22 June 2009

What To Spend On Grandma?

So, I've been brushing up on my healthcare policy in preparation for the debates about Obama Care. I'm agin it, I'm just trying to figure out why.

My best guess right now is that one reason I'm against it is that it's going to have to ration care to deal with the last 6 months problem. About half of all life-cycle health spending comes in the last 6 months of life. An aging population that, more and more, doesn't die young just makes the problem bigger: young people tend to die quickly and cheaply, old people die slowly and expensively. On the one hand, this is likely to be a nice case of giving the people what the ask for, good and hard. People who hate those heartless, profit-making HMOs are going to love the cuddly and benevolent government when it tells them they've lived long enough; "Here, have some nice morphine."

In any event, in doing my research, I stumbled across this nice .pdf of a presentation on long-term health care spending (at the rate we're going, every dollar of gdp will be spend on health care in 2082) by Peter Orszag, who, in 2007, was director of the CBO. This presentation has lots of nice information in it, but I was particularly struck by this slide showing not much correlation between per capita healthcare spending an quality of care:

Now, I don't want to rest too heavily on this graphic. I don't know how quality of care was defined, and it's possible that hard cases are shipped to hospitals in high spending areas, but this chart is certainly suggestive. Combined with another slide in the presentation showing that, in 1975, 33% of personal health care expenditures were paid out of pocket while today only about 15% are paid out of pocket, we start to see a way out of the "health care crisis," which is really a "paying for health care crisis."

46 comments:

erp said...

Connect the dots and you'll see grandma supine on the floor with her guts hanging out -- hopefully already dead sparing her loved ones the ordeal of spending their treasure on her.

It's not only Jewish mothers who will gladly die for their kids.

Harry Eagar said...

2 points:

It is bizarre to hear 'rationed health care' as an objection. We already ration health care.

I suppose what is meant is 'ration me out of it instead of you.'

Projecting health expenses out more than 50 years makes as much sense as projecting global temperature out on a straight line: none.

It could be better, it could be worse, but it cannot be predictable.

The classic example, I suppose, is the projection of future needs for hospitals for permanent victims of polio which the Sister Kenney Foundation was hopelessly attempting to deal with in 1954.

erp said...

Harry, what they mean is health care will be in the hands of bookies who will calculate the odds to determine who gets what treatment with euthanasia being one of the options.

Susan's Husband said...

There's rationing where I decide, and rationing where some government flunky decides. Some of us regressives see a significant difference between these two options.

David said...

I'm not sure that currently we "ration," in the sense of making a conscious decision, at all.

Harry Eagar said...

Go to Wal-Mart and stand by the checkout line and look at the teeth.

We ration.

If you're paying all the freight, Guy, there'll be no rationing for you. Even in England, you can buy your own health services and go to the head of the line.

I'd say our rationing system just growed without any particular plan, the way markets do. But people didn't do it without thinking.

A couple generations ago, when I was a union president, the company drastically changed our health plan. (Unilaterally, since we were a toothless union.)

It took away some routine coverage in order to beef up the catastrophic coverage, which had pretty much not existed before then. Their inspiration came when an apparently healthy, 29-year-old employee had a stroke that was going to leave him incapacitated for the rest of what looked to be a long life.

The company could have added extra coverage, but it decided to ration the coverage it would pay for anyway.

David said...

Harry:

1. Teeth are dental, not medical.

2. All those WalMart shoppers with lousy teeth have titanium hips.

3. Your employer deciding to change health insurance coverage and your showing up to work anyway is not rationing.

But how much should we expect people to pay out-of-pocket for their own health coverage?

Harry Eagar said...

When you get to be as old as I am, you'll think teeth are medical.

I doubt they have titanium hips. For one, they aren't old enough yet. For two, a lot of them don't have much of any medical care.

