• Tag Archives health care
  • 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 other sector of the economy. Some important lessons to consider as we attempt to reform national health care… once again.

    Reprinted from the American Enterprise Institute.


    Mark J. Perry

    Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

    This article was originally published on FEE.org. Read the original article.



  • Can Amazon Fix American Health Care?

    Amazon is teaming up with Berkshire Hathaway and JP Morgan Chase to have a go at reforming American healthcare. This is a good idea for two reasons: first, American healthcare definitely needs reforming. Secondly, it needs to be done in a more, not less, free-market direction.

    Yes, I know that’s not quite how most of us see it. The usual pearl-clutching view is that the US healthcare system is already far too free-market. But that diagnosis entirely misunderstands the system and what it is that ails it; the system is cartelized and rigged in favor of the producers of healthcare. So much so that the method of paying for it, private-sector insurance, just isn’t the root problem.

    Monopolies and Spending Other People’s Money

    Milton Friedman explained all of this 40 years ago, and matters haven’t improved since then. There is the essential financial problem, which is that people aren’t spending their own money on themselves (the way of spending which produces the optimal outcome). PJ O’Rourke’s version of the four ways to spend money is more amusing than Friedman’s, but we are still stuck on the fourth and least efficient method of doing it — spending other peoples’ money on other people. Not something that’s going to be improved by government taking over the raising and distribution of the cash, obviously.

    But beyond that, and far more important as an explanation of the cost of the system, is the manner in which medical care provision isn’t anything close to a free market. Friedman particularly inveighed against the restrictions the American Medical Association places upon the training, number of, mobility, and monopoly of doctors. But there are many other restrictions too. For example, in many states, it is not possible to open a new medical facility — or even expand the equipment installed — without the express agreement of all local competitors that such expansion is needed.

    It is this protection of the incumbents which explains why the US pays nearly twice — 18 percent or so of GDP — what other rich nations do for its healthcare. The system is good in at least one sense: treatment, for those who have the insurance, is blindingly fast by the standards of almost everywhere else. The system is also paying for a very large portion of that public good, global drug research, and development. But that’s not enough to explain the cost — it’s the cartelization and monopoly within the system which is responsible.

    It would be good to have someone come in and break that economic power. Competition is, after all, the cure for such monopolistic costs. Conceptually, we might imagine government doing this, but since that monopoly power is granted by the political system itself, it’s not where the solution can be sought.

    Disruption Is Needed

    Warren Buffett is fond of saying that he likes a business with a moat around it. What he means is protection from any competition which might erode profits. He usually means something like branding, a distribution system that would cost too much to replicate, or some similar advantage — although he’s not averse to legally protected profits, such as those to be had in the insurance industry. And there’s a legally constructed moat around US healthcare, which explains the vast incomes of those working in it and, thus, the cost of the system.

    Just as with medieval castles, the answer to a moat in military terms is overwhelming offensive power. Or, in economic terms, sufficient market power to be able to battle that defense. Which is where — perhaps — we may be with these three companies taking on the task. They have enough people for whose health care they are already paying to make it interesting for them to try to crack the problem. They’re not short of resources, and they’re most certainly not lacking in entrepreneurial brains. Who knows? They may even be able to make a success of it.

    American healthcare definitely needs reform. But to do that we need to identify what ails it and, as Friedman said, the answer is not the insurance model itself, but the privileges accorded to the providers of it. The answer to monopolistic costs imposed upon consumers is competition.

    With these three major corporations turning their attentions to providing just that, it may be possible to get genuine reform. We should wish them luck, for they’re going to need it — perhaps we should lay in a stock of popcorn as we watch how it plays out. But since they are identifying the problem correctly, there is at least a reasonable chance that they’ll be able to improve the system substantially.

    Reprinted from CapX.


    Tim Worstall

    Tim is a Fellow at the Adam Smith Institute in London

    This article was originally published on FEE.org. Read the original article.