Arnold Kling  

Another One of My Health Care Debate Peeves

Race, Marriage, and Poverty... The Rojas Effect...

As you see in the comments on this post, the Left has an answer to my concern that Medicare is the fiscal equivalent of the Titanic. The answer is, "We need to control health care costs!"

Of course! Why didn't I think of that? Just sprinkle some magic fairy dust, chant "Costs, costs, go away," and all of our problems will be solved!

Where costs are coming from is more medical procedures. If you're serious about cutting costs in government-funded health care programs, then you're serious about having government say "no" to a lot of procedures where now it says "yes." What that means is that "Medicare for all" does not mean Medicare-as-we-know-it for all. It means something else. Call it Medicare-Minus for all.

On a more positive note, I recommend two thoughtful posts, here and here, by Maggie Mahar. The second one concludes,

The well-informed patient, on the other hand, appreciates the grey areas of medicine. His doctor has been open in describing the uncertainties. As a result, this patient is more willing to accept answers like “We don’t know.” Or, “It depends.” And he is more likely to listen to a doctor who tells him that the most aggressive approach is not necessarily the best approach. He is more likely to hear a physician who says: “Try physical therapy first. Try drug therapy. Try a change of diet and exercise.”

This is why I think that, if doctors and patients work together, they can contain the cost of health care, paving the way for a sustainable, affordable, health care system that offers the right care to the right patient at the right time.

This is an issue where I have less confidence in the decentralized solution than Mahar. The Harvard-trained physician that I "fired" had neither the knowledge of elementary probability nor the temperament to operate this way. I suspect that more doctors are like him than not (and reading SuperCrunchers gave me some data that supports this view, at least as far as the lack of knowledge of elementary probability among doctors is concerned).

So I actually propose a Medical Guidelines Commission to obtain and analyze statistics on the impact of medical procedures and then present the results in terms that doctors and patients can understand.

I think that in order to cut back on the use of procedures with high costs and low benefits, we need to give consumers the means, the motive, and the opportunity to make different decisions. I agree with Mahar that without better information they lack the means and the opportunity. But I think they also lack the motive, and without it, you won't see any widespread change in behavior.

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COMMENTS (18 to date)
Kevin writes:

It would be really nice if we didn't have to evaluate every procedure in detail for cost effectiveness.

Is there an economist in the house who can find a shortcut proxy by aggregating studies of effectiveness of different procedures? Perhaps absolute cost? Or what about cost relative to average physician salary? Maybe average number of days in the hospital for recovery? Or average time to complete the procedure? Number of words in the journal article describing the procedure?

Whatever it may be, if we found it, then we might just be able to convince people to take Robin Hanson's advice and just cut spending in half.

teddy writes:

The thing is, health is a priority to everything. If a doctor told you that you had six months left, would you resign yourself and accept that fate? Or would you do everything possible to prolong the inevitable conclusion, so that you may live one more day to see those who love you. This situation does often occur in cancer patients.

Uncertainty in the medical field is the reason why people ask for second opinions.
To ask for a second opinion is a gamble, and unfortunately, the house usually wins. That doesn't mean you don't play the game. The stakes are much too high for you not to.

Bruce G Charlton writes:

In the UK the desire to 'control costs', while retaining the National Health Service, has led to a massive expansion in the state bureaucracy for controlling health costs, and the transfer of power from health care providers to health care managers.

Meanwhile the costs, in real terms, have doubled. Most surveys seem to suggest that this doubling of input has led to a modest - maybe 15 percent - improvement in 'output' (ie actual service provision).

Josh writes:

But you're ignoring the savings from the economies of scale that have always allowed the government to operate more efficiently than the private sector.[/sarcasm]

Shotgun writes:

C'mon, cutting costs is easy! Fire 75% of medical specialists, so there won't be anyone ordering all those expensive procedures. Also, cut the salaries of doctors by 50%, and nurses by 33%.

Thes our system will look the same as all the single payer systems out there, and cost the same, too.

bingo writes:


I read Maggie's posts and I agree that they are thoughtful. I believe that they suffer from two significant errors. She assumes that "patient-centered care" and "consumer-driven care" are mutually exclusive. In this she is falling prey to the error of confusing the effort to improve health care with the effort to reform our system of health-care finance. The second error is ubiquitous in this discussion: the assumption that a change in the physician/patient relationship in and of itself, without any change in the relationship of the patient and the cost of the medical care, will somehow magically reduce the societal costs of medical care. This is another example, albeit a very fluent example, of the "magical thinking" that you have consistently criticized.

