Cost Factors WARNING: NON-PACS POST!!!

The U.S. House of Representatives bowed to pressure from Darth Pelosi and passed the monumental Affordable Health Care for America Act (H.R. 3932). Only one Republican defected, a freshman from Louisiana who somehow ended up representing a totally Democratic district. On the other side of the aisle, 39 Democrats, mostly the Blue Dog fiscal conservatives, voted against this lovely bill. The Democratic leadership quickly hailed the 220-215 razor-thin margin as a huge victory, delivering to Americans the health care reform most said they really didn't want. Of course, the Dems have taken the results of the 2008 election as a mandate to do pretty much whatever they pleased. But today's comments are significantly more annoying, with Miz Pelosi demonstrating near-post-coital-bliss over her secure place in history as the second coming of FDR.

This story ain't over, folks, as the Senate has yet to vote on their version, and that may prove even more amusing.

The misguided support of the AMA was cited by the Democrats as validation of their far-left position. Naturally they ignored the fact that less than 10% of American physicians belong to the AMA, and quite a few of the remaining fools (including me) bailed out of the AMA over this issue. Why can't we be as cohesive as the trial lawyers? Their members come out with a boost from the House health-care bill: any state that doesn't have damage caps already will be prohibited from getting them. Not only was tort reform not included in this gargantuan bill, it was actually repressed! Gee, thanks for looking into this thoroughly, AMA.

Even more amazing was the last-minute endorsement by the American Association of Retired Persons, AARP, of which I am soon to be a former member as well. You would think AARP would be up in arms about the pending Medicare reductions. But noooooooooo, they looked the other way. It seems that the AARP is just as nasty and greedy as Republicans are accused of being. From the Chicago Tribune, not exactly a Conservative rag:

A Washington Post front-page story on Oct. 27 questioned whether AARP has a conflict of interest in appearing to represent seniors while watching Congress cut Medicare.

"Democratic proposals to slash reimbursements for ... Medicare Advantage are widely expected to drive up demand for private Medigap policies like the ones offered by AARP, according to health-care experts, legislative aides and documents," the Post reported.

Medigap plans are a cash cow for AARP. And if people don't need them because they can enroll in Medicare Advantage plans, that's a revenue loss for AARP.

While the organization has some partnering arrangements with Medicare Advantage plans, they provide a fraction of the revenues to the organization that Medigap does.

Second, if Medicare's benefits are cut by $400 billion or more, seniors will have an ever greater need for Medigap coverage.

"There's an inherent conflict of interest," former AARP executive Marilyn Moon says of AARP's royalty arrangements. "They're ending up becoming very dependent on sources of income.

"Tens of thousands of seniors have resigned from AARP, many of them cutting up their membership cards to protest the organization's promotion of health reform.

The new chief executive officer of AARP, Barry Rand, who was a strong supporter of President Obama during last year's presidential campaign, says AARP is not protesting the Medicare cuts because reducing waste and fraud in Medicare will make the program stronger over the long term.

Medicare is in dire need of modernization to make it more efficient, but savings should go back in to making it more solvent. But instead of contributing any savings to the $38 trillion in long-term debt the program is facing, the bills before Congress would use Medicare funds to expand health insurance coverage to working Americans.

While expanding coverage also is a worthy goal, if AARP were representing its members well, it would argue that the money should come from other sources.It's no wonder seniors are upset.

Clearly, the interests of AARP and the 40 million seniors it purports to represent are not aligned in the health reform debate.

Gee, you mean there might be support of a bill that will ultimately hurt people because someone will make a sh*tload of money from it? I thought only slimy, greedy, nasty Republicans like Bush, Cheney, and Haliburton execs were capable of something like that. Imagine my surprise to find that an organization to which I belong behaved that way. My cut-up membership card will be in the mail to AARP tomorrow.

The title of this opus is "Cost Factors" and in the end, it is the most important part of the health-care debate that has NEVER been mentioned publicly.

The following information was brought to my attention on AuntMinnie by one of my more liberal friends who thought he was going to prove that insurance companies were going to finish the job of slashing physician incomes that the government had started. He quoted an article from Ezra Klein, one of the most liberal columnist/bloggers out there, who currently writes for the Washington Post. Mr. Klein interviewed Kaiser Permanente CEO George Halvorson, and in the course of the discussion, Mr. Halvorson handed Mr. Klein a stack of charts from the International Federation of Health Plans. These can be found here, and are repoduced below.




The message is pretty clear: health care charges in the US are sky-high relative to those cited from other nations. If that were the end of the story, it would indeed be the end of the story. But there is a lot more there than we realize at first blush.

We have to ask the childishly simply question, "WHY?" WHY are the costs so much higher here than elsewhere? Mr. Klein tries to ask the question, but then answers it with circular logic: it costs so much because it costs so much.

