidence at all to support his claims. In other words, he is simply looking for an interpretation that fits his ideology, not studying the issue at all.

[Keith]

Look, the French system has the following features:

1. Less generous to the elderly and poor than Medicare and Medicaid.

2. Funded by regressive taxes.

3. Virtually impossible to sue under French legal system.

Now, I like all of these features. Please let's hear someone everybody else here endorse these features, and then I'll believe that the US can implement this system.

[Cyrille]

Lafayette -I don't think you misrepresented anything, in fact, it seems a very nice summary which I should copy and save.
I may just add that some things are reimbursed 100% except for one symbolic euro to make people understand it costs money (even though 70% is indeed quite common, and yes psychotherapy is reimbursed 70%), and broadly, if you can't afford a critical medical act you will have it paid for you.

Priscieve, I don't really recognise the country you are talking about.
I have worked for more than 6 years and am yet to get fired after 3 months.
My father in law is Moroccan, and his name shows as much. He has never been homeless, and not because he married into a French family: my mother in law is Laotian.
It is true, though, that if you want to stay among your kind, then the UK is more the place. In France you are (or were) expected to integrate, and it's true that communautarism did not work very well here. But I don't think that a model where people just come for the money and never integrate is very sustainable.

Creating a business has been made a lot easier now, to the point where it is considered easier than in either the UK or the USA.
Now, indeed, firing people or lowering their wages is not easy. Very probably even too hard, but the extent to which people are disposable in the UK is nothing to be proud of.

As for university well... let's say at LSE it was very expensive (although not by USA standards). At Ecole des Ponts et Chaussées it was 200$ a YEAR. At Ecole Polytechnique I was actually getting paid. And the training was better in France. And I got at least as many teachers absent in the UK as in France (and one drunk - in the UK). My brother, a university teacher, is yet to miss a class, so I guess it's not the norm.
I am proud that education is cheap in France and am willing to pay taxes for that. Yes that is not in my personal interest. But ethics is not a matter of personal interest.

[anne]

Thank you, Cyrille. And, yes, I would happily choose the French health care system of which I am especially fond not to mention the cost of the French university system.

[anne]

http://select.nytimes.com/2007/03/22/opinion/22herbert.html

March 22, 2007

Stepping on the Dream
By BOB HERBERT

One of the weirder things at work these days is the fact that we're making it more difficult for American youngsters to afford college at a time when a college education is a virtual prerequisite for establishing and maintaining a middle-class standard of living.

Young men and women are leaving college with debt loads that would break the back of a mule. Families in many cases are taking out second mortgages, loading up credit cards and raiding 401(k)s to supplement the students' first wave of debt, the ubiquitous college loan.

At the same time, many thousands of well-qualified young men and women are being shut out of college, denied the benefits and satisfactions of higher education, because they can't meet the ever-escalating costs.

You want a recipe for making the U.S. less competitive over the next few decades? This is it.

Traditionally, one of the sweetest periods in the lives of many college graduates has been the time immediately after leaving school, when they could relax and take the measure of the newly emerging adult world. It was a time, perhaps, to travel, or to sample intriguing employment opportunities, even if they didn't pay particularly well. Debt was not usually the overriding concern of the young graduate.

That has changed. Along with their degree, most graduates leave college now with a loan obligation that will hover over them for years, maybe decades. Student loans have decisively overtaken grants as the primary form of financial aid for undergraduates.

Two-thirds of all graduates now leave college with some form of debt. The average amount is close to $20,000. Some owe many times that....

[Lafayette]

Keith: "Virtually impossible to sue under French legal system."

That's basically true, but not because the law forbids it.

If you want to sue in a medical case, you have to find a specialist doctor who will testify against their "colleague". That is Mission Impossible. No doctor would do it, not for all the money in the world.

So, proving malpractice is difficult.

More so, I suspect that a malpractice suit would not be a trial by jury. Three judges, probably experts in medical matters, would hear the case, then make the judgment and set the fine. And, this latter would be made according to a mathematical calculation of "damages occurred" and "reparation". Not treble damages for purposes of punishment.

John Edwards would still be driving a junk were he practicing in France.

