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We spend $8,400 per American on health care, which is 18% of our country’s economic output. For those that are interested in a current balance sheet, Kaiser Family Foundation has put out a Primer on Health Care Costs, found here. The report includes all of the requisite graphs and charts all done in multiple colors and looked at six different ways. The conclusions—technology is expensive, old people have a lot of diseases, people with chronic illness cost a lot of money,  Americans are not smart health care consumers, and physicians are not necessarily effective (or even always honest) purchasers of health care—were the same conclusions reached in my health policy class in 1983 when we were spending $1,200 per American and less that 10% of our economic output. Kaiser concludes the report with this statement:

Successfully improving the efficiency and quality with which care is delivered is an enormous challenge, one that will require substantial investment in research, new information systems, performance incentives, and education, with the hope of transforming how health care is delivered by thousands and thousands of providers dispersed across our largely disaggregated health care system. Coming to terms with the potential of medical technology and its long-run influence on costs is a different type of challenge, but one that is also important.

When I was learning about health policy in 1983, there was general agreement that we as a country were spending enough on health care, but we were spending some of it on the wrong things. When I was learning about entrepreneurial health care delivery (same program, different class) we were taught how to manipulate physicians and patients into committing more of their health care choices to our facility, regardless of need. The tension between actual, perceived and created need is pervasive throughout many aspects of American consumer culture. If as a shoe salesman you talk people into purchasing extra shoes, however, the worse that happens is the customer needs a bigger closet. If you talk them into purchasing additional health care, a little waste is the best that might happen. Worst case, to quote the Verizon CEO:

  • 280,000 people will get the wrong advice today in a doctor’s office
  • 2,800 people will be harmed today by a medication error
  • Equivalent of 390 fully-loaded 747’s will die this year in the hospital from a preventable medical mistake – >1 747/day
  • Many of these will be our employees

People tend to make poor health care choices when left to their own devices, rendering the traditional “market” ineffective. Consequently the “give them cash and let the invisible hand decide” strategy is not an option. So, how do we fix this problem? Per Kaiser, the answer lies in the following:

  • improving the efficacy of care delivery (making sure that only correct care is given and only when needed)
  • de-medicalize some aspects of life and encourage patients to demand less instead of more
  • work within the provisions of the Affordable Care Act to improve care
  • demand that the government (the major purchaser of health care) demand better from its suppliers (physicians, hospitals, etc)
  • focus on keeping people from getting sick instead of paying for illness care.

The good news is that in many areas of the country, transformation along these lines is occurring. I will chronicle some of these activities in the coming weeks.

My son is a junior in college and he tells me that his generation is worried. They are well aware that most growth in real income has gone to the folks that already have most of the money. In fact, he has been somewhat insulated from this as the son of a physician.  It seems that the money has been transferred from the average American’s pocket into the pockets of those of us who provide heathcare (as quoted by Kaiser Family Foundation):

Since 1999, the cost of health insurance provided by an employer rose on average by 160%. In roughly the same time frame, the median household income, after adjusting for inflation, fell by 8.9%. Those two figures, both released in the past two weeks, are connected more than people realize.

As I have spent a lot of time and effort describing (here and here, for example), we as a country spend a lot of money on health care and have relatively  poor health to show for it. Now that a possible candidate for the Republican nomination for the presidency has a little weight problem, once again American obesity is being blamed on our health care costs. Although I tire of putting these words to paper (or blogosphere), while obesity is a problem, preventing obese Americans from accessing our health care sustem is not the answer to our health care inflation.

A big part of the problem is that accessing the health care system is not an activity amenable to the insurance model. As posted on PNHP:

Insurance is a great mechanism that people can use to offset their risk of losing some material thing of great value like their house, boat, car or jewelry….

But for something that is predictable, ongoing, needed by everyone, or necessary for the welfare of our community, an insurance model makes absolutely no sense.l…

We know that almost everyone will eventually need some health care and much of it will be ongoing. For a defined population, the health care needs are predictable, and we know that the health of individuals affects the overall welfare of our community. In addition, most believe that people should get treated for illnesses, diseases and injuries that might befall them and expect that everyone should have access to preventive services like prenatal care and immunizations that make our communities a healthier and better place.

A second problem with the blame the victim mentality is that although some costs are predictable (based on certain identifiable risks including weight), most are not (per KFF):

While discussions about the costs of health care often focus on the average amount spent per person, spending on health services is actually quite skewed. About ten percent of people account for 63% of spending on health services; 21% of health spending is for only 1% of the population. At the other end of the spectrum, the one-half of the population with the lowest health spending accounts for just over 3% of spending.

Lastly, it seems that America’s real income has stagnated, her health care costs have skyrocket, and, as Josh Freeman describes, we physicians as a group are guilty of becoming “job creators” by creating demand for unneeded procedures:

A key finding of the study that also supports Goertz’ argument is that [my bold] “Overall, fees paid by Medicare to US physicians for office visits are comparable to those paid by public insurers in several other countries, and fees paid by US private insurers are slightly higher than those paid by private insurers in other countries. In contrast, fees paid by public payers to orthopedic surgeons for hip replacements in the United States are considerably higher than comparable fees for hip replacements in other countries, and fees paid by private insurers in the United States for this service are double the fees paid in the private sector elsewhere .” This is exacerbated by the fact that “In general, Americans are very low users of office visits and relatively high users of hip replacement surgery.”

To my son’s credit, although he is bright enough to get into medical school he would rather work towards a different America. One, I hope, where as health care professionals we give needed care to people suffering from illness, avoid blaming the victim where possible, and all become a little less greedy. Good luck, Henry.


I was in a meeting last Monday and one of my bosses allowed as how we ought to be planning for the repeal of ObamaCare. Not planning for that as a contingency but planning for the certainty of an overturn of the law by the Supreme Court. I was glad to see that the Obama administration is pressing for an early ruling on the mandate. This should put an end to speculation of what might happen.

On the other hand, maybe there is an advantage to planning based on supposition. The  Kaiser Family Foundation reported an increase in health care costs for privately insured folks as well this week. Despite some media reports to the contrary, only 2% of the  increase could be blamed on ObamaCare. The rest is due to the following:

These premiums were generally set in 2010, when insurance companies thought medical costs would be significantly higher than they turned out to be. The Bureau of Labor Statistics found that the health insurance employer cost index (a measure of the price of health care services) was the lowest it has been in over 10 years in the first half of 2011. Additionally, some insurers assumed  that the Affordable Care Act would dramatically raise their costs. In the end, both assumptions were wrong – but insurance companies still charged high premiums and earned impressive profits. Wall Street analysts’ review of results from the first quarter of 2011 found that 13 of the top 14 health insurers exceeded their earnings expectations, with profits that were over 45 percent higher than estimated.

Or, in other words, their record profits were based on supposition. Maybe my bosses should take some lessons.