One argument you hear a lot is “Insurance companies are just greedy”. Insurance companies profit margin are just a little above 3%. Software companies, oil companies, and even telecom companies have higher profit margins. Health insurance companies are highly regulated.
Another problem I see is one of barriers to entry in medical care. The American Medical Association (AMA) restricts who can and can’t become a doctor. The AMA is in charge of granting medical schools. What is very interesting is that today there are around 129 medical schools which is less than the 166 medical schools we had a century ago. This is all despite the fact that the number of medical school applications has increased exponentially in the last 100 years! I am perfectly okay with allowing nurses to do some of the duties of doctors. A lot of ailments that people have (sinus infection, aches, and sore throat) nurses could easily handle. In 2008, there were around 2.6 million nurses. Nurses would be paid more since they would be engaging in more valuable activities. The other major problem is the FDA (Federal Drug Administration). The cost of developing one drug in 2008 was $993 million. If you are one of the major drug companies you are going to be very sure you have a product that can make it to market. The FDA requires that companies go through a clinical trials and a four step process. The drug has to first be evaluated for safety, then the drug has to be evaluated to see if it effective, then people have to actually take the drug and double blind tests with placebos have to be in place. This process takes many years. Meanwhile people with the ailments that the drugs are trying to cure or help are suffering. The number of patients required to conduct a clinical trial have also increased. In the late 1970s only 1,600 people were required for a trial. By the mid 1990s this number increased to 4,200. The number of drugs getting approved every year by the FDA is not in the hundreds its only a couple dozen. In 2009, the FDA only approved 25 new drugs. Yet in that same year more black box warnings were issued than the amount of drugs approved. The black box label warnings are warnings for people who may misuse the drug even though there are directions and a list of possible side effects already on the prescription. Could you imagine if iTunes was in charge of approving new songs and only approved 25 songs in one year? Consumers would be outraged. People could argue “Well songs are one thing but health is another issue”. I think I care more about my life then even my own doctor. There are times when consumers are more informed than even their own doctors because people do actually seem to care about living. When people are dealing with decisions that have huge consequences they will seek information. The icing on the cake is prescription drugs which I mentioned in a previous post. There are close to 4 billion prescriptions written a year. What doesn’t make any sense is requiring a prescription for harmless things like benzyl peroxide (face wash) which I don't believe anyone has ever died from. Drugs like this should just be moved to over the counter which would free up time for the doctors writing the prescription and the consumers who have to waste their time going to the doctor. Also consumers would save money because if you got CVS and Walgreens competing for prices they would drive down prices instead of insurance companies trying to figure out how much they would cover. Moving hundreds of prescriptions from back of the pharmacy to over the counter would improve healthcare.
People are often mad because of the prices they pay for healthcare, but often see what are causing the high prices. Getting rid of the AMA would allow more people to become doctors which would bring down the cost of medical care. Also bringing more drugs over the counter would decrease the cost of prescription drugs since they would be sold in free market places like CVS and Walgreens which would have to sell the drugs for what consumers would pay.
Wow, you sure know alot about medicine and the delivery of medical care!
ReplyDeleteActually there are too many errors, fallacies, and outright ridiculous suggestions here to address all of them, but we'll see if we can't get off to a good start.
Hopefully now that you have your MBA, you understand that the profit margin a company reports on their balance sheet is after all expense -- including write-offs for perks from jets to country club memberships and employee compensation. These companies are compensation machines for their executives, in comparison to whom physicians earn a pittance. Take United Health Care's CEO, he's made just shy of $170-million the last 5 years. Feel free to peruse this link to take a gander at exectuive compensation at several of the major health insurers (http://www.theindustryradar.com/index.cfm?account=radar&page=Healthplan_Executive_Compensation). Still don't think health insurers contribute significantly to the expense of medical care?
"The AMA is in charge of granting medical schools." Aside from the questionable grammatical construction of this sentence, it's not true. Nobody 'grants' medical schools. The LCME accredits allopathic schools in North America. And, you can run a medical-school successfully without their accreditation, as all 29 osteopathic schools in the US demonstrate.
"What is very interesting is that today there are around 129 medical schools which is less than the 166 medical schools we had a century ago." You should read the Flexner report, which was the impetus for closing down many of those 'medical schools'. Read the report, learn a little history, and decide for yourself if you'd like to return to the pre-Flexner days. Just calling yourself a medical school, collecting money from students, and calling them 'doctor' when they finish doesn't mean they're trained to practice medicine. For example, some of the 'medical schools' consisted of a 3-month course of study. Yep, three months, and you were a 'doctor'. I suspect you'd agree that having training standards for physicians is reasonable and necessary.
