Wednesday, October 7, 2009


I'm sorry about what happened with Phil. I wish I was better at moral support - but usually when something bad happens to a friend the best I can do is stand there beside them and bawl. Anyway, maybe this blog will help you take your mind off that while you wait for the next (!!*#%!??!!#%!) court date...

I had started another post while waiting for you to put something up. I'm going to use some of it it this one.

As you know, I sometimes tend to over analyze things. But the more I think about the issue of health care, the simpler it gets. Oh and by the way, in some ways you're a pretty smart guy. It looks to me like you've got your arms around the real problem. More on that later.

While reviewing what I've learned, it struck me forcefully that most efforts at health care reform are about as logical as trying to build a house by starting with the second floor. Forget ideology for a minute and consider this:

It almost doesn't matter how you manage the delivery of health care. One side (mine) justifiably points out the horrible track record of private insurance companies and wants a public option to pound a little sense into these miscreants. The other side (your's, I presume) paints a picture of ham handed government bureaucrats mucking things up, just like they always do. To be fair, I myself conceded this point when I cited this country's bloated military budget a few posts back.

So, pick your poison. Government or private rationing of health care. It's a fool's choice when the real problem is that there isn't enough health care to go around in the first place. Steve, you can only get so many miles out of a mule, no matter how many carrots you dangle in front of it.

Somewhere in my research I recall a statement to the effect that just giving everyone an insurance card isn't going to "reform" health care one bit. What we have in this country is a noticeably smaller supply of providers (relative to demand), across the board, than in just about every other developed country. Given this situation, it seems logical that providers, since they are in short supply, would tend to charge more and therefore drive up health care costs. When viewed from this perspective, it is only reasonable to wonder if indeed the health care delivery systems in other countries work better than ours - not necessarily because they are designed better - but because they have more and less expensive resources to work with.

Now if you are a fool, you can just pass a law which says doctors, pharmacists and hospitals must reduce their charges by half. This isn't going to magically produce more doctors, prescription drugs or hospital beds.

One study I came across indicates that the 2005 median net monthly income for physicians in the U.S. came to about $8200.00, which is far and away the highest in the in the world. The next closest was Taiwan, at $5388.00. Doctors in France averaged $3210.00.

Now if the free market was working properly, one would think this potential for higher income would attract more people to the profession, which would result in more doctors, which would result in a greater supply against demand, which would lower doctor's salaries. To me, this is the way the market is supposed to work. But for some reason it doesn't.

Another study confirms that the U.S. has one of the lowest ratios of doctors per capita among developed nations. France for example has 337 doctors per 100,000 of population, Germany has 337. We have 256.

I wrote about prescription drugs in an earlier post. In this study on antidepressants, the U.S. is at the top of the price scale in every case. The price we pay for this kind of prescription always higher here than in other countries - by an average factor of two to one. I'm quite certain that if you look at any other drug, the relative differential will be the same.

What about hospitals? According to a Kaiser report, despite the fact that aggregate, community hospital profit margins are at an all time high, hospital beds per 100,000 of population have steadily declined - from a whopping 436 per hundred thousand of population in 1975 to 266 in 2007.

It seems to me we ought to be looking at why, despite high demand, the supply remains low. Surely we have enough qualified young people who are interested in a career as a medical professional. Yet according to an OECD study, the number of medical graduates in this country (as of 2007) comes to 6.3 per hundred thousand of population - well below the OECD norm of 9.9. Another interesting number revealed by this study is a little counter-intuitive. Despite the fact that doctors in the U.S. enjoy the world's highest rate of compensation, we seem to be attracting foreign trained doctors at noticeably lower rates than many other countries where compensation is lower.

I think what these numbers are telling us, over and over, is that as an industry, health care in this country simply does not follow the normal principles of supply and demand. With all the money being spent on health care in this country, it is almost incomprehensible that more providers would not be jumping into the market and ramping up competition - thereby lowering costs to the consumer - the same as just about every other industry. Lately, I've begun to believe the answer for this isn't as complicated as we think it is. What if...

Hardly anyone these days actually goes to a doctor, receives a service and then pays for it on the spot (a point you made, thank you). Generally speaking, health care providers are almost always paid by intermediaries, such as private insurance companies or some government program. What if we woke up tomorrow and no such intermediaries existed...

Pretty scary thought, huh? But think it through. Steve Green (or Chris Rhetts) goes to a doctor, finds out he needs battery of tests, followed by some critical surgical procedure, followed by a lengthy schedule of follow-up treatment and medicines. Cost? Oh, say a couple of hundred thou. Now I know I don't have that kind of money laying around (If you do, can I borrow some?). End result: we don't get the treatment because we can't afford it. That, by the way, is precisely the situation which many millions of Americans find themselves in today.

In my research, I was literally flabbergasted to learn that 5% of the population accounts for almost 50% of all health care expenses. Just as amazingly, the lower 50% of spenders account for only 3% of health care expenses. Continuing on with my "what if"...

In health care, what intermediaries do in a nutshell is collect a little money from everyone in order to pay a lot of money on behalf of a very few. But if that didn't happen, what would result is some incredibly radical changes in the health care market. What I mean is, if health care providers had to compete for the individual consumer dollar, just as most other industries must do in a free market, the whole industry would be turned on its ear and costs would drop immediately.

I think now we need to start building this house from the ground up. For the moment, maybe we should realize that although you can relieve traffic congestion by better management of the roads you have, the real solution is that when there are more cars, darn it, you just need more roads.

I'm going to start right now by admitting that this health care crisis (and it is a crisis) we have in this country is not going to be solved overnight by some magic formula which all of the sudden has Dr. Howard or Dr. Fine rushing to my doorstep every time I have a case of the sniffles.

Oh, and the "smart guy" part... I meant it. Turns out this crackpot idea of yours which begins with some dude going to a doctor and actually paying for it, just like I did the Shasta Daisies I bought at WalMart last spring, doesn't seem like such a crackpot idea after all. Stop gloating.


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