The Hard Problem of Healthcare

[fls]

Why should anyone care if many radiology groups invest in MRI facility and it does not do well as a business venture?

Did I suggest that anyone should?

Linda

 

[Ziggurat]

They work rather well finding particular fields of high profit. Those fields may not be the fields of high need.

Because insurance partly decouples pay from demand.

Which makes it a bit surprising that in countries with universal healthcare where some form of insurance picks up practically everything a doctor prescribes, there are fewer unnecessary procedures. Patients still play along with the doctors, and they should, because more often then not the doctor actually does know best.

No surprise that when government does the rationing, you get less. The burden of doing the rationing is just shifted to the doctors, it hasn't disappeared.

 

[Ziggurat]

The two most important causes of market failure are the gross disparity in knowledge/information between physicians and their patients and that physicians often have an incentive to provide as much treatment as possible to maximise their remuneration.

Until a solution is proposed which addresses these problems, forget about having healthcare system which does not have exploding costs.

I'm surprised that you bring up information asymmetry in regards to market failure without noticing the elephant in the room: the asymmetry in information between consumers and insurance companies. Unlike, say, car insurance, consumers have much better information about their own risks than insurance companies do. So low-risk consumers can (and often do) opt out of insurance, which drives up the price for everyone else, in turn increasing the incentive for other low-risk consumers to opt out, etc.

 

[blutoski]

No surprise that when government does the rationing, you get less.

That's an important - nay, key - claim that I've never seen supported by evidence. It seems to be somewhat axiomatic within a certain element.

To keep this within skepticism (although I still argue that the overarching debate is politics)... I'd change my mind on the issue if anybody could show me that this was true. However, the comparison between US and Canada, and even among diffrently operated systems in the US is that the government managed care provides greater value to patients in addition to better access. The most compelling explanation is that the commercial approach has high levels of costs associated with operations that do not actually benefit the patient (they benefit the shareowner).

Relevant question: would you change your mind on the issue if this turned out to be false?

The burden of doing the rationing is just shifted to the doctors, it hasn't disappeared.

In the Canadian system, rationing is obviously done at higher levels than individual doctors. The funding is established, then directed into districts, programs, &c, based on public input. The shareowners (taxpayers) are also the patients, so they work both ends to extract maximum balance of dollar value and social fairness.

Recent relevant editorial in CMAJ: [Privatizing health care is not the answer: lessons from the United States]

 

[fls]

No surprise that when government does the rationing, you get less. The burden of doing the rationing is just shifted to the doctors, it hasn't disappeared.

People don't want to consume MRI's or anti-hypertensives or laparoscopic cholecystectomies. What they are attempting to purchase is health. Focusing on the consumption of goods and services implies that there is a fairly direct relationship - greater consumption leads to greater health. The problem is that this is wrong. The strength of that relationship is highly variable. And it can be demonstrated that increasing consumption under some circumstances leads to a reduction in health. In particular, this relationship breaks down when you are talking about consuming excess services.

Linda

 

[mhaze]

Did I suggest that anyone should?

Linda

No, but when we discuss allocation of resources, it is curious that the difference between private and public investment isn't Item Number One. How exactly can one have a discuss of "allocation of resources" when it is private or corporate investment largely that is the resource being discussed?

I'm not saying that I even like hospital corporations, but they exist and buy whatever MRIs they choose, and their stock goes up and down according to various market factors. Similar with radiology doctors' groups, who profit or lose money according to local market factors.

Looking at public hospitals are concerned, and using the issue of MRIs as an example, there are specific Medicare reimbursement levels and policies for MRI, which is then as likely as not, done at one of the private facilities.

Where is the inefficiency of resource allocation demonstrated in this example case of MRI? Rather, it seems that we are seeing efficient resources utilization and service delivery in the USA and the opposite elsewhere.

Maybe MRI is not a good example of the issues raised in the OP?

 

[T.A.M.]

Patients play along with nurse practitioners even better.

http://www.medscape.com/viewarticle/431252



I predict increasing the numbers of nurse practitioners will be fought tooth and nail by physicians and nurse practitioners will start demanding a similar level of remuneration to that given to physicians.

