Why is Medical Care So Expensive ?

Neil A Kurtzman MD Neil A Kurtzman MD Sandra Sabatini PhD MDSandra Sabatini PhD MD

Feynman’s RulesFeynman’s Rules

Richard Feynman 1918-88Richard Feynman 1918-88 The universe in not only stranger than you think, The universe in not only stranger than you think,

it's stranger than you can imagineit's stranger than you can imagine Anyone who says he understands quantum Anyone who says he understands quantum

mechanics, doesn’t understand quantum mechanics, doesn’t understand quantum mechanicsmechanics

Medicine is a surrogate for the entire economy

Absence of medical insurance is Absence of medical insurance is not absence of medical carenot absence of medical care

Possible Causes of Increased Medical Care

TechnologyTechnology PharmaceuticalsPharmaceuticals Doctor’s feesDoctor’s fees Insurance companiesInsurance companies Hospital feesHospital fees GovernmentGovernment Defensive medicineDefensive medicine No competitionNo competition

InsuranceInsurance

The equitable transfer of the risk of loss, from The equitable transfer of the risk of loss, from one entity to another in exchange for payment. one entity to another in exchange for payment. It is a form of risk management primarily It is a form of risk management primarily used to hedge against the risk of a contingent, used to hedge against the risk of a contingent, uncertain loss. uncertain loss.

Cost ComparisonsCost Comparisons

CPICPI

ToasterToaster

24”TV/26”HDTV24”TV/26”HDTV

Phonograph/iPod Phonograph/iPod ClassicClassic

19581958 NOWNOW ChanChangege

2929 233233 8x8x

6.5 hr6.5 hr 1.35 1.35 hrhr

4.8x 4.8x decredecreasease

136 136 hrhr

6 h6 h 22.6 X 22.6 X decredecreasease

43 h43 h 10 h10 h 4 X 4 X decredecreasease

Comparison CostsComparison Costs

Car ( Ford )Car ( Ford )

Gallon of gasGallon of gas

Loaf of breadLoaf of bread

Consumer Price Consumer Price IndexIndex

19581958 NOWNOW

IncreaIncreasese

$1960 $1960 - - 39003900

$30,3$30,30000

10.310.3

24 24 centscents

$3.25$3.25 13.513.5

19 19 centscents

$2.50$2.50 13.213.2

2929 233233 88

Cost ComparisonsCost Comparisons

Median Wage $/yrMedian Wage $/yr

House, median $House, median $

Medical Insurance $/yrMedical Insurance $/yr

College, total costs/yrCollege, total costs/yr

19581958

NOWNOW IncreaIncreasese

$4650$4650

$52,0$52,00000

11.211.2

$30,0$30,00000

$202 $202 KK

6.7 6.7

$134$134 $8900$8900

6767

$2725$2725

$58,1$58,13535

21.121.1

Total Health Expenditures

United States of AmericaUnited States of America SwitzerlandSwitzerland CanadaCanada United KingdomUnited Kingdom JapanJapan

United States of America

320 million population; heterogeneous with most of 320 million population; heterogeneous with most of the population urban; highly concentrated on each the population urban; highly concentrated on each coast and Texascoast and Texas

Private, government, employee-based insurance Private, government, employee-based insurance began during WWIIbegan during WWII

Unfunded mandatesUnfunded mandates Unfunded liabilities of Medicare = $38.6T or Unfunded liabilities of Medicare = $38.6T or

$328,404/person! ($328,404/person! (WSJ June 24, 2013)WSJ June 24, 2013)

Switzerland

~ 8 million population, relatively homogeneous, land ~ 8 million population, relatively homogeneous, land locked; long-livedlocked; long-lived

Compulsory basic insurance (not risk based); $84 - Compulsory basic insurance (not risk based); $84 - 8% of income up to ~ $1500; this may be 8% of income up to ~ $1500; this may be supplemented with private (risk based) which supplemented with private (risk based) which enhances room type, dental, additional Rx, etcenhances room type, dental, additional Rx, etc

Health care cost ~ 11.5% GDP and rising; just Health care cost ~ 11.5% GDP and rising; just recommended abolishing mammography as one effort recommended abolishing mammography as one effort to control costs to control costs (NEJM, 22May 2014)(NEJM, 22May 2014)

Canada 25 – 30 million people, relatively homogeneous ~ 90% live within 200 miles of the USA border Canada Health Act -must have public

insurance; does not address delivery Some private clinics allowed; cannot operate at

profit; 2006 BC provincial gov’t shut one down Provinces use wait-time strategies(ie,

rationing); those with $$ come to USA

Japan

~ 120 million population; completely ~ 120 million population; completely homogeneoushomogeneous