Maggie's concerns about the difference between a patient and a commercial consumer are valid in my world as a practicing physician. Without beating the dead horse that I have routinely beaten here and elsewhere, neither Maggie nor the "let's just put everyone in Medicare" crowd address the twin demons of demand in medical care: patient demand (unlimited since they are divorced from cost) and provider demand (unlimited in an effort to avoid tort). Maggie doesn't address it at all; the "all in" crowd will be mortified when they realize that controlling access is the single most effective cost suppressant in every single-payor system, efficient or not.

Kimmitt writes:

My understanding is still that over a quarter of all Medicare spending is spent on the last year or so of life -- that end-of-life care is the biggest single driver of medical costs in aggregate. Is this incorrect?

Mt57 writes:

I just think it's a tautology: "if doctors and patients work together, they can contain the cost of healthcare". Yes, if they work together to contain the cost of healthcare, they absolutely can contain the cost of healthcare. We don't need a reform to do that. It just requires the patient to choose to sacrifice medical attention or the doctor to choose to sacrifice income. But there is little incentive to do these things when a third party is paying the doctor to provide care to the patient, and plenty of countervailing incentives, which are in turn amplified by the third party paying the costs and by government regulators of the third party payors. Cost containment is not going to arise out of a relationship in which neither person has any responsibility to pay the costs. So, in lieu of the tautology, a more accurate line of reasoning would be: if neither has any incentive to contain costs and at least one of them has an incentive to generate more costs, they won't work together to contain costs and thus the costs won't be contained. Her tautology is just not so much "thoughtful" as it is just "wishful" thinking.

Arnold Kling writes:

I don't think that the proportion of Medicare spending on the last year of life is quite as high as 25 percent, but I don't have up-to-date figures. I would guess somewhere between 10 and 20 percent.

On the other hand, a lot of *Medicaid* spending comes in the last year of life, because many people spend their last years in nursing homes, often paid for by Medicaid. Not much can be done about that--other than try to get people to save more.

richard writes:

Arnold, is there some resource out there that neatly summarizes what portion of health care dollars is spent for what (for instance, last six months of life, nursing care through medicaid, drugs in general in through medicare in particular, people with chronic illnesses, etc.)?

Arnold Kling writes:

Good question, and the answer is rather negative. The information is scattered, often in separate research papers. And some potentially useful information is missing. At least, that's the way it looks to me.

My guess is that if there is a nice summary document, it is at the Center for Medicare Services (or whatever it's called--the names of these bureaucracies always are changing) or the Congressional Budget Office.

CBO knows a scary amount. When I gave a talk there, I felt like an undergraduate trying to give a talk to professors.

For my book, the best breakdowns I found were the data for the MEPS. I'm sure you can Google it, and they have a web interface that lets you do lots of cross-tabs.

lxa writes:

Lots of good discussion here, some very insightful comments.

To add to the mix (and I am a doctor) think about this - good medicine leads to more costs. If I find a way to cure your cancer, at even marginal cost, that means we'll still end up treating your for the stroke or heart attack that ends up killing you. So now someone paid (cost added to system) for your cancer treatment AND your other problems. Unlike most models, the more efficient medicine becomes, in terms of 'successful' treatments, the more expensive it becomes. You've got to die of something, and the more we prolong the slow downward decline, the more it costs.

So, until someone is willing to say, "You know, we're just not going to do anything about that," you'll continue to see costs spiral upwards as technology enables us to help more 80 year olds live to 90, etc. Helping a 20 year old live and have a productive life yields economic benefits. Helping most 80 year olds continue to waste away while consuming expensive meds in a nursing home while providing little or no positive economic output has negative economic impact. So, until we're comfortable with saying, as a society, that nope, it's not worth it, then nothing will change.

As several have iterated here, the ultimate question to answer is "How do we ration care to those whose economic productivity (not just earnings, but 'value' to society) after medical treatment, minus the cost of the treatment, results in a negative value?"

I can't tell you how many MILLIONS I've seen pissed away on repeat offender drug users who crash cars while running from the police after committing a crime, only to end up in the ICU for months consuming resources to keep them alive so they can go to trial, go to prison, and return to a life of crime. Do you know how many patients I've seen that have been shot on several different occasions? On looking at x-ray "So, is that bullet new or old? Yeah, it was there last time." What a waste.

Tracy W writes:

It would be really nice if we didn't have to evaluate every procedure in detail for cost effectiveness.

It would also be really nice if we could teleport everywhere, thus avoiding traffic congestion. This does not help transport policy.