ETA: As for missing rare but important health problems, I think physicians should keep quiet on the subject. Coeliac disease anyone?

WHy even bother to comment. Bound to offend someone. I am sure there are things engineers should shut up about as well.

TAM

 

[fls]

No, but when we discuss allocation of resources, it is curious that the difference between private and public investment isn't Item Number One.

I don't find it curious, since even under universal systems, the investment is mostly private.

How exactly can one have a discuss of "allocation of resources" when it is private or corporate investment largely that is the resource being discussed?

That's my fault. It's probably confusing as it sounds like a centralized structure where services are handed out. I mean it in an economic sense - how production of goods and services are distributed and how they are apportioned to consumers. Businesses choose to invest where they hope to see renumeration and consumers direct their money toward those goods/services they want.

I'm not saying that I even like hospital corporations, but they exist and buy whatever MRIs they choose, and their stock goes up and down according to various market factors. Similar with radiology doctors' groups, who profit or lose money according to local market factors.

Looking at public hospitals are concerned, and using the issue of MRIs as an example, there are specific Medicare reimbursement levels and policies for MRI, which is then as likely as not, done at one of the private facilities.

Where is the inefficiency of resource allocation demonstrated in this example case of MRI? Rather, it seems that we are seeing efficient resources utilization and service delivery in the USA and the opposite elsewhere.

Depends upon what result you are looking for - maximizing consumption or maximizing health.

Maybe MRI is not a good example of the issues raised in the OP?

You tell me. I've come to the conclusion that I have a poor understanding of the intent in the OP.

Linda

 

[luchog]

Linda raised the question, what price do you put on avoiding unnecessary surgery, and it's a good one. But are an MRI and immediate surgery the only options? That's the kind of question I lack the medical background to answer, but I can as an educated layman raise them.

It's very difficult for a layman to answer those kinds of questions.

(BTW, in Seattle we have a regular flow of Canadian patients coming down to get their MRI or CT work done here. Apparently, there are more devices and radiologists in the Greater Seattle area than there are in the entirety of British Columbia, so it's faster to schedule a trip down here than to wait for access to a device in BC.)

Yeah. IIRC Washington State has more than the entirety of Canada.

That's another problem with the Canadian system, basic medicine and preventative care is much easier to get and more widely available; but more involved speciality care, especially the expensive stuff, can have waiting lists months long. Wealthier or more terminal Canadians often come to the US for treatment because of the wait time.

 

[luchog]

My grandmother became seriously ill when she was in her late '70s, I think. She had private health cover, was in hospital and had a fortune spent on her. She checked herself out, went home, died not long after where and how she wanted to. The vast majority of health care is spent on prolonging the life of those whe are going to die soon anyway.

That was definitely not the case for my paternal grandmother. The hospital tried to turf her out to die at home, despite the fact that all she needed was a relatively minor gastrointestinal surgery; because they wanted the bed space. It took an intern making a fuss and threatening to go to the press to get it done. That was 6 years ago, and she's still kicking right along.

 

[blutoski]

No, but when we discuss allocation of resources, it is curious that the difference between private and public investment isn't Item Number One. How exactly can one have a discuss of "allocation of resources" when it is private or corporate investment largely that is the resource being discussed?

I'm not saying that I even like hospital corporations, but they exist and buy whatever MRIs they choose, and their stock goes up and down according to various market factors. Similar with radiology doctors' groups, who profit or lose money according to local market factors.

Looking at public hospitals are concerned, and using the issue of MRIs as an example, there are specific Medicare reimbursement levels and policies for MRI, which is then as likely as not, done at one of the private facilities.

Where is the inefficiency of resource allocation demonstrated in this example case of MRI? Rather, it seems that we are seeing efficient resources utilization and service delivery in the USA and the opposite elsewhere.

Maybe MRI is not a good example of the issues raised in the OP?

No, it highlights the different interpretations of efficiency, due to different goals for outcome.

