Market Failure v1.2

In my last post I started to tell you why I believe the free-market is the wrong arena for health care. Specifically I stated how health insurance is unlike other "commodities" that are bought and sold in a commercial setting. These claims are largely based on the tenants proposed by the Nobel-Prize winning economist Kenneth Arrow in the 1960's. So in that respect it has failed to lower overall health care costs.

Also it has not been shown, convincingly, to improve overall quality of care. Let me clarify what I mean by convincingly. Obviously there have been some ways in which the health of our country has improved over the last 40 or so years. But how much can we attribute to the free market?

Lets take, infant mortality rates as an example. Those rates have improved significantly by coming down to 7 deaths for every 1000 births compared to 20:1000 in the 1970's. Alright, here comes the convincingly non-convincing part. However great that achievement of lower mortality rate is, we still place 29th in the list of first-world nations based on infant mortality. That is to say we rank lower than countries that have single-payer health care systems. So in that respect we can't say that the free market creates the best possible health care system possible.

Then to be completely fair I assume we should analyze the quality of our care internally within the U.S's own system. For that, there are a good amount of studies which have demonstrated that non-profit institutions have higher quality of care versus their for-profit counterparts. For example, in a 1999 study concerning quality of care between profit and non-profit HMOs, David U. Himmelstein, MD et. al. concluded that "Investor-owned HMOs deliver lower quality of care than not-for-profit plans".

Similarly, Bruce E. Landon, MD et. al. concluded in their 2006 study that "patients are more likely to receive high-quality care in not-for-profit hospitals and in hospitals with high registered nurse staffing ratios and more investment in technology."

Unfortunately, similar studies show that this goes well beyond the hospital setting. For-profit nursing homes, kidney dialysis centers and other care facilities have all been found to have higher rates of code violations and less quality of care.

Here the evidence only corroborates the claim that the commercialization of health care does nothing to improve the quality of care received, and arguably in some cases lowers the quality of care. I guess this is what happens when your priorities happen to simultaneously be the patient and the shareholders! Nurses start to be staffed less abundantly, fewer services might be offered and motives may become dubious (William McGuire's 1 Billion Dollar Salary in 2006 as CEO of United Health Group) all in the name to save money and inevitably pocket that money.

- m.tsang

Market Failure v1.0

Take a moment; sit down. Can you hear that? That's the sound of the free-market workings its talismanic properties to create an efficient, cost-effective and high quality health care system. Wait, you don't hear it? Its ok, neither do I. And we are not alone. But you wouldn't know it based on the current soiree of congressmen, senators and AMA members who don't dare consider a health system not based on the free market structure (ie. single-payer).

Ever since our current style of health care started to take shape in the middle of the 20th century, it has always been based on the free-market concepts. The exceptions are of course Medicare, Medicaid, SCHIP, the VA and the Native American Health Groups. But for the majority of the population we only have the option of picking a private insurer to cover our health care.

Anyway, as the free-market story goes, the price of obtaining insurance, seeing a physician and being checked into a hospital should go down based on the concept of competition. Additionally, in order to attain and sustain lower competitive costs, those institutions will be forced to become more efficient and deliver more effective services. Thus, this should keep costs under control and help improve over all quality.

However, since the 1960's, when major private and for-profit institutions started to enter the health care system, we have seen nothing of the sort. Why is this? In his book "A Second Opinion", Dr Arnold S Relman describes the evolution of the commercialization of health care and why it hasn't worked to keep costs down. Specifically, he mentions Kenneth Arrow's article "Uncertainty and the Welfare Economics of Medical Care" from the American Economic Review of 1963 which gives a pellucid view as to why health insurance is unlike any other "commodity" of the free-market.

For one, the relationship of supply and demand break down since the demand for health services is not regular or predictable. Two, the supply of services does not simply respond to the desires of the buyer. What that means is physicians are the ultimate informed consumers of health care. Although a patient can voice their opinion or insist on a specific treatment, the physician is the person who will be ordering the types and number of tests, procedures and prescriptions.

Three, there are limitation on who can enter the provider side of the market due to high start up costs and education, licensing and so forth. And finally, there is significant insensitivity of prices in the health care system. No hospitals or doctors are actively advertising lower prices or clearance procedures! Simultaneously, a majority of patients don't actively seek out those price reductions. There aren't many individuals who are willing to risk monetary savings for assumed quality of service.