Long-lived; use MD and health services more Long-lived; use MD and health services more than in other countries; 33% hospital stays > than in other countries; 33% hospital stays > 30 days; 8.2 MDs/1000 (cf USA)30 days; 8.2 MDs/1000 (cf USA)

High prevalence of HTN, diabetes and High prevalence of HTN, diabetes and smokingsmoking

70% govt & 30% patient responsibility; 8.5% 70% govt & 30% patient responsibility; 8.5% of GDP; all hospitals non-profit & run by MDsof GDP; all hospitals non-profit & run by MDs

United Kingdom

60 – 70 million population60 – 70 million population NHS began after WWII; went 65 years without NHS began after WWII; went 65 years without

building a new hospitalbuilding a new hospital 90% population covered by NHS90% population covered by NHS

10% population buy private insurance10% population buy private insurance

**Salaries of NHS physicians 2x that of private**Salaries of NHS physicians 2x that of private

**Rationing of services --- age, time of appointment, **Rationing of services --- age, time of appointment, type of service offered, etctype of service offered, etc

N I C E National Institute for Health & Care Excellence Est 1999, United Kingdom for the NHS Provide evidenced-based guidance (clinical

guidelines, tech appraisal, Dx review, etc) Develop quality standards/outcomes Provide information services for managers, MDs,

commissioners, local govt QALY = quality-adj life yr (eg an intervention is cost

effective if <20k pounds; if >30k there MUST be “strong reasons”) (NICE Guidelines Manual, p 54)

I P A B

Independent Payment Advisory BoardIndependent Payment Advisory Board 15 member US govt agency created in 2010; 15 member US govt agency created in 2010;

members appointed; confirmed by Senatemembers appointed; confirmed by Senate Has the explicit task of achieving savings in Has the explicit task of achieving savings in

Medicare without affecting coverage or qualityMedicare without affecting coverage or quality Can change Medicare program; Congress can Can change Medicare program; Congress can

overrule only by supermajority voteoverrule only by supermajority vote

Mass Medical Society – 2013 Report

The Greater the Government Involvement the Lower the

Productivity and the Higher the Cost

Medical Care Spending,2011

Public Health 3 % Infrastructure, research 6 % Administrative 7 %* Rx, durable medical 13 % Professional services 30 % Inpt/nursing home/etc 42 % Total $2.7 trillion

_______________________________CMS data in JAMA 310: p 1950, Nov 2013

Professional Personnel

In 2011---

Total = 21,587,800MDs = 830,700RNs = 2,725,000DDS = 96,000 US Dept Labor - 2013

USA Insurance Status 2012(% Population)

Private 54 %Medicare 11 %Medicaid 13 %Military 4 %Uninsured 15 %______________________________________(data from US Census, JAMA 310:1952, 2013)

Actual Causes of Increased Medical Care

Inappropriate use of the Insurance Model Medicare Third party payers separate the patient from

costs Lack of price competition Technology without competition Unrealistic expectations by the public The idea that medical care is a right Unreformed tort law

$164 Billion in 2015 Budget (6.7 million pts)

It will be of little avail to the people that their It will be of little avail to the people that their laws are made by men of their own choice, if laws are made by men of their own choice, if the laws be so voluminous that they cannot be the laws be so voluminous that they cannot be read, or so incoherent that they cannot be read, or so incoherent that they cannot be understood.understood.

James MadisonJames Madison

The Federalist #62The Federalist #62

Mancur Olson (1932-98)Mancur Olson (1932-98) Great systems can only be reformed after they Great systems can only be reformed after they

collapsecollapse Passionate minorities prevail in a democracyPassionate minorities prevail in a democracy Benefits persist irrespective of their societal Benefits persist irrespective of their societal

valuevalue If you like your benefits, you will keep your If you like your benefits, you will keep your

benefitsbenefits

You have heard of too big You have heard of too big to failto fail

Medicine is too big to fix! Medicine is too big to fix!

Thomas B Edsall:

Joseph Pulitzer II and Edith Pulitzer Moore Professorship in Public Affairs Journalism at Columbia University

New York Times Nov 19, 2013

A man A man cannotcannot know more than a tiny part of the know more than a tiny part of the whole of society…all a man’s mind can whole of society…all a man’s mind can effectively comprehend are the facts of the effectively comprehend are the facts of the narrow circle of which he is the center…nobody narrow circle of which he is the center…nobody can know who knows best…The fundamental can know who knows best…The fundamental assumption…is the unlimited variety of human assumption…is the unlimited variety of human gifts and skills and the consequent ignorance of gifts and skills and the consequent ignorance of any single individual of most of what is known to any single individual of most of what is known to all the other members of society taken together.all the other members of society taken together.

Frederich HayekFrederich Hayek

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