There is a simple explanation for why American health care costs so much more than health care in any other country: because we pay so much more for each unit of care. As Halvorson explained, and academics and consultancies have repeatedly confirmed, if you leave everything else the same -- the volume of procedures, the days we spend in the hospital, the number of surgeries we need -- but plug in the prices Canadians pay, our health-care spending falls by about 50 percent.

In other countries, governments set the rates that will be paid for different treatments and drugs, even when private insurers are doing the actual purchasing. In our country, the government doesn't set those rates for private insurers, which is why the prices paid by Medicare, as you'll see on some of these graphs, are much lower than those paid by private insurers. You'll also notice that the bit showing American prices is separated into blue and yellow: That shows the spread between the average price (the top of the blue) and the 90th percentile (the top of the yellow). Other countries don't have nearly that much variation, again because their pricing is standard.

He almost got the answer, but wearing goggles that allow you only to look to the Left tend to impair one's view.

Here's my interpretation, and I think it has great merit. You have to look at this in the opposite way. Our health care costs are not artificially high, we docs, and the hospitals, and the pharmaceutical companies, and so on, are not gouging the system. Rather, in the nations that are idolized, I mean held up as examples by the Left for us to follow, prices are artificially capped. Our prices are not doubled, theirs are halved, and there is a very, very significant philosophical and practical difference.

With governmental price controls, there is a limit on what can be accomplished. Yes, there is less profit, but there is less incentive as well. Look at Canada, for example:

So physicians in Canada make less money on each patient than physicians in the United States do, and the total impact of those payment differences makes up a major portion of the difference in care costs between the two countries.

For hospital care, the Canadian government doesn't set fees to control costs; instead, it directly controls each hospital's budget. The government of each province sets a specific annual budget for each local hospital, and the government expects each hospital in the province to operate within its assigned budget. Canadian provinces don't like to raise taxes to increase hospital budgets, so the local budgets are far lower than U.S. hospital revenue streams. Those hospital payment levels are likely to stay far lower until Canadian voters offer to pay more in taxes. "No new taxes" has the same political charm in Canada that it has in the United States, so the people who run Canadian hospitals are not expecting big budget increases soon.

Tight individual budgets mean that Canadian hospitals can't invest in medical equipment or new technology as easily as U.S. hospitals can. You can see the results in many spending areas.

For instance, there are more magnetic resonance imaging scanners in Minneapolis/St. Paul than there are in all of Canada.

Relatively long waiting times for some kinds of surgery in Canada tend to be a direct and logical consequence of tight local hospital budgets. When money is tight or runs out, care slows. One of the beauties and virtues of the Canadian system is the absolute equality of access for all citizens. So when care slows for anyone in an area, it slows for everyone in that area--unless you are a well-to-do Canadian who can afford to cross the border to buy your care more quickly in the United States. Canada does not pay for that "external" care.

Sounds eminently fair, doesn't it?

Less profit means less incentive to innovate, to develop, to invent, less incentive to find new drugs, or new cures. I'm still researching the numbers, but I think most would agree that the amount of such innovation coming out of the US dwarfs that from Europe, or Japan, or China. Moreover, much of what is done overseas is targeted toward the US market. As was mentioned on the Aunt Minnie thread, look at the European developers' booths at RSNA. They know which market means success or failure for them, and that market is right here in the United States.

Here is the bottom line: WE in America are funding the medical progress that aids the rest of the world. Were it not for the fact that we actually pay the price for innovation, it wouldn't happen, or at best it would be a mere shadow of what it is today. We do have some price controls, mainly on services provided to Medicare and Medicaid patients, and we see clearly how these impair service. Take examples of Zevalin and Bexxar, radioimmunotherapy agents for certain kinds of lymphoma. For now, they are used as a last-ditch effort to save those who failed other regimens, but both have the potential to be used as a first- or second-line therapy with great efficacy. The cost of the pharmaceutical itself is something like $30-40,000, of which Medicare pays $10,000-16,000 or so, depending upon where you live. To make up for the deficit, hospitals charge upwards of $100,000 to those who can pay, making these miracle drugs available for all. If the government artificially imposes price-fixing on these drugs for everyone, you can bet Zevalin and Bexxar will disappear from our armamentarium.

Extrapolate this world-wide. Once the last profitable market for medicine shuts down, so will progress. What has been the most amazing technical and scientific story of mankind, the rise of health-care beginning in the late 1800's, will come to a grinding halt, or at least a major slow-down. We funded it, and when we stop, everyone will lose.

Anyone with means to do so comes to the United States for critical medical care. They don't go to France, or to Germany, or to Japan, or to Switzerland, or to China. They come HERE. But that may soon cease. Because all of the sudden, the best money can buy isn't good enough for us. We now have to pay more so we can be mediocre. The irony of it all is that sooner or later, our friends in other nations will be incredibly angry at US for what we will be doing to them. By then, it will probably be too late to do anything about it.

As usual, be careful what you wish for, as in cost cutting. You might just get your wish.