Thus, we shouldn't expect to see many changes by trying to alter the current system a little here or there, or going as far as implementing cumpolsory health insurance. Let me include this caveat: by no means am I saying that single-payer health insurance is the answer to all of our problems. There are many other reasons why health care costs are continuing to rise and are hard to control (ie. how health care is administered). However, as Dr Michael Ybarra states, "administrative costs make up 7% [of health care costs]. [Accounting] for $168 billion dollars annually". The significance of this number is shown when compared to Medicare's 2% administrative costs.

So, lets say, even if health care costs weren't escalating higher and higher ever year and the financial stability of our country didn't depend on recasting the entire health care industry, wouldn't it still make sense to change a system of payment if the saving would give our country back 168 billion dollars? The question is even easier to answer when you consider that amount could cover the 47 Million Americans who are currently without health insurance.

- m.tsang

Monopsony Myths

Alright, here we are. On the verge of "change" in health care. Some - mainly conservatives - are upset because they think Obama's plan will inevitably lead the way to some sort of arduous socialized health system under the guise of single-payer. And then some such as I are upset because I know single-payer health care is not in the works.

There are many other aspects that completely upset me about the health care reform issue. However, today I am only going to address the payment side of things, mainly the single-payer obfuscations that persist in the public debate.

Issue numero uno: the name. The term single-payer in itself has become somewhat enigmatic, and is meant to be that way. Single-payer health care has been replaced with such titles as "Socialized Health Care" and "Public Options". The stigmas that are attached to these terms are not fitting in the least bit. Socialized health care is a system whereby the government runs and controls the financing as well as the delivery of health care. And yes that is complete government control.

On the other hand, single-payer health care is a system whereby all medical treatments are paid for entirely by one entity (ie. the government). In other words, an individual has complete freedom of choice to which doctor they would like to visit, which hospital to be admitted to and so on. The difference being that the payment would come from just one payer instead of the hundreds of private (mostly for-profit) insurance companies we have in place today.

So that's that. Same system of health care delivery we have today. Same hospitals, same doctors, same procedures. Single-payer would just take advantage of being a non-profit, consolidated and more efficient means of paying those doctors and hospitals. I find that the Physician's for a National Health Program sum the situation up quite eloquently:

"Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.

Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $350 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do."

Over the next three or four posts, I will continue analyzing the single-payer debate from different angles. I will touch on topics of physicians autonomy, health care as a right v. a privilege, wait times and lessons from Canada, and other topics.

- m.tsang

The Great Escape!

Well, I don't know how they've done it, but those beguiling little devils south of the border pulled off an amazing and lucrative stunt. Don't know what I'm talking about? Just think about it. We just happen to have contracted swine flu at a time that our nation's health care system seems to be in its most tenuous position, and Latin American countries are increasingly benfitting from US Citizens traveling across the border to go get medical treatment.

I know what your thinking. "But what do you mean 'they' pulled this off?". Eh hemmm. I think its quite obvious from CNN and FOX news reports that Mexico created this little virus in their backyard. (For those of you who are extremely credulous or oblivious, I am being facetious.)

But as for the amount of "medical tourism" ocrruing, that is as real as it gets. According to the most recent Gallup Poll on the matter, overall 29% of U.S. Citizens would consider traveling abroad to receive treament for various medical problems. How many of you (faithful and wonderful patrons of my blog) see the obsurdity in this? Although our country has some of the most skilled doctors and advanced treatments in the world, some of our fellow citizens are forced to travel elsewhere to see the doc.

So who are these people traveling abroad to get care? Upon first guess it seems quite logical to answer with the uninsured. I mean there are only 46 million of them in the country; I'm sure someone must be jumping at the opportunity to get their hip replaced for 75% off the $80,000 suggested price for someone who has to pay out of pocket.

Alright, that part of the survey is mostly unprepossessing. On the other hand, another facet to the survey tells of something a little more interesting: 26% of those who currently have health insurance would still consider traveling abroad to receive treament for a medical condition! Ok, now I'm a bit nonplussed. Why? Why would you risk traveling, sometimes extremely far distances, to receive health care in another country, if you already have health coverage down the street from your house?

Its no secret, the decision comes down to cost. I mean, no one goes to Guadelajara because they heard the cancer treatment is better than John's Hopkins. This poll is merely a reflection of the degree of underinsured in this country: the group of citizens living in parallel with the uninsured who make up those who can't receive adequate health care to effectively keep healthy.