NB: The only real problem with French justice is that it takes so damn long. Trials can go on for years. "Justice delayed is justice avoided", as the saying goes.

[priscieve]

Cyrille- If you do not believe me because you had a different experience, there is no way I can convince you otherwise. Just know that many people do not live in your France & it's very irritating for us to have to defend ourselves to you.

but back to health care...

[evagrius]

I'd like to know where the notion that France spends less on the elderly than the U.S. originates.

Less on health care? Maybe because the elderly are healthier than in the U.S.?

Are the pensions, all things considered, less or more? Is the poverty rate for elderly less or more?

As for drugs and R&D, considering that more is spent on advertising than research, where exavtly is the argumention, that is, where are the facts to back up the claim that the U.S. pricing actualy is necessary for the drug companies. Let's also consider the fact that quite a few drugs are really "vanity" drugs. They're developed for extraordinary situations. Meanwhile, the banal conditions, the everyday ones, don't receive that much attention.

[Cyrille]

When somebody is fired at the end of the trial period, he can claim that it's because his boss would have to then pay benefits... or realise that actually the boss must pay benefits from day 1 and reflect that, possibly, his performance or attitude might be of some relevance to his being fired.

[priscieve]

ahh so you know me? or my boss? and the bosses of 5 friends? Montpellier is a small town.

[Whit Stevens]

Tim Worstall notes:

"The French system, the one that is generally rated as being number 1 globally, is neither single payer nor single provider."

[Cyrille]

I just meant that paying benefits was from day 1 -although I think I understand and you meant that firing would become more difficult after 3 months (but benefits are not then paid by the company, unless one has a golden parachute of course, but by the state).

However, if it was Montpellier, then I must admit you have a point about problems with an arabic sounding last name. Racism is strong in the south east, a major source of embarassment (there were 3 extreme rights mayors at some point). My father in law lives in Paris, and that must be for something in the different experiences.
Similarly, this part of France is notoriously bad for having works done -hence the problems with your bathroom. Some people seem to expect to be bribed to do the work.

[Cyrille]

Sorry I meant kitchen

[Isabel]

"Of course, if we adopted the French price-control approach to prescription drugs, that would end a lot of R&D..."

Of course??? Data, please.

[vadim]

reason, thanks.

who said the single payers employees have no risk of being fired? And also, single payer does not mean single provider.

Experience. It's my understanding that bad employees are rarely fired from the government (the payer would be government or quasy-government, right?). Plus, in the absence of competition it's difficult to objectively measure performance. When was the last time you dealt with a government agency as a customer? Have you ever had to deal with the INS (or whatever the new name is)?

But is competition really the only motivation for any business? There are incentives that come just from acchieving a good outcome for the business (that is how any cost-centre executive operates anyway). How good are you at solitaire?

Not at all. Too uncompetitive for me. But cost-centre executives have bosses who have competition, if I understand you correctly. Most employees at most companies don't think about competition most of the time, which doesn't mean that competition doesn't drive those companies.

[bakho]

Having the insurance companies hanging around looking for reasons to drop people that might make claims is having a chilling effect on computerizing medical records, having people show up for testing and sharing medical data among practitioners. There are a lot of benefits to computerizing records and making them more accessable. However, the negative reprecussions of medical records ending up in the hands of insurance companies outweighs the positives. Health insurance companies are parasites that add very little to the system. It is time for them to go.

[cm]

reason: I knew you would know, but perhaps others wouldn't, even as I had mentioned it more than once here & there. I addressed it to you as it was in response to your comment.

[cm]

Lafayette: "Why do pharmaceutical companies price differently from America to Canada? Because they can."

Markets produce prices that "the market will bear". That's essentially the idea.

[Noni Mausa]

priscieve : "I think the US health system would be better, overnight, if losers of lawsuits had to pay the winners' court/attorney fees."

Do you mean that this would discourage frivolous medical lawsuits?

