• Tag Archives health care
  • Media Fail Marvelously in Mocking Rand Paul for Surgery in Canada, “Land Of Universal Health Care”

    Senator Rand Paul is no stranger to public criticism. As one of the few principled members of Congress and an heir to his father’s legacy of anti-authoritarianism, he has grown accustomed to falling under public scrutiny for standing up for his beliefs. But this week he isn’t being condemned for his foreign policy views or his stance on criminal justice reform. Instead, the progressives have chastised the senator from Kentucky for going outside of the United States for medical treatment.

    When Paul was attacked by his neighbor while doing yard work in 2017, he was left with six broken ribs, a bruised lung, and a hernia, which has since been left unresolved. Needing surgery and being well-versed in the atrocity that is our overpriced and overregulated American health care system, Paul decided to join the 150,000 to 320,000 Americans who travel abroad each year in search of lower costs and high-quality health care. But since the medical facility in question happens to be in Canada, Paul has suddenly found himself a target of those accusing him of utilizing the same socialist system he so fervently decries.

    It wasn’t long after Senator Paul announced his intention to travel to Canada for surgery that the accusations began to make their rounds on social media. Democratic Coalition tweeted, “Oh, the irony: Kentucky Sen. Rand Paul, one of the fiercest political critics of socialized medicine, will travel to Canada later this month to get hernia surgery.” Likewise, Talking Points Memo also took a jab at Paul when it tweeted, “Rand Paul, enemy of socialized medicine, will go to Canada for surgery.”

    The media also had a field day attacking Senator Paul. Deceiving headlines intended to mislead the public read, “Rand Paul Heading To Canada, Land Of Universal Health Care, For Surgery” and “Sen. Rand Paul Is Having Surgery in Canada, Where Healthcare Is Publicly Funded.” But there is just one major problem with these tweets and headlines: They inaccurately assert that because the senator is traveling to Canada for surgery, he must be utilizing the country’s infamous socialized medical program. Nothing could be further from the truth.

    Had any of these overzealous Twitter users bothered to do some research, they would have quickly discovered that contrary to their claims, Senator Paul was not being a hypocrite at all. In fact, staying true to his beliefs, the senator plans to go abroad next week to make use of a top-notch private medical facility that offers competitive rates to patients.

    The Shouldice Hernia Hospital is a private facility in Thornhill, Ontario, that prides itself on being “the global leader in non-mesh hernia repair.” It also offers competitive pricing for those paying out of pocket, which is a huge plus for the uninsured. And since it is private, the facility also has more control over its pricing structure, giving it more autonomy to work with health care consumers.

    Paul, who has likened socialized medicine to slavery and who himself is an ophthalmologist, has always been an advocate for private solutions to our health care woes. And while many would like to condemn this decision to go to Canada as hypocrisy, it is actually right on brand for the senator.

    Kelsey Cooper, a spokesperson for Paul, defended his decision and wrote in an email to the Courier Journal, which broke the story,

    This is more fake news on a story that has been terribly reported from day one—this is a private, world-renowned hospital separate from any system and people come from around the world to pay cash for their services.

    While the media and talking heads continue to waste their breath gossiping about Paul’s personal medical decisions, the senator is demonstrating what a truly free market health care system could look like.

    In an interview with Wave 3 News in Washington, DC, Paul commented on his decision, saying:

    I looked for a place that did primarily that type of surgery. A place that actually accepts Americans who pay cash. It’s a private hospital. The funny thing is, people had an agenda that wanted to attack me said, “Oh, you’re going to choose socialized medicine.” I’m actually choosing capitalistic medicine because they only take cash from foreigners.

    He continued:

    We have some centers like this. Oklahoma has a center like this but doesn’t specialize in the surgery I need. I chose (Shouldice) because they are good at it and actually the price is right.

    Once it was made widely known that Paul would not be partaking in Canada’s socialized medicine, the critics switched to condemning the senator for going outside of the US for treatment, as if doing so was somehow anti-American in nature. And while many are using this instance as a means of shaming Rand Paul, his actions offer a great teaching moment for the country.

