Civilized medicine, Part I. Why?
Aug/05/09 01:01
Unless you live in a world that does not include the media or internet, you must be aware of the level and tone of debate about healthcare reform. Before we can discuss healthcare reform, we need to establish why we need healthcare reform. Cutting through the rhetoric as to what needs to be done, we still need to know the reasons that have lead the US to the point where we need to seriously consider some level of reform of the system. Setting aside some of the rhetoric and arguments, let’s look at the key issues regarding healthcare in the US.
There are other reasons for examining our healthcare system. But the fundamental issues are that it costs too much, it favors the very wealthy, and the results are not very positive. But to debate what needs to be done, we need to understand what we have.
By Michael W Simpson
- Costs. From a national perspective, the US (government and private) spends over $2.5 trillion on healthcare. Put another way, the US spends 16.9% of its Gross Domestic Product on healthcare, more than any other developed country in the world. From an individual viewpoint, the costs of health care has been responsible for over half of the personal bankruptcies in the United States. According to Dr. David Himmelstein of Harvard University, "Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy...for middle-class Americans, health insurance offers little protection..." What generates those costs is not just expensive equipment and drugs, but an antiquate health care record system that needs some serious upgrading. Finally, the costs of insurance for small businesses and individuals have grown over the past few years. The money spent on insurance has negative effects on the growth of employment in small businesses and the availability of discretionary spending for individuals.
- Coverage. Over 45 million Americans, approximately 15.3% of the US are not covered by any insurance. Of course, that means that about 85% of Americans are covered by insurance, one-third of those with insurance covered by government and military plans. Even those covered individuals have insurance that might have high deductibles or annual limits which put them at risk, especially with catastrophic diseases such as cancer and cardiovascular impairment. Furthermore, these private payers tend to make choices that maximize their profits as opposed to patient needs.
- Prevention and public health. One issue that has always concerned me about our healthcare system is it’s focus on treatment rather than prevention. Most healthcare plans will not pay for treating obesity (whether through pharmaceuticals or surgery) for reasons that escape many of us who study the healthcare industry. I believe that the reasons lay in the fact that the healthcare plan does not expect the patient to be a “customer” by the time the benefits of reducing obesity are clear.
- Insurance portability. Although the vast majority of Americans are covered by some sort of insurance, there are a number of holes in the system. One that has been mentioned frequently is excluding payment for pre-existing conditions. This is a great fear for individuals who are changing jobs, and one of the covered family members has a serious medical condition. It’s a significant economic issue for small businesses who may try to attract talent to their company. Several years ago, I was trying to hire a successful sales manager whom I believed could help grow my small company. Sadly, his two children had a genetic issue that required expensive drugs (several thousand dollars per month), and we couldn’t afford to cover his prescription benefit. So, he lost the opportunity to take a promotion, and I lost out on a very talented individual.
- Economies of scale. Right now, every insurance company negotiates with providers (hospitals, physicians, and other key healthcare services) and medical products suppliers to manage costs. Although it would be an anathema to the medical products industry, these healthcare insurers do not have the ability to negotiate the very best contracts to reduce costs. In fact, the 2003 Medicare Prescription Drug Improvement and Modernization Act effectively bans the government from negotiating pricing on prescription drugs. The Department of Veterans Affairs, which is not covered by that legislation, has negotiated lower prices for prescription drugs, thereby gaining substantial savings for the Department.
- Quality. Although there is a perception that the US has the best healthcare system in the world, that is not supported by facts. For example, Canada healthcare spending is about 55% of the US per capita, yet it far exceeds the US in key healthcare quality measures, such as infant mortality and lifespan. And Canada spends just 9% of its GDP on healthcare compared to the 16.9% for the US. In other words, despite our very expensive system, the results underperform our immediate, and most similar, neighbor.
There are other reasons for examining our healthcare system. But the fundamental issues are that it costs too much, it favors the very wealthy, and the results are not very positive. But to debate what needs to be done, we need to understand what we have.
By Michael W Simpson