Is there an economist in the house who can find a shortcut proxy by aggregating studies of effectiveness of different procedures? Perhaps absolute cost? Or what about cost relative to average physician salary? Maybe average number of days in the hospital for recovery? Or average time to complete the procedure? Number of words in the journal article describing the procedure?

There are two sides to a decision - cost vs benefit. We can treat many bacterial infections very cheaply - just take a course of antibiotics and save the patient's life (ignoring for the moment anti-biotic resistant drugs). Meanwhile cancer treatments are vastly more expensive, but giving a patient with cancer an antibiotic won't help them.

Then matters get far more complicated than saving life vs not saving life. For example, how valuable is treating my hayfever? It was never life-threatening, but $20 buys me three months of far better life-quality. That's worth it to me. How about if hayfever treatment cost $2000 for three months?

How about breast-reduction operations? There is some risk of death, and no chances of life-saving, but we know some people will pay for the operation themselves with their own money, indicating that they think the improvement in life-quality is worth the price. Do they know the full risks? Would that change things?

Or, say a hospital does have more days in recovery? Is that due to it taking more difficult cases? Doctors will often, when faced with a particularly difficult case, refer to an expert. To compare days' recovery needs to control for that. Or, another example, patients with pre-existing conditions such as diabetes are often slower to recover and more likely to suffer complications than young healthy 20 year olds from the same operation. So you need to control for variations in patient quality - a hospital drawing on an area with a lot of retired people can have very different statistics.

So, to sum up, yeah, we do need to do detailed cost-benefit studies.

Kimmitt writes:

Re: Medicare end-of-life:

The numbers I'm getting from Googling around are 28 percent (source on my name).

I can't get any good numbers on Medicaid.

Irene1426 writes:

If you have ever paid for health insurance you obviously know that it is rather expensive. However if you actually put your health insurance to use you are saving yourself a great deal of money that you would have otherwise had to pay out of pocket without it. If every employer offered Health insurance then the health care debate would not be such an issue. However since not every employer does, there are many left without health insurance. Unfortunately its not only adults who are being left in the cold, its young children as well. i think it would be great if the united states had some type of healthcare that was available to all. The only reason i say this is because so many do without and something is better than nothing. The problem with the United States providing health care would be that so many things that may be needed will be denied for the lack of funds or whatever excuse they choose to make. I am sure they will say that whatever the doctor is recommending isnt really needed and that the patient will have to either do without or come up with the funds themselves. Personally, I have had enough trouble with regular insurance companies trying to get them to foot the bill for procedures that were more than important. I know that if we had a health care system that was nationally funded the trouble would be even worse. My problem with health care being funded nationally is that they would be unwilling to pay for patients to go to have second opinions, which i personally find to be of the utmost importance. I have had a doctor whom i would consider to be a quack and if it wasnt for my insurance company i would not have been able to go and see another doctor, who may have ultimatly saved my life when it came down to it. I dont know where i would be today if it wasnt for this man. My fear is that if health care was to become generic so to speak then doctors would stop caring as much, and lets face it, there are plenty enough doctors as it is who dont care. If all doctors stop caring we will start to see more things that are diagnosed improperly leading to death or longterm illnesses and such. It seems to me that there has to be some way in which we are able to make health insurance more affordable and more readily available. Of course something is better than nothing but would much rather pay my health insurance privately and get better service than have it for free. I feel as if our govt. was providing health insurance today, i would have been stuck with my quack doctor and be in a completely different place in my life and it definitely would not be for the better. At the very least we should be able to supply generic drugs that cost much less. i understand that it takes years and a lots of research to come up with effective drugs which cost very much money, but hell, if we are going to just throw our money around like we do with the war we mind as well do it with medicine as well? If our govt. would stop funding so many things that matter less, they would have much more money to put towards our nations healthcare cost.

Experimental Mouse writes:

First thing to do is to forget the old myth of having good quality healthcare in the US. The US has only an EXPENSIVE healthcare, not a good one!
Please read:


Second thing is to make a quite simple decision: Do you want to punish furter only part of the nation with an expensive - but ineffective, waster - health care (as it is now), or you'd rather reward the whole nation with an affordable, cost effective, and of course more cost sensitive one?

Medicare would do well to allow for education of the elderly in how to best prevent some of the avoidable ailments involved with aging. Clearly low impact exercises would benefit the elderly. Access to swimming pools and Aquatic exercise programs would help seniors whose health problems make up a large proportion of our healt care budget. Prevention of problems is more cost effective than waiting for the problems to develop and then treating them.

Experimental Mouse writes:

Just to be sure, that we are talking about the same things:

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