    It’s a mistake to view health care as some sort of phenomenon unrelated and immune to the market process. Health care is a commodity just like any other consumer good. And when choice in medical treatment is limited, health care consumers suffer greatly.

    Keeping health care options confined only to one’s own country of origin is an outdated concept. Medical tourism is a booming industry that gives patients more control over their health care by giving them the opportunity to go wherever the best possible care is available at the lowest costs. This has resulted in a boom for countries like India and Costo Rica.

    As I have previously written:

    For anyone unfamiliar with the term, medical tourism is when someone chooses to travel outside their country of origin, usually to less-developed countries, in search of affordable, quality medical care. And it also happens to be one of the fastest growing global industries. In 2016, this burgeoning sector was valued at $100 billion and is expected to experience 25 percent year-by-year growth by the year 2025. And in an era of soaring medical costs, it is saving health care consumers thousands of dollars and providing them with the care they so desperately need.

    The thought of traveling abroad for health care might scare a fair number of Americans. After all, we tend to think our own medical system as more advanced than others. But the truth is that excessive government regulation has actually stifled medical innovation and caused the cost of treatment to skyrocket. And while American politicians argue about how to best fix this problem, other countries have been innovating and relaxing regulations in order to offer competitive care to medical tourists.

    In India, for example:

    [T]he critically acclaimed Narayana Hrudayalaya heart hospital offers cardiac surgeries from $5,000- $7,000. The same surgery in the US would cost a patient upwards of $50,000. And as far as other medical procedures are concerned, in Costa Rica, a knee replacement surgery can cost a patient around $23,000. However, the same surgery, obtained in the US can cost anywhere from $35,000-$60,000.

    The dramatically lower costs have encouraged some US employers to encourage their employees to seek treatment outside the country rather than use their insurance policies to see an American doctor. For employees who need knee replacement surgery, Hickory Springs Manufacturing began offering a choice: pay $3,000 dollars out of pocket and have the procedure performed in the United States, or opt to take an all-expenses-paid vacation to Costa Rica for the surgery instead. And on top of the free trip, you will also receive a $2,500 bonus check. Since switching to this model, the company has saved more than $10 million on health care costs.

    The free market is not constrained to the political borders of one’s own country. And in order to have a robust health care market full of choice, consumers need to be able to go wherever the best care is available. Senator Rand Paul’s decision to go to Canada for surgery should not be condemned; rather, it should inspire the rest of the country to take a look at all the medical options available to us.

    Source: Media Fail Marvelously in Mocking Rand Paul for Surgery in Canada, “Land Of Universal Health Care” – Foundation for Economic Education

  • How Medicare For All Could Become the Leading Cause of Death In America

    The top three leading causes of death in the US are heart disease (614,348), cancer (591,699), and seeking medical treatment. Yes, you read that correctly. According to a 2016 study by Johns Hopkins, medical errors contribute to the deaths of more than 250,000 Americans annually, which places it as the third leading cause of death in the US.

    Other estimates have actually placed those numbers even higher at around 440,000 annual deaths because errors by health care providers are not included on death certificates.

    Our current health care system is based on a fee-for-service (FFS) reimbursement model that rewards doctors for providing more treatments than necessary because payment is dependent on the quantity, not quality, of care.

    Each time you visit the doctor’s office, consult a specialist, or stay in a hospital, you pay for every single test, treatment, or procedure, even though some of these services may be unnecessary.

    These unnecessary tests and treatments have accounted for $200 billion annually and have been found to actually harm patients. That’s because the FFS system is volume-based, not necessarily value-based. Therefore, any increases in the volume of care equal increases in medical errors.

    Hospital-acquired infections (HAIs) contribute to the deaths of nearly 100,000 people annually, leaving almost two million of the total afflicted population requiring treatments that cost over $25 billion a year. These costs could be passed along to taxpayers under Medicare for All, instead of private insurers and employers, as they are now.

    Take one HAI, for example: central line-associated bloodstream infections (CLABSIs), which occur when germs enter the bloodstream from a catheter (tube) that health care providers insert in the veins (neck, chest, or groin) of patients to supply them with medication or fluids or to collect blood.