These companies may be providing the most efficient allocation of resources given their objective which is to 'distribute the maximum profit to shareowners'. Changing the objective to 'providing the best balance of healthcare for the population for costs' may end up with a new definition of 'efficient allocation of resources'.

Both environments provide efficiency... but for different outcomes: shareowner returns per dollar invested versus health per dollar invested.

 

[fls]

That's another problem with the Canadian system, basic medicine and preventative care is much easier to get and more widely available; but more involved speciality care, especially the expensive stuff, can have waiting lists months long.

From Waiting for Health Care in Canada, in 2003, more than half waited less than one month and more than 90% waited less than 3 months to see a specialist. The median wait for an MRI or CT in 2005 was 3 weeks (but I see there's a big difference between CT and MRI). Three weeks for coronary bypass (excluding emergencies), about 5 or 6 months for hip replacement.

There's been a dramatic change in the last 5-10 years looking at waiting lists and addressing them in a systematic fashion in Canada. It's quite an interesting process.

Wealthier or more terminal Canadians often come to the US for treatment because of the wait time.

Is that more or less than the medical tourists that come from the US to Canada?

Linda

 

[69dodge]

They work rather well finding particular fields of high profit. Those fields may not be the fields of high need.

Because insurance partly decouples pay from demand.

I don't follow. Are you saying that if everyone had to pay for their own health care, with no insurance, caring for poor people who are sick would be highly profitable? Or are you saying that if someone can't afford to pay for care, by definition they don't need it? Or something else?

 

[Earthborn]

Because insurance partly decouples pay from demand.

Yes. However, if there was no medical insurance, demand would not become synonymous with medical need.

The burden of doing the rationing is just shifted to the doctors, it hasn't disappeared.

There is always rationing of some sort. It just should be based on medical need rather than profitability.

So low-risk consumers can (and often do) opt out of insurance, which drives up the price for everyone else, in turn increasing the incentive for other low-risk consumers to opt out, etc.

I don't think anyone who favours universal healthcare ignores that elephant in the room. Adverse selection is probably one of the big reasons why medical care in the United States is so expensive and why so many don't have insurance. There really is only one way to get out of that mess, and it the one thing that all universal healthcare systems have in common: don't allow "low-risk consumers" to opt out. Make health insurance mandatory.

 

[mhaze]

No, it highlights the different interpretations of efficiency, due to different goals for outcome.

These companies may be providing the most efficient allocation of resources given their objective which is to 'distribute the maximum profit to shareowners'. Changing the objective to 'providing the best balance of healthcare for the population for costs' may end up with a new definition of 'efficient allocation of resources'.

Both environments provide efficiency... but for different outcomes: shareowner returns per dollar invested versus health per dollar invested.

Actually, I don't know that's true. As I noted, MRI facilities could well be losing business ventures. But that'd be beneficial to the patient customer, who would have easy access and (maybe.... ) lower prices.

Although price seems to be held artificially high in many aspects of medical practice.

Side note: I have seen small combo doctorclinics-pharmacy-laboratory in South Africa, walk in, pay visa/mc, that in my opinion were much more efficient, practical and customer friendly than the typical US doctor's office, where from there you go to the lab, then to the pharmacy, then back to the doctor, etc; often with several delays due to calling insurance companies, and with complicated paperwork, copay amounts, and so forth.

The S. Africa clinics were run as small businesses, with no help needed or asked for from the government. Don't get me wrong. This I do not quote as a "complete solution" but it certainly made a big dent in the problem.

 

[blutoski]

It's very difficult for a layman to answer those kinds of questions.

Yeah. IIRC Washington State has more than the entirety of Canada.

That's another problem with the Canadian system, basic medicine and preventative care is much easier to get and more widely available; but more involved speciality care, especially the expensive stuff, can have waiting lists months long. Wealthier or more terminal Canadians often come to the US for treatment because of the wait time.

I think it's hard to generalize. Having worked in the US with what was considered a good employee plan, HMOs did the waiting list game all the time, too. My experience with waiting lists was much worse in the US. In addition, everything was burdened with just ridiculous amounts of paperwork.