" A lot of ailments that people have (sinus infection, aches, and sore throat) nurses could easily handle." Yep, that's why we have nurse practitioners. Letting less specialized/trained people provide services commensurate with their training happens already. That's why physician salaries only constitute 7-8% of medical expenditures in this country. Nurses, office staff, administrators, insurance companies, hospital executives, drug reps -- all sorts of people other than the doctors consume the other 92% of healthcare dollars. And, entrusting lesser trained people with diagnosis is fraught with risk. When is a headache a tension headache, and when is it a brain tumor or the first sign of impending aneurysm rupture? The complexities of the relative costs and benefits and the unintended consequences of lesser trained vs more highly trained people providing differing levels of care could fill a book -- I'm sure you have a physician friend, feel free to discuss with them to learn more. cont...
"There are times when consumers are more informed than even their own doctors because people do actually seem to care about living. When people are dealing with decisions that have huge consequences they will seek information." Spend time in an urban ER and check back with me on how concerned many are with their own health and how capable they are of making informed decisions with regards to such. I've treated untold numbers of patients who sign their name with an 'X', because they can't read or write. Yep, right here in big cities in the good ol' US of A. Weighing the relative merits of surgery and/or radiation and/or chemotherapy for treatment of say, a brain tumor is challenging for the physicians who spend their lives taking part in making such decisions, all the more difficult for someone with no medical, science, or even critical thinking background. Oh yeah, and people will 'seek information', but that doesn't meant they'll get it from a reliable source (can't tell you how many times people with big ol' tumors that would have been treatable months before but are now terminal come to attention too late to receive life-saving care because 'trusted person xxx' told them something along the lines of, 'Don't worry about it, my aunt had that, and it was nothin'. I love highly educated patients who take an interest in and responsibility for their own care. They can become highly educated with regards to their disease and contribute greatly to making the best decisions for their own care. Unfortunately, as you well know, intellectual ability and critical thinking skills are not standardized across the population.
ReplyDeleteAnd with regards to what you seem to think is the all-powerful cabal of the AMA -- less than 20% of physicians are members, and not because it's exclusive. Their 'dues statements' show up as frequently as AOL CD's used to -- but most physicians don't seem them as an entity supporting their interests.
The free market is a great thing, but a truly free market would be an interesting thing in healthcare. It'd be an interesting experiment. I hope you can stomach people being left to die at the doors of ERs because they have no means by which to pay. And you probably know lots of families that could afford the hundreds of thousands of dollars or more the go into the care of preemie in the NICU. Take for example a single medical system comprised of the 5 University of California health sciences campuses, who provided $560-million dollars in unreimbursed care in 2011. Remove the legal constraints of EMTALA and unshackle them to function as a 'free-market' provider and hold on for the ride as they institute policies to stop losses...and if we're going free market, that means they'll lose the billions (yes, with a 'B') from the myriad of direct and indirect state and federal subsidies they receive annually). Millions of people in this country can't afford to feed or house themselves or their kids, not sure how you'd expect them to pay for medical care (and 'government assistance' isn't a plausible answer if you're going to stick to your 'free markets solve every problem' solution).
ReplyDeleteZDC, thanks for your comment. Profit margins are not on the balance sheet. I think you are confusing write offs with expenses which can’t be that outlandish since companies do have people called shareholders (of which most mutual funds or institutional investors have a large say in). So if I look at the profit of United Healthcare I see the stock has increased by close to 50% (which would be the company value increased roughly over $20 billion. Is there no value in that to shareholders, pension funds, and mutual fund holders? Is over $100 million over 5 years really that much when someone greatly increased the value of the company. Also what percent of profits does this represent? 1%, 5%, or 10%. You might be surprised to know that it is in fact less than 1%.
ReplyDeleteSo if I wanted to open up a medical school I could? The Flexner report was done in 1910. The price of knowledge has decreased so it is interesting why medical school and college prices have gone up…oh I forget government intervention. If a medical school really was 3 months people would quickly see how incompetent the individual was and do business elsewhere.
The question is why administrative costs so much. I see piles of paperwork that nurses have to do and I am not sure what value if any it really adds. What hard data do you have that shows that nurses are worse than physicians in providing care? I just did a post that showed how nonsensical that statement is and often nurses provide the same quality care for a lower price.
Has the number of people not being able to read and write been increasing or decreasing though? People do in fact seek out information. If someone is diagnosed with someone do you think they just throw up there hands and say oh well. No a majority of the people will go to Google or Wikipedia and seek out information. I agree with you people may not get it from a reliable source but this is where the challenge process comes in. If people say something not true someone can easily challenge them. If people search enough places they will get a better true answer. Part of the reason why Americans lack critically thinking skills is because of the horrible government run schools they are placed in. If schools were run like businesses we would be spending half the money and people would actually learn something.
We have had hospitals for a long time yet I don’t ever remember a scenario like this ever occurring. There are such places as charity run hospitals that do take patients. I would much rather give people under a certain income threshold a voucher so they can decide where they go and then let the medical providers compete as opposed to just spending money on healthcare. It’s amazing how in the freest market of things like technology things the quality has greatly increased and quality hasn’t suffered without government intervention. How do you explain this?