Tuesday, September 22, 2009

Health care costs

The US spends around $7400 per person per year on healthcare, twice the health costs in Canada, the next highest spender. This increase is outstripping the nation's ability to pay. Over the past decade the rise in health spending has been more than 2 percentage points greater than GDP increases. If healthcare costs continue to grow at this rate, they will consume 150 per cent of the extra wealth that Americans would expect to gain as the economy grows between now and 2050.

In other words, as Americans get richer they will become poorer.

These are the conclusions of a new study published in Health Affairs
Increased Spending On Health Care: Long-Term Implications For The Nation
Michael E. Chernew, Richard A. Hirth and David M. Cutler

I would not presume to tell America how she should allocate health care, but when demand is greater than the ability to pay there has to be some drawing in of the belt. One way of looking at the problem is to regard health as any other commodity; some can afford Cadillacs and some get by with clunkers. If you want a better car you should get a better job and work harder. There are some drawbacks to this policy since we are protected from infectious diseases by herd immunity, but if the herd is already infected and there is no way in getting it immunized, then your only hope if you are unable to be immunized effectively (say you have CLL) is segregation. Many people do live in walled communities.

Restricting access to medicine by cost is how the free market would operate, but even in America the market is not free. I have just read an article on rationing of health care by a medical advisor on oncology to a medical insurance company (and sorry but I have lost the link). He takes the view that rationing is inevitable, but that it is far better that it should be explicit, so that potential patients can buy an appropriate product, than it should be implicit, which is what happens when the government gets involved.

If I were a member of a medical insurance scheme, I would be quite upset if my contributions went to pay for homeopathic medicine (indeed as a contributor through my taxes to the NHS I have been vociferous in my protests at the NHS funding homeopathic hospitals). Indeed, I would like things like IVF and breast enlargement excluded too. For the market to work properly, customers should have good quality access to good quality information about the product. When I buy a car or a television, I get the magazines devoted to these products like "What Car" and "What TV". I look at the features they offer, their performance, their size, and whether they are value for money. Then I shop around for the best deal I can get.

Most people don't shop for health insurance like that. Employers might, but they might also go for things like 'go-faster' stripes, that may look good, but don't add a whit to performance.

Of course, most of you won't be such an expert in health care as I am. Some of you will be able to read the original literature on which certain treatments are based, but even then access is restricted. Just getting access to some papers can cost $25 for each paper. But most of us have to rely on experts. Can you trust the experts? How many are in the pay of the pharmaceutical companies?

In the BMJ last week was a report of the International Congress Of Peer Review and Biomedical Publication in Vancouver. Of concern was the practice of senior academics having their names attached to papers written by pharmaceutical companies in order to give the paper 'authority'. It was asserted that more than 20% of medical articles had a "guest" author. Sometimes such articles were written by "ghosts" employed by the pharmaceutical companies for a fee, who spins the article so as to make a mildly interesting trial seem like a great discovery.

Plainly, the market in health care needs to be regulated. There need to be unbiased experts for are able to judge the merits of particular treatments to know whether they should be paid for or whether they are a waste of space.

Such a body exists in the UK in NICE. The problem with NICE is not its judgement on the efficacy of treatments - indeed it has been useful in telling us that certain well tried and trusted treatments that have been used for many years are of no earthly use - but in its attempts to put a price on anything. Far better for treatments to be evaluated on terms like the number needed to be treated to achieve a certain end and to give a broad range of the costs involved. For example, an average cost for administering a particular drug may be $x. Shop around and you might get it for $x/2. That would be a market with competition. Better still would be providers who could get a better deal from the drug company and market that - and be assured that such deals are available out there - I was able to negotiate them for drugs like neupogen. In fact it is routine to negotiate with pharmaceutical companies for different versions of NSAIDs or PPIs.

Here is an example of the complexity of decisions to be made. Some years ago I was consulted by a colleague about whether she should have adjuvant chemotherapy following her operation for breast cancer. When we consulted the meta-analysis of trials for her particular extent of disease it worked out that for every 20 women, chemotherapy would save two lives. For one in 20 it would not rescue her; she was doomed whatever we did and for the other 17 there would be no benefit, but they would have to suffer the complications of chemotherapy - hair loss, nausea and vomiting, and the possibility of an early menopause, cardiac damage, and later leukemia. A ten percent chance of a life being saved or you could look at it and say two thirds of those who would have otherwise have died of breast cancer would be saved. Or you could say that you needed to treat 10 women to save one life. Fine if it's an aspirin a day - not so fine if it is adriamycin - and Herceptin is not much different from adriamycin in its risk/benefit analysis.