The underinsured are a product of all parts of our health care system. They are products of private health insurers as well as Medicare and Medicaid. The Commonwealth Fund estimates that 25 million people in the U.S. are currently underinsured. An individual who is underinsured is someone who has insurance yet still has to pay more than 10% of their income on out of pocket medical expenses. These out of pocket expenses can be the cause of high deductables, co-pays, and limits on what the insurance company is willing to pay to medical providers.

Deductables can reach well over a few thousand dollars for the most non-comprehensive plans. And compulsory co-pays can slowly drain the income of a patient with chronic conditions. Medicare recipients often have to supplement their coverage with Medi-Gap plans whereby they pay extra for extended private coverage. On the other end of the spectrum payment-caps limit the types of procedures the insurance company will cover.

As a consequence a significant number of the underinsured forgo necessary medical screenings, check-ups and treatments in order to avoid forking over a large percentage of their income. What good is health insurance if you are afraid to use it because of colateral cost or if the health insurance company isn't willing to foot the bill? It just shows that the issue of increasing health expenditures is more than just a burden on the economy or a burden for those who can't "buy" into the health care system: those who've bought already bought into the system are having trouble getting the health care they need. Its sadly just another reason why complete reform of the financing and delivery of health care is needed.

Biased: Who Isn't?

Just recently I heard former US Ambassador to the United Nations, John Bolton, comment on the controversy surrounding Sonia Sotomayor. Bolton, reading from two post-it notes, reflected on the Oath of a Supreme Court Justice which states,

"I, [NAME], do solemnly swear (or affirm) that I will administer justice without respect to persons, and do equal right to the poor and to the rich, and that I will faithfully and impartially discharge and perform all the duties incumbent upon me as [TITLE] under the Constitution and laws of the United States. So help me God."

Bolton stated that because of this oath judges are required to exhibit "blindness" in their decision making. That they shouldn't be interpreting how they would have written the law but how they believe the law applies based on its original intent.

However ideal, noble and effective this mode of decision making may be, how likely is it that anyone is truly "blind" in their decision making? Is it possible to be indifferent at all times when coming to a conclusion about some issue at hand? How can one be sure that others are being genuinely impartial?

Yet a majority of the public puts great faith in the belief that most professionals do carry out their work with equitable judiciousness. This is especially true in the medical sciences, epidemiology and the like.

Now, unlike the laws of a nation which are written with some degree of general context, data from a survey is less lucid. A law has structure and arguably a specified intended meaning. For example, let me make up a mock-law that states, "X" shall be required of all companies unless "Y" has occurred concurrently.

This differs greatly from epidemiological research where one might measure an "X" and a "Y" yet there is no "law" initially to state how those two are associated. That is the job of the scientist, the epidemiologist, the researcher: to judiciously interpret what associations, if any, exist between X and Y.

Raj Bhopal, from his 2nd edition of Concepts of Epidemiology, notes that, "interpretation is a matter of judgement which depends on the prior values, beliefs, and interests of the observer". And in epidemiological research interpretation is huge! It is not very common for diseases and conditions to have any one specific cause. Many times it is the case that factors "X", "Y", "Z", "A", "B" and "C" seem to all be related to a specific disease. Then the researcher needs to find out which factors are artifact, which have real associations and which influence the disease the most.

But what if the researcher's initial hypothesis was that only "A", "B", and "C" were contributing factors to disease? Might one be inclined to doubt the data, if for no other reason but, to alleviate the disappointment? How will that effect the researcher's analysis of the data? The influence of a researcher undoubtedly goes well beyond failed fruition. There could be long held beliefs on the subject, past experiences related to the study subject, entrenched interests supporting the researcher and so forth.

I can't imagine many scenarios that involve a scientist conducting research without interest: without some force of motivation to drive them to do what they do. Bhopal also points out, bias goes well beyond how you interpret data. It can start with how you phrase your question of study, your hypothesis and how you choose your methods or populations to study. Take this for example, how many hypothesis do you think sound like: "Diets with the highest fat content increase one's life span". 

Now, I'm not saying that all research is unfair or biased. Most definitely many scientists start their research from a certain vantage point and judiciously come out thinking from the other side. The key is to be impartial in data collection, methods and analyzing. One needs to be aware of their own biases, inclinations and motivations. One should also be open to criticism, disappointment and alternative evidence. If not, not only is the scientist blinding himself from the truth, but more importantly they impede on the greater scientific community and the larger public from finding it as well.

- m.tsang