If you do, then a study last year in the US might be of interest:

"...For 3 percent of the claims, there were no verifiable medical injuries, and 37 percent did not involve errors. Most of the claims that were not associated with errors (370 of 515 [72 percent]) or injuries (31 of 37 [84 percent]) did not result in compensation; most that involved injuries due to error did (653 of 889 [73 percent]). Payment of claims not involving errors occurred less frequently than did the converse form of inaccuracy — nonpayment of claims associated with errors. When claims not involving errors were compensated, payments were significantly lower on average than were payments for claims involving errors ($313,205 vs. $521,560, P=0.004). Overall, claims not involving errors accounted for 13 to 16 percent of the system's total monetary costs. For every dollar spent on compensation, 54 cents went to administrative expenses (including those involving lawyers, experts, and courts). Claims involving errors accounted for 78 percent of total administrative costs.

Conclusions Claims that lack evidence of error are not uncommon, but most are denied compensation. The vast majority of expenditures go toward litigation over errors and payment of them. The overhead costs of malpractice litigation are exorbitant."

It may be found here, in the New England journal of Medicine, May 11, 2006 -- http://tinyurl.com/2t8da6

So (if I read it correctly) the outcomes of these court cases are sloppy but mostly just. However, whether just or unjust, the lawyers and administrators get a huge cut.

Making the loser pay won't effect that.

Noni

[reason]

vadim...
public cost centers have bosses who answer to tax payers (for waste and inefficiency). The answer is to improve the way government works. (The same as we should look to improve the way markets work).

As for public employees not being sacked, you haven't been paying much attention recently have you.

Keith...
I don't think it is generally accepted here that the R&D argument is more than big Pharma spin. Have you got some convincing evidence? The FDA and the (past) drawing power of US Universities are probably a big part of the reason why so much research is concentrated in the US.

[priscieve]

Noni- Sorry, but I think you've proven my point..? I suggested that if court/lawyer fees were paid by the loser, which as you agree is a "huge cut", then we would see medical costs reduced. If it's expensive to bring up a case without enough merit, not as many would do it. Beyond the reduced costs of courts/lawyers, I believe this 'loser pays' will reduce unnecessary tests & procedures, which are entirely done to cover the doctor's butt in case a patient makes a claim of insufficient treatment. There are many indirect costs associated with reducing the risk to facing litigation, not with reducing risk for proper health care.

Preventive treatment shows great returns and is another avenue to reducing medical costs. I wouldn't suggest there's only way towards lower medical costs & better health, just that 'loser pays' is one.

Cyrille-that kitchen still m'enerve! I do believe, however, the employment issues I faced were all over France. The inflexible regulations do not bring more "job security", just more clever ways to avoid it. And again, unless you possess characteristics that are most affected by this (i.e. young, low-skilled) you wouldn't have experienced it. Perhaps this is the point where our experiences have been different (obviously you are/were young but maybe not searching for a job?)

[Peter Tveskov]

I wish I had written Tyler Cowen's article comparing the European and Canadian health delivery systems with ours.
Having had experience with both in my own family, my mother and brother in Denmark and my daughter and son in law un British Columbia I personally would rather not get sick in either of these places, especially at my age (72).
The principles behind these systems are different and one can argue as to which is better. One thing is clear, the "free" Danish and Canadian systems are not free, considering the taxes paid by the residents of those countries.
From my own observations and in twenty five words or less, the delivery under their systems is strictly rationed and aimed at "young and productive" members of their societies, where the care of the elderly and thus presumably less productive members of their society tends to be paliative.
Is this good or bad? Who knows, but it certainly is different!
Peter

[Keith]

"Of course??? Data, please."

Ask and ye shall receive:

This paper argues theoretically and shows empirically that pharmaceutical R&D spending increases with real drug prices, after holding constant other determinants
of research and development (R&D). Specifically, an estimated elasticity suggests that a 10 percent increase in the growth of real drug prices is associated with nearly a 6 percent increase in the growth of R&D intensity. Simulations that are based on
our multiple-regression model indicate that the capitalized value of pharmaceutical R&D spending would have been about 30 percent lower if the federal government had limited the rate of growth in drug price increases to the rate of growth in the general consumer price index during the period 1980–2001. Moreover, the results suggest that a drug price control regime would have resulted in 330–65 fewer new drugs, representing over one-third of all actual new drug launches brought to the global market during that time period."

http://www.journals.uchicago.edu/JLE/journal/issues/v48n1/480109/480109.web.pdf

[Keith]

That's one of the scariest things about the leftish side in the health care debate. They claim to care about long-run cost savings, but they then want to damage long-run cost savings with short-sighted drug price controls.