    According to an article in the New England Journal of Medicine, CLABSIs may cause an “estimated 80,000 catheter-related bloodstream infections and, as a result, up to 28,000 deaths among patients in intensive care units (ICUs).” These deaths often occur after patients have spent a significant amount of time and money in the hospital.

    The CDC admits the infections are preventable, yet ICUs still experience high numbers of them. A 2003 study conducted by researchers at Johns Hopkins revealed that hospitals can eliminate CLABSIs entirely and very cheaply simply by requiring physicians and hospital staff to follow a five-step checklistwhen inserting central lines, which include obvious sterilization and precautionary measures.

    The researchers tested the checklist at 103 ICUs in Michigan and published their findings a few years later. They found the rate of CLABSIs fell by two-thirds while saving over 1,500 lives and $200 million.

    The simple explanation for most medical mistakes is human error; in CLABSIs’ case, neglecting simple precautionary measures. The problem is hospitals have no incentive to change the issue because they generate more money from treating infections than preventing them.

    It’s evident that iatrogenic events caused by medical oversights or mistakes spur higher health care consumption. An article published in the Journal of the American Medical Association found that issues with quality in outpatient care and medical errors exclusively caused “116 million extra physician visits, 77 million extra prescriptions, 17 million emergency department visits, 8 million hospitalizations, 3 million long-term admissions, 199,000 additional deaths.”

    Patients from HAIs spend, on average, an additional 6.5 days in the hospital and are five times more likely to be readmitted and twice as likely to die, while surgical infections add another $10 billion in annual costs.

    If third-party payers (insurance companies, government, employers) weren’t obscuring the true cost of health care by covering patients’ medical bills, patients would be less likely to permit hospitals to give them highly profitable, easily preventable infections.

    If Medicare for All covered all 325 million Americans—which include the nearly 30 million uninsured Americans and the 41 million more with inadequate health insurance—it would be the most disastrous third-party payer ever, once cost was not a primary factor.

    Including fatal medical errors and the hundreds of thousands of deaths resulting from longer wait times—already exhibited by VA health care—this could presumably make Medicare for All the single biggest factor to the leading cause of death in the US.

    Medicare for All would not only be benefiting those who didn’t contribute 40 or more years into the Medicare Trust, but it also wouldn’t substantially improve conditions because it would forcibly thrust all Americans into a system that costs billions of dollars in unnecessary treatments that don’t necessarily improve patient outcomes but rather impose tremendous harm.

    The fundamental flaw people assume about health care is that being universally insured equals better health outcomes. Not true!

    Canada has a single-payer system, and not only are they experiencing increased wait times every year (average of 21.2 weeks from primary care doctor to specialist for treatment) for health care but their mortality rates from diseases such as cancer (22 percent) are actually 3.5 percent higher than US cancer deaths (18.5 percent) relative to population size. Canadian deaths from heart disease (14.3 percent) fall only 5.4 percent lower than US deaths from heart disease (19.7 percent), so Canada is not significantly healthier because of its single-payer system.

    US Medicare is wasteful, ineffective, and expensive. The Dartmouth Atlasdocuments variations in health care utilization in the US, and it can reveal spending differences on Medicare patients in separate geographical locations with demographically homogeneous populations.

    Further, studies show the variances between patients in these separate regions were not due to differences in prices of medical services or levels of illness but rather the aggregate amount of medical services, which did not generally correlate with better patient outcomes.

    More spending in the higher-cost regions results in “supply-sensitive” services by providers: more frequent doctor visits mean more use of diagnostic tests and procedures, which result in more costly hospital visits.

    Medicare currently enrolls 57 million Americans and suffers $60 billion in annual fraud, waste, abuse, and improper payments (a single payer would reduce some improper payments) using up 10 percent of Medicare’s total annual budget. Adding another 268 million Americans under Medicare for All would certainly raise that annual $60 billion significantly higher.

    Medicare reimbursement rates are set by physicians, which leads to inflated pricing of medical services, and most enrollees are covered by traditional FFS Medicare so there’s no guarantee Medicare for All would decrease the volume of services or the associated negative effects which, altogether, would equate to higher taxes, increased medical injuries, and more fraud under Medicare for All.