I am having difficulty figuring out how you define rationing. Let's change the scenario to something that happens even more often: my employer, who is small enough to be part of a pool of small businesses, gets a notice from their insurance carrier that practice X will/will not be covered from now on.

I guess a free market idolator would say, sure, the employer can switch plans. In practice, not so simple.

Physicians I talk to certainly consider they are being rationed by the insurers from the other end.

In May, I had the chance to have dinner with one of the world's premier heart surgeons (he's got a wall of medals to prove it). He's my age, already retired several years.

He didn't tell me why he quit so early (it wasn't inability although that happens to surgeons at an early age). His wife did, though.

More or less her exact words: 'He got tired of having 18-year-old girls tell him who he could admit and who he couldn't, and tired of lying and cheating to get people into the hospital to save their lives.'

That second part presents an interesting moral question, but since retiring he has developed a neural condition, so he cannot operate any more.

David said...

1. The old and the poor have excellent health insurance.

2. "Rationing" is not synonymous with "allocating." Rather, once government has disrupted the pricing mechanism so that the price of a given product is below the market clearing price, resulting in unsatisfied demand, rationing is the method government uses to channel product to politically popular individuals.

Harry Eagar said...

Don't know where you live, but I know plenty of poor but not destitute people who have no health coverage at all and consume next to no medical treatment at all.

To the extent that meaningful medical treatment means taking prescription drugs, there are plenty of old people who do not have good insurance.

My view is that medical treatment, and especially surgery, is the classic example of where clearing markets fail. The case of the Canadian clinic for easy inguinal hernia repair -- praised to the skies some years ago by the dean of the Harvard Business School -- is a perfect example of why, when you are sick, you do not want to visit a hospital that operates according to market clearing mechanisms.

Markets are imbeciles. They cannot tell the difference between a good surgeon and a bad one.

Susan's Husband said...

Mr. Eagar;

Can you not keep your story straight for even one comment string? You wrote "We already ration health car" then you tell me if I pay for things, I won't get rationed. I am having difficulty figuring out how you define rationing. You provide an anecdote but fail to specify any definition of rationing.

You wrote "I guess a free market idolator would say, sure, the employer can switch plans."

No, a free market idolator would tell you that in a free market, you wouldn't be getting your health insurance through your employer. Beyond that, I don't know where you live, but here I recently attended a meeting of small business owners where this issue came up and the concensus was that switching plans was fairly easy, and several companies did it on a regular basis to keep costs under control. But I am sure that somehow, your personal anecdotes are deeply indicative of the overall situation, while mine are statistically anamolies.

Harry Eagar said...

My employer changed plans two years ago. It has not been easy to deal with.

Maybe in a big state there are lots of plans, but here only about half a dozen all told, fewer if you want to join a pool.

Maybe you don't understand rationing. Since I was referring particularly to the English system, let's stay there.

In World War II in England, everybody got ration cards (except bread and seagull eggs which were never rationed). If you had enough money to eat at Simpson's on the Strand, you could consume all your ration amounts plus whatever you could afford at Simpson's.

The National Health works exactly the same.

Susan's Husband said...

"Since I was referring particularly to the English system"

Is that like Obama's "As I have always said ..."?

However, if you can buy more of something legally, then it's not rationed. Your example is a subsidy. Canada has true health care rationing, at least in those provinces where private insurance and payments are illegal.

Harry Eagar said...

Funny, they called it rationing.

Maybe I'm just thick, but I don't get the difference between rationing and allocating. When the War Production Board takes over steel and allocates shipments to fabricators, it looks to me like rationing.

Since Obama has explicitly rejected the idea of nixing private systems, what the backwards provinces of Canada do seems irrelevant.

Now it sounds as if you are saying that the government is going to limit the total amount of health care that can be provided, and the limited amount will be divvied up on a spoils system.

Don't know where you got that.

If you want a real nightmare scenario, I'll give you a freebie: What if the subsidy/rationing/whatchamacallit was limited only to services of proven effectiveness?