I simply do not trust the pro-national health care people until they stop their ignorant populist dementia concerning pharmaceutical pricing.

[anne]

http://www.nytimes.com/2006/03/12/business/12price.html?ex=1299819600&en=58f5b388064887dd&ei=5090&partner=rssuserland&emc=rss

March 12, 2006

A Cancer Drug's Big Price Rise Disturbs Doctors and Patients
By ALEX BERENSON

On Feb. 3, Joyce Elkins filled a prescription for a two-week supply of nitrogen mustard, a decades-old cancer drug used to treat a rare form of lymphoma. The cost was $77.50.

On Feb. 17, Ms. Elkins, a 64-year-old retiree who lives in Georgetown, Tex., returned to her pharmacy for a refill. This time, following a huge increase in the wholesale price of the drug, the cost was $548.01.

Ms. Elkins's insurance does not cover nitrogen mustard, which she must take for at least the next six months at a cost that will now total nearly $7,000. She and her husband, who works for the Texas Department of Transportation, are paying for the medicine by spending less on utilities and food, she said.

The medicine, also known as Mustargen, was developed more than 60 years ago and is among the oldest chemotherapy drugs. For decades, it has been blended into an ointment by pharmacists and used as a topical treatment for a cancer called cutaneous T-cell lymphoma, a form of cancer that mainly affects the skin.

Last August, Merck, which makes Mustargen, sold the rights to manufacture and market it and Cosmegen, another cancer drug, to Ovation Pharmaceuticals, a six-year-old company in Deerfield, Ill., that buys slow-selling medicines from big pharmaceutical companies.

The two drugs are used by fewer than 5,000 patients a year and had combined sales of about $1 million in 2004.

Now Ovation has raised the wholesale price of Mustargen roughly tenfold and that of Cosmegen even more, according to several pharmacists and patients.

Sean Nolan, vice president of commercial development for Ovation, said that the price increases were needed to invest in manufacturing facilities for the drugs. He said the company was petitioning insurers to obtain coverage for patients.

The increase has stunned doctors, who say it starkly illustrates two trends in the pharmaceutical industry: the soaring price of cancer medicines and the tendency for those prices to have little relation to the cost of developing or making the drugs.

Genentech, for example, has indicated it will effectively double the price of its colon cancer drug Avastin, to about $100,000, when Avastin's use is expanded to breast and lung cancer patients. As with Avastin, nothing about nitrogen mustard is changing but the price.

The increases have caused doctors to question Ovation's motive — and left lymphoma patients wondering how they will afford Mustargen, which is sometimes not covered by insurance, because the drug's label does not indicate that it can be used as an ointment. When given intravenously to treat Hodgkin's disease, its other primary use, the drug is generally covered by insurance.

"Nitrogen mustard has been around forever," said Dr. Len Lichtenfeld, the deputy chief medical officer of the American Cancer Society. "There's nothing that I am aware of in the treatment environment that would explain an increase in the cost of the drug." ...

[anne]

http://www.nytimes.com/2006/02/15/business/15drug.html?ex=1297659600&en=62aabaec5acffa8c&ei=5090&partner=rssuserland&emc=rss

February 15, 2006

A Cancer Drug Shows Promise, at a Price That Many Can't Pay
By ALEX BERENSON

Doctors are excited about the prospect of Avastin, a drug already widely used for colon cancer, as a crucial new treatment for breast and lung cancer, too. But doctors are cringing at the price the maker, Genentech, plans to charge for it: about $100,000 a year.

That price, about double the current level as a colon cancer treatment, would raise Avastin to an annual cost typically found only for medicines used to treat rare diseases that affect small numbers of patients. But Avastin, already a billion-dollar drug, has a potential patient pool of hundreds of thousands of people — which is why analysts predict its United States sales could grow nearly sevenfold to $7 billion by 2009.

Doctors, though, warn that some cancer patients are already being priced out of the Avastin market. Even some patients with insurance are thinking hard before agreeing to treatment, doctors say, because out-of-pocket co-payments for the drug could easily run $10,000 to $20,000 a year.

Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument — citing the inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year.

"As we look at Avastin and Herceptin pricing, right now the health economics hold up, and therefore I don't see any reason to be touching them," said William M. Burns, the chief executive of Roche's pharmaceutical division and a member of Genentech's board. "The pressure on society to use strong and good products is there."

Studies show that Avastin can prolong the lives of patients with late-stage breast and lung cancer by several months when the drug is combined with existing therapies. Genentech expects to seek federal approval later this year to sell it specifically for those diseases. But even now, doctors, who are free to prescribe the drug as they see fit, are using Avastin for some breast and lung cancer cases — and finding its cost beyond the means of some patients.

"Avastin is a superb drug, but its cost is already discouraging patients and doctors from using it," said Dr. David Johnson, who heads the cancer unit at Vanderbilt University and is a former president of the American Society of Clinical Oncology. "I wish it were one-tenth the cost, and if it were I would be giving it to almost everybody."

With colon cancer, a year of Avastin treatment costs about $50,000. But the drug will be used at higher doses for lung and breast cancer, and Genentech does not plan to reduce the unit price, even though the additional cost of producing a higher dose is minimal. Roche executives described the pricing plans in a recent interview.

Because Genentech is a leading developer of cancer therapies, some doctors also fear that the company's pricing plans for Avastin — around $8,800 a month — may encourage other companies to charge more for their own oncology drugs....

[anne]

Notice, and notice several times over:

"Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument — citing the inherent value of life-sustaining therapies.

"If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year."

[anne]

Not to worry about the cost of drugs though for you too can be without insurance for, well, for, well, you know....

http://www.latimes.com/business/la-fi-health23mar23,0,3345943,print.story?coll=la-home-headlines

March 23, 2007

Blue Cross Cancellations Called Illegal: The health insurer 'routinely' dropped the policies of pregnant or ill clients, an agency finds. The company disputes the charge.
By Lisa Girion - Los Angeles Times

Blue Cross of California "routinely" violated state law when it canceled individual health insurance coverage after policyholders got pregnant or sick, making no attempt to determine whether they did anything to merit such "harsh" treatment, according to a state investigation of practices that appear to be industrywide.

State regulators plan similar investigations of other health plans in California, and the findings against Blue Cross ratchet up the risk of liability for other insurers, many of whom face lawsuits from consumers who claim they were illegally dumped and subjected to substantial hardships.

As a result of its unprecedented investigation, the Department of Managed Health Care on Thursday said that it had fined Blue Cross $1 million — an amount immediately criticized by canceled policyholders and consumer advocates as too small to matter to an insurer whose parent company, WellPoint Inc., earned $3.1 billion in profit last year on revenue of $57 billion....

[anne]

Ah, in case your were worried, and I am sure you were worried for I was worried, the Chief Executive Officer of WellPoint was granted, well, was granted $72 million when last I looked, and I looked, in 2005.

Just make sure not to get pregnant in California. Say what? That was $72 million, so don't you worry.

[anne]

http://www.aflcio.org/corporatewatch/paywatch/db_console_r.cfm?f=0&ind=Insurance%20Health%20%26%20Disability

Hey, Lady, how many cancelled health insurance policies does it take to make $72 million?

Who wants to know about the $1.8 billion in stock options that were awarded to the chief of UnitedHealth? Say what? Say, yes, that $1.8 billion with a "b" for billion.

[anne]

Now, what was that about 75% of new drugs being developed these last several years being "me too" drugs representing no particular advance for patients but a fine advance for drug companies? Really? Really.

[Keith]

"Now, what was that about 75% of new drugs being developed these last several years being "me too" drugs representing no particular advance for patients but a fine advance for drug companies?"

You got a cite for that?

Keith -> supports his positions with peer-reviewed research.