Here in BC, we do have waiting lists, but that's a choice in terms of what we're willing to pay out of general funds in order to shorten the lists by adding capacity.

And it works both ways. The baseline costs in BC for medical beds are much lower than in the US for whatever reason. The big kerfuffle a few years ago was that an HMO in the US exploited the price difference by dumping their patients in Canada. Interesting story...

There is an arrangement for tourists in jeopardy here: we will treat a tourist without hesitation, and figure out billing later. We have standard rates for US HMOs and insurance companies. Turns out these wholesale rates are about half the wholesale rates for US beds (possibly because we charge cost for aspirin instead of $100 per tablet with dispensation fee) so a couple of these insurance companies had the bright idea of loading patients in need of surgery onto cruise ships in Seattle, sending them on an Alaska cruise, but with the explicit instructions to complain of chest pains when they hit Vancouver Cruise Ship Terminal. They get shipped to VGH or SPH and we bill their insurance companies less than half what it would cost them in the US, and with a significantly shorter wait.

Ultimately, the scheme got busted, but not after a few hundred patients had been run through the system.

My point is that there's a lot of anecdotal discussion, a lot of one-offs, a lot of generalizations drawn from a few personal experiences, but the overall picture is studied to death and is more objective and it doesn't look good for the US privatized approach in terms of quite a few metrics. In particular, it looks especially bad for the metrics I take into account: universality of access, effectiveness per dollar spent, and cost burden per patient.

 

[blutoski]

Actually, I don't know that's true. As I noted, MRI facilities could well be losing business ventures.

Very likely, actually. But that doesn't mean the company is not focused on the efficent maximizing of profits even if there is none forthcoming. They would be efficiently minimizing losses, which is done by reducing value per transaction, or increasing prices.

There are private MRI clinics in BC, too, and my understanding is that they are dramatically undercapacity. The investors were somewhat fleeced by the people who manufactured and sold the devices. Some are franchise operations. Our MP was pushing them for a few years, as he had an investment. According to him, everybody should have an MRI quarterly "just to be sure." My dad almost bought into it (dad was a big fan of this politician) until I provided enough research to show that it was just so dangerous as to be unconscionable advice.

But that'd be beneficial to the patient customer, who would have easy access and (maybe.... ) lower prices.

Debatable. Paradoxically, overbuilding could just as likely increase retail prices through various mechanisms. Specifically, since the operator needs to make profit x to cover physical plant, or cease operations, with fewer units sold, he needs to squeeze more profit out of each transaction or close. We call it ARPU (average revenue per unit). Fewer units sold; more markup required per unit. Or close the business to reduce losses. What I'm seeing in WA is that fewer operators are chasing the high markup worried well, rather than providing volume discounted product to the masses. This explains why they're in business while undercapacity: they're profit maximizing and finding that profits are highest with lower volume. It's not carteling, but the effect is the same. If one operator were to come in and wreck up the situation by being the value brand, things could change. (this could very well happen now that the economy is tanking)

Although price seems to be held artificially high in many aspects of medical practice.

Yup. That's a direct result of its unusual "your money or your life" value proposition. It's not a purchase that the customer can invest time exploring alternatives, or even understand very well to do proper independent research. Purchases cannot be postponed until a more convenient time. There's no, "Oh, I'll wait until quadruple-bypass goes on sale."

Side note: I have seen small combo doctorclinics-pharmacy-laboratory in South Africa, walk in, pay visa/mc, that in my opinion were much more efficient, practical and customer friendly than the typical US doctor's office, where from there you go to the lab, then to the pharmacy, then back to the doctor, etc; often with several delays due to calling insurance companies, and with complicated paperwork, copay amounts, and so forth.

Yeah, there's a shady side to that that has led to it being more or less illegal in the US and Canada, and as far as I know in most countries as well. It's the corrupting conflict of interest.