That would immediately reduce the total outlay by a huge amount, flatten out David's trend line and make everybody much healthier and wealthier.

I cannot imagine anything less congenial to the American public and American business.

Susan's Husband said...

People call the Modern American Left "liberal" too, but that doesn't make it so.

And note that in your own example, there isn't other steel on the market, because the War Production Board has control of all of it.

Where did I get limiting total medical care? Canada, a system frequently praised by the same people working on health care "reform" here.

Peter Burnet said...

Oh sure, blame Canada. In the interests of accuracy, I must agree with some of my leftist cyber-friends that our health care system should not be seen as a government-run system, but rather as a government-insured system. The government acts as a monopolisitc HMO, but it doesn't own hospitals or employ doctors, which are private and usually run for profit. That's why the care itself is usually very good. And at least part of the mess about waiting periods and high-end equipment can be explained by the fact that we simply don't spend nearly as much on healthcare as you do.

As to restrictions on private payment for care, don't forget that about 90% of us live within a couple of hours of the border. That's why we don't hear too many horror stories about people not being permitted to purchase care in the market.

Harry Eagar said...

Unless somebody repeals the Constitution, the US government will be unable to ration health care like the WPB did steel, because the plutocrats can always go to Canada (for hernia repair) or Thailand (for all sorts of stuff).

Hey, they already do!

I remain baffled by the rationing claims.

joe shropshire said...

Plutocrats?

Susan's Husband said...

I never thought I would see the day when Mr. Eagar takes that line that if plutocrats can do something that other citizens can not, then it's wrong to complain about people not being able to do it. I, personally, prefer to see a little less government granted privilege for the upper class.

Hey Skipper said...

Yeah. They are just past the Uranuscrats, on the left.

Harry Eagar said...

You never read me complaining that not everybody drives a Cadillac.

And for David, if everybody is getting such great medical coverage now, how come the majority of bankruptcies are driven by medical bills?

Susan's Husband said...

Your first point is a complete non-sequitor. You certainly have, many times, complained that plutocrats can do things that are forbidden to others (e.g., your claim that the poor in American have no rights). But I will accept your change of heart, that any complaints that the middle class or poor can't do something can be disregarded if the plutocrats can do it.

As for the second, the research I have done on that topic leads me to believe that your claim is a fabrication.

David said...

if everybody is getting such great medical coverage now, how come the majority of bankruptcies are driven by medical bills?

That study's been soundly debunked. It simply counted any bankruptcy with more than de minimis medical bills as being "caused by" medical bills. But if so, so what? People are getting health care, they're being billed for it, they're avoiding the bills if they can't afford it. We don't have a health care delivery crisis, we have a paying for health care crisis, as a direct result of government intervention. Now, how is new government intervention going to make health care cheaper? By doing exactly what people accuse the insurance companies of: refusing to pay for treatment.

Now it's your turn. If people are so unhappy with their medical care, why do a high proportion of Americans (I believe in the neighborhood of 80% and including the uninsured) report that they are satisfied with their healthcare?

Harry Eagar said...

Try answering the phone at a newspaper city desk for a few days if you think that a) people aren't overwhelmed by unpayable medical bills; or 2) are satisfied with the medical system.

I haven't said what system I prefer, although at Restating the Obvious today I did explain why even capitalists should be demanding a universal coverage system.

I don't recall ever saying that the poor have no rights. I said they have not much clout.

There was a joke in WW2 about rabbit stew.

A restaurant was famous for its rabbit stew and a long-time customer at it regularly. But after rationing came in, it seemed to taste different.

Finally, he asked the chef: "Come on, you've known me for years and I've eaten your stew for years. You've changed something, right?"

And the chef said,"I wouldn't tell anybody else, but since it's you, yes, it's true. We've been cutting the stew with horsemeat. But we keep it 50-50. One horse to one rabbit."

In economic relations, the poor are the rabbits.