See how difficult it is?

Rationing is bound to come whether Obama triumphs or not. Americans ought to be thinking now just how that rationing should be applied. Are we going to continue to buy the new biological therapies? The average annual sales growth in revenue for these was 20% between 2001 and 2006, compared to that of conventional drugs of only 6-8%. Some of these drugs may have too much patent protection in that they restrict biosimilar drugs from reaching the market.

Another strategy that might be applied is to have an excess on your policy of say $1000 as you might on car insurance so that the simple and trivial illness is dealt with at the local pharmacy, saving the doctor and expensive medicines for the real thing.

Obama's plan is a symptom not a cure. It tells us that trouble is on the way.


Anonymous said...

I don’t have any definitive answers, but I am certain that any omnibus plan to radically alter health care provision and delivery in a country of such size and diversity as the US is doomed to fail the ultimate test...providing better healthcare for more of the population.

I agree that some rationing is inevitable, but would prefer to see market forces dictate the limits at the upper levels of service provided and cost per such services. By that I mean, people who can afford the “premium” service ought to be able to choose whether or not to obtain it (after considering carefully the cost/benefit analysis in each individual circumstance) while there certainly should be some “floor” or “safety net” which assures basic care more or less for everyone.

The problem in the US is that as we have slowly evolved into more of a welfare state with the programs adopted after WWII, more and more people are now ‘addicted” to their entitlements. As we push the envelope, increasing the availability and largesse of the entitlements, we have fewer and fewer people working to pay for the benefits of the collective population.

Currently the liberal politicians (aka the Democrats) are heady with their power and I fear that they will institute programs that will prove to be unaffordable to future generations. It is far easier to withhold candy from a baby that it is to take it away from a baby!

A rationale approach would be to identify cost effective methods to provide a safety net while methodically working on correcting the many faults of the current system in a stepwise fashion.

The current Senate plan to tax developers and manufacturers of medical devices and to tax health insurance companies to provide for the “new” health plan is irrational. What incentive will there be to develop the next generation of medical devices and biopharmaceuticals?

We in the US are heading down a slippery slope and would be better served by moving slowly and methodically with time permitted to assess and modify the changes as we go. Omnibus legislation is very dangerous, but is in keeping with Mr. Obama’s “rock star” image.


Burke said...

As long as the govt is involved in our health care, it will be a mess.

Every alternative to the free market is just some exploiting others by force and is ultimately destructive.

There is no free market in health care or anything else in the US. And there never has been. Virtually all our problems are caused by this fact.

These are lessons that will be learned the hard way.

Terry Hamblin said...

Competition doesn’t lower prices in medical care as it does in other markets, because physicians usually choose the services to be provided and are paid largely by insurance — not by the consumers for whose business they would compete if this were an ordinary market.

New England Journal of Medicine - this week

Anonymous said...

Competition may not serve to lower prices, but I can assure you that it does serve to improve the overall quality of care.

People go where they perceive that their medical care and 'people care' (personal service) are the best and may even be willing (to a point) to pay more for such care and attention.

Centralized regulation likely guarantees minimum service, but can remove the incentives to improve upon the minimums.

In the US to date, competition has served to improve healthcare beyond what would have been achieved based on the basic altruistic drive of healthcare providers (doctors, nurses, ancillary care and institutions themselves).


Burke said...

The essential element of free enterprise is not competition. It's freedom, the absence coercion.

Capitalism didn't just bring us advances in medicine. It brought us the modern world, all the things those advances depended on.

And I'm still waiting for some good Christian to explain to me how his religious beliefs lead to the conclusion that he should (via his govt) be forcing some to serve others, as is done in non-capitalistic societies.

BTW, doc, as I write this, I'm listening to a Sarah Brightman CD. Is she still popular in Great Britain?

Terry Hamblin said...

Sara was the wife of A L-W and achieved a career boost from that. I haven't heard anything by her for years.

Unbridled capitalism certainly produces many innovations but can lead to exploitation of the weak. It needs to be governed by criminal law to stop people killing or maiming those who oppose them and contract law to force people to keep to agreements. Unfortunately, fallen mankind will make every effort to turn situations to his advantage, legal or not. When the losers are losing too much to the winners, the losers tend to club together to attack the winners. To avoid that, informal social contracts are agreed to. The rich are taxed to benefit the poor. In any capitalist society the limits of that social contract vary with the times.