Anne -> anecdotes from New York Times

Ask and ye shall receive:

This paper argues theoretically and shows empirically that pharmaceutical R&D spending increases with real drug prices, after holding constant other determinants
of research and development (R&D). Specifically, an estimated elasticity suggests that a 10 percent increase in the growth of real drug prices is associated with nearly a 6 percent increase in the growth of R&D intensity. Simulations that are based on
our multiple-regression model indicate that the capitalized value of pharmaceutical R&D spending would have been about 30 percent lower if the federal government had limited the rate of growth in drug price increases to the rate of growth in the general consumer price index during the period 1980–2001. Moreover, the results suggest that a drug price control regime would have resulted in 330–65 fewer new drugs, representing over one-third of all actual new drug launches brought to the global market during that time period."

http://www.journals.uchicago.edu/JLE/journal/issues/v48n1/480109/480109.web.pdf

[Keith]

1/3 fewer drugs if you put in price controls? Really? Really.

What what? Anne favors policies that kill our future children.

[anne]

Actually 78% of the drugs marketed between 1998 and 2004, were simply imitations of existing chemical compounds, while the Food and Drug Administration classed 68% as not improving what was already on the shelves.

How does she know that?

[Keith]

"Actually 78% of the drugs marketed between 1998 and 2004, were simply imitations of existing chemical compounds, while the Food and Drug Administration classed 68% as not improving what was already on the shelves."

Are those marketed drugs new drug introductions, or do you know that?

Or are you just making up numbers? Still no cite...

I'm all for generics whenever possible, but even generics started as patent-protected drugs developed thanks to R&D. I've got the cite that shows less drugs due to price controls. That's also less future generics.

[anne]

http://www.nytimes.com/2004/09/14/health/policy/14conv.html?ex=1252900800&en=fe413194a662c12b&ei=5090&partner=rssuserland

September 14, 2004

A Doctor Puts the Drug Industry Under a Microscope
By CLAUDIA DREIFUS

WASHINGTON - In many ways, Dr. Marcia Angell is an unlikely muckraker. A pathologist by training, she is the former editor in chief of The New England Journal of Medicine. She is also a senior lecturer at Harvard Medical School.

But just days short of her 65th birthday and her first Social Security check, Dr. Angell is taking on the American pharmaceutical industry with a new book, "The Truth About the Drug Companies: How They Deceive Us and What to Do About It" (Random House)....

[Sorry, I have been juggling; a fine reference.]

[anne]

This is a most serious subject, and I am completely supportive of a powerful domestic drug industry, nonetheless there are serious problems to think through. A significant majority of new drugs in the 6 years from 1998 to 2004, were indeed already existing chemical formulations.

Remember, the modern drug era begins in 1980 when companies gained the right to patent drugs developed with public funding. This was what gave the profitability levels to drug companies we find today. The question is to better stimulate creative and braoder research, while limiting patent exploitation.

[anne]

http://www.nybooks.com/articles/17244

July 15, 2004

The Truth About the Drug Companies
By Marcia Angell - New York Review of Books

1.
Every day Americans are subjected to a barrage of advertising by the pharmaceutical industry. Mixed in with the pitches for a particular drug—usually featuring beautiful people enjoying themselves in the great outdoors—is a more general message. Boiled down to its essentials, it is this: "Yes, prescription drugs are expensive, but that shows how valuable they are. Besides, our research and development costs are enormous, and we need to cover them somehow. As 'research-based' companies, we turn out a steady stream of innovative medicines that lengthen life, enhance its quality, and avert more expensive medical care. You are the beneficiaries of this ongoing achievement of the American free enterprise system, so be grateful, quit whining, and pay up." More prosaically, what the industry is saying is that you get what you pay for....

[anne]

Price controls as such are not what I have in mind, as opposed to changing the size of bargaining units to gain leverage, but I am not thinking conclusively only experientially so far and I wholly support drug industry strength.

[anne]

Notice:

http://www.nytimes.com/2007/03/24/business/24vaccine.html

March 24, 2007

Pediatricians Voice Anger Over Costs of Vaccines
By ANDREW POLLACK

The nation’s pediatricians, the foot soldiers in the campaign to vaccinate America’s children, are starting to revolt.

The soaring cost and rising number of new vaccines, doctors say, make it increasingly difficult for them to buy the shots they give their patients. They also complain that insurers often do not reimburse them enough, so they can lose money on every dose they deliver.

As a result, some pediatricians are not offering the newest and most costly vaccines. And some public health experts say that if the situation worsens, it could lead to a breakdown in the nation’s immunization program, with a rise in otherwise preventable diseases....