    Medicare doesn’t cover all health care expenses for its enrollees, so expecting a Medicare for All plan to cover 325 million Americans for “free” looks a lot more like “Medicaid for All” than “Medicare for All,” which would be an even more dreadful scenario.

    The private insurance market largely follows Medicare’s reimbursement rates and the types of health care services Medicare reimburses. Changing what Medicare reimburses would change the entire incentive structure because private insurance companies could cover evidence-based treatments that improve health outcomes, and provider services would be aligned with what insurers cover so it would transform the entire health care industry.

    Successful attempts have been made by identifying high-cost, high-tech medical interventions such as cardiac catheterization, coronary angioplasty, and stent implantation that are less effective than low-cost, low-tech interventions such as intensive cardiac rehabilitation (or lifestyle medicine)—which actually reverses heart disease.

    Value-based strategies such as lifestyle medicine that address lifestyle factors (i.e. nutrition, physical inactivity, and chronic stress) improve health outcomes of patients, and these strategies should be implemented into the current system before committing $32 trillion in new costs for a Medicare for All plan that is more a political talking point than a medical solution to improve the overall health outcomes of Americans.

    Source: How Medicare For All Could Become the Leading Cause of Death In America – Foundation for Economic Education

  • Why a Facelift Costs Less Than a Knee Replacement

    Between 1998 and 2017 prices for “Medical Care Services” in the US (as measured by the BLS’s CPI for Medical Care Services) more than doubled (+105.3 percent increase) while the CPI for “Hospital and Related Services” (data here) nearly tripled (+189.3 percent increase). Those increases in the costs of medical-related services compared to only a 50.3 percent increase in overall consumer prices over that period (BLS data here). On an annual basis, the costs of medical care services in the US have increased almost 4 percent per year since 1998 and the cost of hospital services increased annually by 5.8 percent.

    In contrast, overall inflation averaged only 2.2 percent annually over that period. The only consumer product or service that has increased more than medical care services and about the same as hospital costs over the last several decades is college tuition and fees, which have increased nearly 6 percent annually since 1998 for public universities.

    One of the reasons that the costs of medical care services in the US have increased more than twice as much as general consumer prices since 1998 is that a large and increasing share of medical costs are paid by third parties (private health insurance, Medicare, Medicaid, Department of Veterans Affairs, etc.) and only a small and shrinking percentage of health care costs are paid out-of-pocket by consumers. According to government data, almost half (47.6 percent) of health care expenditures in 1960 were paid by consumers out-of-pocket and by 2017 that share of expenditures has fallen to only 10.6 percent (see chart above).

    Spending Unknown Amounts of Unseen Money

    It’s no big surprise that overall health care costs have continued to rise over time as the share of third-party payments has risen to almost 90 percent and the out-of-pocket share approaches 10 percent. Consumers of health care have significantly reduced incentives to monitor prices and be cost-conscious buyers of medical and hospital services when they pay only about 10 percent themselves, and the incentives of medical care providers to hold costs down are greatly reduced knowing that their customers aren’t paying out of pocket and aren’t price sensitive.

    How would the market for medical services operate differently if prices were transparent and consumers were paying out-of-pocket for medical procedures in a competitive market? Well, we can look to the $16 billion US market for elective cosmetic surgery for some answers. In every year since 1997, the American Society for Aesthetic Plastic Surgery has issued an annual report on cosmetic procedures in the US (both surgical and nonsurgical) that includes the number of procedures, the average cost per procedure (starting in 1998), the total spending per procedure, and the age and gender distribution for each procedure. Here is a link to the press release for the 2017 report, and the full report is available here.

