Wednesday, August 8, 2012

Health care costs

Do you want to know why health care is so expensive in the United States (and to a lesser extent, Canada) while it is pretty cheap in Europe?

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No, it doesn't have to do with universal access. Though larger insurance pools will drive down costs for individuals and thus is the only industry to have an exemption to anti-trust laws, it has not been proven to drive down total costs for everyone. Note: Massachusetts.

No, it doesn't have to do with single-payer or a public option. Well, not directly at least. Even the government can run health care poorly.

No, it doesn't have to do with negotiating prescription drug prices with pharmaceutical companies. Okay, you caught me. It does partly have to do with that. But that is not the main story. Canada does negotiate. The US does not. More on this later.

One word: Bundling; Or how about the opposite, fee-for-service. It's what both Canada and the US have right now. Every time you go to see the doctor, their office charges you or someone who pays on your behalf. May it be your parents, your employer, your government, or some combination thereof. More complicated the procedures, then more they charge you. The incentive is then aligned for the doctors to go about treating you in the most expensive way possible.

Sarah Kliff at the Washington Post reports:

In 2006, a trio of medical professors gathered 20 cardiologists and asked them to discuss a hypothetical heart patient with a blocked artery and no symptoms. Removing the blockage would be riskier and costlier than giving the patient a few pills to take. The professors wanted to know: Would the cardiologists do the procedure?
Yes, nearly all of them agreed. Yes, they would.... One physician said, “There were some very strong financial and emotional biases towards going ahead with the procedure.”


Bundling, also known as coordinated care, is the cure to this health care cost disease. It has a bit of a funny name, but this is what Europe does, for example: Take a cardiologist who is seeing 100 patients with heart disease related illness. Bundle them together and tell the doctor that we will give you X dollars to cure them all as a group, plus an X bonus for making more than 90 percent of this group healthy again. The incentive has changed. Now they want to cure them all in the most cost efficient way possible. Welcome to Europe. 

Fun fact: The only other organization that is exempt from anti-trust laws is Major League Baseball. Not any other classic American sports like the NFL, Nascar, or planking (can you even believe people do that for fun?) have such an exemption.

1 comment:

  1. Likely part of your "more on this later", but very recent developments: http://www.pharmatimes.com/Article/12-07-30/Canada_s_health_ministers_call_for_VBP_for_generics.aspx

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