Curing the Cost of Health Care

Back in 2005, I had surgery for my arthritic back.  The surgeon was skillful, and the recovery, according to the doctor who lives next door, the smoothest he had ever witnessed.  In its execution, it was the kind of medical event in which American medicine can take justified pride.  Then I began getting copies of the bills sent for the surgery to Medicare and my insurance company.  While I had no out-of-pocket expense for the surgery, I was horrified.  The surgeon had sent a bill for $10,000, and was paid $2,000. Frankly, considering the skill he evidenced and the office overhead he supported, I thought the payment well justified and would have found a payment even of about $5,000 reasonable.  Then the hospital sent Medicare a bill for $25,000, of which all but a co-pay of $15 was paid by Medicare, with the private insurance picking up the $15.  Part of the bill was for legitimate hospital costs – operating room, room and board, nursing care, etc. – amounting to $9,000.  Though steep for two days of hospital care, I could pity the hospital a little and grudgingly swallow the costs.  But $16,000 of the cost was for a 2-inch titanium rod and two titanium screws inserted into my back.  I was appalled.  My son, an avid bicycler, commented that an entire titanium bike costs about $3,000. Excuses were made that custom tooling was expensive, health required exacting precision, etc., etc. They would have been valid even fifty years ago, but in an age of robotics and sub-atomic precision, they simply represented excuses for inefficiency. What had caused this charge, and what could be done about it?

The answers of course were greed and the legislated inability of Medicare to control charges by medical device makers.  While Medicare is allowed to squeeze excess out of doctors’ bills, often to the detriment of the patient, it is not allowed to regulate effectively either hospital charges or device manufacturers.  That in turn causes costs to be incurred somewhat akin to the $2,000 toilet seat charges the Pentagon faces from contractors.  The result is a tragedy for Medicare, which is blamed for costs it is not permitted to regulate. But the real tragedy is for American medicine and the American people.

In the Washington Post this morning, Matt Miller writes the first frank account of this issue I have seen.  Miller writes that we are debating Medicare in a bubble, “impervious to global benchmarks that suggest our efficiency ambitions are far too timid.”  We blame Medicare for escalating costs when the real villain is the entrenched inefficiency, and greed, of the private health care sector.  Other countries’ health systems deliver more effective health care than the U.S. at far lower per-capita costs.  The traditional excuse that our high health costs result from the superlative character of our health system just doesn’t fly. Internationally, we do not rank even in the top five of national systems for effectiveness, in terms of things like infant mortality, availability of coverage, etc.  Yet the most effective systems deliver health at a far lower percent of national GDP than ours does, with a more elaborate national administration, i.e., they are far more efficient despite having a higher governmental overhead. Our percent of GDP spent on health care is about 18, while OECD countries average 8 percent and Singapore, with similar effectiveness scores to ours, spends 4 percent.

 It turns out that the top national health systems in terms of effectiveness, none of which is the U.S., use a great variety of approaches, from all private providers as in Switzerland or Japan to all public single payer systems as in several European systems, but share one trait in common: all insist that no profit be made from the treatment of those who are ill.  Yet profiting from illness is at the heart (or lack thereof) of the American pharmaceutical and medical device manufacturing industries.  It turns out that the American insistence on private, unregulated costs of medical goods, pharmaceuticals and services is itself the illness we need to treat.  As Miller notes, we have given a license to inefficiency and excessive profits at the expense of the individual citizen.  A step toward a cure would be to provide for regulation of device and pharmaceutical costs by Medicare.

We celebrate the virtues of a free market, while forgetting that the market for esoteric goods and services to individuals who don’t understand them yet must have them cannot by definition be free.  Free markets imply perfect information and freedom of choice.  Our health services markets fail us constantly, with more neurosurgeons in Boston than in all England and whole rural counties without obstetricians, with 50 million uninsured, and with $16,000 2-inch rods about which the ultimate consumer has no choice.  Then we blame the messenger, Medicare, for exorbitant costs over which it has no control.  Health services are not luxury items like yachts, where we might sometimes pay willingly for old fashioned, handmade ornaments. Other countries have already shown us alternative ways to do things right.  It’s time we lifted our eyes beyond our ideology and looked to the future of effective and efficiently provided medicine.