If you look at the less regulated analogous industries, my vet just got some bad press as she was involved in massive conflict-of-interest problems because her practice, lab, and dispensary are synergized. Basically, she overdiagnosed, over-referred for tests, and locked in prescriptions that only her dispensary could fill, at unreasonable markups. I knew her when she was a fresh graduate, but over the years, the temptation of easy money has made it hard for her to treat her customers fairly.

And we have a constant example of chiropractors who scrape up enough cash to finally buy an x-ray and discover that everything complaint requires an x-ray diagnosis.

The S. Africa clinics were run as small businesses, with no help needed or asked for from the government. Don't get me wrong. This I do not quote as a "complete solution" but it certainly made a big dent in the problem.

Please don't take this the wrong way, but my perception is that SA has much bigger health policy challenges than patients having to schlepp back and forth half a block from office to dispensary. My background is AIDS research, and I've had to spend time in SA - particularly Durban - and those people with no money would be pretty happy to walk a little if there was even a chance they would get health care at all.

 

[blutoski]

The big kerfuffle a few years ago was that an HMO in the US exploited the price difference by dumping their patients in Canada. Interesting story...

I wrote this before Linda mentioned the general term for this: "Medical tourism."

The other weird thing was a moment of deja vu when I was packing to go back to Canada for a holiday visit, I was given a few shopping lists for prescription medications to pick up and bring back for coworkers.

It reminded me of when I was visiting relatives in Lithuania, and they had asked me to bring a good supply of name-brand over-the-counter meds. Basics like Asprin and Tylenol. Lithuania, too, was in the thrall of free-market worship, and one effect was that fake drugs was out of control. Unless they came out of my suitcase, nobody could really tell if their drugs had any real ingredients, or were just starch pills.

 

[a_unique_person]

That was definitely not the case for my paternal grandmother. The hospital tried to turf her out to die at home, despite the fact that all she needed was a relatively minor gastrointestinal surgery; because they wanted the bed space. It took an intern making a fuss and threatening to go to the press to get it done. That was 6 years ago, and she's still kicking right along.

There is a difference between being turned away for minor surgery, and a major heart issue like my grandmother had.

The fact is, the majority of health care spent on the average person is spent in their last years. I would expect health professionals to be able to use their skills to be able to discern the difference between what is achievable and what is not. For example, IMHO, the private health system can be guilty of spending a lot of money pointlessly on someone who is it to spend, them dumping them when they run out. That is different to realising it's all over and a dignified death is the best way out, rather than spending on a fortune on prolonging pain and suffering.

 

[mhaze]

Yeah, there's a shady side to that that has led to it being more or less illegal in the US and Canada, and as far as I know in most countries as well. It's the corrupting conflict of interest.

If you look at the less regulated analogous industries, my vet just got some bad press as she was involved in massive conflict-of-interest problems because her practice, lab, and dispensary are synergized. Basically, she overdiagnosed, over-referred for tests, and locked in prescriptions that only her dispensary could fill, at unreasonable markups. I knew her when she was a fresh graduate, but over the years, the temptation of easy money has made it hard for her to treat her customers fairly.

And we have a constant example of chiropractors who scrape up enough cash to finally buy an x-ray and discover that everything complaint requires an x-ray diagnosis.

Please don't take this the wrong way, but my perception is that SA has much bigger health policy challenges than patients having to schlepp back and forth half a block from office to dispensary. My background is AIDS research, and I've had to spend time in SA - particularly Durban - and those people with no money would be pretty happy to walk a little if there was even a chance they would get health care at all.

Those are the public clinics, and those are an entirely different matter. As you likely surmised, the clinics I mentioned would cater to the middle and upper class, which these days is pretty much integrated, although there is little relation to western concepts and tribal prejudice rules. HIV positive in male army ranks was 86% in 2005, but this is not related to the issue I mentioned. Obviously, doctors are leaving the country along with a large portion of the white population with some of the new rules that were put into place.

But these issues, although interesting, are detours. The problem you have when you note corruption in the combination office I mentioned, is simply that physically separating businesses is a quaint and archaic means of legislating in reactionary mode against a perceived problem. EG, you get a different kind of corruption. Duhh....

Surf Durbin!