By the way, given the news about Jobs, are you guys still goimg to deny that we ration? Or do you think he bought his way to the head of the line?

Also, planning for a fulminating flu epidemic contemplates giving vaccines first to health-care workers/first responders, not to who bids the most?

What do you think about this market inference?

Susan's Husband said...

I was thinking of this quote.

Harry Eagar said...

I said freedom. You say rights.

Different things.

joe shropshire said...

This would have been the thread in which we were instructed that freedom is when you get revenge on the richest guy in your neighborhood.

Hey Skipper said...

According to James D. Eason, M.D., program director at Methodist University Hospital Transplant Institute:

[Jobs] received a liver transplant because he was the patient with the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available. Mr. Jobs is now recovering well and has an excellent prognosis.

(From Respectful Insolence, a blog written by an actual, reputable, practicing surgeon.)

So, no, I don't think he bought his way to the head of the line. And, yes, of course we ration, because the demand for replacement livers exceeds the supply. Your alternative would be?

My wife is a nurse in a family practice. They have stopped taking Medicare / Medicaid patients because the reimbursement is so lousy. Of course, they could take more, but then that would only increase the cost transfer to patients who have their own insurance, or are paying out of pocket.

Harry Eagar said...

I don't have to have an alternative. I only started by saying that claiming that Obama's proposal is objectionable because it rations is . . . odd.

Since we already ration, the question ought to be, is some other system of rationing better than the one we have?

Peter Medawar said the National Health was the greatest achievement of his generation. It might be worth thinking about why a guy as smart and well-informed as he would say a thing like that. (And, as far as I know, he never expanded on that, it was just a line in his autobiography; but it is not hard to think of reasons that a man like Medawar would come to that conclusion.)

Susan's Husband said...

It's short hand for "government will ration instead of consumers". I have pointed this out previously in this very thread. If things cost money, then an individual or family makes the rationing decisions. If it's government run, the government makes those decisions. That you fail to see any difference between these is appalling but not surprising.

Harry Eagar said...

NPR had a piece yesterday about rationing. A surgeon related the story of a woman in her mid-30s who was in the trauma center with a brain hemorrhage. She died.

She had a choice between buying her 3 blood pressure medications or food for her children.

You're right. I don't see any difference.

David said...

With all due respect for NPR, Harry, that story is obviously false.

Harry Eagar said...

Why obviously?

I know personally similar, less fatal stories.

David said...

Harry:

I'm somewhat skeptical of a woman in her 30s being prescribed 3 blood pressure medications. For what purpose?

Next, there are many effective blood pressure medications available in generic form. 90 day prescriptions cost $10 at WalMart. Why wasn't she prescribed at least one or two generics in her drug cocktail.

Third, Americans don't spend much on food. On average, we spend less than 10% of our income on food. While the poor spend more, it's not hugely more, and the poor can get food stamps. Why was food for her children the only possible expense she could cut? It's a dramatic statement, but false on its face.

Fourth, even assuming she was on three expensive blood pressure medications and couldn't afford the prescriptions, why wasn't she on Medicaid? The only possible answer (other than her refusing to take help that was available to her) is that she wasn't poor enough, which, again, makes it unlikely that the choice was drugs or food.

Fifth, all the drug companies have programs to get drugs to people who can't afford them, in part to avoid this sort of story being used to pass bad legislation. Why didn't her doctor get her into these programs?

School departments, on proof of qualification, will provide meals for children, including during the summer. Was she rejected by food pantries and if so, why? (My experience with our local food pantries makes me think it unlikely that her children would have been turned away.)

Basically, the whole idea that there was a literal choice to be made between "food for her children" and horribly expensive prescription drugs is highly unlikely -- and I notice that these stories are always repeated without any detail.

David said...

This appears to be the story, from All Things Considered yesterday:

Kellermann still remembers the young mother of two who came into his emergency room more than 15 years ago, suffering from a hemorrhagic stroke.

