ponderings: health care

[cellio]

In the comments here we were talking about health care in the US. The current system is broken in many ways, but the "nuke it and start over with some nationalized program" proposals are scary too. What incremental improvements are possible? I have to believe that there are some.

One idea I'm interested in is what would happen if we separated paying for routine care from paying for catastrophic care. What would happen if people could be on their own for the former but could buy a policy to cover hospitalizations, major illnesses, and the like? How effective would that be and what would it tend to cost? What would having that in play do to the over-the-counter (uninsured) price of routine care? (Yes, I know that not everyone can afford to pay for routine care out of pocket. I'm exploring a suite of options, not choosing a single one.)

On the flip side, would medical practices or insurance companies be willing to sell affordable plans that cover all your routine care (only), if they were not on the hook for catastrophic losses? Could that get things down to the point where the average family could afford regular checkups, preventative care, and routine tests (which helps prevent some catastrophic issues)? Such plans exist now in niches (vision and dental, most commonly in my experience), but I haven't heard of one for general medical care. Why not? (Am I totally misunderstanding where the profit centers are in the insurance business?)

Both angles are important. What I'm labelling catastrophic incidents are (as the label implies) financially devastating if you don't have sufficient coverage. Outside of elder-care issues I'm not sure how common they are, but it's the sort of thing I wouldn't want to take a chance on. I insure my car and house, after all -- how much the moreso should I insure my health?

What I suspect has a bigger impact on the poor, though, is the routine care. If you don't have insurance, you're looking at a three-digit number to walk into your doctor's office. Throw in some kids and you're in trouble. (This is why I asked what would happen to those costs if catastrophic care were a separate factor.) Could plans that just cover routine care be made affordable enough for most people? This doesn't solve the other problem, but neither does the current system -- we rely on hospitals' obligations to treat (which is a legitimate public demand while they pay no taxes), or medicaid/medicare/SSI in some cases, to get through those. Remember, incremental improvement.

I'd also like to explore the effects of reducing drug regulation, letting people buy from anywhere that's selling and reducing barriers to getting things onto the market. I know the standard argument against this (those high prices pay for R&D), but I'm not sure how much I believe that. What are the other considerations?

Where else could we look for incremental improvements?

(In case you haven't figured it out, I am not a medical professional, an economist, nor part of the insurance industry.)

Comments

[jerusha.livejournal.com]

Where are you thinking the threshold for "catastrophic" lies? Right now something like an uncomplicated appendectomy and associated hospital stay can run >$20k. Cheap compared to (say) a car accident with multiple trauma, a protracted ICU stay, and extensive rehab, but the difference between a medical bill for half your annual salary and a medical bill for ten times your annual salary is, IMHO, only how quickly you go broke... I know these costs are wildly distorted by insurance (see laid's comments about the 'list price' vs. the discounted price paid by the insurer), but I don't know what the actual cost is (some of the padding in the 'list price' charged to the uninsured is to cover the expenses of people who can't pay; the better the discount the insurers negotiate, the more of that burden ends up on the uninsured, who then can't pay it *either*).

Although the pharmaceutical industry does have significant profit margins, R&D costs really are a significant burden. For every drug that makes it to market, something like 1000 candidate compounds started at the beginning of the drug evaluation process. While many of these were eliminated at earlier (and cheaper) stages in the process (compounds that lack in vitro activity aren't going to progress to animal trials, compounds with unacceptable toxicity in animal trials aren't going to get human trials, etc), some make it all the way to large-scale human trials, which are expensive.

One thing that I think would solve two problems (although it does introduce yet another 'where is the money coming *from* issue) is to transition to public funding of Stage III and Stage IV human trials. [Generally, Stage I is animal trials, Stage II is small-scale human trials examining gross toxicity/safety, Stage III is large-scale human trials examining efficacy (and establishing dosage), and Stage IV is post-marketing trials (usually for either extended surveillance or to study new indications.] The problems I see with the pharmaceutical companies funding these studies (the current model) are: 1) The costs of these trials, including the trials for all the compounds that never make it to market, is part of the R&D cost that gets rolled into the cost of each drug. 2) Because the study is funded by an interested party, we see distortions like burying unfavorable studies, studies done only against placebo (which is necessary for approval) but not against competitor drugs (because neither drug company wants to pay for them - what if the study is unfavorable?!), when study against competitor drugs is really what's needed to help establish which treatment is better, and by what margin. (Knowing not only the relative costs and risks but the relative efficacy of drugs is necessary to do a cost-benefit analysis which may guide therapy).

One argument I would make towards a simplified, if not single-payer system, is this: My primary care physician is a member of a large group practice with offices all over our county. His particular office has four practitioners. For four practitioners, they have one full-time person just to deal with insurance issues! What we pay for medical care currently goes to pay not only for our practitioners and our care, but for all of the support staffs necessary (including one insurance-wrangler per four doctors). What we pay for insurance goes to cover not only costs related to our care but costs related to having insurance - not only insurer profits, but advertising, coverage review/denial specialists, etc. If most or all of this overhead were eliminated, how much would we still pay for healthcare? I don't know the answers to these questions, but I'd sure like to...

Edited to fix my HTML error

[fauxklore]

The overhead associated with insurance is, indeed, significant. It's been some years since I read The Invisible Bankers by Andrew Tobias so I don't recall the numbers. But I remember being struck by how low a percentage of the money collected for health insurance premiums was paid out for care. (A much higher percentage of auto and home insurance premiums goes to benefits.)

I also affects the time doctors spend with patients. One of my oldest friends is a cardiologist. She says she spends less than 10 minutes per hour with patients (on the average) because of all the paperwork she needs to do with our insurance system. There is also the issue of defensive medicine - unnecessary, time-consuming, and expensive tests done primarily as a defense against lawyers.

[cellio]

Where are you thinking the threshold for "catastrophic" lies?

I don't know. Maybe it's measured in dollars rather than by diagnosis?

Although the pharmaceutical industry does have significant profit margins, R&D costs really are a significant burden.

Yup. The company I work for has customers in the pharmaceutical industry, so I've heard some of this (but not in any great detail because I don't work on that project). I think your suggestion to transition funding of later-stage trials is a good one. I might also explore making available -- fully at the consumer's risk -- drugs that haven't made it all the way through yet. (Depends what they are, how stringent the tests are, what alternatives there are... I don't know enough to have a meaningful opinion on this, but if an experimental drug is the only thing out there right now that might cure what ails you, maybe you should be able to take that risk.)

Paperwork: ugh. That might be separately solvable (don't know), and it's possible that a nationalized system won't reduce it enough, but it's a factor to consider.