

Reexamining what makes health care so expensive. - cwan
http://reason.com/archives/2009/10/20/health-care-nihilism

======
tokenadult
"The rise of HMOs was enabled by an earlier federal government attempt to rein
in health care costs, the Health Maintenance Organization Act of 1973. The
idea behind HMOs was that these insurers would control costs by offering a
wide array of preventive care to their subscribers. That sounds like a
plausible idea until one realizes that people, on average, change insurers
every four years or so. An insurer that invested in preventive care was
unlikely to reap the cost-saving benefits."

That's an interesting response to the HMO phenomenon, which I remember was
touted as a solution to ballooning health care costs. The cost containment
didn't happen, which is an important lesson for today's predictions about
efforts to contain health care costs.

~~~
furyg3
I also read this as one of the most important points in the article.

I wonder if requiring insurance companies to accept all customers, regardless
of risk or pre-existing conditions, would create incentives for insurers to
promote more preventative care.

Since customers could still switch providers, insurers wouldn't _know_ whether
or not they'd be holding the short straw when the customer gets sick in 10
years, but that wouldn't matter since they'd have the same chance as any other
insurer of 'reap[ing] the cost-saving benefits' of their own preventative
care.

~~~
yummyfajitas
Unless the insurance company holds 50% market share, the odds are pretty high
that they won't reap the purported benefits of preventative care.

If a companies market share is 10%, their odds of reaping the benefits of
P(customer switches) x 10%.

Regardless, I'm not sure how an insurance company will manage to get people to
eat less and exercise more.

------
yummyfajitas
One unavoidable reason why health care costs go up is simply Baumol's Cost
Disease.

<http://en.wikipedia.org/wiki/Baumol%27s_cost_disease>

In short, health care hasn't experienced the same productivity gains as
manufacturing, agriculture or many other areas. The cost of medical services
is proportional to income, while the cost of cars, computers and groceries
have gone down relative to income. Therefore, the opportunity cost of visiting
the doctor has gone up.

There is little we can do to fix this without mass producing medicine.

~~~
tomjen2
You seem to be right, that would be what is happening.

So, how do we mass produce medicine?

~~~
frig
Easiest solution is to embark on a serious 10-year plan to double-and-then-
triple the number of newly-created mds passing through the system.

This can't be done immediately -- it'd take time for institutions to ramp up
their teaching staff and associated facilities -- but it could be done over
time.

Some federal program that'd make funds available on condition of a particular
school hitting a particular # of enrollments would the simplest solution;
given a choice between mad money and placating the AMA boffins most
administrators would take the money.

There's no real shortage of people capable of being decent physicians; most of
the selectivity of medical school admissions is b/c the # of slots the schools
allow is low.

~~~
matrix
Physician supply is a long, long way down the list of fundamental issues with
US healthcare.

Right now, we as a nation have bigger fish to fry - such as making the moral
decision on whether we as a society feel healthcare should be a right or a
privilege, and getting the right alignment between economic incentives and
effective healthcare.

~~~
yummyfajitas
No, physician supply is a fundamental issue. The price of medicine is high in
part because of scarcity: there are (doctor's working hours) x (number of
doctors) doctor hours available for consumption.

People desire more doctor-hours than exist, hence some rationing mechanism is
needed. By increasing the number of doctor-hours (either increase number of
doctors or doctor working hours) you can reduce the scarcity.

You can't eliminate scarcity simply by making a moral choice.

~~~
nradov
Sure you can reduce the price of physician time by increasing the supply, but
that isn't practical for several reasons.

1\. The high price is largely due to the need to pay off education loans.
Physicians commonly finish training $200K+ in debt. Even if there were more
physicians, they would have to charge almost as much just to make ends meet.
To solve that you first need to find a way to cut the price of education.

2\. Very few people want to be physicians, and fewer still have the
intelligence and talent to do it well. Treatment by a quack is often worse
than no treatment at all.

3\. The only way to get a lot more physicians in to industrialized countries
is through immigration from developing countries. However the political
climate has turned against immigration (I think that's a bad change, but it's
unlikely to reverse any time soon). And importing physicians leaves those
developing countries bereft of medical care they desperately need.

4\. Most physicians already work long hours. You can't squeeze much more out
of them. Or if they do work longer, quality of care suffers.

~~~
yummyfajitas
The question of whether training more doctors is feasible is tangential to the
point that making a moral choice won't make medical services less scarce. It
may not be feasible, and in that case there is no solution to the problem of
scarcity of medical services.

Regarding increasing the number of doctors: plenty of people want to be
physicians. In 2007, 42,315 people applied to medical school, but only 17,759
were accepted.

<http://www.aamc.org/data/facts/2007/mcatgparaceeth07.htm>

The people who are rejected are fairly close in scores (GPA, MCAT) to those
who were accepted and there is plenty of overlap between the accepted/rejected
distributions.

Let me do a little normal-distribution-fu. Assume that MCAT VR of 8.3 is the
cutoff for "intelligence and talent to do it well". If we accepted every white
person above that cutoff, we could train about 10,728 more white doctors per
year and a few thousand more asian doctors.

(I picked 8.3 so I can call you a racist if you say you want a higher cutoff.
;) )

Regarding point 4), I agree.

In any case, while increasing the supply of physicians may not be feasible,
this doesn't mean it is the case that making a moral choice can cure issues of
scarcity.

~~~
frig
Thank you for making my case more succinctly.

I'm intimately familiar with the specifics of medical education as a family
member of mine is a high-up muckety-muck at one of the world's better academic
hospitals (won't be more precise than that).

There's a perception amongst outsiders that medicine is unbelievably difficult
that only a handful of people qualify for medical training on their merits; a
more accurate assessment is that the # of slots is fixed and the admissions
are as selective as they need to be to filter down the applicant pool to the #
of available slots.

It'd take time to ramp up to being able to handle that many students --
medicine is mainly taught by working under the supervision of existing
experts, and there's a finite supply of expert-hours at the moment -- but the
present rate of doctor-production is far from what it could be without a
material drop in applicant quality.