"We worked for 90 minutes to save her life, but basically she had burst a blood vessel in her head. She didn't have a chance," he says. "She had no health insurance, and when the money got tight, she had to make a choice — she could either buy the groceries for her kids, or she was going to buy the three blood pressure medicines she had to take every day."


So, add "15 years ago" to my reasons for skepticism.

Susan's Husband said...

Even if true, I still fail to see the relevance of Mr. Eagar's anecdote, except that he believes the world would be a better place if medicines and doctors magically appeared on unicorns to save people so no one would ever have to make a decision based on finite resources.

Harry Eagar said...

You should get out more.

I spent a couple hours yesterday, as I do from time to time, sitting on a stool behind the counter at my friend's pawnshop, and I observed (among other things) a mother of 4 in her 30s selling her last possessions in order to get money for food.

No insurance (she's waiting for unemployment but she has to eat in the meantime), no income, no medical care unless she has something to present at the emergency room.

You guys have a romanticized view of how poor people live. Angels of mercy do not descend on them with food and medicine and, especially not, rent.

People do have strokes in their 30s. I think I related that experience with my first union in one of these blogs earlier.

True, we aren't told exactly what drug panel the woman was on, but I know from my own experience that some people have great difficulty finding a panel of drugs that will get blood pressure down.

Generics are not always available.

Yeah, maybe the story was a confabulation, but there's no obvious reason to suppose so.

Susan's Husband said...

"You guys have a romanticized view of how poor people live. Angels of mercy do not descend on them with food and medicine and, especially not, rent."

We are keenly aware of that. The problem seems to be that you think that is how it should be, and we're of the opinion it will never be that way. I see this in the way you dismiss as untenable and immoral any economic system / society that does not have those angels of mercy.

Harry Eagar said...

It certainly won't be if you don't want to try.

However, I thought David's position was that, at least in the realm of medical care, everybody gets everything, like titanium knees, gratis.

The personal choice to spend your $400 a week income on food or, say, cancer treatment at $16,000 a day is not something worth defending from government supervision, is it?

David said...

Harry: Sometimes I think you fundamentally misunderstand how health care works in the US, what the "crisis" is and why the government cares.

As it happens, joint replacements are the single most common reason for Medicare covered hospital admission.

Medicare and Medicaid account for one-third of personal health care spending in the US. Anyone poor or old who needs a hip replacement gets one.

Anyone who has a job is covered by workers comp for job related injuries. Most of the rest have private health insurance, usually obtained through their jobs. If they lose their job, then COBRA gives them the right to keep their health insurance for 18 months.

As a result, the uninsured tend to by the working young, who know that they'll get coverage for work related injuries (the most likely reason for young people to need medical care) and for acute and trauma care (since hospitals are prohibited from turning people in need of acute and trauma care away). The reason the government wants to force them into coverage isn't benevolence, but to get them to pay premiums at more than their expected usage.

As I've mentioned, 80% of Americans, including the uninsured, are satisfied with their medical care. No number of questionable anecdotes are going to make it worthwhile to take a great leap into the unknown for the sake of the 20%.

Hey Skipper said...

But how much should we expect people to pay out-of-pocket for their own health coverage?


I don't have to have an [to rationing livers]. I only started by saying that claiming that Obama's proposal is objectionable because it rations is . . . odd.

Of course, one of the reasons that we have to ration livers is that the government has decided the residual value of your liver to your heirs is precisely zero.

You need to be careful in using the term "rationing." Properly speaking, it means there is a fixed quantity of something that is less than demand, and must therefore be doled out by some central authority.

When I lived in England, during the early and late 80s, health care was rationed by availability. If you needed a hernia operation, you would get it, but you would also wait 18 months. If your grandmother fell and broke her wrist, you would get seen at the empty emergency room, but wait nearly three hours to see anyone.