    The table above (click to enlarge) displays the 20 cosmetic procedures that were available in both 1998 and 2017, the average prices for those procedures in each year (in current dollars), the number of each of those procedures performed in those two years, and the percent increase in average price for each procedure between 1998 and 2017. The procedures are ranked by the number of cosmetic procedures last year. Here are some interesting findings from this year’s report and the table above:

    • For the top seven most popular cosmetic procedures displayed above for last year, none of them increased in price since 1998 more than the 50.3 percent increase in overall consumer prices, meaning that the real, inflation-adjusted price of all ten of those procedures has fallen over the last 19 years. Only four of the 20 cosmetic procedures (facelift, nose surgery, upper arm lift, and chin augmentation) increased more than the overall CPI, while the other 16 procedures increased less than overall consumer prices.
    • For three of the most popular nonsurgical procedures in 2017—botox injection, chemical peel and laser hair removal—the nominal prices have either fallen over the last 19 years, by nearly 1 percent for botox (from $424 to $420) and by more than 33 percent for chemical peel (from $821 to $545), or barely increased (1.1 percent increase in laser hair removal from $452 to $457). Note also that the demand for two of those procedures has increased dramatically—botox procedures increased by nearly ten times and laser hair removal by 63 percent.
    • The two most popular surgical cosmetic procedures last year were breast augmentation and liposuction, which have increased in current dollar prices by 25.5 percent and 28.0 percent respectively since 1998. Both of those average price increases were roughly half of the 50.3 percent increase in consumer prices over the last 19 years, meaning that the real, inflation-adjusted prices for breast augmentation and liposuction procedures have fallen since 1998—by 17 percent for breast augmentation and by 15 percent for liposuction.
    • The unweighted average price increase between 1998 and 2017 for the 20 cosmetic procedures displayed above was 34.2 percent, which is far below the 50.3 percent increase in consumer prices in general over the last 19 years. When the average procedure prices are weighted by the number of procedures performed last year, the average price increase since 1998 is only 12.6 percent. Of the 20 procedures above, 16 increased in price by less than overall inflation (and therefore decreased in real terms) since 1998, and only four increased in price by more than inflation (facelift, nose surgery, upper arm lift, and chin augmentation).
    • And most importantly, none of the 20 cosmetic procedures in the table above have increased in price by anywhere close to the 105.3 percent increase in the price of medical care services or the 189.3 percent increase in hospital services since 1998. The largest cosmetic procedure price increase since 1998 was the nearly 83 percent increase for chin augmentation, which is still far below the more than doubling of prices for medical services overall and nearly three-fold increase in the CPI for hospital services.
    • As in previous years, there was a huge gender imbalance for cosmetic procedures in 2017—women accounted for 91.3 percent of the 4.78 million total cosmetic procedures performed last year (92.3 percent of surgical procedures and 90.8 percent of non-surgical procedures.

    What Does This Mean?

    The competitive market for cosmetic procedures operates differently than the traditional market for health care in important and significant ways. Cosmetic procedures, unlike most medical services, are not usually covered by insurance. Patients paying 100 percent out-of-pocket for elective cosmetic procedures are cost-conscious and have strong incentives to shop around and compare prices at the dozens of competing providers in any large city.

    Providers operate in a very competitive market with transparent pricing and therefore have incentives to provide cosmetic procedures at competitive prices. Those providers are also less burdened and encumbered by the bureaucratic paperwork that is typically involved with the provision of most standard medical care with third-party payments.

    Because of the price transparency and market competition that characterizes the market for cosmetic procedures, the prices of most cosmetic procedures have fallen in real terms since 1998, and some non-surgical procedures have even fallen in nominal dollars before adjusting for price changes. In all cases, cosmetic procedures have increased in price by far less than the 105 percent increase in the price of medical care services between 1998 and 2017 and the 189 percent increase in hospital services. In summary, the market for cosmetic surgery operates very much like other competitive markets with the same expected results: falling real prices over time for most cosmetic procedures.

    If cosmetic procedures were covered by third-party payers like insurance companies, Medicare, and Medicaid, what would have happened to their prices over time? Basic economics tells us that those prices would have most likely risen at about the same 105.3 percent increase in the prices of medical services in general between 1998 and 2017.

    The main economic lesson here is that the greater the degree of market competition, price transparency, and out-of-pocket payments, the more constrained prices are, in health care or any other sector of the economy. Another important economic lesson is that the greater the degree of government intervention, opaque prices, and third-party payments, the less constrained prices are, in health care or any ot