In the NHS, which aims to give a broad coverage of care to all without charging, health care is rationed on the grounds of clinical need, meaning that emergency cases (e.g. heart attacks) get instant access where those with less urgent needs (e.g. cataract surgery) are given lower priority and so wait longer.

Although there are obvious arguments in favour of prioritising by clinical need rather than ability to pay ...


An October 14, 2008 article in The Daily Telegraph stated, "An NHS trust has spent more than £12,000 on private treatment for hospital staff because its own waiting times are too long."


So, how much does the NHS cost? Around £1,800 per capita (2008/9 NHS England budged £92.5bn, 2009 England population 51.6 million). My guess is that the average exchange rate over the last 30 years has been about $1.50 per pound sterling. In USD terms, the NHS costs $2700 per person.

For a family of four, that amounts to $10,800 per year. (More, of course, if one elects to bypass waiting times through paying out of pocket.)

Which sounds a lot like how much privately purchased health insurance costs in the US.

Odd how advocates of nationalizing health care don't mention how much money will not be saved by doing so.

The leader in the most recent Economist excoriates the US health care system for being expensive and delivering middling care despite that. In order to reach that conclusion, though, they did not compare like against like. Had they done so -- excluding African Americans would have been a good start -- they would have found that US health and life span numbers are indistinguishable from those in Europe. Of course, that means coming to grip with the terms under discussion, which The Economist often fails to do.

I happen to think there are good reasons for changing the way health care is funded in the US, starting with eliminating the tax code preference for employer provided health care. I say that, despite knowing the same health care coverage will cost me an additional $3000 per year.

Harry Eagar said...

Where in the world do you get the idea that 'most' people have job-related health care insurance?

That isn't even true in Hawaii, which has the most generous/onerous law about employer insurance in the country.

Harry Eagar said...

Skipper, well there is a difference in outcomes.

In Britain, everybody gets covered for that amount.

In the US, about 2 in 3.

That, I think, is why Medawar thought that the NH was the finest achievement of his generation.

I haven't said what I think ought to be done, other than to have universal coverage, and, if you read Restating the Obvious, the reason had a lot to do with business competitiveness.

At least you and I think there is a problem.

David said...

Ah, so you really are just making this up as you go along.

60% of Americans get health insurance through their employers. 10% pay for it themselves. 15% have Medicaid or Medicare and 15% are uninsured. All numbers are approximate.

Given that there are 300 million Americans and the 40 million uninsured is a well-known stat, where did you think the other 85% were getting their insurance?

erp said...

My husband and I both have Medicare and Medicare Part D Drug Coverage. Neither are free and neither cover all costs. The total cost last year including supplemental insurance for the two of us was well over $11,000.

I'd far rather purchase health insurance on the open market where I can choose the plan that's best for us than support a hopeless bureaucracy that will continue to gobble up tax payer funds until somebody (surely not Obama) puts a stop to it.

From what I can gather, NHS in Canada and the UK is great if you're not sick or don't need to use any new fangled equipment or whatever procedure you need isn't urgent or if you're under over 55. Otherwise, not so much.

Our neighbors to the north should be actively campaigning against this or where will they go when they need something their "one size fits all" system doesn't provide.

Just a reminder: health insurance and health care aren't synonyms.

Harry Eagar said...

I am ballparking 'reality,' David.

To say that 85% 'have insurance' is accurate in the same sense as saying that about 99.95% of Americans 'have money.'

Being medically insured is not like being pregnant. It matters how much you've got.

Nowhere near 85% have dental. I realize you write off dental care as 'not medical,' but I don't.

I have the luxest of de luxe policies: Everything is covered and no co-pays. All I pay is excise tax on the bills.

From there, there is a descending scale of usefulness of the coverage people have.

My guess is that about 2 in 3 Americans have insurance that is 'good enough' for all but the most desperate circumstances.

That may be an overgenerous estimate. It will not be undergenerous.